Verizon Communications Aktie

Good morning, everyone. I'm Sebastiano Petti, and I cover the telecom cable satellite space for JPMorgan. I want to welcome Dan Schulman, CEO of Verizon. Dan, thanks for joining us.

Thank you for having me, Sebastiano.

Of course. And I think you have a safe harbor to review?

Yes. So I would refer everybody to our safe harbor on our website. I'll be talking about things in the future. And so they're always subject to risk and uncertainty.

Great. Now with that out of the way. So Dan, you're now seven months into your role as Verizon's CEO. And in that time, you've driven some meaningful change across the organization, but perhaps the most notable milestone so far has been returning Verizon to postpaid phone subscriber growth in the first quarter for the first time in 13 years. And so I guess where are we in the transformation story? What inning are we in? And looking ahead, what are the biggest near-term opportunities and priorities for you and your team?

Well, first of all, thanks for having me. I appreciate it, and thanks, everyone, for being here. I would say we're a bit further ahead than I expected in our transformation. It's a big company. It normally takes a lot of time to turn things around, but the company has responded quite quickly to the transformation efforts that we've had. So I'm pretty pleased with that. I think our turnaround is on track and probably gaining momentum right now.

I have four priorities for the year. The first inside the company was a shift to focusing on customers. Everyone talks about being customer-centric, but we were network-centric and engineering-centric inside Verizon. By the way, having the best network, I think, is massively important. I fully intend for us to continue to have the best network in the industry. But it can't be the only thing that you go to market. It needs to be -- the whole end-to-end customer experience needs to be revised.

And the best way for everyone here to measure our success on whether we are truly becoming customer-centric is our churn rate. If our churn rate is coming down, we're being successful. And if it's not, then we have more work to go and do. And churn is really the one metric that I think unleashes our entire business model. And so to me, that's probably one of the most important metrics to look at.

The second thing that I'm focused on is a shift in our culture. Verizon has a pride culture, but we are bureaucratic. We are hierarchical. We are process-oriented versus outcomes oriented. We love to show our work, but results come later, and that's not acceptable for me. We're risk-averse and we move slowly, and all of those things have to change quite dramatically. And what I say inside the company is if we're going to regain our market leadership, we need to play to win. And that is not a trade marketing statement, that is something that I have deep conviction around, and that is resonating inside the company, and that's why you see things like our net adds improving. You see us being able to execute against our cost initiatives. And that is the third priority for me. Let's make sure we are the most efficient telco in the world.

We are taking out $5 billion in OpEx. We are well underway in that. I'd be surprised if we don't come in slightly more than that. We're taking out $4 billion from our capital, from our CapEx, and we are on track on that as well. But that is basically a means to an end. So you don't cost cut your way to greatness. We are taking out costs to do two things. One, to reinvest back in the customer experience, and we're seeing already improvements as a result of that. And the second thing that you do with that is that you go into our fourth initiative, which is return value to shareholders.

And so my view is previously, most people saw us as kind of like a substitute for bond yield because we have a great dividend that we've been -- increased 20 years in a row. My view is we need to have a step function improvement in both our top line and our bottom line performance. We need to show consistency in our revenue growth, continual productivity and efficiency in the middle, in our operating expenses, and therefore, drive bottom line growth and equity growth for our investors. And for the last five years, our free cash flow growth and our adjusted EPS growth rate have been negative 1%. This year, we guided to free cash flow growth of 7%, at least 7%, and we just raised our adjusted EPS growth to 5% to 6%. And so I think those are the four priorities that we're going to pay a lot of attention to. And they'll probably stay with us for the years to come.

So a lot of topics we'll circle back on during the conversation here. But one of the things I want to bring up, and you've been quite vocal about as well is your belief in AI and on the call recently, I think you drew a deliberate distinction between being an AI-first company and being an AI-native company. So I guess with a preference for the latter, right? What does that actually take to get there? And I guess, where would you say Verizon is in that journey today?

Well, we're moving rapidly towards being AI native, which means that AI is going to redefine every single part of our organization, our organizational structure, our productivity, the way we go to market, the way we defend ourselves from attacks. AI is not a nice to have, it's existential. We are one of the first 40 companies to work with Anthropic with their Mythos model. And if you've worked with Mythos, you understand that the only way to defend is to defend through your use of AI models.

It is no longer enough to have great humans in the loop, great processes. This is a whole different world, and it needs to evolve rapidly in the next 6 to 12 months. 85% of our network issues are autonomously fixed, that needs to move towards 100%. If there's an element in our network that is not remotely patchable, that needs to come out of our network, and we need to replace it with things that we can automate rapidly and quickly.

When I look at our whole tech stack, we are putting into place a 4-level tech stack on AI. The bottom is kind of our intelligence layer, how do we structure and format our data, whether it be structured or unstructured, that's where LLMs and SLMs come. On top of that is a kind of a development layer where we gin up our models, we gin up our agents. We watch how they run before we release them into the top level of our model, which is our run time or production level, which is where we put AI into our business functions.

And we surround all of that with control panels to look at safety guidelines, observability, identity management so that we have an entire stack. That stack will be mostly done by July and complete by November. That's a very rapid implementation for Verizon. But based on what I'm seeing in the world right now, that's the pace that we need to go at. And it will have profound implications, it will have profound implications on our cost structure, it will have profound implications on our value proposition, what we can offer to customers. And hopefully, it will enable us to be the most reliable and safe and secure network as well.

Great. So you touched on churn, one of the key drivers behind the year-on-year improvement in your net adds in the first quarter was the churn improvement, churn reduction. And I think you said on the call that you expected that at least half, if not more, of your 2026 net adds would come from the churn improvement. I guess we touched on a lot of this last night, but help us think about what are the business and process changes that are -- you're enabling today. And then, I guess, thinking about, I think you've thrown out a target of 5 basis points of churn improvement year-on-year. Is that still maybe the target we should be thinking about for the year?

I think churn is a reflection of how our customers think about us, how well we're doing and satisfying their needs vis-a-vis our competitors. And so I think churn is one of the most important metrics that we have. Our churn has been going up over the last two or three years. And it's essential and it will be a reflection of how successful we are in our value proposition to watch the direction of churn.

We have reduced churn in the first quarter by 5 basis points from the first quarter. And I would fully expect us to continue to reduce churn. We are incredibly focused on the drivers of churn. We have an initiative inside the company, which is called Every Customer Has a Name. It means that we treat every customer as an individual. We are massively sophisticated now inside the company in terms of what are the churn drivers and what can we do to satisfy customers and delight them. And I think churn is the best way to improve your business model.

My anticipation is that at least half of our net add improvement, and we've just taken up our net add guidance for postpaid, will come from churn improvements, maybe more. We're making very good progress on that. We had 95 basis points of churn in our Consumer division in Q4. We had 90 basis points in Q1, and we exited Q1 at an 85 basis point improvement. So we'll see where we come out in Q2, but that is a way of measuring whether or not we are satisfying our customers. And when you have churn improvement, it means that your Cost per Gross Add also comes down as well. And we have seen our Cost per Gross Add, our retention costs come down by 35% since the height of Q4. And so I would expect that would continue to be something that investors should focus on. We are clearly focused on it inside the company, and we're making good improvements, too.

I guess one of the things we've discussed as well is, given the dramatic improvement in the first quarter, call it, 340,000 net add improvement in the first quarter on a total phone basis. I guess maybe why -- given the magnitude of that, why shouldn't investors view, I guess, the revised upper half or upper end of the net add guidance? Why isn't that conservative, given the momentum coming out of the first quarter?

Because everything we talk about should be conservative. I feel if we say something, we have an obligation to meet it. And if you look at our adjusted earnings per share, if you look at our free cash flow, over the past five years for both of those metrics, we're negative 1%. For this year on free cash flow, we'll be at least 7% up. On our adjusted EPS, we just raised our guidance to 5% to 6%, just took our guidance up for our net adds for postpaid to the upper half of the range. And our revenue growth, and this will be a transitional year for revenue growth, and we should talk about that, we'll be between 2% to 3%, and will accelerate through the year.

So I feel like that's good, conservative guidance. It's a step function improvement from where we've been. But I think at the same time, we want to be as sure as we can be in uncertain environments, things can change, as sure as we can be that, that guidance is guidance that is prudent and it's something that investors can count on.

Okay. And I think still awaiting perhaps a value prop refresh. I think you've talked about central pillar of the strategy is to redesign, to have an end-to-end redesign of the customer experience based around transparency, simplicity, genuine value delivery. I guess, the question is, I guess -- I mean, can you bring that to life a little bit for us? I mean what does that actually look like in practice? I guess how do you -- how will customers feel that difference?

Yes. Well, we've been working on our value proposition since the -- well, since weeks before I went into the job, because obviously, the way to measure whether or not we are satisfying customers is both the net adds that we have, our churn rate and their customer satisfaction levels. We hit our highest customer satisfaction levels in our history last quarter for our customer service.

Our churn is starting to come down. And that's because we are doing lots of small things right now. Our models are much more sophisticated. We're looking at hundreds of variables now as opposed to 2 or 3. It's why our cost per acquisition is coming down, cost per retention is coming down, because we're much more segmented, much more thoughtful about what the customers need.

It used to be, for every problem you had, we gave you a free phone. That was expensive. And if you are having a problem with connectivity at home, a free phone does not address that at all. A femtocell may address that. A femtocell is 1/3 the cost of a free phone, and it actually addresses your problem as opposed to you have a new phone, and you still have bad service at home.

And so we're just going to be much more sophisticated in the way that we think about this. I think we can be much more fiscally responsible and much more customer obsessed by thinking about things on a micro segmentation basis. We will -- we will look at revamping our value proposition, but that value proposition it's not one big thing. It's tons of small things that make a difference. And so the way to measure us is our churn rate come down and do we still continue to add net adds at an accelerating basis going forward?

And so talking about the -- going back to the efficiency efforts on the CapEx side as well as on the OpEx side. So you've announced the goal to cut $5 billion of OpEx in 2026, maybe some upside there, but also reduced pro forma CapEx by $4 billion. So I guess one of the questions we get is how do investors get comfortable that this level of network spend will still allow Verizon to remain competitive?

Well, we're still spending $16 billion to $16.5 billion in CapEx. Frankly, whether we need that amount is somewhat debatable in my mind. We have done most of our 5G implementation. We probably have 10% more to go. We're constantly fine-tuning our network. The fact of the matter is we can have what we consider to be the best network and what is measured by external benchmarks, 7 of the 8 of them, we lead.

I'm going to constantly make sure that we have the best network, that we invest the right way to make sure that, that happens. But we've done a lot of the investment that we need. We'll constantly build out. I'm always measuring. And it's a very mathematical equation. How much more capacity do we need? Do we want to build incremental cell sites? Do we want to get more spectrum into our mix?

But we have a pretty good view of all of that. I think I will never compromise on the quality of our network. I want it to be the best in the industry. I'm quite focused on that. I don't feel network is the only thing that you can differentiate yourself on. I want to have the best network. And when I look at the metrics, we do and I'll continue to invest to make sure, $16.5 billion is a lot of money, but we've done a lot of our investment. I actually think we can probably become more efficient from here, not less efficient and maintain our network lead that we have.

At the same time, I want to invest in other parts of our business. The whole experience to me is crucial from the time that you come into one of our stores, that you're online, that you have customer service from us. It all needs to be the best in the industry. And so we're investing a lot behind that, and I would never under-invest in any part of our business, but I'm making sure that everything we do is as efficient as possible.

I guess, how does that translate to the spectrum side? Is that somewhere in an area you believe -- not necessarily you're pulling back on, but an area that you want to make sure from a spectrum perspective, Verizon is well capable?

Yes. I mean, I look at -- I'm very math-oriented, so I look at everything from kind of what does the investment get us? So do we need more spectrum? Can we add more cell sites and densify what is the trade-off? What is the timing for that? And so I look at all these things as a sophisticated math problem, but I'm not going to lose our best network claims and where we need to add additional spectrum, we will.

But I look at everything kind of as a very sophisticated math equation, where are we, where do we want to be competitively, what's the time frame around that, because you can either buy spectrum or you can add more densification in your network. They have different time frames and different costs associated with them. But I'm not going to lose best network claims for us. That's essential. But best network alone is not enough.

There needs to be surround around it. The value proposition needs to be right. Every touch point needs to be superior. And we're investing. I mean we did cut $5 billion of operating expenses, but I'm investing a lot back into the business to be sure that we have a superior value proposition and that our churn rate continues to come down because we have a superior value proposition.

Sticking with spectrum, you recently announced an agreement in principle to form a joint venture with AT&T and T-Mobile aimed at eliminating wireless dead zones. Given that a definitive agreement has yet to be reached, can you walk us through the strategic rationale? What does this joint venture accomplish that Verizon can achieve on its own? And how do you think about maybe the playing field? What does it mean?

Yes. So we, along with AT&T and T-Mobile, we'll be going into a joint venture to basically eliminate dead zones, partnering with satellite companies. We think that working together that we can create standards as opposed to being three sets of standards for all the different satellite players to work with us. We'll have a common set of standards. We'll be able to leverage our volumes and create value propositions for consumers, and each of us will create our own unique value proposition. But we'll have a common set of standards that we can use across handsets, across the different satellite players.

And we're all eager to provide the best communications to our customers, and we felt doing this together was a way that we could accelerate that and also make it simpler and easier for the industry and our customers. So we're excited about the JV. We think it will eliminate a lot of dead zones. It will create a lot of value for both the satellite companies and for the wireless providers together. And so we are eager to make it happen. And I think it's a big step forward for consumers.

Great. And then sticking with Direct-to-Device. How concerned is Verizon about Direct-to-Device providers eventually going Direct-to-Consumer, whether via a terrestrial network, MVNO agreement? And I guess, what are the -- I guess I want to ask you the follow-up of what are the pros and cons of an MVNO for Verizon since you've shut that down recently. But how are you thinking about that threat?

Look, I think over the foreseeable future like, call it, the next 10 years that satellite is a complementary service to the carriers. If you think about kind of our capacity in urban and suburban, where 100 to maybe 1,000x more efficient than satellite could ever be in those areas. There are probably 5 million homes in the U.S. where satellite can be a more efficient alternative. But for us, the physics of satellite versus terrestrial are really kind of night and day difference and so forth, 95% plus of our customers, we see satellite as a complementary service and very, very hard to compete with terrestrial networks.

Okay. And then for a couple of minutes here we have remaining, you talked about perhaps maybe upside to the $5 billion cost opportunity. But as we think about just Verizon's focus just on efficiencies. As we look out to 2027 or we look out to down the road here, how meaningful or should we expect a similar magnitude of cost takeout kind of going forward into 2027? And just maybe, what are the efficiency efforts above and beyond, we talked about churn, but at a business level, maybe where do you see the lowest-hanging fruit down the road here?

Well, I think my view of the whole model in general is that on revenues. There are five things that are probably going to happen that will start to accelerate our revenues going forward. First of all on -- we decided we were not going to take up pricing again. That's going to lap by the third quarter. And so that starts to be a tailwind for us as we go into the back half of the year and next year. Also, our amortization, promo amortization, which is almost 190 basis points of headwind against us begins to turn as well. And that will start to turn probably maybe as soon as the third quarter of this year.

We also obviously are now putting on quite a number of net adds. Before, we were losing a lot of net adds. Now we say we're going to do at the upper half of our postpaid that will be anywhere from 2x to 3x. What we did last year also, we have accelerating broadband penetration as well. And so that will continue to go. And we also have talked about, we have $1 billion to $1.5 billion of negative margin programs for us, and we are either going to exit those programs or supplement them in different ways where that drag will not happen.

And finally, we have a huge opportunity right now working with AI providers. So there is maybe once in a lifetime opportunity now as AI continues to move where we can use our infrastructure to support that. We can use our central offices to support that. And so I see a real significant opportunity for us as we look forward on that.

On the cost side, we're just going to continue to take out costs year after year after year. And that's just going to be a continual effort for us. AI is going to redefine the way that we go to market, the way we think about our cost structure. We are already seeing where we've started to put AI into place in our, for instance, in our customer service locations where we've had a [ 1,280% ] improvement in customer satisfaction rates, and we're just beginning on that.

And so I think whether you look at the top line, the middle of our income statement, and then obviously, on our bottom line, I can see room for us to consistently improve year-over-year for the next several years. And at the same time, we obviously have a dividend that has gone up for 20 straight years. We are now doing a share buyback. I expect close to $55 billion of return of capital to shareholders over the next three years. And we feel very comfortable with that entire model.

Great. And on the AI infrastructure side, I mean, any KPIs or how meaningful could that be from a top line perspective?

Well, we haven't talked about that specifically. But it's a multi, multibillion dollar opportunity for us clearly, and possibly more.

And then before we conclude here, any final message you'd like to share with the investment community that we haven't maybe perhaps covered yet?

I think we have what I think is a conservative plan in place. We know what we need to execute against. I'm really pleased with what the team has done. But we have a lot more to do, a lot more to prove, and you can be sure we're very focused on it.

Great. Well, Dan, thanks for joining us today, and thank you, everyone.

Thank you, everyone.

Good morning, everybody, and welcome to MoffettNathanson's 13th Annual Media and Communications Conference. And for those of you on the Web, welcome.

I am really delighted this morning to kick off this year's conference with Dan Schulman, CEO of Verizon. Dan and I go way back. We first crossed paths back at -- when he was at AT&T in the 1990s. He brings a remarkable resume to the CEO position at Verizon, serving as not just a business leader at AT&T, but also at Priceline, American Express, Virgin Mobile USA and PayPal. And you took over as CEO in October of last year. So that's a good place to start, Dan.

You've now been in the CEO chair for a little more than 6 months. Granted, you already knew the company well from your time on the Board. But what have you learned in the first 6 months as CEO that you didn't know before you started? And what surprised you the most?

Well, first of all, thank you for having me, Craig. And we do go way back, and it's a pleasure. I always learn a lot from reading all of your reports, and they're always thoughtful and analytical, and I appreciate them.

I appreciate you saying that.

I don't think there were any huge surprises when I made the shift from Lead Director to CEO. It was evident we needed to make changes. Obviously, we have been losing market share for 5 years. We have gone from #1 in market cap to last in market cap. Our forward P/E was the lowest in the industry, which was a reflection of how well you felt about our future growth prospects. And so we clearly needed to make a change. And I had a lot of ideas about that coming in. I mean, obviously, any time you come into an organization, you find pockets of things that are better than you thought and pockets of things that were worse than you thought. But in general, it was as advertised.

So what's the top priority item for 2026? And how do you judge the progress that you've made so far with the turnaround? Because you laid out some pretty clear and tough language about the turnaround that needed to happen.

Yes. We have 4 priorities coming into the year. The first is what I would just call a focus shift where we're shifting the organization from being sort of engineering network-centric to being customer-centric, where everything we do is about putting the customer front and center. It is figuring out that end-to-end customer experience, how we delight customers, address their pain points and do it in a way that no one else can do that. And that's no small task, but the way to measure our success on that, by the way, would be to look at our churn rate. So if churn is coming down constantly, that means we're doing a good job at delighting our customers. And then from there, I would look at net adds. So that's how I look at how are we doing on that shift.

Second thing is the culture shift. When I got there, I feel like the organization was more prey than predator. And we were not playing to win. We were, as somebody put it, gently ceding market share to the other 2 carriers, and that just doesn't work for me. The culture -- I mean, there are good parts of the culture of Verizon, a lot of pride in what we do, but way too bureaucratic, way too risk-averse, scared to make mistakes. Therefore, we move slow. We are -- we love to show our work as opposed to show outcome like process versus outcomes oriented. When I came in, I read this article, like, how is Dan going to get along inside Verizon when it's a company that files paperwork to do paperwork. And so busting through that cultural shift is a very important element for us, and I'm quite pleased with the progress there.

The third focus is I want to be the most efficient telco in the world. And that means we committed to $5 billion of OpEx cuts. That's the -- that's the smallest number that I want to see. Like we are well along...

What's the yardstick for most efficient? Is it revenue per employee? Or is it just...

Cost structure...

So net margin?

Yes. I want cost structure.

Yes.

Yes. We cut out $4 billion from our CapEx, and I feel really, really comfortable with that number. But basically, being the most efficient telco is a means to an end. It is not about cost cutting. It's about investing back into the customer experience. It is about amassing a war chest for us to be able to respond to what is happening in the market. And then obviously, it is about shareholder return, and that is the fourth focus area that I have, which is how do we drive shareholder returns. And there are a couple of ways that we do that. Obviously, we're known for our dividend. That is an ironclad commitment that I have. It's almost a 6% return.

But I don't want to be known for like a bond return. That's not who we are as a company. This is about driving equity performance. It's about driving sustainable top line performance. I'm sure we'll talk about that. It is about being incredibly efficient and productive in the middle and therefore, driving adjusted EPS growth. And if you look at kind of our EPS growth and our free cash flow growth for the last 5 years, our average for both of those metrics has been negative 1%. For this year, it's a step function improvement. Our EPS, we just improved our guidance on that. For adjusted EPS, it's 5% to 6%. Our free cash flow at least 7%. We put into place buybacks, $25 billion over the next 3 years. In the first quarter alone, we returned $5.5 billion to shareholders.

