Verizon President and COO Denny Strigl sat down with Citigroup analyst Michael Rollins at the bank’s annual media and telecom conference. Key points:
- Unlike rival AT&T, Verizon is feeling no impact from an economic downturn. A slight pickup in “bad debt” on the wireless side, Strigl said, but less than 2%.
- As we expected, Verizon Wireless’ “open access” plans won’t be all-you-can-eat. Verizon plans to charge people by how much bandwidth they use, so anyone planning to use VoIP software to make calls instead of using Verizon’s phone service will probably have a nice bill to pay.
10:16 Summing up Verizon’s business units. Thinks product lineup is best ever.
10:22 Still nothing interesting. Just lots of love for Verizon’s stuff. Smartphones!
10:23 Not sure about all of the economic hubbub out of the conference this week. No economic impact in small biz market. No economic impact in enterprise market. Slight pickup in bad debt in wireless — under 2%. Not from the economy, but more from prepaid. Looking from total access lines [where AT&T saw weakness] we just don’t see it. Perhaps because we don’t have lines in the upper Great Lakes. We’ve seen minimal impact.
10:26 Seeing more of a competitive impact than an economic one.
10:27 No need to roll out FiOS fibre faster. Need to get franchises — can only deliver FiOS TV to a fraction of apartment buildings. At end of 3Q, we passed 2.1 million multiple-dwelling units (MDUs), only can offer service to 400,000.
10:29 Some skittish about high wireless penetration in U.S. I don’t think penetratition is limited to 100%. Many people have 2-3 devices. I think data revenue growth we’ll see is very high potential for us. 50% of customer base have data capable devices. Look for revenue growth, not line growth. Focus has always been on retail, post-paid customers. Getting more into prepaid.
10:30 Think about opportunity in machine-to-machine service. Also, we continue to be net beneficiary from local number portability. Taking two customers in for every customer that leaves Verizon Wireless.
10:32 iPhone envy question: Do killer devices matter for VZW? Sticking to basics but also on “forefront of innovation.” Open access, mobile TV, blah blah blah. Hardly — none of these things are innovative at all!
10:33 Upside for margins? Expect to deliver cash flow margins in wireless business in mid 40% range. Expect same levels of growth in mid teens (rev.).
10:36 When acquired MCI with EBITDA margins of 5% – 7%. Thought we could get to 14% – 16% range. Continue to move to that goal. Upside is good.
10:37 Any opportunity for FiOS for small-mid-size business? Premise of question is correct. We agree that FiOS gives us a competitive advantage in small and medium size market. Will happen more as we build out major cities, and on the video side, as we get franchise agreements.
10:38 Technologically, there is nothing hindering us. Will be able to offer FiOS data and video to small business market in 12-18 months. Other things on drawing board, too. No impact from cable competitors in our small business market yet.
10:41 Where we do not have FiOS product rolled out, fierce bundling competition from cable competitors. That’s why we’re emphasising building FiOS out as quickly as we can. Also trying to compete with DirecTV bundles — 800k subs.
10:42 What do you see on churn side? Can you increase customer spending? We believe we can get people to spend more money. More HD this year means we have some upside. Where FiOS has been out for a while, feeling good about increasing spending. Churn: based on what we’re seeing in customer comments and awards we’ve won, I think we’re in very good shape on service quality. Churn rate is not at all significant on FiOS.
10:44 Capex: how should we think about capital intensity of wireless and fixed line going forward In wireless side, essentially completed in EV-DO rollout (3G wireless). Also announced commitment to LTE (long-term evolution) in 2010-2011 time frame. Lots of work left. Will not be a significant increase in capex. Slight spending over what we’ve historically spent, but I don’t consider it to be material. FiOS: Said we’d pass 3 million more homes for next several years. Don’t see significant change in capital spending while we’re building out FiOS.
10:46 I am hoping open access is a big market, a brand new marketplace for us. But the truth is, time will tell. We think it’s a new opportunity for us. But can’t quantify it for you. Jury is out at this point. Better feel for it when we have our developers conference later this quarter. Hope we can tell the marketplace more of our thoughts, see how many developers are interested. Have begun talking with many devs, will have more info about that at end of Q1. Aspirations now, but no specific projections.
10:50 Smartphone penetration: how much ramp over next year, will it have an ARPU impact? Nope, will not tell you per cent of base of smartphones or our projections for ’08.
10:52 I don’t think WiMax is a serious threat to us at this point. We’ll have to take a wait-and-see attitude. In terms of LTE, working with partner Vodafone. We’ll see what happens with WiMax. Will begin testing LTE in networks this year, will begin installing it in 2009-2010, hope commercially available end of 2010/2011.
10:53 Usage-based pricing structure for open access customers. Is there an opportunity for bypassing us? Maybe.
10:56 Closing thoughts: coverage is good. Participating in 700 MHz auction. Shed some access lines, cleaned up international holdings, bought MCI, got rid of directories, invested in 3G and FiOS, spent a lot of time, effort, and capital. Saw some benefits already last year. There’s more to do, of course — can take a lot of costs out of our business. But we feel good about progress and opportunities going forward.
10:58 Session finished.
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