Good morning, welcome, everyone. For those who, for those of you who don't know me yet, I am Kannan Venkateshwar. I lead the North American Cable, Telecom and Media Research effort here at Barclays. I'm happy to have with me Tony Skiadas, CFO of Verizon. Sorry for the last minute switch to a virtual event, Tony, great to have you here, and thanks for joining us this morning.
Of course, thank you.
Yes, Tony, you have a safe harbor statement, I think, that you want to read out as well.
Yeah, sure. Thanks, Kannan. Great to be here. I just need to draw your attention to Verizon's safe harbor statement and our SEC filings, which can be found on our investor relations website. My comments may include forward-looking statements which are subject to risks and uncertainties.
With that out of the way, Kannan, we're ready to go.
Thank you. Tony, maybe we could start with all the changes Dan's made. In the first 100 days, he's had a lot of impact. Could you just talk at a very high level about what are the operational changes that have been made thus far, and what is yet in the pipeline and what is yet to be done?
Yeah, sure. We have a lot going on, from a macro view, you know, as you heard from Dan talk about, we're creating a new Verizon, you know, aimed at being the best and also playing to win in the marketplace. As Dan said on the earnings call, you know, the company's at a critical inflection point. We have to radically change our culture towards the goal of delighting our customers and also delivering for our shareholders. We talked about having network excellence and leveraging that network excellence to grow both mobility and broadband, doing that in a very responsible way.
To your question, Kannan, you know, the last 100 days, we've had a lot of change and, I would say a renewed sense of excitement inside the company as well. You know, we took bold actions, as we talked about, to drive $5 billion of cost savings out and, you know, for 2026, some of which gets reinvested in the customer and the remainder, falling to the bottom line. We moved quickly in the fourth quarter to rightsize the organization. We also sharpened our capital envelope, as you saw, you know, improving efficiency and really narrowing our focus on mobility and broadband programs. Doing that, we drove about $4 billion in savings, and I'm sure we'll get into that.
In terms of your question about what's in progress and what still has to be done, we still have a lot of work in front of us. First and foremost, improving the customer experience. Second, leveraging and deploying AI to optimize the operation of the business. We also talked about launching a new value prop for customers. We also gave guidance for 2026, which is, as you saw, significantly improved over prior years. We're excited about what's in front of us.
With all the changes happening, in the company and across the industry, from your seat, what are the main priorities that you're focused on for the organization?
Sure. You know, maybe I'll start at the top, and overall, as I said, you know, the team is very focused on growing mobility and broadband, through sustainable volume growth and doing that in a disciplined way. Second on that list is executing on our transformation. As I said, we're taking bold actions, improving customer experience, focusing on loyalty and improving churn, and having a value proposition and offers that delight customers. The other thing we have in front of us is the integration of Frontier, as well, since we closed the deal back at the, on January 20th. Third is continuing our network excellence, as we complete our C-band build and as we continue to deploy fiber, in the network.
From my standpoint, in terms of my priorities, I have three. One of them is, the first one is supporting the leaders in the business and making sure we maintain our focus on operational performance and execution. I think you saw the results of that in the fourth quarter. Second priority for me is delivering on our guidance for 2026. We gave guidance, as I said, that's a step function improvement. I'll come back to that. Third is making sure we generate strong cash flows and execute on our capital allocation framework. You know, if I can expand maybe on the guidance and the CapEx allocation, I think it would be helpful just for some context.
For guidance, in terms of volumes, we said we expect to grow our postpaid phone net adds 750,000-1 million, which is an increase from what we saw in prior years and an increase in our share of industry net adds, and doing that in a responsible way. From a revenue standpoint, we said mobility and broadband service revenue, we expect to grow 2%-3%, and we see 2026 as a transitional year for wireless service revenue as we continue to drive volumes. With all the cost work that we're doing, we expect our adjusted EPS to grow between 4% and 5%, and that's a significant improvement over where we had been over the last four or five years. Free cash flow.
We have industry-leading free cash flows. We said we expect to grow our free cash flows at least 7% or at least $21 and a half billion. In terms of the capital allocation framework, we have four capital allocation priorities. The priorities themselves haven't changed, but that we've made significant updates inside of those priorities as we outlined them on the January earnings call. The first one, and first and foremost, is to invest in the business. You see us doing that with our CapEx program. We said $16 billion -$16.5 billion. That's all in and very sufficient to support our growth initiatives, both across mobility and broadband.