So those 4 things are the things that I'm focused on for this year and quite frankly, probably over the next several years.

So there's a lot in there that we're going to unpack over the next half hour. I want to start, though, you and I spoke a couple of months ago about the need for competitive differentiation in this business. Can you talk about that a little bit? And you mentioned in your remarks a minute ago that the organization was too network focused and not customer-focused enough. Is network superiority, though, still an available position in this industry? And given how important it has been for Verizon historically, is that still important for you in your brand positioning?

Yes. Is that 5 questions in that 1 question? I think it was. Look, objectively speaking, Verizon still has the best network in the industry. If you look at most measures, like 7 out of 8, we have the best network. Having network superiority is incredibly important to me. I want to compete on that. But that isn't the only thing. What I tell the team is network superiority, network excellence is foundational, but it's not enough. I want to do more than that. And really, it is about the end-to-end customer experience. How are we defining that? How are we supporting that? Is there friction in that process or not? And as you well know and everyone knows that there was a lot of friction in that process.

The thing about competitive differentiation is -- and this is good and bad, and this is exactly what I tell my team. There is no silver bullet. So if there was, that would be great, it would be easy to go do. I would have done it already. And by the way, all my competitors would have done it as well if there's a silver bullet.

The thing about creating competitive differentiation is it is some cumulative total of hundreds of things that you have to do extraordinarily well. And I have the team focused on every single one of those metrics every single week. I expect to see every single month, every single quarter, I expect to see us improving on those. I have a mantra inside the company that every day matters. I want to see what we did better today than we did yesterday. And I know that's a bunch of intensity that I have inside the organization right now, but that is what we are driving right now.

If we want to reclaim our market leadership across all elements, we need to be intense inside the company. We need to play to win. We need to do all the small things extremely well because if we do that -- and by the way, just one proof point is last quarter, our customer satisfaction scores when people called into our customer care centers were at a record high. And to me, that's outstanding progress in that. And so to me, differentiation is not one thing. It's not a big bang. It's -- it is hundreds of things that you need to do extraordinarily well. That's why it's hard. But if you can do that, you have a lasting differential value.

One of the basis of differentiation that I think the industry has been increasingly embracing, and it's one of the things I really want to pull out of this conference through all the discussions that I'm going to have with leaders over the next few days is the topic of convergence. Now that you closed the Frontier deal, is it fair to say that convergence is the cornerstone or at least a cornerstone of your go-to-market strategy?

I think it'd be fair to say that convergence is a part of our growth story. But clearly not say that it is a growth story for us. Convergence is really important. I mean we have a nationwide broadband offering and fixed wireless access. It's got extremely high NPS scores, higher than cable companies, for instance, the FWA. We have tons of capacity in our network to drive that. And we also have a large and growing fiber footprint. We'll be well over 32 million homes passed by the end of this year.

And with convergence, you get a number of things. First of all, only 20% of our wireless base has a broadband offering. So a lot of opportunity for penetration there. When somebody does have broadband, by the way, our connection rate of wireless is also industry-leading. It's over 55% and take our wireless service as well. Our churn in general is quite substantially less, about 30% less when somebody takes a converged offering, and that's across both fiber and FWA. And when our ARPA goes up, some people say, oh, convergence is another word for discounting. That is like...

I think it's me who said that.

Yes. Well, I didn't want to say anything. I was giving you the chance not to say that. It's just not true. I mean it actually adds lifetime value. It adds to ARPA. You can charge like depending on what the speed is, you can upcharge for that. And so to me, convergence is a really nice cornerstone for growth. We have some really great assets that we can leverage.

But one of the things that we don't spend a lot of time talking about because you haven't seen it yet and it probably isn't in your model, and I'm sure it's not in anybody's model right now, is we also have a gigantic opportunity in AI infrastructure. We are sitting on some amazing assets, whether they be dark fiber routes, lit fiber routes. We have hundreds if not thousands central offices that are data centers that we've decommissioned, but have power, have permitting, are at the edge and for applications like remote surgery, autonomous driving, et cetera...

So that's our -- this generation version of mobile edge computing...

Exactly. And they're in huge demand. And so to me, you've got a massive incremental leg of revenue growth for us that will start to become apparent as we announce deals going forward. That is another leg of growth. And then, of course, we'll have volumes that are picking up that will drive growth. And then we've got -- the fact that we're -- by the third quarter, we will have lapped our price increases.

So now instead of having a 180 basis point headwind that turns as we go into the third quarter and promo amortization, which most people probably understand, but we were very promotionally intense last year and the previous years. That's how we were driving net adds. That puts pressure on your revenues because you need to amortize that promotional expense on your revenue line. That's about 200 basis points. And my anticipation is based on what we're seeing right now and our ability to drive down promotional intensity that, that will go from a headwind to a tailwind maybe as early as third quarter. So a lot of legs of that stool of growth and convergence being an important one, but you can emphasize it, but I wouldn't overemphasize it.

I do want to go back to convergence one last time for a second, though. You said a second ago that you're getting the 30% churn reduction in both fiber and FWA.

Mixed across those.

So is FWA then a sufficient answer for the -- ultimately, I think you get to maybe 30% of the country covered with your target homes passed with fiber. In that other 70%, is FWA a sufficient solution? Or do you need to keep looking for wireline assets to grow the wireline footprint?

Yes. I know that there are some, not necessarily you, but maybe you who think about kind of what I would call like ILEC 2.0 or something like that. But that is not how I think about this at all. Like we have great fiber assets that will grow to 40 million to 50 million over the medium term. I feel very comfortable with that number. We have an excellent product in FWA that has very high satisfaction rates. We bundle it easily. We have plenty of capacity in the network to continue to push that. We have 6 million customers on it. I think we have guidance out there of 8 million to 9 million by 2028 and very comfortable with that.

So that's going to be a growing part. Fiber will be an increasing part of our mix of broadband. And there are other things going on with spectrum. We have a lot of millimeter wave. We're thinking about ways how do we utilize that more effectively in a broadband fashion, and there are ways that we're thinking about utilizing that. So I think there's a lot of elements that we have. But if you take your argument to its logical conclusion, you would say then, okay, AT&T, Verizon, you guys have a lot of fiber assets. T-Mobile has no fiber assets or very few, then they would be at a massive disadvantage.

And I do get to that what you called ILEC 2.0, where you have Fortress Northeast for Verizon, Fortress South and West for AT&T and so on. But you don't believe that we're headed in that direction.

I don't. I think you're going to have really strong broadband offerings that will be increasingly powerful. And remember, speed is an interesting concept, like on your mobile phone, all of you on -- like it's doubtful that you ever use more than 25 meg of speed on your mobile phone. Speed is really great for speed tests on your mobile phone, but it's good for very little else on that. In the home, if you're at 100 meg, you're probably way more than satisfied on that. Will some people need a gig? Maybe, maybe to show off to somebody or something like that, like -- and we could do 7 gig on fiber, but you've got...

There are no applications for it.

No. It's just the speed test. And so do we have a really good, solid nationwide broadband offer? Absolutely.

Well, I'm going to come back to that, especially the FWA capacity questions and that sort of thing in a second. But I want to sort of dig into the individual businesses, at least as what I still think of as the individual businesses of wireless and so on. And start with wireless. Tell us what's behind the turnaround that you've had in postpaid phone net adds because it really has been a remarkable turnaround in the last just 2 quarters.

Well, I think we have a lot of work to still do there, honestly. And I think we have work to do on both the account and line level on that as well. But look, the first thing is to clearly define what your objectives are, clearly define to the company, like we are going to play to win, like it is not a marketing slogan. This is like look into my eyes, I fully mean that we're going to win...

So this is predator, not prey as you described earlier.

Yes. I've been a Mixed Martial Artist for 40 years. I also know the best way to win a fight is to not get into a fight, like because any time you get into a fight, you're always going to be hit. But in the fourth quarter, basically, it's like we're getting into the ring and we're not going to lose. It's as simple as that. And we -- and I have a huge war chest to go spend, but that's not really my way that I want to compete. Like my way I want to compete is to be segmented financially and fiscally responsible, and I want to close the bottom of my funnel. That's like the best way to win. But in the fourth quarter, we got into the ring, and we said like if you're going to hit us, we're going to hit back hard, and we're going to win.

First quarter was very, very different than that. The first quarter was about how do we think about segments of the market? How do we think about segmented offers into the market? How do we move away from free handset being the answer to everything? How do we stop giving away value from MNOs to OEMs by just giving away free handsets on everything that goes on? How do we lower cost of acquisition and how do we drive a better customer experience? And because we're not raising prices without value anymore, are we going to get more customer loyalty? And so in the first quarter, it was predominantly about shutting down the bottom of the funnel. We exited the quarter on the consumer side at 85 bps of churn, which is a really good number.

And so my view as we go forward is our cost of acquisition, our cost of retention was down 35% from Q4 levels exiting the quarter. I see us being able to stay at those lower levels because we're just smarter about how we're talking to customers and offering like N -- if N is the best model, N minus 1, which costs half that in an acquisition, actually plays to like 80% of the base. They love that offer. And so we're just -- we're so used to doing things the way we did them as opposed to being massively analytical, very sophisticated modeling segmentation of not like 4 segments in the market, but hundreds and thousands and hundreds of thousands of segments. I mean that's the sophistication that we're driving towards. And I feel like we'll continue. We took up our guidance for net postpaid adds.

But for me, like that will happen. To me, it's now about how do we also drive account growth? How do we drive ARPA growth? How do we do all the things that are right for the business model? Start with churn reduction, start with your cost of acquisition and your COR. Start to measure people like not on -- like no more free lines, like I don't really want to measure a free line as a net add. It's low calorie. And so I told the team like that doesn't cut it anymore, no more free lines going forward. ARPA will naturally turn just because you have price -- lapping price increases, lapping promo amortization, volume growth, AI infrastructure growth, that will naturally turn as we go through the year. And account versus line, now that I'm driving the company towards being obsessed with customers, customers are accounts. And so like both accounts and lines are important. You want to drive account growth and you want to drive as many lines with that account as you can as long as they're like real lines.

Yes. How do we reconcile that difference? Because in the first quarter, you added 55,000 postpaid phone net adds, but you dropped 127,000 accounts. So you can't even calculate the number of lines per account in that -- just -- but you're obviously adding lines to accounts really quickly if you're shedding accounts and adding lines. What's going on there?

Both have to improve, like our account growth did improve year-over-year, but it was still negative. It will continue to improve going forward, especially as we focus more and more on customer and less and less on lines per se. But I would say that account growth will continue to improve and ARPA absolutely will grow as the year goes on.

So I'm going to come to ARPA in a second, but I just -- so AT&T -- I struggled with this when I was sort of trying to digest the last quarter's results across the industry...

Don't struggle.

AT&T lost share of the subscriber growth market, but they actually gained share of the account growth market. Yours was the opposite. You -- so if you looked at market share between you and AT&T alone, you're gaining share of subscribers, but losing share of accounts. That's obviously not sustainable. What's -- but how do we even analytically understand that?

I don't know. I can't really talk for others in the industry. I do know that we want to grow our accounts, grow our number of lines and drive our ARPA up. And I think that's how you should look at us. So to me, both accounts and lines are important. ARPA is important. And then just look at our top line revenue growth and that, that should guide you the right way. Good enough.

And the ARPA, you said a couple of minutes ago that you thought it would turn in the third quarter. It was down 1.9% year-over-year last quarter despite the fact that you had a big uptick in the number of lines per account because, again, you were losing accounts and adding lines. So is that all promotional amortization that's really weighing that much on?

No. Half of that was the network outage.

But even with that, you were down 9, 10...

Yes, about 9. And then a ton of that is promotional amortization.

And that's the -- you've talked about changing and moving away from this industry addiction to giving away free phones. Talk more about that. What does that future look like as you move away from free phones? How do you get customers who have been trained for 20 years now to expect free phones every time they turn around to be weaned from that expectation?

No, it's not customers that need to be weaned. It's the industry that needs to be weaned. That's just the way that the industry has done things. Look, I can't speak for the other carriers. But what we've seen through our segmented offers, both on the retention side and the acquisition side is that you can be much more sophisticated in what you offer to a customer, listen to them, understand what they need. 20% of the market is latest edition free phone addicts, and we'll have offers for those. 80% of the market is not like that. And again, I don't know what the other carriers are doing, but I listen to them, just like you listen them on their phone calls.

I think everybody is coming to the conclusion that we can be -- that we're transferring too much value from MNOs to OEMs for no good reason. Like if it makes sense, so be it. And will there be promotional times where people will be out there? I'm sure that will happen as well. But in general, I think you're seeing it already with Verizon. We can be way more profitable, drive bottom line performance and top line performance and net adds in ways that we haven't done in a long time by being a lot more sophisticated, a lot more fiscally responsible and a lot more customer-centric.

We've talked mostly about the retail wireless business. I don't want to miss the opportunity to ask about the wholesale wireless business and in particular, the MVNO that you've got with cable. The question I get most often from investors in Verizon is, is cable friend or foe?

To me, they're friend. We have an extremely accretive arrangement with them. And I'm happy to be really close partners with them. And I think my attitude is -- I ran an MVNO as well. So I know inside and out. I understand the pressures that they have on them. I understand the opportunities that they have as well. It's great that they're on our network. But because we are thinking of each other as partners now and not as foes, there's a lot of opportunity that comes with that, too. I want to really think carefully about how we think about our networks together and what can we do on that front to be helpful to each other. And so I see a lot of opportunity, and I'm good friends with Chris and Bryan and Mike, and we're going to figure out opportunities to work closer together.

Interesting. Okay. Let's go back to FWA for a second. You talked about the capacity you've got for FWA, but you've had now 10 straight quarters of lower year-over-year net adds. Is -- what's going on there? Is that just the introduction of new FWA competitors competing in each market? Is it the beginning of competition from LEO satellite? Or what is the reason why the FWA business seems to be decelerating?

Well, I mean, one, we have 6 million people already on it. Again, we'll get to 8 million to 9 million by 2028. We also now have a lot more fiber than we have. And when we go and sell, you should expect our mix shift to move more towards fiber than FWA. But we're going to do a ton of broadband growth every single quarter. We did 341,000. I think it was net adds. I don't even want to look at my team in case they're going to shake their heads to that strong number. But I think we did 341,000 net adds in broadband. Look, when I look at our net adds across postpaid, across broadband and across prepaid, we're going to have quite a number of net adds by the end of the year across all those things, and that's going to drive a lot of revenue growth for us.

So last year, we published -- I think it was probably before you took the CEO position, but we published some -- maybe back of the envelope math is the best way to describe it, but it would suggest that even by last year, FWA was roughly half of all the traffic on your network, but only about 4% of your revenues. Is that sustainable? And where is that mismatch a problem?

Well, first of all, your math is wrong. So it's hard to argue against the wrong math equation. So it's a minority of traffic, not 50%. So yes, we have a lot of room on the network for FWA to go forward.

And one of the questions that I find really interesting, both as opportunity and it relates to this capacity question for FWA is, what do you expect AI is going to do to network traffic loads? You can imagine as we start to see whether it's delivery vehicles or driverless cars and drones and various types of robotics and meta glasses and you name it, that you start to see much more significant loads on the wireless network than what the growth rate starts to reaccelerate to those old 35% compound annual growth rates that we used to see 4 or 5 years ago. There's obviously opportunities in that traffic, but there's also network capacity challenges in that traffic. Can you talk about that a little bit as to what you think is going to happen with AI workloads on the network?

Well, first of all, it reinforces kind of this AI infrastructure point that I feel we might be best positioned to capitalize on. Obviously, the hyperscalers, alternative cloud providers, large enterprises that are moving rapidly into the AI age are keen to leverage our assets in that. Second, from a consumer perspective, I think as more and more AI applications, as phones move from apps to kind of an agent-based interface, I think there's room for us to price to that value as well.

So if we're offering more value, more things, I think people hear me saying like Dan doesn't want to take price. That's not true. I'm not going to price for no value. But where there is value, it's irresponsible actually not to price to that because if you don't price to it, then in effect, you start a different type of price war on that. And so I need to think very carefully about where are we adding value and making sure that we price to that and where we're not, making sure that we're not trying to gouge customers either. So I think there's -- the bottom line on that, I think there's a lot of opportunity, both in supplying infrastructure to those who are driving the AI type of things and then making sure that customer is going to avail themselves...

But it sounds like you don't see any risk of crowding out FWA with AI workloads.

Not in the near to medium term.

I want to talk about fiber. You know that I've been concerned about fiber, which is you know I've been concerned...

You need more of it in your diet. I can see that in you.

That -- as density falls and as you move into...

Your bone density?

Yes, that's right. Bone density falls. That as density falls, the cost per home inevitably rise, right? It's just the nature of the math, more miles per home or fewer homes per mile. And that's before the cost pressures that are created on the supply chain by data center demand for fiber and for labor and all that sort of thing.

Do you share that concern as you look out over your sort of passings menu for the next 2, 3, 4 years? Those are inevitably going to be lower and lower density passings. How do you maintain the discipline of the ROI that you want to get out of those investments given that the cost necessarily has to rise and that we're starting to see pressure on broadband ARPU at the same time that says the ROI goes down as ARPU goes down.

What are you, a big cynic? Cassandra of the industry? No. Let me...

I've been called that...

No, I think as I mentioned, you're thoughtful around your analysis on this, like that's why we came up with 40 million to 50 million passings on this. Like past that, it doesn't pencil out for me because then you'd start to get to more rural and there, it doesn't pencil out. But in terms of the supply, we do most of it in-house. We just came to an agreement with our unions as well. So I know what that cost structure is going to look like, and that's how we came up with our number.

Is there a risk that with so many different people chasing the same price that AT&T is mostly building in its own footprint, you're mostly building in your own footprint, but you've got all these kind of free radicals, as John Malone would have called them, the Brightspeeds and the Ziplys and people that are building in all different markets. Is there a risk that somebody gets to a meaningful part of that 40 million to 50 million before you can?

I mean there's always risk. But my view of that is quite small. And on the LEO side because you mentioned that. Look, I think satellite is a really good complementary service to our product, but they cannot compete in urban and suburban against the terrestrial network. And that really comes down -- and by the way, that's where like 95% plus of the revenues are. And the reason for that are really simply comes down to densification and orbital physics when you have a low earth orbit satellite, it beamed, covers a much wider area than a cell tower. Once you get congestion in there, you actually -- when we get congestion in our network, we add another cell site and it increases capacity 2 to 4x. In urban and suburban areas, terrestrial networks are 100 to 1,000x more efficient than low earth orbit. But is there a market for that? Of course, there is. I think over the next 7, 10 years, I think that's like maybe like 5 million households or so. It's a real market, but it's not our market.

You said before that you really value your partnership with cable. Is there a scenario where you would enter into a similar partnership with a LEO satellite operator and give them an MVNO?

No.

Clear. We've only got time for a wrap up. So I want to go to your favorite topic and mine. And that is what you called to me a while back, your growth equation. We don't get to see pro forma financials. But I think about this as organic versus inorganic. Absent Frontier, you're probably right now at sort of roughly flat revenue growth overall or service revenue growth. But you've talked about a picture where that starts to meaningfully accelerate. So talk about the growth equation and how you think you can grow organically going forward, what are the pieces?

Yes. I think there are 4 areas where I want to assure we execute on to create sustainable and consistent revenue growth going forward. First is create volume growth on that. And I've seen that happen, and I expect that to continue. Second, pricing turns around. So you have 180 basis points of headwind that turns into tailwind. Promo amortization, you have 200 basis points of headwind turns into tailwind. You've got AI infrastructure as well. And so all of that along with driving convergence and those kinds of things, I think I see a really good revenue story, and I think you'll see that very, very clearly as you go into the back half of the year and go into 2027.

In the middle, we want to be the most efficient telco in the world. And we are taking out a lot of costs. And we are at the beginning of those stages of being efficient. We are moving rapidly to be an AI-native company. We are the only global operator in the world that got early access to Mythos because we do critical infrastructure for the United States. Like moving to become AI native is not a nice to do, it is a must-do in this world. But man, can you drive efficiency, productivity, customer sat rates, redefine your value proposition.

So -- and then as a result of that, like you're beginning to see increasing bottom line performance and free cash flow performance. And on top of that, obviously, we're driving quite a bit of capital return, whether that be through dividends and share buyback that will also help our adjusted EPS growth as well. So when I look at the overall growth equation over the next several years, I just see it continuing to compound.

Well, I think I told you the last time we were together, my history with what is now called Verizon goes back to the days of NYNEX, and there's no company that I want to see succeed more. So I wish you great success in this transition. I really thank you for joining us this morning.

A pleasure. Thank you, everybody.

Good morning, and welcome to Verizon's First Quarter 2026 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time.

