Release Date: July 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Wireless service revenue climbed 3.5% year over year.
- Adjusted EBITDA rose by 2.8%, showing operational efficiency.
- Free cash flow increased by 3% compared to last year.
- Consumer postpaid growth adds are up 12% year over year.
- Strong quarter for postpaid phone net adds in Verizon Business at 156,000.
Negative Points
- Consumer postpaid phone churn was 0.79%, up slightly from the prior-year period.
- Consumer postpaid phone net losses were 8,000 for the second quarter.
- Overall prepaid net losses were 624,000, including 410,000 losses related to the ACP shutdown.
- Adjusted EPS in the quarter was down 5% compared to the prior-year period.
- Higher cash taxes and interest expenses impacted cash flow from operating activities.
Q & A Highlights
Q: Was there any impact on the broadband side in the quarter from the ACP program, and do you expect any lingering impact from ACP in prepaid, postpaid, or broadband in the second half?
A: Yes, there was some impact on the prepaid brand and a little bit on Fios. Looking forward, we see this as an opportunity, with 21 million people having ACP. The importance of mobility and broadband today is significant, and our offerings are very efficient. We expect some disconnects in prepaid and a small number across other products in the third quarter. The margin impact from ACP was insignificant in the second quarter.
Q: Can you provide more clarity on the potential beyond the 4 million to 5 million fixed wireless access subscribers?
A: We have good momentum and are expanding our C-band to suburban and rural areas, which opens up more opportunities. We are gearing to reach our target of 4 million to 5 million fixed wireless access broadband customers. Once we reach that target, we will reassess the opportunity going forward.
Q: How do you expect the pricing environment in the postpaid wireless category to evolve, and can it start to look more like fixed broadband or video product categories?
A: We have been very consistent about evaluating pricing opportunities and aligning the price with the value proposition for customers. We took pricing actions in the first half of the year that provided a good tailwind to service revenues. However, it wouldn't be appropriate to comment on future pricing actions at this time.
Q: What is your level of confidence in driving more volume growth while maintaining pricing power over the next 12 months?
A: We are excited about our consumer side with myPlan and other innovations. We have seen improvements in both revenue and operational volumes on postpaid. Prepaid also showed significant improvement this quarter. We are in a good position going into the second half of the year.
Q: Can you provide more details on the voluntary separation program and its impact on EBITDA?
A: The program was announced in early June for a portion of our workforce and will be completed by the end of August. It was contemplated in our full-year guide, and we expect to see savings towards the back end of 2024 and into 2025. We will provide more details once the program is finalized.
Q: How do you view the importance of having a vertical solution for customers, especially in the context of competitors potentially expanding their fiber assets?
A: We are well-positioned with our current assets. If the market moves towards convergence between mobility and broadband, we will be there to serve our customers with Fios or fixed wireless access. We are happy with our current deployment and continue to innovate to meet customer demands.
Q: What are your expectations for free cash flow growth this year?
A: The cash generation of the business continues to be strong. Free cash flow was $8.5 billion in the first half, up 7%. We expect free cash flow to build throughout the year, similar to last year. We see slightly more incremental pressure from cash taxes, but overall, we are in a strong position to pay down debt in the second half of 2024.
Q: Can you share more about Verizon's position for AI and enterprise, and what you are seeing in 5G enterprise adoption?
A: Private networks continue to grow in volume, which is a prelude to adding more applications and mobile-edge compute. We are seeing more business cases for logistics centers and factories. Gen AI will accelerate this trend. We are well-positioned to take advantage of AI both for internal efficiencies and revenue opportunities.
Q: How do you view the overall health of the broadband market, and what is your capacity for fixed wireless subscribers?
A: We see the broadband market as very healthy, with consistent net adds. Our capacity for fixed wireless access is strong, with around 50% of traffic now on C-band. We continue to deploy more, opening up more opportunities.
Q: What are your expectations for wireless service revenue trends in the second half of the year?
A: We expect sequential growth in service revenue in the second half. The assumptions in our guide include pricing actions, improving volume profile in consumer, scaling fixed wireless access, and improving prepaid. We feel good about our performance and momentum heading into the second half.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