Second priority is the dividend. We are proud to have said that we raised the dividend for the 20th straight year. It's a track record we're extremely proud of. The goal is to put the board in a position to continue to raise the dividend in the future. Third priority is having a strong balance sheet. As we said, goal is to pay down debt. We've been operating inside of our long-term leverage target for the past two quarters, up to the Frontier deal. Now that we've adjusted Frontier, we said we'd get back to our long-term leverage target in the 2027 timeframe.
Fourth priority is share buybacks, and we're pleased to announce that the board authorized up to $25 billion in share repurchases for over three years, with at least $3 billion in 2026. Overall, the goal is to generate strong cash flows and execute across all four pillars. As I said, this is a really a step function increase over where we've been in prior years, and, you know, the exit rate from 2025 sets us up for a good, a good platform for 2026.
Yeah. That's great. I mean, there's a lot to unpack there, obviously. I mean, maybe we could just start with the subscriber side. I mean, you mentioned 750,000-1 million, which is your guidance. Could you talk about maybe the context of industry growth that, you know, you've used essentially to, you know, come to that kind of a number? U.S. population growth last year was the slowest in five years, and it seems like this year's going even lower. What industry growth framework did you assume when you set your subscriber goals for the year?
Yeah, sure. I think as we've seen, you know, the wireless industry is both robust and resilient, and now that everyone's re-reported results, I think that's pretty clear. By the way, the broadband market is also very healthy as well, and we now have Frontier in the portfolio, which also helps us extend our reach. When you put it together, the demand and the priority for connectivity still remains extremely high. You see that day in and day out, and even from a payment trends perspective, very, very healthy. You know, the fourth quarter showed that we can compete and execute well. You know, we have offers that resonated in the market.
We had a consistent approach, we had strong execution in the field, we delivered those volumes within the parameters of our guidance for the full year. As I look ahead, to your question, you know, we gave guidance of 750,000 to 1 million postpaid phone net adds, which is roughly 2x to 3x the volume growth that, you know, we had in 2025. We see enough growth in the industry, as we've said, and we said on the earnings call, you know, we expect to grow volumes in a fiscally responsible manner.
You know, you mentioned, you're working on offers to delight customers, and there's a new approach to go to market and so on. You know, what should we expect, when should we expect to see further changes in the go-to-market strategy, and what vectors are you trying to optimize for? Organizationally, there's obviously been some changes, so who's leading the activity? If you could just walk us through the planning process for this.
Yeah, sure. I think if you heard Dan on the earnings call, we talked about being thoughtful and financially disciplined, that's kind of the framework that we start with. We're in the early stages of our transformation, and a lot of the go-to-market activities reflect the drive to being more customer-centric and delighting customers. We can do that by, you know, eliminating pain points, making it easier to do business with us, investing in the customer experience, and deploying AI, you know, proactively to help solve customer issues, take calls out of the system. Ultimately, this is gonna, you know, lead to reduced churn and hopefully a lower cost to serve, and ultimately, you get to a higher margin profile.
As we look ahead, you know, we're focused on a new value proposition, and we said we're targeting to launch that in the first half of this year. In terms of, you know, who's running this right now, right now, Alfonso Villanueva is serving as our interim CEO for the consumer team. Having Alfonso in the role, I think gives us a critical bridge between the transformation work that he's doing and our daily operational execution, particularly when you think about the customer journey and the work that we still have in front of us. As I said before, you know, the objective here is to grow volumes across both mobility and broadband and do it in a very fiscally responsible manner.
Got it. Something I forgot to mention in my introduction, in case the audience has questions, there's a chat box that you should see in front of you, and so feel free to type in your questions, and I'll read it out to Tony.
I guess looking beyond volumes, Tony, when we look at pricing for this year, in both broadband as well as wireless, it feels like, given the unit growth framework that we are looking at, as long as industry growth holds up, maybe there's a bit of rationality, but if that changes, then pricing could be under a bit more pressure. Based on your NAD and these comments, it also feels like ARPU this year could be under pressure irrespective. How do you see the trajectory beyond this year?
I mean, is this the new normal in terms of pricing? You know, how should we expect this to evolve next year and beyond?
Sure. maybe I can start at the top of the house with the revenue guidance. we said we plan to grow both mobility and broadband service revenue 2%-3% in 2026, and that includes Frontier. you know, that also reflects the importance of both mobility and broadband and both of those pillars being key to our growth strategy. you know, we also said that 2026, and we've been very transparent with this, is gonna be a transitional year for service revenue. you know, when you break it down underneath with mobility, we said we expect wireless service revenue to be around flattish as we look to drive sustainable volume-based growth, and that'll ramp up over time here.