I would now like to turn the call over to Colleen Ostrowski, Senior Vice President, Investor Relations.

Thanks, Brad. Good morning, and welcome to our first quarter 2026 earnings call. I'm Colleen Ostrowski and on the call with me this morning are our Chief Executive Officer, Dan Schulman; and Tony Skiadas, our CFO.

Before we begin, I'd like to point you to our safe harbor statement, which can be found in the earnings presentation and on our Investor Relations website. Our comments this morning may include forward-looking statements, which are subject to risks and uncertainties. Factors that may affect future results are discussed in our SEC filings. This presentation also contains non-GAAP financial measures, and you can find reconciliations of these measures in the materials on our website.

Finally, as a reminder, the results of Frontier Communications are included in our financial and operating results beginning on January 20, 2026, the date we closed the Frontier acquisition.

With that, I'll turn it over to Dan.

Thank you, Colleen, and good morning, everyone. When I joined Verizon, I have a simple but ambitious goal. I wanted Verizon to reclaim its market leadership. Obviously, there are a lot of things we need to do, right, to make that happen. We need to delight our customers and put them at the center of everything we do. We need to drive consistent and fiscally responsible subscriber and revenue growth. We need to keep more of our customers, as measured by our churn rate and convert that into stronger, more predictable cash generation for our shareholders.

With all of that in mind, we ended last year with our strongest quarter of mobility and broadband net adds in 6 years, and we entered 2026 with a clear set of priorities, a step function improvement in guidance and a realistic plan. Today, our first quarter results show that our turnaround is not only progressing, it is gaining momentum powered by a comprehensive transformation program that is reshaping how we operate and serve our customers. I'm also very pleased that our East unions recently ratified a new 4-year contract that we believe will enable us to better serve our customers.

Let me start by saying we delivered a strong quarter across our core operating metrics, and we translated that performance into solid operational and financial outcomes, some of which we haven't seen in over a decade. I'll briefly review the key highlights of the quarter, including the impact of the network outage we experienced earlier in January. Then I'll walk through 3 key themes: how we will continue to drive healthier growth second, how we will accomplish that with meaningfully better customer economics and finally, how that leads to improved cash generation.

I'll close with how these results and the transformation work underway, supporting increase in our 2026 guidance for both our adjusted EPS growth and our postpaid for net adds. In the first quarter, total revenues grew 2.9% to $34.4 billion, while our reported mobility and broadband service revenue grew below our annual guided range. Our reported growth includes a onetime pressure of 80 basis points on our wireless service revenues from customer credits and other impacts related to our network outage. We ended the quarter with momentum with March mobility and broadband service revenue growing in the middle of our guidance range, with Consumer wireless service revenue approximately flat year-over-year.

We anticipate Q1 mobility and broadband service revenues will be the low point of 2026. The and we are highly confident that our forecast for mobility and broadband service revenue growth is in line with our 2% to 3% guidance for the year. Importantly, the quality of our revenue is improving. We are purposely shifting our mix towards durable recurring service revenues and away from low-margin, highly promotional activity. We are prioritizing customer lifetime value over short-term revenue maximization. The benefits of that approach are obvious when looking at the combination of positive postpaid phone net adds better churn, lower acquisition and retention costs and higher free cash flow and adjusted EPS.

We added 55,000 postpaid phone net adds in the quarter. That represents an improvement of over 340,000 postpaid phone net adds versus the same period a year ago and it's the first time in 13 years that Verizon has set positive postpaid phone net adds in Q1. Both consumer and business had significant improvements in postpaid phone net adds Overall, we delivered almost 0.5 million net adds across our mobility and broadband platforms. This is a strong continuation of the momentum we established in Q4 of last year, and it is happening while we are also improving the overall quality and economics of our customer relationships. I'm particularly pleased to see the early results of our transformation efforts on our customer retention.

Consumer postpaid phone churn in the quarter was 90 basis points, a sequential improvement of 5 basis points from Q4. Importantly, churn improved throughout the quarter. And in March, consumer postpaid phone churn improved further to below 85 basis points. That is a significant improvement both sequentially from Q4 and within the quarter, and it reversed the upward pressure we had seen in churn over the past several years. As expected, when we stop imposing blunt price increases without corresponding value on our customers and begin to remove friction from the end-to-end customer experience, they reward us with their loyalty. At the same time, we are acquiring and retaining customers far more efficiently. Our cost of acquisition and retention in March was down approximately 35% relative to the end of Q4 and we expect to maintain a lower cost of acquisition and retention as we look forward.

I would point out that we accomplished these meaningful cost reductions while still delivering increasingly positive postpaid phone net adds versus a year ago. In other words, we are no longer predominantly reliant on expensive promotions to drive our growth. We are growing, and we are doing so in a much more disciplined, repeatable and fiscally responsible manner. We, of course, retain the flexibility and conviction to defend our base and have a large war chest, if necessary, to react to competitive moves in the market. These trends in churn and unit economics are listing, our consumer lifetime value and are already flowing through to the bottom line and to our free cash flow.

I'd also point out that a lower cost of acquisition will benefit our future revenue growth as the headwinds of promotion amortization finally begin to subside. Adjusted earnings per share for the quarter were $1.28, up 7.6% year-over-year, our highest adjusted EPS growth rate in over 4 years. Free cash flow was approximately $3.8 billion, up 4% year-over-year and represents a strong start to the year. Our performance is consistent with and in a few key areas ahead of the guidance we laid out for 2026 driven by a better customer experience and operating efficiency. It is also the foundation for the capital allocation priorities we have outlined, investing to maintain our network excellence and our overall value proposition, maintaining our ironclad commitment to our dividend, steadily reducing our leverage and returning capital to our shareholders.

Now let me come back to the 3 themes I mentioned earlier, healthier growth better economics and stronger cash generation. First, healthier growth. The story in mobility and broadband is that we are now consistently adding more of the right customers at the right economics. The dramatic year-over-year improvement in postpaid phone net adds over the past 2 quarters with continued momentum into Q2, all reinforce that our offers and our go-to-market strategies are working. We are leaning into converged value, mobility plus broadband, a simplified customer experience and features that matter to customers rather than chasing every promotion in the market. We are also beginning to see the benefits of our transformation efforts, which make it easier for customers to do business with us and reduce friction in their interactions with us.

In fact, I'm very pleased to say that our consumer customer service team delivered its best quarter on record for customer satisfaction, driven by improved resolution, fewer handoffs and faster response times. In broadband, we continue to aggressively expand our footprint, increase penetration and position those assets as a core part of our long-term growth story. We are solidly on track to have more than 32 million fiber passings by the end of this year. We are early in the journey of fully monetizing the combination of best-in-class mobility and a growing fiber and fixed wireless access footprint. But we already see in our net adds and in our improved churn that customers value having more of their connectivity needs met by a single trusted permitter. Our Frontier integration is on track and I'm extremely pleased with the level of teamwork and focus from go-to-market execution to network integration and all with a keen focus on driving convergence and delivering on our more than $1 billion of run rate operating cost synergies by 2028.

Now let me turn towards our second theme, which revolves around driving better economics. The improvements in churn, acquisition costs and retention costs are not one-off events. They are the result of specific choices we have made over the past 200 days and the early benefits of a broader transformation we have launched across the company. We have put in place an ambitious company-wide transformation built around 10 major work streams. These work streams span everything from becoming an AI-first company to reducing friction in every step of the customer journey to reexamining outdated internal policies and procedures that slow us down and add to bureaucracy. We aim to simplify our products and services, apply micro segmentation to better match offers to customer needs and drive towards our goal of being the most efficient telco in the world.

Each work stream has a dedicated cross-functional tiger team with clear monthly and annual targets in a disciplined governance process that reviews progress, unblocks issues and reallocate resources where needed. This program is changing how we run the company day to day. As I've mentioned before, we will not rely on empty across-the-board price increases that create short-term financial gains that erode the long-term trust of our customers. Instead, we aim to delight customers. A central pillar of our upcoming new value proposition is the end-to-end redesign of our customer experiences to ensure we delight each customer in every interaction. Our commitment to customer value and trust is becoming part of our corporate DNA embedded in how we design offers, how we communicate with our customers and how we measure success internally.

We are in the final stages of extensive market research that will inform a new generation of offers built around the principles of transparency, simplicity and genuine value delivery. We have begun to embed AI and automation into our operations and customer interactions, which is already significantly improving customer experiences and lowering costs. We will encourage more volume into digital sales and service channels, which lowers cost, increases engagement and leads to higher customer satisfaction and we have begun to see meaningful cost benefits from our transformation efforts as we take out legacy structural costs from the business.

Consequently, we are well on our way towards our OpEx savings target of $5 billion in 2026. Churn is the clearest measure of whether our efforts are resonating with our customers. When we achieve the kind of churn benefits we did during the first quarter, it has profoundly positive implications for our business model. Every cohort now contributes more revenue, more margin and more cash. That affects compounds over time. Lower churn also makes our marketing dollars work harder because we are not simply replacing customers who leave, we are adding to a more stable base. Our advertising is also evolving as exemplified by our Connor story brand advertisement which resonated powerfully across social media and focus on our service and our network, not promotions or handsets.

The same is true for acquisition and retention economics. We were able to meaningfully drive year-over-year improvement in our postpaid phone net adds while driving the cost of acquisition and retention lower by approximately 35%. Obviously, this fundamentally changes the return on investment we make to attract and keep our customers. And as I mentioned, the less we spend on promotions to lower our amortization headwinds, enabling a step function change in our future revenue growth. These improvements come from the work our teams are doing in our transformation streams, smarter channel mix, less friction, better tools and modeling the beginning of AI and naval processes and a tighter focus on fiscally responsible offers that drive profitable growth. We expect these more efficient levels to be sustainable under our current strategy, and we see additional opportunities to further improve our trends as our transformation matures.

Finally, our third theme revolves around stronger cash generation. The combination of healthier subscriber growth and better economics is evident in our first quarter free cash flow results and we are confident in our annual guidance of approximately 7% or more growth. We are seeing the benefits of a more disciplined capital program. where we continue to invest in capacity, coverage and reliability, but do so with sharper prioritization and better utilization of the assets we already have. We are also continuing to execute on our operating expense initiatives, which are delivering a substantial war chest to continue our investments in driving our end-to-end value proposition while driving continued shareholder returns.

We see room for further meaningful efficiencies in the years ahead while simultaneously advancing our primary goal of delighting our customers and by doing so, driving long-term sustainable revenue growth. We have also discussed in our previous earning calls that we aim to drive incremental margin by eliminating sunsetting or creating structures to dramatically reduce our exposure to noncore assets. We are well underway in this journey, and we look forward to sharing more details shortly. All of that brings me to our updated outlook.

On the back of our first quarter performance, the leading indicators we see in our business and the traction we are seeing in our transformation work streams. We are raising our guidance for adjusted EPS growth to 5% to 6% versus the prior range of 4% to 5%. We also now anticipate our postpaid phone net adds to be in the upper half of our $750,000 to $1 million range. We are reaffirming the balance of our guidance, mobility and broadband and service revenue growth of 2% to 3% with Q1 being the low point of 2026 and free cash flow growth of approximately 7% or more versus last year. We are making these changes early in the year because the data supports a higher level of confidence. We are ahead of pace on postpaid phone net adds and doing so with lower churn, better unit economics and record customer satisfaction scores.

We have clear line of sight to the remaining cost and capital efficiency actions that underpin our free cash flow target. And the transformation program gives us additional levers as the year progresses. At the same time, we are far from assuming a perfect environment. We operate in a dynamic and rapidly changing landscape. Our revised guidance continues to reflect a prudent view of competitive dynamics and the macro political and economic environment. Our capital allocation priorities remain unchanged. We will continue to invest in our network, our platforms and our people to deliver the reliability and experiences our customers expect.

We will, of course, maintain a strong and sustainable dividend, reflecting the cash-generating nature of our business. And as Tony will discuss, we are delivering on our commitment to return capital to shareholders. We will continue to use excess cash to strengthen our balance sheet over time, giving us flexibility as markets and opportunities evolve and we remain on track to return to our target leverage ratio in 2027.

To summarize, in the first quarter of 2026, Verizon grew underlying mobility and broadband service revenue in line with our annual guidance. delivered positive postpaid phone net adds in Q1 for the first time in 13 years, reduced churn meaningfully quarter-over-quarter, and exited the quarter with consumer postpaid phone churn below 85 basis points, all while significantly lowering both acquisition and retention costs, driving our best adjusted EPS growth in 4 years and delivering strong free cash flow. We did all of this by addressing a significant network event transparently and decisively. At the same time, we have launched and are executing against the [indiscernible] transformation program that is making Verizon an AI-first simpler, more efficient and more customer-centric company. On the strength of that performance, the transformation work already underway and the trends we see in the business.

We are raising our adjusted EPS growth outlook to 5% to 6%, and we anticipate our postpaid phone net adds will be in the upper half of our guided range, while we maintain our free cash flow and mobility and broadband service revenue guidance. We still have much to accomplish, and we are far from our longer-term aspirations, but the direction of travel is clear. we are growing. Our customers are staying longer. We are serving them more efficiently by executing on a disciplined transformation agenda and we are converting all of that into stronger, more durable cash generation for our shareholders.

With that, I'll turn it over to Tony to provide more detail on the quarterly results, and then we will take your questions.

Thanks, Dan, and good morning. Our first quarter results reflect a strong start to the year. We've built upon the operational momentum from the fourth quarter and continued executing on our transformation efforts to deliver on both volume and financial growth. Dan has discussed our plan to deliver long-term sustainable financial and operational growth, and our first quarter results show the early impacts of that plan. We're on track to deliver our 2026 guidance, including increased guidance for postpaid phone net adds and adjusted EPS growth. In mobility, we are pleased that for the first time since 2013, we generated a positive first quarter total postpaid phone net additions.

Our first quarter results of 55,000 included significantly better performance from both our consumer and business segments. Consumer postpaid phone net losses were $35,000, a $321,000 improvement year-over-year, driven by a higher mix of new to Verizon gross adds. In total, the year-over-year improvement of $344,000 reflects our consistent and disciplined go-to-market approach solid execution of our volume growth strategy and steady progress of churn. While there is more work to be done with customer experience, which is the largest component of our transformation plan, we're pleased to see early signs of progress towards our goals. Total postpaid phone churn was down 5 basis points sequentially to 0.97% for the first quarter. Consumer postpaid phone churn was 0.90%, down 5 basis points sequentially and improved throughout the quarter as we took actions to delight and retain our customers.

In prepaid, we grew our customer base for the seventh consecutive quarter. We delivered 115,000 net adds, driven by our visible and total wireless brands, demonstrating the continuing strength of our prepaid business and our segmentation approach. We look forward to optimizing the value of each of these brands as we continue our transformation.

Shifting to broadband. We continue to take share in the first quarter and delivered 341,000 broadband net adds. This includes 214,000 fixed wireless access net adds and 127,000 fiber net adds. We now have approximately 16.8 million broadband subscribers. We are confident in the long-term success of our broadband strategy. Frontier accelerates our opportunity to grow our broadband subscribers as well as our converged offerings, a key enabler to growing wireless share in underpenetrated frontier markets. In the first quarter, in addition to Frontier, we've also closed a Starry transaction, an investment that will enable us to drive further broadband growth opportunities in multi-dwelling units within urban areas. Overall, we're pleased with our operating results for the first quarter as we have seen significant improvement in our net adds. We look forward to continuing our commercial momentum throughout the year.

Now let's turn to our consolidated financial results. Our first quarter financial results show our disciplined execution is directly translating into operating leverage. We are driving financial growth and strong free cash flow even as we undergo a transitional year for revenue. Mobility and broadband service revenue was $22.9 billion for the first quarter, a 1.6% increase year-over-year. This result includes $20.6 billion of wireless service revenue, which was down 1% year-over-year. Customer credits associated with the network outage reduced first quarter wireless service revenue by approximately 80 basis points. As previously communicated, we continue to absorb elevated promotional amortization pressures and are lapping approximately 180 basis points of pricing impacts implemented in the prior year.

We expect to improve on our first quarter's wireless service revenue performance by maintaining low churn, being disciplined around cost of acquisition and cost of retention, and continuing to drive net adds. Additionally, we continue to see strong performance with perk adoption, continued growth in premium base mix and prepaid. Given these factors, we are confident we will achieve our full year revenue guidance and expect to have an even stronger and more sustainable revenue profile by the end of 2026. Our disciplined. Our disciplined financial approach and targeted actions led to strong profitability this quarter. Consolidated adjusted EBITDA was $13.4 billion, a 6.7% increase in the prior year. adjusted EBITDA margin of 38.9% expanded by 140 basis points. This represents our highest ever reported adjusted EBITDA performance, and we expect it to be an industry-leading result.

We are growing responsibly with healthy economics in both the cost of acquisition and cost of retention. We are also making significant tangible progress with our cost efficiencies. During the quarter, we realized substantial savings in key areas, including advertising, network operating expenses and workforce-related costs. A significant portion of these savings dropped directly to the bottom line while we simultaneously reinvested a portion back into the customer experience. Our integration of Frontier operations is progressing well. We are on track to deliver over $1 billion in runway operating cost synergies by 2028. While there is more work ahead to drive further efficiencies, our first quarter performance puts us on track to deliver on our $5 billion of operating expense savings target for 2026.

Our focus on the customer and our cost discipline drove adjusted EPS of $1.28, up 7.6% year-over-year, even as we incurred the incremental depreciation and interest expense associated with the Frontier acquisition. Our performance reflects our responsible growth and our actions taken to streamline the business to make us more agile in serving our customers. This gives us the confidence to raise our guidance for adjusted EPS growth for the full year to 5% to 6%.

Now let's turn to our cash flow and balance sheet. Our financial foundation has never been stronger. Our cash flow generation remains a cornerstone of our financial strength and a testament to our high-quality earnings. Cash flow from operating activities was $8 billion for the first quarter. We achieved this strong result even after absorbing severance payments of approximately $1.1 billion related to our restructuring efforts, incurring costs associated with the Frontier integration and delivering higher gross add volumes. We're on track to achieve our CapEx guidance of $16 billion to $16.5 billion for the full year. Capital expenditures for the quarter were $4.2 billion. We continue to invest strategically for network excellence and future growth opportunities in a disciplined way by prioritizing our wireless and fiber builds.

As Dan mentioned, we expect to end the year with more than 32 million fiber passings. Free cash flow for the quarter was $3.8 billion, up 4% year-over-year. We expect our free cash flow performance to ramp as we further realize the full run rate of our operating expense savings and grow volumes responsibly. We are on track to deliver our full year free cash flow guidance of $21.5 billion or more. Our robust cash flow enables the seamless execution of our capital allocation framework, including investing in our business maintaining a strong dividend, strengthening our balance sheet and returning additional value to shareholders through stock buybacks.

Our net unsecured debt to consolidated adjusted EBITDA ratio increased due to the acquisition of Frontier to approximately 2.6x at the end of the quarter. We are making good progress and have paid down about half of the frontier debt since the acquisition closed, and we expect to repay substantially all of Frontier's debt by the end of the year. We remain firmly on track to achieve our target net unsecured leverage ratio of 2.0 to 2.25x during the 2027 time frame.

Lastly, we are delivering on our commitment to enhance shareholder returns. In January, we declared an annualized dividend increase of $0.07 per share, up 2.5% from our prior annual dividend rate. This marks the 20th consecutive year of dividend increases, a track record we're extremely proud of. In addition, our stock buyback program is off to a strong start. We successfully completed $2.5 billion in share repurchases during the first quarter. We are in a position of significant financial strength, generating the cash necessary to invest in our future, reward our shareholders and maintain a healthy balance sheet. In summary, our customer-centric approach has generated a step function change in our performance trajectory. We delivered positive first quarter total postpaid phone net adds for the first time since 2013 and raised our full year phone net add outlook. We achieved our best adjusted EBITDA in history, and we also delivered our best quarterly adjusted EPS growth rate since 2021 and raised our full year adjusted EPS guidance.

We returned a significant amount of capital to our shareholders, including commencing our first share buyback in over a decade. Our first quarter results demonstrate that our transformation is gaining momentum, and we're delivering on our plan. This is the new Verizon playing to win.

With that, I'll now hand the call over to Colleen to take your questions.

Thank you, Tony. Brad, we are now ready to take questions. [Operator Instructions]

[Operator Instructions] Your first question will come from Michael Rollins of Citi. Your line is open, sir.

Congratulations on the early progress. Curious if you could discuss the performance of accounts and ARPA with the dense in the quarter as well as what that means for the go-forward outlook for these measures including how the current promotional environment and your pricing strategy are influencing the performance.

I think I'll jump on that, Mike, and then we'll -- Tony can add color if he so desires. Look, I think if we take a step back, clearly, we're now orienting everything we do around a customer-centric approach. And just by definition, that means that we're thinking about accounts and not just lines and I would say previously, the company predominantly focused on lines, and that's just not our approach going forward. And as a result of that focus, our trajectory is moving in the right direction. Account net adds improved year-over-year in both consumer and total retail postpaid and that's in the same quarter we delivered our best postpaid net adds in 13 years, and that's not the coincidence.

A customer-centric approach is driving our progress on both fronts. The net adds we're adding are higher quality than those that are rolling off. Our new accounts are being added with more lines per account or percent of new to Verizon continues to climb, and that's a leading indicator of where our account number is headed next. But we're also very focused on driving higher revenue with every line. We are no longer giving away lines for freight. Our entire approach is to grow our accounts and lines and overall ARPA. And I think there are a lot of different ways that we can do that. We can do that through convergence.

Clearly, as we are more disciplined in our COR and our COA. We believe we're going to start to see the headwinds of promotion and amortization on our revenue growth rate start to flip and become tailwinds. And the majority of the ARPA declined in the first quarter came from our decision to do the right thing for customers on the network outage and to immediately give them credits because we absolutely always want to do the right thing for customers, and we value the long-term relationship with our customers. And so we feel really good about the way we reacted to our network outage. But obviously, that's a onetime event and doesn't come and follow us through the rest of the year. So I would say, in general, we expect to see account net adds continue to improve as well as ARPA as we go through 2026 and as we go to 2027.

Yes. I'd just add a couple of things to that, Mike. We exited the quarter with good momentum. The team is focused on writing good business and the new to Verizon is up 150 basis points, which is great to see. We see a lot of opportunity with convergence, and we saw that in the quarter with bringing Frontier to the fold. And then also, we've done a lot of work on bringing value to customers, things like perks. We've seen significant uptake in perks step-ups and of course, in FWA. So as Dan mentioned, we do expect improvements in ARPA as the year progresses. And as we continue to reduce our reliance on expensive promotions, that will obviously reduce the headwind per amortization that we move ahead. So that's how we're thinking about it.

The next question will come from Michael Ng of Goldman Sachs.

I wanted to ask about upgrade rates and the changing approach to device subsidies. What are you expecting around upgrade activity for the rest of the year? And how do you balance improved profits on some of these lower device subsidies versus opportunities to use devices to drive gross adds given that it should be a strong device for fresh year?

Yes. Well, I would say both on our cost of acquisition and our cost of retention. The improvements that we saw throughout the quarter. These are structural changes. They're not onetime or seasonal. We would expect that based on micro segmentation really understanding what our customers exactly want and what our customized offer to them will be will result in us being able to be much more disciplined in how we think about retention. Not every retention is going to be a free handset. In fact, quite the opposite. I mean, I think our industry has been too dependent on free handsets being the solution for everything.

And I think all of us, and I know for sure, Verizon can be much more profitable when we start the micro segment really listen to what a customer wants and not just give them a free handset for everything. So I'll give you an example of that. If a customer calls us and says that they're having a difficulty with service in their home, previously, what we would have done is send them a free handset so that they wouldn't churn. And what happened at that point is a customer who have a new handset and still have poor service at their home.

So we just spent like $1,000 and did not solve the customers' issues. If we have listened and sent a femto cell to be installed at the house, we could have done that at 1/3 the cost and made the customer happy. And so that's what's happening right now. We're listening what customers really want. We're customizing offers to exactly their needs and we are moving away from just, I think, one tool in our toolbox becoming much more sophisticated. And as we continue the micro segment, we're going to become much, much better at this. And so I think we will continue to be ferociously focused on retention an acquisition, but doing it in a smart fiscal micro segmented manner that should really improve our unit economics going forward.

Yes. And then, Michael, just a couple of other things to add to that. So obviously, the strong capital generation that we have in the business gives us a lot of optionality and scenario planning. In the quarter, we were able to absorb about 6% higher upgrade volumes year-over-year, being more surgical, as Dan mentioned, with retention offers and also having strong cash flow. And the one thing I can say is the rate of growth in upgrades has slowed the last couple of months and into the second quarter, and that's both reflective of the work we're doing, particularly on retention and being very segmented in our approach and very disciplined and also customer choice, customers choosing to hang on to their phones for longer periods of time. Obviously, we don't guide on this, but we'll see how it plays out, but we're being very disciplined in our approach.

Next question will come from John Hodulik of UBS.

Maybe 2, if I could. First, on the cost cutting, maybe for Tony, the -- any color on sort of how much of the $5 billion in OpEx savings we've seen thus far and how it ramps for the year? And then a lot of sort of bullish commentary on volume trends in the wireless business. How should we expect the fixed wireless and fiber broadband in terms to sort of play out through the year as you sort of digested fiber assets and get the converged offering sort of up to speed?

Sure. So on the cost transformation, let me just start big picture. So obviously, we're making significant progress on the transformation work and the cost work and it's showing up in the EBITDA and as we said in the prepared remarks, we expect EBITDA to grow at a faster rate than adjusted EPS when you factor in both the Frontier acquisition interest expense, which is about $1 billion and also the depreciation from the asset base, which is about $1.5 billion. And obviously, we had good acceleration and really good operating leverage. And to your question, we're off to a great start on the $5 billion of cost transformation. And we're seeing proof points in the quarter. Maybe I break down between the first quarter and also what's in progress and coming ahead.

So in terms of what we're seeing right now, first and foremost, on the network side and network operating costs. The team is doing a great job in continuing to decommission legacy elements in the network, and that includes copper and recycling that copper and also monetizing that copper as well as optimizing our third-party access costs with our larger footprint and there's a lot more we can do here when you think about Frontier coming into the fold. Second, from an advertising and marketing parking perspective, continued efficiencies in our spend, including use of digital. And then Dan mentioned our cost of acquisition called the retention, structural improvements there since year-end and particularly on cost of retention really being targeted with our retention spend. And then from a workforce perspective, we're exiting the first quarter.

We're running leaner with the 13,000 reduction behind us as well as reduced third-party contract to outsource spend. And then in terms of what's the opportunities ahead and things that are underway, we talked about in the prepared remarks around customer experience, and that is the largest part on the largest facet of our transformation program, and that's addressing customer pain points as Dan mentioned, reducing complexity and call volumes. If you think about both the IT and the real estate, continuing to rationalize IT platforms, including AI enablement along with reducing the real estate footprint, both on the work side and the admin side. And then from a frontier perspective, the integration work is well on track.

And we said we expect at least $1 billion of operating expense run rate synergies by 2028, and the synergies ramp as we execute on our integration plans. And as we continue through the cost transformation, the expectation is that we'll continue to reduce -- to further reduce costs beyond 2026. And then when you put that together, the EBITDA and the cost reductions allow us to do a number of things. First is run a lot more efficiently. Second is to absorb the transitional year that we have in service revenue. Third is to invest in the customer experience, and that includes defending our base if we need to do so. And lastly, returning a significant amount of capital to shareholders. And overall, we see a great path to both adjusted EBITDA and EPS growth for the year, and that gave us the confidence to raise the EPS guide for the year and then I'll hand to the broadband question over to Dan.

Thanks for the question, John. So convergence, obviously, it's one of our key vectors of growth. We intend to fully leverage our growing fiber footprint, as I mentioned in the last earnings call, we are still very focused on driving our fiber footprint $40 million to $50 million over the medium term. We made good progress this quarter towards that and expanding our fixed wireless access capacity. In Q1, we continue to take broadband share. We have absolutely no intention to slow down, in fact, quite the opposite. We have a huge cross-sell opportunity. Only 20% of our base has broadband. And so we see a large go-to-market opportunities for us there.

Look, fiber has inherent advantages over FWA, and we're going to prioritize it where we have coverage. And therefore, you should expect a mix shift from where we've previously been. We have very positive owner's economics on both our broadband and our wireless churn is almost 30% less on converged offers and has a higher both LTV and ARPA. However, be sure we're going to continue to drive FWA. And we entered the year with more available capacity in our network for fixed wireless access than when we began 2025, and we intend to take advantage of that. Q1 is seasonally our slowest quarter, but even so, we added 31,000 broadband subscribers. And by the way, that excluded the first 20 days of January for Frontier.

You can probably do the math on what our numbers could have been on broadband had we had a full quarter of Frontier in our numbers. So we're quite pleased with where we are in our broadband net additions, and we expect to see that accelerate as we go forward. We're going to continue to invest heavily in broadband. We're going to have at least 32 million passings. We're looking at more partnerships, potential acquisitions to speed the number of homes passed. There's no question. We think that fiber is a key differentiator against competitors who don't have it. And I'd also point out that our attachment rate of wireless when a customer has broadband, I think it's best in the industry at 55% right now. So expect that you'll see improvement in our broadband numbers as we go through the year, and we're looking for the optimal and most efficient way to deliver broadband to the home.

The next question will come from Sebastiano Petti of JPMorgan.

Just a quick follow-up to John's question there. Just in regards to your FWA commentary, I mean, should we still anticipate $8 million to $9 million FWA subs by 2028? Is that still a target for the management team? That's my first question. And then, Tony, the buyback is $25 billion great to see in the quarter. You're not surprised given the momentum. How should we think about the expectations for buyback in 2026? I think you previously talked about $3 billion, clearly seems conservative at this point. And I didn't see any commentary in the press release, but I mean how should we think about the, I guess, phasing or cadence of buybacks from here over the multiyear period?

Yes. I'll first jump on the FWA question. No, I don't think you should really adjust any of your thoughts around that. We're going to drive quite aggressively on the broadband front. Again, there may be more of a shift to fiber than FWA. We've had a lot of progress on FWA over the years, and we'll continue to drive it.

Yes. And then Sebastian on your question on capital allocation. I mean, look, as we said in the remarks earlier, that the pillars are the same. Our first priority is still investing in the business, and you see us doing that with our capital program of $16 million to $16.5 million in our acquisition of Frontier as well. The dividend is still iron clad for us, and we raised the dividend $0.07 back in January, and that's the 20th consecutive year. And the third is having a strong balance sheet and paying down debt.

And as we said, there's no change to our long-term leverage targets and we said we'd be there in the 2027 time frame. We've also paid down about half of Frontier's debt stack already. So we're well on our way there. And then fourth, as you mentioned, we have our share buyback curve underway. We did $2.5 billion of share repurchase in the first quarter. So we're off to a great start, and that reflects the strong cash generation and the conviction -- our conviction in the value of the stock at current levels, right?

In terms of your question, I can't talk about hypotheticals. Look, if we have additional excess cash flow beyond our plan and maintain our leverage commitments and invest in the business and things like that. We would have the ability to do more. But our plan of at least $3 billion is appropriate at this time. But the overall goal doesn't change. It's generating strong cash flows and being able to execute across all 4 pillars of our capital allocation strategy and doing that simultaneously. As you saw, we returned a significant amount of capital to shareholders. It was $5.4 billion in the first quarter. And we're doing all of this while we're executing on our transformation plan as well.

The next question comes from Sean Diffley of Morgan Stanley.

Dan, you spoke recently about AI transforming the economy and impacting jobs. I was hoping you could elaborate a bit on how you think about the ability to take out more costs across the business. Obviously, you referenced it a bit on the OpEx commentary. But any tangible examples of AI use cases that are being implemented at Verizon? How you think about total head count growth over time? And then one on CapEx. Can you elaborate on investing in wireless versus fiber? And anything to say on spectrum acquisition interest going forward?

Sean, it's like 12 questions. Let me jump on the AI piece of it. Obviously, I'm quite outspoken about the time we live in. It's one of ferocious technological change, not just AI, quantum coming in the next 3 years, humanoid robotics coming after that. I think it's important we openly talk about it and talk about the implications or potential implications of it. I also feel it is absolutely essential that Verizon uses the tools of this era to compete. I want us to be not an AI-first company. I want us to be an AI-native company. And I think there are 3 areas Were you going to see us utilize AI to its fullest.

One is around operational efficiency, taking out costs, improving productivity, delivering more value to customers. The second, really important, I'll give some examples of this is customer satisfaction improvements. How can we better serve our customers through the use of AI? And then finally, how do we fully ingest AI capabilities into our value proposition? How do we take that so that we micro segment down to every single customer? We have an initiative inside the company. We call it every customer has a name, and that is about full microsegmentation. And that is where we will fully ingest all of our data, structured, unstructured, external data into creating customized propositions for every individual customer.

Our AI tech stack has 4 different layers to it right now. We have a data and intelligence layer where we're taking, again, formatting all of our data, and we have a huge amount of data that's both structured and nonstructured bring it into the right format layering on top of that, both LOMs and SLM. We've got a second layer, which is our development factory layer, which is kind of our middleware. It's where we gen up agents where we have agent building capabilities. We have a third layer to our stack, which is what we're calling runtime engines, which is where we deploy agents, we deploy business features and impact how we serve customers. And then surrounding all of that, we have a control plane, which looks at security, identity, guardrails, safety, observability, traceability, those kinds of things.

We are going to be substantially complete with that entire AI tech stack by July, and we hope to be fully done by November. I would say we've recruited quite a number of AI savvy individuals into the company over the last 7 months or so. We've done more in the last 3 months than we've done in the last 3 to 4 years around this. We had a previous project on this that had a 4-year completion date. We, again, will be substantially complete on all of this by July. We are working very closely with Google and Anthropic and other best-of-breed AI players to bring this to life. This isn't our own stack. We are using best-of-breed to go and make it happen.

We're very close. Obviously, with Anthropic, we are part of glass wing. We are working with Mythos and have been for some time across all of our cybersecurity efforts, and it has given us great insight in terms of what we need to do to continue to have the world's most reliable, secure and safe network. We have been now for the past 3 months, you saw some of those results happen in this quarter. Looking at working with Sierra, ElevenLabs, Google, to start to put into place of voice agents into some of our customer service operations. Again, we are testing these models, and we are fine-tuning them. But what we are seeing already is a 1,280 basis point improvement in customer SAT scores year-over-year.

I mean these are quite astonishing step-ups in our ability to satisfy our customers. We're deploying quad code across our software development life cycle. This is not just around coding, but across the entire life cycle. We see opportunities to do an increase in our delivery by 40% plus, and we spend a ton of money on vendor support here, and we see our way to reducing those costs by over 70% as a result of what we're doing with AI. And in the network we have really deployed quite extensively inside our network. 85% of all of our issues right now are autonomously resolved. That means we are resolving issues for our customers even see them.

We used to have in our network by the bill of material, it was over like 1 million different combinations. Think about the cost and the complexity around that using AI, we've driven that down now to about 20 kits. And so our ability to deploy save costs because of this is radically improved. We already have over $200 million of energy savings as a result of deploying AI into the network and looking how we can optimize on energy, and we're doing things now at industrial scale. And so I'm quite pleased with the amount of progress we've made in a short period of time. And I would also point out on the commercial side, we are in quite deep discussions right now with hyperscalers with alternative cloud providers, large enterprises to integrate our fiber, both dark and lit and our 5G assets to support their AI infrastructure efforts.

And that can include data center connectivity, ability to help them with their training and inference. And that is the potential for multibillions in revenues, quite frankly. We'll have more specifics on that in the next 3 to 6 months. But the world is moving towards edge computing towards data connectivity, and we are in a real good place to play inside that AI infrastructure revolution that's going on.

Brad, I believe we have time to take one more question.

Your final question will come from Michael Funk of Bank of America.

So Dan, one for you. Theme of the call has clearly been customer lifetime value and micro segmenting as well. So just kind of curious about the save budget as part of that micro segmenting and churn reduction effort. And how much you've improved or increased the save budget how that might impact the repricing of the back book? And one follow-up. Do you still expect your postpaid phone net adds to be 10% to 15% of the net new?

Okay. A lot of different questions in there. One on our postpaid phone net adds. Yes. I mean I still think that's probably a good estimate of the 10% to 15% of new. We'll have to see where the industry comes out, what is new, what's real in those numbers. One thing I would say though on that, that we haven't really talked about is I think it's obvious now that at least as, if not more than half of our net adds are going to come from improvements in churn. And what that means is that the amount of dollars that we will spend on driving our net add number will be reduced because the bottom of our funnel is tightening. We're at 95 bps in Q4, 90 bps overall in Q1, 85 bps at the end of the quarter.

And so that obviously is an extraordinarily important element and a demonstration of how putting the customer at the center of everything you do when you stop raising prices with no corresponding value when you start improving the customer experience, which, by the way, is very difficult to do and is a differentiating thing hard for others to follow. You put out a price plan, people can follow that, you put out a promotion people can follow but the hard work of improving the customer experience that comes day by day. One initiative after another to make that happen. And that's why I really am pleased to see an all-time record of our customer satisfaction when people interact with our customer service teams on our consumer side. On cost of retention, the cost of retention and cost of acquisition have come down substantially through the quarter.

We believe that those lower levels will continue to play out through the year. And that really has to do with micro segmentation and really understanding what a customer needs. The era of just the free handset, that's gone right now. We are looking at what does the customer need. They have a handset that is last year's model that's been refurbished. Do they need a new handset, many of them because of the economy are keeping their handsets longer right now. And so I believe that you're going to continue to see COR and COA at reduced levels. But of course, as Tony mentioned, we have a substantial war chest, and we will defend our base whenever we see any competitive activity on that. But we think right now that the competitive intensity in the industry is moderating quite frankly.

And I think everybody is thinking about how do we look at acquisition, how do we look at retention in a much more segmented and much more fiscally responsible way than maybe we were several years ago. So I appreciate the question.

That's all the time we have for questions. Thank you all for your time today.

This concludes the conference call for today. Thank you for your participation and for using Verizon Conference Services. You may now disconnect.

Okay. Good morning, everyone. Thanks for joining us for our first session this morning. So I'm really pleased to introduce Tony Skiadas, who is the Executive Vice President and Chief Financial Officer of Verizon. Tony, welcome.

Thank you. Thank you for hosting us, Bryan.

And before we get started, I think you've got some safe harbor language you want to share?

Sure. Just wanted to mention that Verizon Safe Harbor statement and SEC filings are on our Investor Relations website and comments that we may make are forward-looking in nature and subject to risks and uncertainties. So with that, we can get coming. Thanks for [ hosting ].

Great. Our pleasure. Maybe to start off, can you give us just some perspective on the transformation that Dan Schulman commenced after taking on the CEO role in October? What are some of the goals the management team is trying to achieve with it? And how will that accrue to the company and shareholders in terms of benefits?

Sure. We have a lot going on, as you've heard. We're creating a new Verizon and with the goal of being the best and playing to win. And as Dan outlined on the earnings call back in January, he talked about the company being at a critical inflection point and making sure that we make significant changes to our culture and shift our culture towards the goals of delighting customers and delivering for shareholders.

And in doing that, leveraging our network excellence to drive mobility and broadband growth and doing that in a fiscally responsible way. And the last 100 or so days have been filled with a lot of change, but also a renewed sense of excitement and optimism inside the company.

We moved quickly and took bold actions to drive $5 billion of cost out of the business. Some of that will be reinvested in the customer with the remainder falling to the bottom line. We also took actions to rightsize the organization to make us more agile in serving our customers.

And then from a capital perspective, we really sharpened our capital envelope to focus on mobility and broadband and driving about $4 billion in savings along the way.

And then lastly, we also gave guidance for 2026, which is a significant improvement over what you've seen from us in the past. We're very excited about the future and in process in executing our plans.

And what about your priorities this year in the context of that overarching plan for the company?

Sure. So if I start at the top of the house, the team is very aligned on growing both mobility and broadband. And as I said, doing it through sustainable volume-based growth. That's extremely important for us.

Second is around executing on our transformation. A lot of work ongoing with the customer experience and improving the customer experience and also doing that through loyalty and churn improvements as well. Part of that transformation includes executing on our Frontier integration. We closed on Frontier back on January 20. So we're in the middle of that integration work right now, and that's going extremely well.

And then thirdly is continuing our network excellence. And that includes deploying C-Band, and also continuing to build fiber.

And then if I dive down into my priorities, I have 3 of them. First is to support the leaders in the business. And narrow our focus to both operational performance and execution day in and day out. And I think you saw that in our performance in the fourth quarter.

Second is delivering on our guidance for the year. And if I can give you a little color on that. We gave guidance on volumes, net adds in terms of 750,000 to 1 million retail postpaid net adds in the year. Service revenue, mobility and broadband service revenue, 2% to 3%. And we said 2026 will be a transitional year for wireless service revenue as we build up sustainable volumes.

Adjusted EPS, 4% to 5% growth is our expectation. And that's a significant improvement over where we've been in the last few years. And then cash flow, we set at least 7% growth. We have industry-leading cash flows, so at least $21.5 billion.

And those cash flows bring us to my third priority, which is executing on our capital allocation framework. And having strong cash flows allows us to execute on all 4 pillars of our framework, including a share buyback program that we announced earlier.

So we're very excited about it and focusing on executing.

You've talked about the plans and some of the targets for the year. Can you talk about the progress that you've made so far against the plan? And how we should see those progress over the course of the year?

Sure. So when Dan came in, he had a vision for the company. And that vision and that plan is both bold and transformative. And it's very customer-centric, but it's also focused on delighting the customer. and delivering and returning capital to shareholders. It's both. And those can go very much hand-in-hand. And I think leveraging our network excellence is extremely important and foundational for us, to do that and growing volumes in a very fiscally responsible way.