You know, in terms of your question around pricing, obviously, I can't talk about what we might do in the future, so I'm not permitted to talk about that. What I can talk about is, you know, what we've done in the past is, you know, we're lapping pricing initiatives that we took last year. We still have the ongoing promo amortization headwind that we've still got to fight through as well. In terms of driving ARPA organically, there's a lot of ways to get there. We've had a lot of success with perks and getting customers to take perks. So the penetration of perks has increased, and that drives revenue. We've had step-ups to premium plans. As customers continue to step up, that helps. Adjacent services and even prepaid.
Prepaid continues to grow. We've had six straight quarters of growth there. With the volume growth to follow, the exit rate for, you know, for 2026 should be much better in setting us up for a better revenue profile as we head into 2027. On the broadband side, you know, we now have, with Frontier, 16 million, a little over 16 million subs in the base right now, broadband subs. There's a lot of room to run with fiber, you know, with Frontier in the base and also with our FWA products. You know, when you see a converged offer, there's a lot that can happen there in terms of customer lifetime value and churn benefits as well.
There's a lot of opportunities to grow on the revenue side, and we're going after it with urgency now that we've closed Frontier.
Got it. Maybe sticking with, you know, the broadband part of the business for a bit. What is the fiber goal? I mean, you obviously have a very ambitious passings goal now, post Frontier Communications. The $35 million to $40 million became $50 million, and, you know, AT&T's $60 million seems to be creeping to $70 million . When you look at the $50 million, I mean, why is that the right number, just given the scale of the opportunity, and what could drive you to push this higher or lower in one way or the other?
Yeah, I think, I think you see that. Again, I can't speak for others, but I think you see that it's a clear indication that there's a lot of opportunity with fiber and convergence, we all see it. It goes back to our capital allocation framework. You know, first priority is to invest in the business, and there's no change there. We're going to continue to invest in fiber, and we're continue to, you know, grow that business where we see the best returns. You know, we've expanded the fiber footprint. We have over 30 million premises passed, now that we have Frontier in the mix.
We said that we'd have at least 2 million premises passed in 2026 towards a goal of 40-50 over the medium term. We have, you know, a sufficient path to get there, and we can get there in a reasonable amount of time. We're going to look at, you know, where we see the best return economics, you know, whether it's penetration rates, conversions opportunities, things like that, bill costs. You know, we have 20 years of, as you know, 20 years of experience building fiber with Fios, so we know what that looks like. Fios is the gold standard, and it's still growing. We're confident that we can get to our 40 million -50 million passings in a reasonable timeframe.
Got it. In terms of, you know, the way fiber and fixed wireless fit together, how are you thinking about the path going forward? I mean, is fixed wireless maybe an upper funnel product, which helps you upgrade people and therefore get more price over time? Is this essentially a market expansion opportunity, beyond the regions that you have fiber in? How are you know, framing that discussion internally?
Yeah, Kannan, I would say we do both. Both fiber and FWA are important pillars in our broadband strategy. With FWA, we've said for a long time we're, you know, we're building a long-term sustainable business, and we're building a long-term sustainable business. We have over 5.7 million subs in our base, and we put on about 1 million, 1.2 million subs in FWA in 2025. We see a lot of room to grow there.
We can do both, and, you know, we have the capacity in the network to do it at this point, and we will continue to deploy fiber where it makes sense to do so, up to the 40 million to 50 million passings over the medium term. You know, we feel like there's a lot of optionality there for customers and, you know, with both FWA and with fiber.
Got it. Moving on to the cost side a little bit. You mentioned the OpEx savings of $5 billion, some of it to be reinvested. Could you help us understand? I mean, it's a pretty big number in terms of, you know, the savings goal. Could you help us understand where these savings are coming from?
Sure. As we said up front, you know, we're driving $5 billion of OpEx savings in 2026. I think it gives us a lot of flexibility to be more agile, be leaner, and also invest for growth. There's a lot of work that's already underway. You know, when you think about the work that we're doing in the network and the continued decommissioning of the legacy elements in the network, whether that's copper, whether that's even inside the Frontier footprint or access costs, continue to drive that down. I talked about customer experience and addressing customer pain points and reducing call volumes. That's also underway.
On the IT and real estate front, continuing to rationalize IT platforms, deploying more and more AI as well, and then looking at the real estate portfolio, both on the network side and the admin side. On the advertising and marketing, just continuing to be much more efficient with our spend. Then from a workforce perspective, as you saw in the fourth quarter, we reduced our workforce by 13,000, 80% of which were off payroll in the fourth quarter, and then the remaining 20% coming off payroll here in Q1. We also addressed, as part of that exercise, you know, third-party contractors and vendors as well.