And I think when you saw the fourth quarter results, we put up strong volumes. We put on over 1 million net adds in terms of mobility and broadband. We took meaningful share, and we delivered on our financial guidance. So those were the early glimpses of the work that's ongoing. We're very early in our transformation right now. A lot of the work that's forthcoming and what you alluded to is around the customer experience and improving the customer experience and investing in that as well to make sure that we can continue to reduce churn.

Deploying AI to improve our operations to make us more agile in serving our customers and also having a value prop that resonates with customers and is simple for customers to understand.

So when you put that all together, with the sustainable volume growth, we'll be able to exit the year in a stronger place than where we started.

And you've talked about $5 billion in cost savings this year. How are those savings being redeployed to support the strategy?

Sure. So we took actions pretty quickly back in the fourth quarter to drive $5 billion of cost out of the business. And that allows us -- and that gives us a lot of flexibility. It gives us flexibility to invest in the customer. It gives us flexibility to drop some to the bottom line as well.

In terms of -- let me just dive a little bit on where some of those costs are coming from. First, on the network side, if you think about legacy network decommissioning, a lot of work being done there, think about the copper networks that we have, continuing to get copper out of the network, including Frontier as well, and we have a lot of opportunities there and reducing access cost.

From a customer experience, I mentioned, continuing to take calls out of the system. That's a big driver of cost and continuing to improve customer experience. And then from an IT and real estate perspective, continuing to reduce the IT stacks, deploying AI to make us more agile in serving customers. And then reducing real estate, both on the network side, network facilities and also admin facilities as well.

On the marketing side, now that we have Frontier in the fold as well, being very efficient and smart with our marketing spend.

And then from a workforce standpoint, we talked about workforce reductions that we had in the fourth quarter, about 13,000. Most of those folks are off payroll now in Q1. And we also reduced significantly our contract and third-party spend as well.

And then lastly, from a Frontier perspective, we talked about on the earnings call, doubling the synergy targets. So we said at least $1 billion of operating expense run rate synergies by 2028, and those synergies will ramp over time. So when you put that together and you look at it from an EBITDA standpoint, the work that we're doing and the cost out work that we're doing enables us to do a number of things.

First, it allows us to run more leaner and more agile. It allows us to invest in the customer experience. And we think that's extremely important. It allows us to absorb the transitional year in service revenue, and it allows us to return capital to shareholders. So that EBITDA growth is really what's underpinning the adjusted EPS guide that we gave this year.

How much of the volume improvement strategy is intended to deliver -- sorry, how much of the volume improvement strategy intended to deliver the 750,000 to 1 million postpaid phone net add guidance do you expect to be driven by lower churn versus higher gross adds? And where really is the greater opportunity and focus there?

Sure. So we gave guidance for 750,000 to 1 million postpaid net adds. It's 2 to 3x what we did in 2025. And if you think about our performance in 2025, our share of net adds was in the low single digits, maybe 4%, depending on how you do the math. So this year, we expect to significantly improve upon that and do it in a very fiscally responsible way.

And we see a lot of opportunities with churn. To your question around churn versus gross adds. Our focus is really on retention. And churn improvements. And we think, for example, if we can reduce our churn by 5 basis points, that gets us more than halfway to our net add target for the year. And if we do that, we can be much more targeted and much more surgical with our promotional spend to drive the other half of the volume growth. So we're putting money behind this with the cost takeouts and the efficiency work that we're doing to improve our churn and do it in a smart way.

And we said we're going to deliver volumes in a fiscally responsible manner, and we think we can do it through churn improvements.

How achievable is that churn improvement opportunity, though? What's the time line look like for bringing that down? And what are some of the tactics that you can employ to do that?

Yes. Sure. We've been getting after it right out of the gate. A lot of work ongoing right now. In terms of the tactics and what's driving it, there's a few factors there. I would say, first is around some of the pricing moves that we did in the past. We did a number of pricing changes while they've been a good tailwind to revenue. They have put pressure on churn. And that forces us to try to put more promotional dollars in to get after growth. So that's not necessarily the most sustainable strategy. And while I can't talk about what we might do from a pricing perspective in the future, we'll always evaluate pricing with the corresponding value prop. That's something we're very mindful of.

When we think about customer experience and customers being frustrated, customers are calling in multiple times, for example, that's not a good experience that drives churn -- that drives significant churn. Customer doesn't understand their bill or their promotion. We've made it too complex for them to do business with us. So those are areas where we're getting after.

And then convergence. And we see a lot of opportunity with convergence and even particularly now with the Frontier and the mix as well. When we have a converged customer, we see significant improvements in churn. A 30% reduction in churn, when we have a converged customer. So there's a lot of ways to get after it. And because we continue to have cost takeouts, we have the flexibility to invest in some of these areas to make sure we drive it down.

Your guidance for 2% to 3% service revenue growth includes flat wireless services revenue growth, which implies some modest ARPU and ARPA pressure in 2026, which I think you alluded to already. What's driving that pressure? Can you give us more detail on that? And how should investors think about the longer-term ARPU trend? Do you expect ARPU to be -- to grow again in 2027 -- how are you thinking about that?

Sure. So our guidance for mobility and broadband service revenue is 2% to 3%, and that includes Frontier, and this really reflects our focus on both mobility and broadband being the drivers of our growth strategy. And what we said is 2026 would be a transitional year for wireless service revenue as we make that pivot towards driving sustainable volume-based growth.

And in terms of your question around some of the pressures we see this year. We have the ongoing promo amortization pressure that we've seen from the last couple of years. That's going to be there. Also, we're lapping pricing actions from last year, and that will put about 180 basis points of pressure on our revenue as well.

And then combating that, there's a number of ways to combat that. First, if you think about having perks in our portfolio, last year, we exceeded 15 million perks. Those perks give great value to customers. They're also great revenue, great margin for us. So continuing to penetrate the base with perks. Customers stepping up to premium plans is also another way our customer is taking adjacent services such as handset insurance.

Also, we've seen improvements in our prepaid business. And after several quarters now of volume growth, we're starting to see revenue growth as well. So on the mobility side, I think we have ways to stabilize that this year.

And then on the broadband side, we have over 16 million broadband subs in the base now when you include Frontier. And Frontier did a great job. They added about 500,000 fiber subs this past year. And we see a lot of opportunity with convergence and growing both fiber and fixed wireless access and both of them are keys to our growth strategy. And we're getting after it. As soon as we closed the deal, we had the convergence offers in market within 48 hours, and we're getting after it with sense of urgency.

And I wanted to ask you about the fourth quarter on the promotional environment. I think Verizon was fairly aggressive in the quarter with promotions. Some would say more aggressive than warranted by the economics of the customers. Do you agree with that view? And will we see Verizon continue to be that aggressive on the acquisition side?

Bryan, here's how we think about it. We had a strong fourth quarter. We delivered over 1 million net adds across both mobility and broadband. We took share in our broadband business. And we also delivered on our raised financial guidance. And a few reasons for that. We had offers that resonated in the market.

And to your question, we matched competitor offers. We had strong execution in the field, which is -- the sales team did a great job. So that was extremely important for us, and we had a consistent presence in the market, which is something different than where we had been earlier in the year. So those 3 factors contributed to a strong fourth quarter.

And as we look ahead, we said we're going to drive sustainable volume growth and be financially disciplined. And I think when you look back on the fourth quarter, we had strong volumes. We had full year EBITDA -- adjusted EBITDA of $50 billion, and we had industry-leading cash flow. So I think the outcome speaks for itself.

Yes. Okay. What have you been seeing in the market during the first quarter in terms of industry switching, retail store traffic, promotion levels? Talk about the competitive environment a little bit there.

Yes, sure. I mean it's still a competitive environment that hasn't changed. We don't give quarterly guidance. So I'm not going to share any quarterly environment guidance. But in terms of from what we're doing, we have a consistent presence in the market, and we saw that in the fourth quarter. We see that in the first quarter. We're continuing to focus on making sure that we execute well in the field day in and day out.

And look, the goal here is to grow year-over-year. The volumes will follow a normal seasonal pattern. And we're going to be very fiscally responsible as we do that as I outlined.

You just closed the Frontier acquisition in January. Can you walk us through your strategy in fiber-to-the-premises broadband? The current footprint, your build to pace and your longer-term targets there?

Sure. So we're very pleased that we finally got the Frontier deal closed on January 20. It was a long road, but we got there. And kudos to the Frontier team too, for keeping the business in great shape during that period of time. The Frontier team executed extremely well during that pendency period. So we're very happy with the asset. And now with the deal closed, we have over 30 million prems passed with fiber in our footprint, which is great to see.

And in terms of your question around build pace, we expect this year that we have around 2 million prems passed with fiber, and that's across the entirety of the footprint. We have a number of ways to get there, whether it's with our own organic build within the combined footprint or whether with partners like Tillman, who allow us to also build outside the footprint to our specifications and with really good economics.

And then what we said is, over the medium term, we expect to pass 40 million to 50 million homes with fiber and do that in a very efficient way. And we see the power of convergence. And the converged customer is a very sticky customer. And as I said, we're -- now that the deal is closed, we're getting after it with urgency, and we're also be deep in the integration as well.

What about penetration levels? What kind of penetration do you think the company can achieve across the fiber footprint? What's the opportunity for ARPU growth and convergence that you see in the broadband business?

Sure. And we have -- as you know, we have 20 years of experience building fiber with Fios. And our Fios product is a best-in-class product. We're extremely proud of it. And Fios is still growing 20 years later. So we know how to build fiber. We know what extent looks like. In our most mature Fios markets, we have penetration rates that are in the high 40% range.

So when we look at the Frontier footprint, we think there's upside to what we have there, and we think we can improve upon that. And that's really the goal there. And doing it in an efficient way. We're going to look at the fiber build, we're going to see where the best return is, and that could be in the Verizon footprint, it could be in the Frontier footprint. We'll look at build economics, we'll look at geography, cost per prem passed, et cetera. And we're going to get after it with urgency, and we're not stopping.

So -- but we're very pleased with what we have done with Fios, and we think we can bring the best of Fios into the Frontier footprint as well.

I forget if you've said, does the 2 million accelerate after this year or is...

We haven't given a target beyond that, Bryan. So -- but we're not stopping. I mean I think the message that we've given is we're being very focused on driving mobility and broadband. And we're not stopping with our fiber build. We're going to continue.

Okay. How should we think about the growth outlook for Verizon's fixed wireless access products? Do you expect any reacceleration in the pace of growth there?

Yes. And with fixed wireless access, what we've said is we're building a long-term sustainable business with plenty of runway. And that's what we're doing. In 2025, we added about 1.2 million fixed wireless net adds. And our base of business right now is over 5.7 million FWA customers. So customers are very happy with the product. It's a great revenue stream.

When I think about the network, our engineers do a fantastic job in engineering the network with capacity that's way out in front of the demand that's out there. And we're entering 2026 with more capacity on fixed wireless access than we entered 2025. So we feel really good about that. The shape of growth for fixed wireless access, to your question, will probably follow seasonal patterns with mobility. And it's generally sold with mobility. So you would expect it to follow that sort of trend.

And then when you think about some of the other work we're doing with multi-dwelling units, we just completed our acquisition of Starry. And that will help us expand our product there in the MDU space and give us more open-for-sale on fixed wireless access. So we're very happy with the product. And as I said, customers love it, and we can do FWA and fiber at scale, and that's what we're doing.

Okay. Maybe you could talk about just free cash flow growth a bit. So despite a number of areas where you're investing, which you talked about, you've guided to a decline in CapEx this year. And free cash flow growth of about $1.5 billion or more. How are you achieving the CapEx savings, especially now that you're bringing Frontier into the company and the asset base is growing?

Sure. So our first priority is to invest in the business, and that's what we're doing. Our CapEx envelope for this year, we said is $16 million to $16.5 billion is all in and sufficient to address all of our growth initiatives. And we really narrowed our focus to both mobility and broadband platforms.

And if I start with on the mobility side, if you think about C-Band, we talked about in January, we're about 90% done with our C-Band build. So 90% of our planned sites are now on C-Band. And the goal is to substantially complete that C-Band build this year. And as we do that, that build is going to be with -- more with small cells, which come at a lower unit cost. So and that was planned. We did a lot of this investment in C-Band earlier, we accelerated a lot of that investment in years past. So we're coming towards the end of that with small cells. So that's one side of it.

And then on fiber, we just touched on continuing to deploy fiber in the network. We said 2 million prems passed this year and focused on doing that in a very efficient way.

And then to your question about, why is it lower? We really took a hard look, and we put a lot of rigor both around OpEx and CapEx and narrowing that focus to both mobility and broadband in areas not aligned to growth, we actually rationalized and/or eliminated. So if you think about some of the legacy areas, if you think about business wireline, if you think about wholesale, copper areas, there's a lot of areas that we don't need to invest in or projects with too long of a paybacks.

So we really put a lot of rigor when we put our capital plan together this year. And we're focused on deploying capital in an efficient way, and we know how to do that. So that's the focus for the team this year.

Okay. Maybe just a follow-up on C-Band, if you don't mind on -- you talked about it being predominantly small cell. Is that because you've already deployed on the macro cells and now you're filling in...

Yes, we're filling in at this point. As I said, a lot of the investment -- we accelerated a lot of that investment, and we have over 300 million POPs now on C-Band. So we're getting towards the end of that build. And it's mostly around densifying now. So -- but we're very happy with the performance. We see great performance on C-Band and we also see lower churn as well where we have C-Band deployed.

And maybe you could just walk us through the bigger moving pieces this year for free cash flow bridge.

Sure. So if I start at the top, we really have strong cash flow generation in the business, and we like the cash generation of the business. We have industry-leading free cash flows. And coming into the year, underpinning that is a strong EBITDA profile. And our adjusted EBITDA last year was about $50 billion.

And then when you bring Frontier's base of business into the fold, they had a good EBITDA profile as well. So that's helpful. You take the cost work that we're doing, the $5 billion of cost work, we have about $4 billion in CapEx savings. And then you put back the investment in the customer. So those are the big moving pieces.

And then in terms of some of the puts and takes, we talked about our CapEx envelope being $16 billion to $16.5 billion. So we're going to be very focused there. From an interest expense perspective, we're absorbing about $1 billion of interest costs related to the debt that we took on with Frontier. So we have that in the mix.

From a working capital perspective, our goal is to continue to improve our working capital profile. We do see about $800 million of year-over-year pressure from the severance payments that we'll make in the first quarter related to the headcount actions that we took at the end of last year.

And then from a cash tax perspective, we said that we see cash taxes being up slightly year-over-year as we look at our plans and the attributes we have for Frontier. But when you put that all together, the strong work we're doing around cost discipline, around capital efficiency gives us a strong and growing cash flow profile. We said we grow our cash flows at least 7% or over $21.5 billion, which is a very strong outcome. And it allows us to execute across all 4 pillars of our capital allocation strategy.

You mentioned working capital and trying to improve that. Maybe you could talk about the underlying assumptions in that free cash flow guidance for the working capital investment for upgrades and customer acquisition, especially given that you're trying to bring churn down and I think, improved gross adds at the same time. So it seems like there's more volume flowing through.

Yes. So a couple of things here, Bryan. We don't -- we're not guiding on gross adds or upgrades. I think that's a tough thing. Upgrades are very tough to forecast. But what I would say is this, last year, we saw double-digit gross add growth. We also saw double-digit upgrade volumes as well, growth and upgrades. And we were able to still absorb all of that and have a very strong cash flow profile, and we delivered on our cash flow -- our raised cash flow guidance.

So this year, with the work we're doing to become more flexible from a cost and a capital efficiency standpoint, we plan for various scenarios. We'll have to see how those scenarios play out throughout the year, but we have the flexibility to do that.

And we said we're going to make sure that when we grow, we grow in a fiscally responsible manner.

Okay. All right. Well, it's probably a good place to wrap up. So I don't know. Sorry, a couple more questions. Other page. So business wireless service revenue and customer growth decelerated in 2025 and a lot of that, I think, came from government job cuts with DOGE as I understand anyway, can you walk us through the totality of factors that impacted '25? And maybe share your thoughts on '26? Are you expecting an improvement this year?

Yes. And Kyle and the team have done a great job in navigating this environment. I mean as you mentioned, we did see pressure from the public sector last year with some of the government efficiency efforts. And obviously, that put pressure on volume growth. In 2026, we see that returning to more normal levels. A lot of that pressure is now behind us, which is great to see.

And Kyle and the team are very focused on growing mobility and broadband but being very disciplined in the growth. We're writing good business, and we're making sure that we're being very disciplined at the deal desk, both on the wireless side and also on the wireline side as well. And deemphasizing low-margin deals.

The team has also done a great job in taking costs out. And we've taken a fair amount of cost out in the last year, that's still ongoing. And for the first time in a long time, we had an improved EBITDA margin year-over-year, which is really great to see.

And as we look ahead, Kyle and the team will continue to focus on growing both the mobility and broadband even fixed wireless access is doing great on the business side. And doing that in a very sustainable way.

The other thing that Kyle and the team are focused on is what we call AI Connect and having fiber, both dark fiber, lit fiber. We're seeing a lot of demand for that. We have some signed deals with hyperscalers and diversifying with other logos. So this is something we do well. It's a good margin business. And we're happy with the deals we see so far. There's a lot of deals in the funnel. We'll see where it goes, but that will hopefully help stem some of the legacy declines that we continue to fight for. But by being disciplined and by taking cost out we continue to see good opportunity to expand margins there.

And as I said, Kyle and the team have done a great job.

Yes. On the AI opportunity. I mean, I think about a year ago, you were talking about that, and I think it helped in the December '24 quarter.

It did.

Then we didn't seem to hear a lot about it since then. Is that something that maybe there was a law now you're starting to see some reacceleration or...

There's a lot of demand. And obviously, these building fiber out takes time, too, and getting it to specifications that the customer wants takes work. And -- but we're seeing -- there's a lot of demand for fiber routes to support the AI economy. So we like the business that we see. It's -- I like the margins that we're seeing from that business. So obviously, it's early days, but it can be an enabler to stem a lot of the legacy wireline MPLS declines that we've seen over the years. So Kyle and the team are right on top of that one.

And that -- is that mostly -- it sounds like it's mostly build-to-spec business as opposed to routes...

In some cases, yes. Yes. It could be specific routes, for example, yes.

Okay. All right. On the -- I wanted to ask you about the wholesale other and prepaid revenue. I think combined, it drove about 100 basis points of the total Consumer wireless service revenue in '25. Just wanted to ask, is it fair to assume that the contribution from those 2 areas will continue at about that rate going forward? How are you thinking about that?

Yes. So let me start with prepaid. We've had a significant turnaround in our prepaid business. So we now have -- after several years of declines, we've had 6 straight quarters of volume growth, which is great to see. And that volume growth has translated into revenue growth, which is what I wanted to see. And really -- and healthy and profitable revenue growth as well. And that's coming from a couple of places. It's coming from our visible brand and total wireless. Both of those brands performing extremely well, and we continue to open distribution doors. So I'm pleased with the progress that we have on our prepaid business.

And then to your question on wholesale and MVNOs, I'm a little bit limited in what I can say there. But as you heard, we recently signed a long-term agreement with the cable companies. We're very happy with the partnership. It's on really strong footing. That business is accretive and allows their customers to stay on the best network. And we're very happy with the partnership.

And as I said, I can't talk about the commercial deals, but we're very happy with the partnership with the cable companies.

Okay. All right. Great. It sounds like the trajectory is still intact, though...

Very much. Yes.

Maybe you could talk about -- and this is where we wrap up. Capital allocation. Talk about capital allocation strategy, plans over the next year or 2, dividend, share repurchases, other investments, whether it be potential fiber acquisitions, spectrum, et cetera.

Sure. So our capital allocation framework is both disciplined and deliberate. And we have 4 capital allocation priorities. Those priorities have not changed. But we've made a number of updates inside of those priorities, and let me just go through them.

First one, as I mentioned upfront, is investing in the business. And we talked about our capital envelope of $16 billion to $16.5 billion to both across mobility and broadband. So we're going to continue to invest in our networks and maintain our network excellence. That's extremely important.

Investing in the business also encompasses M&A, and we just closed on Frontier. And we're in the middle of executing on that integration. So first and foremost is investing in the business. Second priority is our commitment to the dividend. And I think you heard Dan on the earnings call talk about our commitment to the dividend being iron-clad. In January, we raised the dividend for the 20th consecutive year. That's a track record that we are extremely proud of. And our goal is to put the Board in a position to continue to raise the dividend per share in the future. So that's our focus there.

Our third priority is a strong balance sheet. And we've done a lot of work in paying down debt. We've been operating inside of our long-term leverage target, our unsecured leverage target of 2.0 to 2.25x over the past 2 quarters. And we just took on the debt from Frontier, so that will add about 0.25 turn, on the unsecured metric. And what we said is we expect to return to our long-term leverage target in the 2027 time frame. So the focus will be to continue to generate cash and pay down debt.

And then lastly, our fourth priority is share repurchases. And the Board authorized up to $25 billion of share repurchases over the next 3 years with at least $3 billion of repurchases in 2026. So when you put that all together, we have a strong cash flow profile, and that allows us to execute across all 4 pillars of our capital allocation strategy, and we're getting after it with urgency.

Okay. All right. Great. Thanks, Tony. Thanks, everyone.

Thank you so much, Bryan. Appreciate it.

All right. Okay. Good afternoon. I'm Ben Swinburne, Morgan Stanley's telecom and media analyst. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales rep.

I'm really excited to welcome to the conference, he's been here before, but not as a member of and leader of Verizon, Dan Schulman, who has been Verizon's CEO since last October, has been on the Board since 2018, previously CEO of PayPal, other leadership positions at AT&T, Priceline, Virgin Mobile and American Express. Dan, thank you so much for coming. And I believe you have a safe harbor you at least want to reference.

Yes. Obviously, I'm going to be talking about things in the future, which always have some degree of risk in it. So I would reference the safe harbor statement for all of you.

Okay. With that out of the way. So you moved from the Board to the CEO role last fall. Can you talk about what excited and motivated you to make that change and how you have defined your sort of first few months leading the company?

Well, truthfully, I wasn't excited about it. I was very happily retired. I was on our ranch with my wife in Montana, trying to live up to a cowboy work ethic, which, by the way, puts all of our work ethic to shame. I mean I love my wife madly and the more time I spend with her, the better. So this was not a job that I aspired for or politic for despite what you read in the papers. But we had to do something. I was on the Board for 7 years. I was the Lead Director for a year or so before we made the change. And we were at a critical inflection point for Verizon.

We have been losing market share pretty consistently for 5 years in a row. Our stock was down over 30% in that 5-year time frame. We had gone from first to last in market cap in our industry. Our churn rate was up dramatically due to a lot of self-inflicted wounds. And our forward PE was reflected what everybody thought our growth would be. But what I saw is the opportunity to make a real difference, an iconic American company. I've been in the telecom industry for 2 decades plus.

I ran AT&T's consumer division. I ran Virgin Mobile in 5 or 6 years, who put on 6 million-plus customers. So I felt like I can make a difference in it. I convinced my wife of that. And I have to say, 5 months into it, I could not be more excited about being in this position. I feel like all those opportunities are turning into realities right now. And we're -- we have a long road ahead of us, but we're well on our way right now.

That's great. We're going to talk a lot about the opportunities ahead for Verizon. I'd love, Dan, if you could just talk a little bit first about the industry. This audience has a lot of investment options across TMT. How would you describe kind of the big picture trends in the U.S. telecom industry and why it's an attractive -- potentially attractive investment opportunity for folks?

Well, I think connectivity is one of the most demanded elements in our economy. I would say this is probably one of your most intimate devices. You take it to bed with you. When you go out to dinner, you put it on the table next to you. Too many of you take it into the bathroom with you. I mean it's just like -- this thing is intimate and is always with you. And there's more and more connections to it. There are more and more devices connecting into that connectivity. You have a huge demand for it. You have anywhere between 5 million and 6 million new people coming into the industry every single year.

You have convergence happening right now where you've got both broadband and wireless now coming together, and that's a huge opportunity for us. So I think on the demand side, and then you've got all the AI infrastructure that's happening right now, all the dark fiber that we have in the ground, like we don't talk enough about what that might do in the future, but it's a huge opportunity as well. And then I would just say, as you drop from the demand side down to the bottom line, I'll talk about Verizon, but I would submit this is an industry-wide thing.

We're massively inefficient. We can be -- there's so much more efficiencies to mine out of our operations. And that's not all just due to more efficiency and better customer satisfaction that you can get by the implementation of AI, and we will be an AI-first company. But just over the years, we've grown inefficient. We think that the only tool we have is a hammer and that nail is basically a free phone that we give away.

And I'll give you one example of like inefficiencies. Like if somebody calls us and we're worried they're going to churn because they call us and say, the service is great when they're traveling to their company and at their company, but in their home, they don't have the connectivity that they would like. We give them a free phone because that's all we know how to do.

That costs us about $1,000. And when we do that, it's a customer who's upset with a free phone. We could for 1/5 of the cost, give them a femtocell in their home and make them a happy customer. So like just take that one example and multiply it times hundreds and the amount of efficiency to be brought out of this industry and bottom line profitability improvement is actually quite immense. So I'm excited about it, both on the top line demand side as well as at the bottom line.

So I know you guys -- you've been busy and the team has been busy since you stepped into the CEO role. Talk a little bit about the kind of foundational changes you're trying to make in the organization to get Verizon where you want it to go.

Well, there are probably 4 or 5 things that I'm focused on. I mean the first was to be massively blunt and transparent inside the company. I mean first thing you have to do is admit you have a problem. And I wanted to be very upfront with the company that we could not be complacent that we were losing in the market, losing is unacceptable that I was there to win in the market, that Verizon was no longer willing to seed market share that we were going to grow through volumes, and we are going to have a sustainable top line that didn't come from short-term revenue price increases without corresponding value to it.

And so that was all about like going head on into the culture of Verizon. We were too bureaucratic, too hierarchical, too process focused, not outcomes focused. We didn't move fast enough. We're risk averse. And I will say the company really reacted to that. And I have no tolerance, honestly, for anything but that we have a saying inside Verizon now that every day matters. And I firmly believe that every day matters. If we aren't getting better every day, and I want to measure that, then we are falling behind because any time the pace of change external is greater than the pace of change internal, you're falling behind.

And so seizing the wheel, I'm just saying like we need to recognize where we are, we need to believe in what we are doing and what our future looks like is essential. The second thing was rallying around being a customer-obsessed organization, not a network engineering organization. Look, I believe in network excellence. I believe in having the best network, but that is not where it's at. This is about what are the pain points that our customers have.

What is the value proposition that we can put in front of them that delights them. What are the friction points we can take away. And that's how we reclaim our market leadership. Third thing was all around the cost side of it. I told people when I first came in that I was going to be aggressive on that. I think people maybe semi believe that I was going to be aggressive, but we took out $9 billion of costs, $5 billion in OpEx, $4 billion in CapEx.

And that has funded a war chest for us to invest back into our value proposition so that our value proposition is the best in the marketplace. I feel if we do that, that we will start to lower our churn. And I feel like lowering churn is a massive opportunity for us. It is the most profitable way to grow. Every basis point that we lower churn is the equivalent of 90,000 incremental net postpaid adds for us.

And so we've done that, and I will tell you that we are at the very beginning of that. And for those of you who doubt that, I would just say watch this space, like we have multiple billions of dollars to take out of this company year after year after year in terms of cost efficiency. I would say the next thing after that is I'm very focused on convergence. We have 30 million homes passed now with fiber. We're going to get up to 40 million to 50 million in the medium term.

A lot of that came from our Frontier acquisition. We have a huge opportunity to grow through that. We are very underpenetrated in the Frontier territory with wireless services. We're going to cross-sell into that. We're going to -- like we've got 1 gig to 7 gig of speed with fiber that we can offer to consumers right now. And so we're going to really step on the broadband gas pedal.

And any time we bundle customers together, there's a 40% reduction in churn versus stand-alone wireless. So to me, that is a huge opportunity. And finally, all of you saw this at our last earnings call, we are relooking at our capital structure. I have maximized our cash flow right now. For the last 5 years, our cash flow average growth rate has been negative 1%. We guided to at least 7% positive growth this year, $21.5 billion.

And so we'll invest in the business with that. We raised our dividend again for the 20th straight year, and I don't want to be the CEO that doesn't do that every single year going forward. That is an ironclad commitment for us. We are returning capital to shareholders now, $25 billion over the next 3 years, at least $3 billion this year. And we are going to delever. We are going to get to our 2.0 to 2.25 leverage ratio within the next 12 to 18 months after the acquisition of Frontier. So we have a really strong balance sheet. That balance sheet is going to get stronger. Our cash flows are going to get stronger. And so those are really the priorities that I'm focused on right now.

Great. That's a really helpful overview. You mentioned churn and growing subscribers and taking share and not losing share. So you guided to higher net adds, retail postpaid net adds in '26 versus '25 across consumer and business. We were chatting earlier about sort of what is the market looking for from Verizon. And I think one of the questions we get a lot is, well, if Verizon has the highest ARPUs and therefore, maybe the highest prices in the market, how do you grow market share in a competitive wireless sector? So maybe you could talk a little bit about what you think are the levers to grow sales, lower churn and do so in a way that's CLV attractive.

There's about 25 questions in there. But let me start off at kind of a high level. We guided to 750,000 to 1 million net postpaid phone adds. Honestly, it's 2 to 3x what we did last year. So in that way, it's impressive. But in the great scheme of things, I hardly consider it heroic. There's going to be 5 million to 6 million net new coming into the industry. That's maybe 10% to 15% of the net new in the industry.

What I am encouraged by is everyone has accepted that the fact that Verizon is going to grow now, and we are going to put on volumes. On top of that, obviously, we'll put on 1 million plus -- much more million-plus broadband and then we've got postpaid. So we're going to put on a good amount of net adds, and that will help grow our top line in a sustainable fashion going forward in addition to new value-added services we're going to do.

So I think it's a very doable, very responsible number to put out there. And I think the way that we're going to do it, and I'm putting a lot of money behind the customer experience, is we're going to take our churn down this year, I hope by at least 5 basis points. If you take our churn down by 5 basis points, we're halfway already to our target. And what that means is if we're halfway to our target with churn reduction, and I feel pretty good about that, then we're going to be very fiscally responsible because we don't really have to use a lot of promotional dollars to drive the other half of that.

And I think we can just be much more surgical and targeted in terms of how we acquire customers. And my view is I'm focused on net adds. I'm not focused on gross adds like gross adds are easy to get. They honestly are easy to get. We just spend a lot of promotional money to go do that. I have a war chest to go do, but that's not what I'm doing. Like I'm going to be very fiscally responsible. I'm going to be very conservative about what the top of my funnel looks like because I think I can take the bottom of my funnel and shrink it. And that is a smart way of getting at your growth.

Look, we're going to focus on churn in 3 different ways. The first thing, the #1 reason why our customers churn by far and away is price increases without corresponding value. And this is one of the reasons why I felt like we had to make a change in leadership here at Verizon is because for the past 3 years, we've done something like 30 price increases without corresponding value.

What does that do? That does something in the short term, it raises your revenues and maybe your EPS, even though our EPS has actually grown at negative 1% for the last 5 years. But it does nothing in the medium to long term. In fact, it's actually counterproductive to it because -- then you lap those price increases, you have higher churn that's going on and it is counterproductive to having a sustainable long-term strategy of growth. So as I said on our last earnings call, the first rule of getting out of a hole is stop digging.

And so we're not going to do price increases without corresponding value. I'm not against price increases, by the way, just to be clear, but there has to be value associated with it. And I believe by not doing that and I have some proof points that you'll start to see churn come down as a result of that. Second is friction in our process.

Like if you come into our store and 2 hours later, you have not been able to activate your phone and you walk out of the store without your phone and we promised to get it to you, like we're starting off the relationship on a bad initial footing. If you get a bill, your first bill, and it doesn't reflect what you think the promotion offered you or whatever it may be, that's a terrible experience.

If you call in to us sometime over your lifetime and we transfer you from one place to another, again, a terrible experience. And we have taken out of that $5 billion, quite a chunk of money to go after with Tiger teams established 12-month, 24-, 36-month targets for each of those to go after every single one of those pain points. And I am ruthless about it right now, just ruthless. And every day, I want to see how we're improving on those things, and I'm pushing the teams hard on it. And finally, convergence is a great opportunity for us. The more people we put on converged offers, 40% less churn that happens with that, the better off we'll be. And so I see a real -- there's a real path to it. We have to keep executing, but I really like what I'm seeing so far.

That's great. Obviously, a lot of stuff that you're focused on internally. In the backdrop, it's been a competitive environment. I think the investor view is it's gotten more competitive over the last year. I don't know if you would agree with that, but any thoughts on how you would describe the competitive backdrop here that you're operating in, inside of the first quarter?

In the first quarter, are you asking about?

Yes.

No, not really. I feel like actually, we're doing pretty well in the first quarter and doing it responsibly. So -- but in general, I think the industry is acting quite rationally right now. I know we are, and we're a big part of it. I know everybody thought it was crazy coming in because it was like this does not work for Verizon the way it's going right now.

But I think what I'm seeing right now is industry where all of us can grow, all of us can be more profitable. That's what we are focused on. And so I think we'll -- I think we -- and we're a big part of the industry, we're going to be much more rational about how we think about where value should be added and how much value we give away to other players in the ecosystem versus keeping ourselves. And so I want to be very thoughtful about it, very rational about it. But I feel like the goals that we set out for 2026, although they are step function improvements from where we've been, they're just the starting point for where I think we can be over the next couple of years.

I want to shift over to the broadband side of the business for in a minute, but I want to ask you about direct-to-sell connectivity in the context of adding value to your customers. SpaceX presented earlier today. There's a lot of focus in this area. What's your message to investors on satellite connectivity, direct-to-device sort of value to the consumer or new competitor? How do you look at it?

Well, right now, we cover about 99% of the areas where people work, live and play. So we've got pretty good coverage. I do think that the opportunity to work with some of the satellite companies, and I've spoken to all of them to be able to give an offer to our customers where we say you are never without service. I think that's real value added.

I mean you talk about like how could you add value, where could you raise prices with incremental value. To me, that's a super offer, but there's a lot that needs to be get done. Like the handset folks need to work with us. We need to really figure out how easily that switches back and forth. We need to make sure that the quality of that service is where we want it. And right now, terrestrial, like just like that is the best connectivity and speed and everything by far and away. And I think as I look at industry structure personally, I think we understand it really well. I think we're very thoughtful about it. And we know the ecosystem that we think is best for Verizon, and we'll be very disciplined around it.

Got it. Okay. You recently closed on the Frontier acquisition. Congratulations on that. What does this business and these assets bring to Verizon when you sort of fold it into your long-term growth plans?

Yes. Honestly, I couldn't be more excited about the acquisition closing. That was not an easy thing to close, and we did it. It's taken our fiber footprint to over 30 million homes passed right now. We want to build that out over the medium term to at least 40 million or 50 million. We're going to do at least 2 million homes passed incremental this year.

And to me, one of the big growth opportunities for Verizon is in convergence. And that convergence can be either with fixed wireless access or fiber. I mean fiber gives speeds up to 7 gig. Nobody here needs speeds up to 7 gig, but it provides it. And fixed wireless access where we don't have fiber is a really good alternative, and we're doing quite well on that. In fact, we have more open for sale coming into this year on fixed wireless access than we did going into last year. So I'm really pleased with the capacity that we've put on into the network around that.

I do think any time you can bundle together, you have higher lifetime values. I mean, much higher LTVs. You have both the broadband part of it, you have -- and the ability to upscale that and price that up. And then you've got the wireless side where you have a lot less churn, 40% less churn. So convergence offers us the opportunity to grow and the opportunity to retain. And so it's a big deal for us.

You guys are going to be building a lot of fiber over the next couple of years. Can you talk a little bit about ramping up that organization? And I guess you're bringing on a new organization and maybe just compare the Fios, legacy Fios opportunity relative to what you just bought with Frontier as we think about the next couple of years in fiber builds?

Well, we know how to build fiber, I mean, yes, and we know the whole regulatory process to do that. I was talking to members of the administration who are really quite excited to help us to lay more and more fiber. I mean it's just -- it's better for critical infrastructure for the United States. It's better for customers. It is massively helpful as we go into the age of AI as well, whether that be with our commercial customers, the hyperscalers or our consumers. There's huge opportunity in doing that. And so we'll do that organically.

We have partnerships that we're quite happy with that will help on some of that build-out. We've done some acquisitions like a smaller one called Starry that helps us get into MDUs, multiple dwelling units. more effectively. And so there are all sorts of ways that will accelerate our move into fiber, and we'll continue to add capacity and make sure we have room for more and more fixed wireless as well.

I was going to ask you that next. So when you think about the long term, Dan, you've got more and more fiber coming on, how does fixed wireless fit in? How do you think about customer segmentation and sort of bringing the right product to the right customer?

Where there is fiber, that will be our initial choice for broadband connectivity for our customers just because the speeds are so much better. And Fios plays right into what we're doing with Frontier. And I couldn't be happier to get the Frontier workforce into us. They're -- I got to give them a ton of credit. Like they went through bankruptcy. They came out of it. They executed in a time of uncertainty in a way that was extraordinary.

So they are scrappy. They are hard charging. I really -- I love their network folks, and we're learning a lot from them. They're learning a lot from us. We're going to come together. We've got a ton of opportunity to learn and get better at installing fiber. We also obviously have a ton of opportunity in terms of synergies. We said we're going to do instead of $0.5 billion, $1 billion of synergies off of that.

And that doesn't even include like the fact that our cost of debt is way less than theirs. We're retiring their debt. But there's all sorts of things we can do together from go-to-market to learning from each other to common systems to leverage back on access costs that make that acquisition and our whole convergence and broadband strategy one that gives me a lot of confidence about the future.

Yes. One area that all this fiber certainly helps is on the commercial or the enterprise side. You touched on it a couple of times, hyperscalers, AI, big theme at this conference. How would you -- how do you advise us to think about Verizon's opportunity to participate in all the investment that's happening around connectivity and AI?

Well, I don't talk enough about it, honestly, and that's my fault. That is not like Kyle Malady, who runs our business group is doing an unbelievable job right now. He is killing it. First of all, like he's got a lot of the wireline stuff in there where we lose $1 billion to $1.5 billion of margin. And over the next 1 to 3 years, we will either sunset all of that, exit it, look at different structures where we can free up all of that $1 billion to $1.5 billion of incremental margin on top of the efficiencies that I talked about.

But also the opportunities now in the business segment, in the commercial segment as more and more companies are looking at how do we use AI and like we're going to do that inside for us and every company is going to do it. I have strong thoughts about it. I've been very public about those. But the opportunity to use our embedded assets, we have a ton of dark fiber. More and more of the hyperscalers are looking at not just building out data centers, but how do you cluster those data centers? How do you tie them together.

And really there, you need amazing connectivity to go and do that, and we can offer that, and we are working and have in place with several of the hyperscalers that connectivity, and that's only going to grow, but it's also going to grow on the commercial side. So I see a ton of top line opportunity for us on the commercial side, and I look forward to talking about that more.

That's great. Let's shift over just to the -- a little bit more on the efficiency front. You mentioned that a couple of times. You guys have taken a lot of cost out. You haven't guided specifically to EBITDA, but you've mentioned you want to grow ahead of the 4% to 5% target you set for adjusted EPS. What are the levers -- you mentioned $9 billion earlier. That's a big number for any company of any size. How do you find those kind of efficiencies? What are the levers you're pulling that you think will not slow the company down?

I think quite the opposite. I think it's actually going to speed the company up. Look, over time, you build up a bureaucracy, you build up -- I'm very strict on like performance. Like to me, I have no time to admire problems. Like I want to know what is the time frame that we're going to fix something and what the results are going to be. Like process, I think -- I'm not coming down on process or anything. I want to be thoughtful. I want to be rational.

I want to be analytical, but I like results. And for me, this is about do we have the right people in the right places focused on the right things. And we took out 13,000, 14,000 people. We took out a whole heck of a lot out of our contracted workforce as well. That was step one. And that was relatively easy to go and do. Step 2 is we strip out complexity that frees up a ton of resources, and step 3 is we automate what's left.

And so I feel like we want to be the most efficient telecom company in the world, but there's so much opportunity out there. And right now, it's just we are at the beginning of that journey. And I know it looked like it was a lot. But like on CapEx, people are like, are you sure $16.5 billion is enough? I'm like $16.5 billion is a hell of a lot of money. It puts us outside of people who are investing in data centers, puts us as like one of the top 10 investors of capital and infrastructure in the country.

And honestly, I agree to it because it was [indiscernible] like we've got to be way better than that. And by the way, I will not sacrifice for a moment anything around network excellence in our broadband and our wireless networks. I will not do that. But we can be ever more efficient there, and we can be way more efficient in our operating expenses. I mentioned something like you don't have to give away a phone for everything. Like that is thousands of dollars, like our cost of retention and our cost of acquisition can come down substantially, and you will see that as we go through the year. You will see it.

Great. All right. Well, maybe in the couple of minutes we have left, I want to make sure we hit on capital allocation. It's an important part of the Verizon story. You announced plans to buy back at least $3 billion in stock this year as part of a 3-year, I think, $25 billion buyback plan. Talk about your approach to capital allocation as you weigh buybacks and dividend growth against investing in the business and reducing leverage?