Lastly, on the Frontier integration, as you saw on the earnings call, we said we saw double the operating expense run rate synergies, so at least $1 billion of synergies by 2028. Those synergies are going to ramp up over time as we execute on the integration work. When you put that together and you look at it from an EBITDA standpoint, you know, the cost reductions give us the optionality to do a number of things. Number one, it's run more efficiently. Second thing is to absorb the transitional year-end service revenues we talked about earlier. Then the third is to invest in the customer, and last is return a significant amount of capital to shareholders.
We see a good path to both EBITDA and EPS growth for 2026, and that's by taking bold actions.
Got it. I guess EBITDA, if I may have missed this in your early comments, or maybe I heard this wrong, but I think you mentioned about 4%-5% EBITDA growth?
EPS.
EPS growth. Yeah, that's why I wanted to clarify that.
Yes.
Okay. Then in terms of CapEx, I mean, that again, is a pretty ambitious target, given that it's $4 billion lower, versus I think what you and Frontier on a combined basis, spend. This includes, you know, some of the incremental fiber CapEx. On the wireless side, it probably looks even deeper in terms of the savings. Could you understand how, where these savings are coming from on the CapEx side as well?
Yeah, sure. As I said before, the first priority is to invest in the business, so we're gonna continue to do that. The CapEx profile that we have for this year of $16 billion to sixteen and a half billion is sufficient to address, you know, all of the growth initiatives. We talked about having networks excellence and that being foundational for us. We're not compromising on that. You know, we'll continue to invest in the wireless RAN. From a C-band perspective, 90% of our planned sites are on C-band. We said we'd be substantially complete here in 2026, and a lot of that build is on small cells, which obviously have a lower cost point. From a fiber perspective, you know, we're not slowing down. You know, we'll continue our fiber build pace.
We said at least at the combined rate of, Verizon and Frontier, which is about 2 million premises passed in 2026. We're gonna continue to do that and then get to the 40 million to 50 million as we talked about. In terms of, you know, what we're not doing, you know, we really took a sharp look both at OpEx and CapEx and put a lot of rigor in around narrowing the focus on the CapEx program to mobility and broadband. Things, areas that were not aligned to growth were either reduced or eliminated, and that includes, you know, things like in business wireline, you know, wholesale, looking at projects, you know, legacy copper projects, you know, Like, projects that have a long payback.
We really took a sharp look at this and went back to, you know, aligning it around growing mobility and broadband and doing that in a very efficient way.
Maybe one ancillary question related to that is: You have an opportunity, you have this cable MVNO deal, and you always get questions more on the wireless side in terms of what it means. I guess there's also an opportunity here to somehow use the cable network, cable infrastructure to offload your traffic or, you know, save some CapEx or OpEx, for that matter. Is there an opportunity to do something, you know, slightly different with these partnerships? Are we just looking at it from a very narrow lens right now?
I mean, look, I can't say too much about the partnerships on good footing from a wholesale standpoint, so, you know, I'll leave it at that. We're very happy with the agreements we have with the cable companies, and we just signed a long-term agreement, so puts the partnership on a really good footing.
Got it. Maybe just, you know, looking back at that partnership more broadly, obviously this is an important source of revenues, high-margin revenues for you. Given that cable is now adding close to half of industry net adds, longer term, how do you frame this discussion? Like, I mean, if industry volumes at some point were to slow, I mean, doesn't this become a bigger problem for the industry as a whole?
I have to be careful with my answer here on the MVNOs, what I'll say is, you know, as I said, the partnership's strong. You know, we have a long-term, comprehensive agreement that we just signed. It allows Their customers to remain on the best network, and it's an accretive deal for us. It sets us on a solid, you know, foundation. I gotta kind of leave it at that. If you shift from wholesale over to retail, I think you saw in the fourth quarter, you know, our fourth quarter results speak for themselves. You know, we did very well. That's the way I would frame it.
Okay. More in terms of, you know, the cash flow side of the business. Obviously, we've talked through the OpEx and CapEx savings, there's also, you know, upcoming spectrum auctions that you may have to invest in. You know, given fixed wireless and its importance, I mean, obviously there are other ways to deal with it, like densification, for instance, which again, goes back to the CapEx question. When you think about fixed wireless in the broader scheme of things, or your spectrum needs going forward, is there a way for us to contextualize that in terms of how you've, you know, considered that within your cash flow and capital return goals?