Yes. Well, as I said, our #1 priority is invest back in the business. Like the way that I think about our business model is I want to have top line sustainable growth, and that's going to come from volumes, not from empty price increases. It's going to come from volumes. It's going to come from convergence and it's going to come from added services that we add on top of that. But that can keep our top line growing substantially over time in a responsible, sustainable way. Then I want to be the most efficient.

I want to take out costs continually, and I want -- and that, to me, is pretty straightforward to go and do. And then I want to buy back my shares. And that -- like if you think about that, what I think we can do is like grow our bottom line. I know you want adjusted EBITDA, but I like adjusted EPS.

I like adjusted EPS.

Okay. Good because that's what we're going to be guiding on. But I think we can take that and just start to grow that and grow on top of growth year after year after year for the foreseeable future. And so you take that with free cash flow that I intend to increase as well through these efficiencies and top line growth. And then our dividend, which is a good paying dividend, and we're committed to that.

But on the dividend, what's really important is this is the highest in terms of the money we'll spend on our dividend. It will peak here and go down from here, even though we're going to increase because we're buying back shares now. And so -- and I think that's really healthy for our balance sheet as well. And so I think our capital allocation makes sense to me. We have plenty of flexibility, by the way, in our balance sheet to do acquisitions if we wish to do that, to go after spectrum if that makes sense for us versus network densification. And so I feel really good about our capital allocation plan right now, but within the context of our overall business model.

Great. Well, Dan, we're out of time. Anything you want to wrap up with for this audience before we close it out?

No, Ben, thank you. I appreciate it. Thank you, everybody.

Thanks, everybody.

Good morning and welcome, everyone. For those of you who don't know me yet, I am Kannan Venkateshwar, and 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. And sorry for the last-minute switch to a virtual event. But Tony, great to have you here, and thanks for joining us this morning.

But before we get started, yes, Tony, you have a safe harbor statement I think that you want to read out as well.

Yes, sure. Thanks, Kannan. Great to be here.

So 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. And my comments may include forward-looking statements, which are subject to risks and uncertainties.

So with that out of the way, Kannan, we're ready to go.

Thank you. So Tony, maybe we could start with all the changes Dan has made in the first 100 days, he's had a lot of impact. So 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?

Yes, sure. And we have a lot going on, and from a macro view, as you've heard Dan talk about, we're creating a new Verizon and aimed at being the best, and also playing to win in the marketplace. As Dan said on the earnings call, the company is at a critical inflection point and we have to radically change our culture towards the goal of delighting our customers and also delivering for our shareholders. And we talked about having network excellence and leveraging that network excellence to grow both mobility and broadband, and doing that in a very responsible way.

And to your question, Kannan, 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. We took bold actions, as we talked, about to drive $5 billion of cost savings out of -- for 2026, some of which gets reinvested in the customer and the remainder falling to the bottom line.

And we moved quickly in the fourth quarter to rightsize the organization. We also sharpened our capital envelope, as you saw, improving efficiency and really narrowing our focus on mobility and broadband programs. And 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. So we also talked about launching a new value prop for customers. And then we also gave guidance for 2026, which has, as you saw, significantly improved over prior years. So we're excited about what's in front of us.

And 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. So maybe I'll start at the top. And overall, as I said, our team is very focused on growing mobility and broadband through sustainable volume growth, and doing that in a disciplined way. And 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 20. And then third is continuing our network excellence as we complete our C-Band build and as we continue to deploy fiber in the network.

And then from my standpoint, in terms of my priorities, I have 3. 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. And 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, and I'll come back to that. And then third is making sure we generate strong cash flows and execute on our capital allocation framework.

And if I can expand maybe on the guidance and the capital allocation, I think it would be helpful just for some context. So for guidance, in terms of volumes, we said we expect to grow our postpaid phone net adds 750,000 to 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% to 3%. And we see '26 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 4, 5 years. And then free cash flow, we have industry-leading free cash flows, and we've said we expect to grow our free cash flows at least 7% or at least $21.5 billion.

And then in terms of the capital allocation framework, we have 4 capital allocation priorities. The priorities themselves haven't changed, but we made significant updates inside of those priorities, as we outlined them on the January earnings call. And the first one, and first and foremost, is to invest in the business. And you see us doing that with our CapEx program, we said $16 billion to $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. And 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. And 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. And as we said, goal is to pay down debt. And we've been operating inside of our long-term leverage target for the past 2 quarters up to the Frontier deal. And now that we've ingested Frontier, we said we'd get back to our long-term leverage target in the 2027 time frame.

And then fourth priority is share buybacks. And we're pleased to announce that the Board authorized up to $25 billion in share repurchases for over 3 years, with at least $3 billion in 2026. So overall, the goal is to generate strong cash flows and execute across all 4 pillars. So as I said, this is really a step-function increase over where we've been in prior years. And the exit rate from '25 sets us up for a good platform for 2026.

Yes. 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 to 1 million, which is your guidance. Could you talk about maybe the context of industry growth that you've used essentially to come to that kind of a number? And U.S. population growth last year was the slowest in 5 years, and it seems like this year it's going even lower. So what industry growth framework did you assume when you set your subscriber goals for the year?

Yes, sure. I think as we've seen, the wireless industry is both robust and resilient. And now that everyone's reported results, I think that's pretty clear. And 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. And 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.

The fourth quarter showed that we can compete and execute well. We have offers that resonated in the market. We had a consistent approach and we have strong execution in the field. And we delivered those volumes within the parameters of our guidance for the full year.

And then as I look ahead, to your question, we gave guidance of 750,000 to 1 million postpaid phone net adds, which is roughly 2 to 3x the volume growth that we had in 2025. We see enough growth in the industry, and as we've said and we said on the earnings call, we expect to grow volumes in a fiscally responsible manner.

And you mentioned you're working on offers to delight customers and there's a new approach to go to market and so on. So 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? And 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.

Yes, sure. And I think if you heard Dan on the earnings call, we talked about being thoughtful and financially disciplined. So that's kind of the framework that we start with. And we're in the early stages of our transformation. A lot of the go-to-market activities reflect the drive to be more customer-centric and delighting customers.

And we can do that by eliminating pain points, making it easier to do business with us, investing in the customer experience and deploying AI proactively to help solve customer issues, take calls out of the system. And ultimately, this is going to lead to reduced churn and hopefully a lower cost to serve. And ultimately, you get to a higher margin profile. And as we look ahead, we're focused on a new value proposition, and we said we're targeting to launch that in the first half of this year.

And in terms of who's running this right now, so right now, Alfonso Villanueva is serving as our Interim CEO for the Consumer team. And 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.

So as I said before, the objective here is to grow volumes across both mobility and broadband and do it in a very fiscally responsible manner.

And 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 with Tony.

So 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. But based on your and AT&T's comments, it also feels like ARPU this year could be under pressure irrespective. So how do you see the trajectory beyond this year? I mean is this the new normal in terms of pricing? And how should we expect this to evolve next year and beyond?

Sure. So maybe I can start at the top of the house with the revenue guidance. So we said we plan to grow both mobility and broadband service revenue 2% to 3% in 2026, and that includes Frontier. And that also reflects the importance of both mobility and broadband and both of those pillars being key to our growth strategy.

We also said that 2026, and we've been very transparent with this, is going to be a transitional year for service revenue. When you break it down underneath with mobility, we said we expect wireless service growth be around flattish as we look to drive sustainable volume-based growth, and that will ramp up over time here.

And 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. But what I can talk about is what we've done in the past is we're lapping pricing initiatives that we took last year. We still have the ongoing promo amortization headwind that we still got to fight through as well.

But 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 6 straight quarters of growth there. So with the volume growth to follow, the exit rate for 2026 should be much better and setting us up for a better revenue profile as we head into 2027.

And then on the broadband side, we now have, with Frontier, 16 million -- a little over 16 million subs in the base right now, broadband subs. So there's a lot of room to run with fiber, with Frontier in the base, and also with our FWA products. So 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. So 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. And so maybe sticking with 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, the 35 million to 40 million became 50 million, and AT&T's 60 million seems to be creeping to 70 million. So 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?

Yes. And 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, and we all see it. And it goes back to our capital allocation framework. First priority is to invest in the business, and there's no change there. So we're going to continue to invest in fiber and we're going to continue to grow that business where we see the best returns.

And we've expanded the fiber footprint. We have over 30 million prems passed now that we have Frontier in the mix. And we said that we'd have at least 2 million prems passed in 2026, towards a goal of 40 million to 50 million over the medium term. And we have a sufficient path to get there and we can get there in a reasonable amount of time.

But we're going to look at where we see the best return economics, whether it's penetration rates, convergence opportunities, things like that, build costs. 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. So we're confident that we can get to our 40 million to 50 million passings in a reasonable time frame.

Got it. And in terms of 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? Or is this essentially a market expansion opportunity beyond the regions that you have fiber in? How are you framing that discussion internally?

Yes, Kannan, I would say we do both. So both fiber and FWA are important pillars in our broadband strategy. And with FWA, we've said for a long time, 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, and we see a lot of room to grow there. So we can do both and we have the capacity and 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 in the medium term. So we feel like there's a lot of optionality there for customers with both FWA and with fiber.

Got it. So 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 the savings goal. So could you help us understand where these savings are coming from?

Sure. So as we said upfront, we're driving $5 billion of OpEx savings in 2026. And it gives us a lot of flexibility, to be more agile, be leaner and also invest for growth. And there's a lot of work that's already underway. 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, continuing 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.

And 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. And we also addressed, as part of that exercise, third-party contractors and vendors as well.

And then lastly, on the Frontier integration, as you saw in 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.

And then when you put that together and you look at it from an EBITDA standpoint, cost reductions give us the optionality to do a lot -- a number of things. Number one is run more efficiently. Second thing is to absorb the transitional year in service revenues we've talked about earlier. And then the third is to invest in the customer. And last is return a significant amount of capital to shareholders. So we see a good path to both EBITDA and EPS growth for 2026, and that's by taking bold actions.

Got it. And so I guess EBITDA, if -- I may have missed this in your early comment or maybe I heard this wrong, but I think you mentioned about 4% to 5% EBITDA growth.

EPS. EPS growth.

Yes, that's why I wanted to clarify that. Okay. And 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. And this includes some of the incremental fiber CapEx. On the wireless side, it probably looks even deeper in terms of the savings. So could you help understand how -- where these savings are coming from on the CapEx side as well?

Yes, sure. And as I said before, the first priority is to invest in the business. So we're going to continue to do that. And the CapEx profile that we have for this year of $16 billion to $16.5 billion is sufficient to address all of the growth initiatives. And we talked about having network excellence and that being foundational for us. We're not compromising on that.

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.

And then from a fiber perspective, we're not slowing down. We'll continue our fiber build pace. We said at least at the combined rate of Verizon and Frontier which is about 2 million prems passed in 2026. So we're going to continue to do that, and then get to the 40 million to 50 million as we've talked about.

And in terms of what we're not doing, 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. And things, areas that were not aligned to growth were either reduced or eliminated. And that includes things like in business wireline, wholesale, looking at projects, legacy copper projects, things that have a longer -- projects that have a long payback. So we really took a sharp look at this and went back to 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. But I guess there's also an opportunity here to somehow use the cable network, cable infrastructure to offload your traffic or save some CapEx, or OpEx for that matter. Is there an opportunity to do something slightly different with these partnerships? And are we just looking at it from a very narrow lens right now?

I mean look, I can't say too much about the -- the partnership's on good footing from a wholesale standpoint, so I'll leave it at that. But we're very happy with the agreements we have with the cable companies, and we just signed a long-term agreement. So it puts the partnership on a really good footing.

Got it. And maybe just looking at that partnership more broadly, obviously, this is an important source of revenues, high-margin revenues for you. But given that cable is now adding close to half of industry net adds, longer term, how do you frame this discussion? 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?

Yes, I have to be careful in my answer here on the MVNOs. But what I'll say is, as I said, the partnership is strong. We have a long-term comprehensive agreement that we just signed. It allows them to -- their customers to remain on the best network, and it's an accretive deal for us. And it sets us on a solid foundation. I got to kind of leave it at that.

But then if you shift from wholesale over to retail, I think you saw in the fourth quarter, our fourth quarter results speak for themselves. So we did very well. So that's the way I would frame it.

Okay. And more in terms of the cash flow side of the business, obviously, we've talked through the OpEx and CapEx savings, but there's also upcoming spectrum auctions that you may have to invest in. And 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. So 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 considered that within your cash flow and capital return goals?

Yes. 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. But if I stepped 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 going to look at everything, and we always do. And generally speaking, in terms of spectrum, we always look at it from -- as a build-versus-buy analysis, and we'll look at it that way. And we have sufficient balance sheet capacity to the extent that it makes sense for our business. And same thing with fiber as well, and we're very thoughtful about what we're doing there and we're pressing ahead. So I feel good about our positioning right now. We have a strong balance sheet to support our growth initiatives.

We also have a couple of questions from the audience, but I wanted to maybe broaden that a little bit. So the question specifically is about interest in further acquisitions in fiber and what other frameworks you could look at in terms of expanding footprint. And so it's more about inorganic use of your cash.

But 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 the Lumen acquisition structure that AT&T used where it's partly off balance sheet. So 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.

Yes. 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 outside of our footprint, to our specifications, with good economics. So we like those structures. And to the extent we can continue to grow that, that would be another option.

And as I said before, we always look at everything. I mean obviously, we just ingested Frontier so we have the integration work in front of us right now. But we'll always look to do that. And we have many paths to get to the 40 million to 50 million prems passed in the medium term. So we have a lot of optionality there, with the work we're doing organically, with partnerships, et cetera. So I feel good about that.

And looking at cash flow more broadly beyond this year, next year obviously, you have a lot easier cash cost comparisons, I mean, so that should help you, and some of the restructuring costs fall off, and synergies, the cost savings start kicking in. So when you think about 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. So could you frame the puts and takes for us as you think beyond this year for cash flow?

Sure. And I'm glad you think it's easy, Kannan. So look, I'm not going to guide on 2027, but as I said earlier, we expect to grow free cash flow at least 7%, which is an acceleration from prior years. And 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 about $1 billion of interest expense this year from Frontier. We continue to do work and improve our working capital profile now that we've absorbed Frontier. We have some incremental year-over-year severance pressure from the head count actions we took in the fourth quarter. Some of that comes in Q1 here. And then cash taxes, we expect to be up slightly year-over-year just given the plans we have for the year.

But the strong cash flows allow us to execute across all 4 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 4 of those this year. So obviously, more to do, but the goal is to continue to increase our cash flows and be very disciplined in our approach.

And here, just maybe a minute left, so in that minute, I guess the mandatory question in all these conversations now is AI, so 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 could you talk more expansively about maybe both the cost and the revenue side of it, I mean, how we see this playing out in the coming years?

Sure. Yes. We do look at it from both of those dimensions, Kannan. First, on the efficiency side, obviously, tied to making sure we have customer experience improvements and efficiency. And ideally, we want to be able to do both of those, whether it's 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 taking out manual work and improving our processes. So the goal here is to operate a lot leaner, be more agile. And that's what our transformation is going to require. So that's the cost side of that.

On the revenue side, a number of opportunities that Kyle and the team see on what we call AI Connect. We have a number -- 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. So we're excited to see that space evolve, and more to come.

Got it. Tony, we're at time. So thank you so much for joining us. I know you have a busy day ahead. So with that, all the best for the rest of the day.

Thank you, Kannan. It's good to see you.

Same here.

Good morning, and welcome to Verizon's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time.

I would now like to turn the call over to Mr. Brady Connor, Senior Vice President, Investor Relations.

Thanks, Brad. Good morning, and welcome to our fourth quarter 2025 earnings call. I'm Brady Connor, and on the call with me this morning is our Chief Executive Officer, Dan Schulman; and Tony Skiadas, our CFO. Additionally, I'd like to introduce our new Head of Investor Relations, [indiscernible]. She will be assuming the role on a go-forward basis.

Before we begin, I'd like to point you to our safe harbor statement, which can be found in the earnings presentation and on our Investor Relations website. Our comments this morning may include forward-looking statements, which are subject to risks and uncertainties. Factors that may affect future results are discussed in our SEC filings. This presentation also contains non-GAAP financial measures, and you can find reconciliations of these measures in the materials on our website. With that, I'll turn it over to Dan.

Thanks, Brady, and thanks for all of your service to Verizon over the years and to me personally over these past 100 days. I'll miss working with you.

And Colleen, welcome to the Verizon team. We are so lucky to have you. And thanks to everyone on the call for joining us this morning.

We have a tremendous amount of information to share with you from our fourth quarter results, our Frontier acquisition, our renewed MVNO relationship with Comcast and Charter, and of course, our 2026 guidance, including an update on our capital allocation plans. And we are you're going to dive into each of those topics, but first, I want to acknowledge the network outage that impacted our customers earlier this month. We did not meet the standard of excellence our customers expect and that we expect of ourselves. We let our customers down. The Verizon brand was built on superior network quality and reliability, and I'm committed to relentlessly working to deliver the service that our customers expect and deserve each and every day.

We saw that resilience in action this past week under difficult circumstances. In response to the winter storm, I want to thank our technicians, fiber crews and retail teams who have battled the ice and snow to serve our customers and keep them connected. We maintained seamless connectivity across the most heavily impacted regions. Last quarter, I said that we would transform our company in a fiscally responsible manner with a clear focus on driving shareholder value.

Net volume growth and profitability growth can and will go hand in hand and that they can happen simultaneously. And as I talk to you today, I am more convinced of that than ever. Our transformation will be driven by bold and meaningful actions to affect what is essentially a turnaround story. We are already a leaner, more efficient and intense organization. We are bringing in talent with new skill sets to complement our workforce. Every single year, we will become more efficient, more agile, more outcomes-oriented and our speed of decision-making and product deployment will meaningfully increase.

We are creating a new Verizon, one that does not settle for anything less than being the best. So far, I am very impressed with the reaction of our workforce as they begin to truly embrace, feel and drive the level of commitment that is needed to transform our culture. That attitude is fully required from every single member of the Verizon team.

There's no question that Verizon is at a critical inflection point, and there is no doubt that we must radically shift our culture towards the goal of delighting our customers and building a brand that stands for trust so that we can deliver for our shareholders. The prevailing attitude inside Verizon is that we are now going to play to win, and we will never again be content to be the hunting ground where our competitors take our share and our customers.

These last 100 days have been full of change and a renewed sense of excitement about our future. And I expect that intensity to continue and grow. We moved quickly to rightsize our organization by aggressively removing pockets of underperformance, eliminating redundant organizational structures, reducing layers of hierarchy and cutting resources not focused on our priorities with both our full-time employees and contractors. We are building an in-year war chest of $5 billion in OpEx savings, with a substantial portion realized by headcount reductions, alongside marketing efficiencies, real estate rationalization, contract renegotiations and more. This will allow us to be more agile and reinvest in our business for growth and loyalty, and this is just the beginning of the efficiencies we are uncovering in both our OpEx and CapEx.

We aim to be the most efficient telecom company in our industry. As we continue to reduce complexity, eliminate structural inefficiencies, divest noncore assets and deploy automation at scale, we will enable a growing stream of cost savings, providing us with ever more operational flexibility to invest for growth and provide meaningful and increasing returns for our shareholders.

Make no mistake, our #1 priority is to invest in our business to drive our future growth. No company ever cost cut its way to greatness. We are examining every dollar of OpEx and CapEx to ensure it is being spent on initiatives that will drive customer loyalty and brand trust. However, when we invest, the bar will be high. We will only do so when we know it drives growth, delights our customers and delivers for shareholders. There is nothing more important than that.

Our financial success will rely on subscriber growth, driven by convergence, a value-based pricing strategy, superior value-added services and a fully revamped end-to-end customer experience. We will not rely on empty price increases to drive short-term revenue and earnings. That is not a sustainable financial model nor an engine of long-term growth. I strongly believe that Verizon, and possibly our industry, is only scratching the surface of meaningful increases in bottom line performance.

We began to see initial glimmers of our actions to play out in our fourth quarter results. We were disciplined and we performed well in the market, achieving more than one million mobility and broadband net adds, our highest reported quarterly net adds since 2019, while simultaneously writing better business than we did in the fourth quarter of last year. Importantly, we added 616,000 postpaid phone net adds with 551,000 from consumer, our highest postpaid phone net adds in the last 5 years, all while delivering on our 2025 financial guidance.

I think by now it's clear, we are not satisfied with [indiscernible] market share to our competitors. Our fourth quarter results show that we can compete effectively and win when we move with speed and consistency. While we are still in the very early stages of our transformation, and we are still predominantly competing with many of our existing and blunt tools, our execution in the fourth quarter was critical to establishing a strong baseline and momentum as we enter 2026.