Look, in terms of spectrum, and you mentioned auctions, I mean, we're in a quiet period for the AWS-3, the Auction 113, so I can't comment on anything related to that auction, given the FCC's rules. If I step back more broadly, I mean, we're happy with the assets we have. We have the assets we need to execute on our strategy. We're gonna look at everything, and we always do, and generally speaking, in terms of spectrum, we always look at it, you know, from a, as a build versus buy analysis, and we'll look at it that way. You know, we have sufficient balance sheet capacity, you know, to the extent that it makes sense for our business.
you know, same thing with fiber as well, and we're very thoughtful about what we're doing there, and we're pressing ahead. I feel good about our positioning right now. We have a strong balance sheet to support our growth initiatives.
Got it. We also have a couple of questions from the audience, but I wanted to, you know, maybe broaden that a little bit. The question specifically is about interest in further acquisitions in fiber and what other frameworks you could look at in terms of expanding footprint. It's more about inorganic use of your cash. Are there also other alternatives in terms of fiber structuring? I mean, we've seen some of this in the industry, for instance, all the JVs that have proliferated or, you know, the Lumen acquisition structure that AT&T used, where it's partly off balance sheet. If you could just talk more broadly about fiber investments and potentially organic or inorganic structures that would help you use your capital more efficiently.
You know, obviously, we have a great build engine, and we've been at this for a long time, so we know how to do this organically. We also have a partnership with Tillman, that's expanding as well, and they're building fiber, you know, outside of our footprint to our specifications with good economics. We like those structures, and, you know, to the extent, you know, we can continue to grow that would be another option. As I said before, we always look at everything. I mean, obviously, we've just ingested Frontier, so we have the integration work in front of us right now.
We'll, you know, we'll always look to do that, and we have many paths to get to the 40 million-50 million premise pass in the medium term. We have a lot of optionality there, with the work we're doing organically, with partnerships, et cetera. I feel good about that.
Got it. Looking at cash flow more broadly beyond this year, next year, obviously, you have a lot easier cash cost comparisons, I mean, that should help you. And some of the restructuring costs fall off and synergies that costs start kicking in. When you think about, you know, the growth path from here, it would seem like cash flow should see a step function change as you go into next year and beyond. Could you frame the puts and takes for us as you think beyond this year for cash flow?
Sure. I'm glad you think it's easy, Kannan. I'm not gonna guide on 2027, but as I said earlier, you know, we expect to grow free cash flow at least 7%, which is an acceleration from prior years. You know, we have industry-leading cash flows, and the cash flow generation of the business continues to be strong, and it starts with a strong EBITDA profile. Last year, we had $50 billion of EBITDA, and you layer in the work we're doing around our cost structure, our CapEx, having Frontier in the mix, investing in the customer, we have a good cash flow profile. I mean, I talked about our CapEx program and being very sharp there.
We're also absorbing $1 billion of interest expense this year from Frontier. You know, we continue to do work on, you know, and improve our working capital profile, now we've absorbed Frontier. We have some incremental year-over-year severance pressure from the headcount actions we took in the fourth quarter. Some of that comes in in Q1 here. Cash taxes, we expect to be up slightly year-over-year, just given the plans we have for the year. You know, the strong cash flows allow us to execute across all four pillars of our capital allocation framework, including investing in the business, paying the dividend, reducing debt, and having a share repurchase program, and being able to do all four of those this year.
You know, obviously more to do, but the goal is to continue to increase our cash flows and be very disciplined in our approach.
We have just maybe a minute left. In that minute, I guess the mandatory question in all these conversations now is AI. I got to ask you about this in terms of how this fits into the organization. Obviously, you mentioned briefly about some of the cost opportunities you may have, but, you know, can you talk more expansively about maybe both the cost and the revenue side of it and how we see this play out in the coming years?
Sure, yeah. We do look at it from both of those dimensions, Kannan . You know, first, from the efficiency side, you know, obviously tied to, you know, making sure we have customer experience improvements and efficiency. Ideally, we wanna be able to do to do both of those, whether it's, you know, customer care and reducing the handle time for the customer or just reducing call volumes in general. Of course, that's extremely important. If you think about what we're doing in our network and optimizing the performance of the network, day in and day out, or just, you know, taking out manual work and improving our processes. The goal here is to operate a lot leaner and be more agile, and that's what our transformation is gonna require. That's the cost side of it.
On the revenue side, you know, a number of opportunities that Kyle and the team see, on what we call AI Connect. We have a lot of demand, for both, dark and lit fiber, and we have a number of signed deals with hyperscalers and diversifying to other logos. There's a lot of demand there right now, and we do see further opportunity here, as we go through the year with success-based capital. We're excited to see that space evolve and, you know, more to come.
Got it. Tony, we're out of time. Thank you so much for joining us. I know you have a busy day ahead. With that, all the best for the rest of the day.
Thank you, Kannan. It's good to see you.
Same here.