Before Tony reviews our fourth quarter results and our 2026 guidance, there are a few topics I want to briefly cover. First, and obviously crucial to our converged future is the closing of our Frontier acquisition. We now have over 30 million fiber passings with a huge cross-sell opportunity as we are significantly underpenetrated with our wireless services in Frontier markets. I want to thank the entire Frontier team for their focus and execution over the past 18 months. We intend to continue our fiber build-out, adding at least 2 million fiber passings this year, with our goal to reach 40 million to 50 million fiber passings over the medium term. At the same time, we are aggressively driving efficiency through our integration. We now expect to realize over $1 billion of run rate operating cost synergies by 2028, double our initial estimate. These savings will be derived from network integration, third-party contract efficiencies and go-to-market savings across marketing and advertising. The combination of our assets creates a powerful force in the market, and we intend to aggressively seize incremental net adds and share of both mobility and broadband services within Frontier markets.

I'm also very pleased to announce that we have completed a comprehensive long-term agreement with Comcast and Charter to continue our partnership. We obviously can't reveal any of the details, but each of us agrees the partnership is on very solid footing financially, operationally and strategically. It is an accretive deal that ensures their customers remain on the best network.

Finally, we are targeting the launch of our new value proposition in the first half of this year. We are in deep market research with a very sophisticated conjoint analysis that is providing us with detailed customer feedback, projected market dynamics and associated financial and operational metrics. I'm encouraged to say that the feedback is quite positive.

Obviously, all of you and our competitors want the details. The good news is we have them, and we are now in the fine-tuning stage of our value proposition work. We are not going to show our hand until the day we launch, but our guidance incorporates our view of how the new value proposition will impact our volumes and financials based on significant market input and data analytics. We are driving a customer-obsessed culture deep into the organization. We are reducing complexity, eliminating the things customers hate and removing pain points to make it easier to do business with us. To do this successfully and efficiently, we are determined to be an AI-first company, deploying AI at scale. We will use AI to optimize our operations and fundamentally reshape the customer experience. We are leveraging it to simplify offers, personalized interactions and reduce churn through smart, consistent marketing.

By using predictive models, we can anticipate customer pain points before they happen, allowing us to solve problems proactively. We will use our data and AI capabilities to not just massively improve our efficiency and customer satisfaction, but to redefine our value propositions and deliver hyper-personalized experiences. Eventually, every individual customer will have a tailored proposition.

Beyond these internal efforts, we are unlocking new revenue streams by reimagining our existing assets, leveraging our deep fiber footprint and distributed network facilities to enable AI at scale for our enterprise customers, including hyperscalers.

I'm proud of what we have accomplished in the last 100 days. We have a financial and operational plan that is truly transformative and appropriately conservative. Our 2026 guidance is significantly more robust than our recent performance, and it reflects the beginning of our turnaround.

With that, let me turn it over to Tony, who will cover our fourth quarter and full year 2025 results and outline our 2026 financial guidance.

Thanks, Dan, and good morning. We finished 2025 with strong operational momentum while also achieving our full year financial guidance. This includes our previously raised guidance for adjusted EBITDA, adjusted EPS and free cash flow. In the fourth quarter, we added over 1 million net adds across mobility and broadband, our highest reported quarterly volumes in 6 years. We ended the year funding growth delivering high-quality net adds across mobility and broadband with healthy customer lifetime values. We accomplished this while taking decisive steps to transform our cost structure, ensuring that we have the necessary flexibility to invest in our customers and business going forward.

Fourth quarter postpaid phone net adds were 616,000. This was our best net add quarter in 6 years as our offers resonated in the market. Our consumer team executed exceptionally well across the holiday season, especially with new to Verizon sales. Consumer postpaid phone net adds of 551,000 were driven by strong demand as we leveraged our financial strength and flexibility to fund growth opportunities.

In our business segment, we continue to see growth in the small and medium business and enterprise sectors. Public sector results were impacted by residual disconnects from government efficiency efforts as well as the federal government shutdown. However, public sector performance improved from the prior quarter. With the vast majority of these related disconnects behind us, we expect to see further improvements in public sector wireless volumes across the first half of 2026.

Postpaid phone churn remained elevated in the quarter, largely from prior pricing actions as well as competition. Churn remains a pivotal opportunity in 2026, and we expect our investment in the customer as well as increased convergence opportunities to benefit retention over the next few quarters.

In core prepaid, we continue to take share. Fourth quarter net adds were 109,000, our sixth consecutive quarter of positive customer growth. Our visible and total wireless brands continued their strong performance. We finished the year with over 2,000 total wireless stores across the country, and we have good momentum with our key brands going into 2026.

Moving to broadband, we also continued to take meaningful share. Fourth quarter net adds were 372,000, our highest of the year, reflecting strong customer demand across both fixed wireless access and fiber. Fixed wireless access net adds were 319,000. The quarter-over-quarter improvement was driven by our Consumer segment and reflects the innovation and expansion around the product offering.

Fios Internet delivered 67,000 net adds, our highest fourth quarter net additions since 2020. Fios continues to be the gold standard for broadband connectivity. We are excited to grow our fiber footprint through the Frontier acquisition and the Tillman partnership. Frontier delivered an exceptional performance in the fourth quarter, generating 125,000 fiber net additions, representing a 29% increase over the prior year. This momentum was supported by strong operational pace.

Frontier deployed approximately 1.3 million new fiber passings in 2025, bringing their footprint to more than 9 million fiber passings. We are incredibly pleased to have Frontier in our portfolio, and we're excited about the long-term growth potential these assets provide.

When we combine Frontier, FWA and fiber, net adds were almost 1.9 million for 2025, resulting in over 16.3 million connections. While we are in the initial stages of our strategic transformation, our execution is already yielding significant progress across both mobility and broadband platforms.

Turning to our financial results. We delivered on all of our 2025 financial guidance even as we undertook a change in strategy in the fourth quarter. This reflects the strength and resiliency of our business and provides a good jumping off point for 2026. Wireless service revenue for the full year grew 2%. The fourth quarter performance reflects an increased emphasis on disciplined volume-based growth.

As the revenue benefits as a volume-based growth model scale across 2026, we will continue to rely on growth from areas such as FWA, perks, premium mix and prepaid to help offset continued promo amortization pressures as well as lapping last year's price increases. I'm proud of our team's efforts to meaningfully reduce our cost structure. Our goal is to create flexibility to invest in the customer while also delivering strong financial results.

Consolidated adjusted EBITDA was $11.9 billion for the quarter. Full year adjusted EBITDA, which we expect to be industry-leading, was $50 billion. This was an increase of $1.2 billion or 2.5% from the prior year and within our guided range.

Adjusted EPS for the fourth quarter was $1.09, bringing the full year number to $4.71. 2025 growth of 2.6% from the prior year was driven primarily by the strength in adjusted EBITDA.

Our cash generation remains a key strength for Verizon. Cash flow from operating activities was $37.1 billion for the full year, up year-over-year even with stronger volume growth. CapEx for the full year totaled $17 billion. We delivered on all of our growth initiatives across C-Band and Fios builds. The team has done a great job finding efficiencies across mobility and broadband with more to come in 2026.

As of today, our C-Band build-out is about 90% complete and covers approximately 300 million POPs. Additionally, we exceeded our Fios build targets for the year.

For the full year 2025, we generated $20.1 billion in free cash flow, which we anticipate will once again be industry-leading.

Net unsecured debt at the end of 2025 was $110.1 billion, a $3.6 billion improvement year-over-year. We continue to make meaningful reductions to our debt throughout the year, resulting in our net unsecured debt to consolidated adjusted EBITDA ratio ending at 2.2x as of the end of 2025. This represents our second quarter in a row that we were inside of our leverage target prior to the Frontier closing.

Additionally, we had $1.3 billion in discretionary pension contributions during 2025, which resulted in the pension being fully funded as of the end of the fourth quarter.

Funding for the Frontier transaction was completed in the fourth quarter. Both the amount we needed to raise for Frontier and the rates we achieved came in favorable to our original expectations. By the end of January, we will have paid down approximately $5.7 billion of Frontier's debt since closing on the 20th, moving quickly to realize benefits from the strength of our balance sheet.

As we indicated before, we expect our unsecured leverage ratio to increase by approximately 0.25x once Frontier's EBITDA contributions are factored in.

Looking ahead, 2026 represents an exciting opportunity for Verizon. Our guidance reflects the impact of the bold actions we have taken recently. We expect to deliver performance that is a step function improvement from our recent historical trends across our key metrics. We're taking actions to ensure we have the financial flexibility to invest in the customer, drive improvements in postpaid phone net adds and expand our broadband base. Our guidance reflects the beginning of our transformation.

For the first time, we're guiding to our consolidated postpaid phone net adds. We expect to deliver approximately 2 to 3x of 2025 total, targeting a range of 750,000 to 1 million postpaid phone net adds in 2026.

Our 2026 financial guidance includes Frontier from January 20, the closing date of the acquisition. As we work towards driving sustainable and disciplined volume-based revenue growth, we anticipate that 2026 will be a transitional year for revenue as we lap prior year price increases, absorb promotional amortization and await the benefits from churn reduction and increased volumes.

We are guiding to 2% to 3% mobility and broadband service revenue growth, which equates to approximately $93 billion. We expect wireless service revenue growth to be approximately flat in 2026.

Having broadband in our service revenue guidance reflects the importance of both mobility and broadband as key growth drivers in the future. We have streamlined our organizational structure and are conducting a rigorous bottoms-up review of our entire cost base. Over the last 100 days, we have implemented several actions that would deliver multibillion-dollar benefits in 2026, including a reduction in workforce as well as asset and business rationalization efforts. The work on our cost structure will continue in 2026 as we simplify operations, deliver Frontier synergies and exit low-margin businesses.

As Dan mentioned, we have line of sight to delivering $5 billion of operating expense savings in 2026. We are reinvesting a portion of these savings to drive a higher quality revenue profile, which in turn creates a more profitable and stable foundation for sustainable long-term growth.

Based on our anticipated revenue performance, combined with the strength of our cost efficiencies, we expect adjusted EPS to be in the range of $4.90 to $4.95 for the full year, or year-over-year growth of 4% to 5%.

This represents a significant acceleration compared to our recent historical performance. While we were not guiding on adjusted EBITDA, we do expect adjusted EBITDA to grow at a faster rate than adjusted EPS.

Our 2026 CapEx spending is expected to be in the range of $16 billion to $16.5 billion, a combined improvement of $4 billion from Verizon and Frontier's capital expenditures from 2025. We are bringing the same rigor to our capital expenditures as we are to our P&L, while not sacrificing any of our network excellence for mobility and broadband.

The efficiency work that helped us come in below our 2025 CapEx range has only just begun. In addition, our C-Band will be substantially complete in 2026 and any initiatives outside of mobility and broadband are being aggressively rationalized.

We expect free cash flow to be $21.5 billion or more, growing approximately 7% or more, which will mark our highest free cash flow generated since 2020.

As we communicated at the announcement of the Frontier acquisition, we anticipated the inclusion of Frontier's results to be cash flow dilutive in 2026 and given the investments being made to expand the fiber footprint. However, because of the work being done to streamline our cost structure, grow adjusted EPS and drive CapEx efficiencies, we are now in a position to grow our free cash flow in 2026 even with the inclusion of Frontier and our investments in the customer.

Our strong free cash flow generation enables us to execute on our capital allocation priorities, including strategic investments and paying down debt. We expect to return to our target leverage range of 2.0 to 2.25x in the 2027 time frame.

To summarize, we delivered strong volumes in the fourth quarter, delivered on our 2025 financial guidance, and we have a plan for 2026 that accelerates our trajectory.

I will now hand the call over to Dan to discuss more on our 2026 capital allocation priorities.

Thanks, Tony. Our 2026 guidance reflects our conviction that this year is not just the time of transition, but a measurable and improved performance that will only accelerate as we go into 2027 and 2028. Our guidance for our adjusted EPS growth, our free cash flow growth and our postpaid phone net add targets are all significantly above historic trends for Verizon. For instance, our guidance for adjusted EPS growth of 4% to 5% represents a meaningful acceleration, increasing our growth rate by more than 70% at the midpoint of our guide compared to 2025.

It is also significantly better than our 5-year historical average adjusted EPS growth rate of approximately negative 1%.

Also, our guidance for free cash flow of $21.5 billion or more is expected to be our highest performance since 2020. The guided growth rate of approximately 7% or more eclipses our average free cash flow growth rate of approximately negative 1% over the last 5 years.

We are targeting a range of 750,000 to 1 million postpaid phone net adds, approximately 2 to 3x our 2025 total and the highest since 2021.

With Frontier, we expect our mobility and broadband service revenues to grow 2% to 3%, even as we lap billions of dollars of price increases from last year that we will not repeat.

I want to close by discussing our capital allocation strategy. Our framework remains unchanged. However, we are also making meaningful improvements in our capital allocation to shareholders, while maintaining significant flexibility. We will be much more deliberate in how we allocate our capital spend across 4 key priorities. Our first priority is to invest in our business. We simply won't be satisfied without delighting our customers, investing in our employees and delivering for our shareholders. We will continue to invest to maintain and improve the network excellence our customers expect. Importantly, we are applying the same rigor towards CapEx as we are on OpEx efficiencies. As Tony mentioned earlier, we expect CapEx to be in the range of $16 billion to $16.5 billion for 2026.

Our investment is focused squarely on our growth areas. In mobility, we are focused on the completion of our C-Band build-out, and increasing our investments to assure our track record of unparalleled reliability. In broadband, we are focused on achieving our goal to reach 40 million to 50 million fiber passings over the medium term. Second is our commitment to our dividend. That commitment is ironclad. We are pleased to announce that we are pulling forward our annual dividend increase to the first dividend declaration of the year. Today, the Board declared a dividend payable in May, which represents an annualized increase of $0.07, a 2.5% per share increase from our prior annual dividend rate. This marks our 20th consecutive year of dividend increases, and our goal is to put the Board in a position to continue to increase our dividend per our track record.

Third is maintaining a strong balance sheet. We remain committed to paying down debt and achieving our long-term net unsecured leverage target of 2.0 to 2.25x within the 2027 time frame. We have a strong balance sheet with significant financial capacity and flexibility for strategic investments. Fourth is returning cash to shareholders. I am pleased to announce that our Board has authorized up to $25 billion of share repurchases, which we expect to complete over the next 3 years with at least $3 billion of repurchases in 2026.

This plan underscores our confidence in the strength of our business our cash flow generation and our dedication to driving meaningful shareholder returns. Consistent with our growth profile and cash flow generation, we expect to significantly increase our total return of capital to shareholders over the next 3 years.

This is a defining time for Verizon. We have lots of hard work ahead of us. We know we are only at the beginning of our transformation, and it will take time, and it will always be a straight line. But we have a clear and doable plan for 2026, a value proposition that we believe will resonate with customers, momentum from the fourth quarter with volumes that we haven't seen in 5-plus years and a financial plan that is significantly more robust than any in recent history, with room for us to continue to improve as we go through the year and into 2027.

Our targets reflect a step function change in our performance trajectory. The Board has been clear that my mandate is to not only deliver for our customers, but also for our shareholders. We are heads down focused and ready to show the world that a fiscally responsible Verizon is playing to win. We look forward to your questions.

Yes, Brad, we are ready for questions.

[Operator Instructions] First question will come from Michael Ng of Goldman Sachs.

I just have 2, if I could. First, it was really encouraging to see this strong outlook for postpaid phones in 2026. Would you talk a little bit about the investments needed to drive that subscriber growth? Will we see the improvements more on the churn rates? Or will it be more marketing and promotions to drive gross adds? And then I have a quick follow-up.

I think maybe I'll start and then Tony can come in if he's got any additional color to add. If I just take a step back, we delivered 616,000 postpaid phone net adds in Q4. And we did that in what I thought was a very fiscally responsible manner just no actions on our core base pricing. We went into the ring, we offered a set of promotions. We are consistent in that and the market reaction was excellent to that. We met every single day. We looked at what was happening in the market. We made changes where we needed to. And I felt really good about how the team executed against that.

As I look to next year, we're targeting 750,000 to 1 million postpaid phone net adds. That is 2 to 3x what we did last year, but that's only about 10% to 15% of the net new to the industry. So I think it's a very doable target for us in year 1 of our transition. We don't need to overutilize promotions or pricing to achieve those targets. There's absolutely no need, in my mind, for that to happen.

If we reduce churn by 5 bps, we are already halfway to our target. And think about some of the things that we're doing, like our churn is driven by price increases without corresponding value. And we've already said in our remarks that we're not going to do that.

By the way, that is exactly the right thing for us to go and do. Although that puts about 180 basis points of pressure on our revenues for this year, what happens is when we raise rates without corresponding value, our churn rate goes up. And right now, our churn over the last 3 years has gone up by 25 basis points, every single basis point is 90,000 net adds. 25 basis points times 90,000 is about 2.25 million net adds that we've lost Obviously, not all of it because of price increases, but that would generate $3 billion-plus revenues a year for us. And so we're not going to go do that going forward, and that should help churn.

Second, we're going to be investing in our overall customer experience. We have a large amount of flexibility with the $5 billion of OpEx savings that we have. We're going to be able to be to compete in the market, invest in improving our end-to-end customer experience. And the third thing they have is we're going to leverage strongly all the convergence opportunities we have. We did 1.2 million of fixed wireless net adds last year, and we entered 2026 with more capacity in our network to do fixed wireless access than we did when we start at 2025.

Obviously, Frontier is a huge opportunity for us in net adds as well. We're significantly underpenetrated in Frontier markets on wireless. And when we bundle together, we see a 40% reduction in churn versus stand-alone mobility. And so our goal over time is to win our share of new to market net adds, win responsibly in a manner that sustainably grows our top line and allows us to drive shareholder value.

And so I think you're going to see a combination of us spending a lot to improve our overall value proposition, leveraging convergence, seeing churn go down and then being appropriately aggressive where we need to in the market. But this is not going to be anything on price where a lot of promotional expenses is about investing in our customers.

Great. Dan, that was all very clear and comprehensive. I appreciate that. And then just on the follow-up, I think you guys raised the fiber passings outlook to 40 million to 50 million over the medium term. I think the old target was 35 million to 40 million. So could you just talk a little bit about whether you saw more opportunities in footprint, opportunities to go out of footprint? Any thoughts there would be great.

Yes. Well, first of all, we're really pleased with the closing of the Frontier acquisition. Our partnership with Tillman, we acquired [indiscernible], which is going to help us with MDUs as we pass those passing as well. And the more I look at convergence, the more optimistic I am that that's going to be a major part of our future. So we want to double down on that. We want to get to at least 40 million or 50 million fiber passings. We said in our CapEx guidance that we'll do at least 2 million organically. Obviously, we'll look at a possibility of both inorganic and partnerships. That is something we're always looking at. We have plenty of capacity and flexibility on our balance sheet to do any one of those acquisitions and other things that we might consider. And so the combination of what we're seeing at Frontier and what we can do internally here at Verizon, we need to be comfortable with that 40 million to 50 million.

The next question will come from Ben Swinburn of Morgan Stanley.

Again, you talked through some of the strategies around go-to-market. But I guess I'm just wondering how -- if you could talk about how you're thinking about customer lifetime values as you move forward relative to the past. There's probably some concern out there that CLVs will be lower for Verizon, if not the industry in '26 and '27 versus the last several years. So what does Verizon doing to make sure it's bringing on high-value customers and it takes us more aggressive posture?

And I just wanted to ask, maybe for Tony on CapEx. You mentioned CapEx efficiencies. Looks like you're taking a couple of billion roughly out of kind of the previous run rate. You said no impact to revenue. Just could you talk a little bit about where you found all this CapEx opportunity that's not going to impact the business, if anything, might help the business grow faster?

Yes. I guess, I'll start and then turn it over to you to Tony. I can add on the CapEx side, too. So I have some thoughts on that. So on LTV, I was really pleased not only with the number of net adds that we added in Q4, but the quality of the business. We had a lot of new to Verizon. As you know, new to Verizon is our highest LTV value. And LTV is driven by a number of things. One of the biggest things is churn. And to me, we have a large opportunity to address churn. I think it's one of the biggest opportunity sets we have.

As I mentioned on the pricing side, there are 4 reasons why people leave us. It's price increases without corresponding value. That just irritates our customers, and we've seen the churn arise as a result of that, and we've stopped doing that, and we're going to start adding value to it. Second is friction in the process, whether it's onboarding, the billing, when they call our customer service, that needs to be flawless. And we need to reduce complexity, and we need to address that. And we already have initiatives underway to address each and every one of those things. And then there's price perception and competitive intensity. And we want to be very rational and very fiscally responsible when it comes to promotional activity.

Again, I think we are targeting a very reasonable number given our momentum and given the percentage of the net new to the market. And so I think we're going to be able to move after our targets in a fiscally response the way without stepping up on the promotional side. I think we're going to be able to lower churn. I think we have a lot of opportunity there. And then as I look at convergence, that combination of having an ARPU associated with your broadband service and an ARPU with your mobility at much lower churn rate is a higher LTV for us as well. And when we sell broadband, the majority of our customers have our mobility solution with that, too. We're really pleased with the attach rate on that as well.

And so I'm hopeful that LTVs go up this year as we act responsibly, and we reduce churn. Churn will be a key lever for that.

And Ben, on your question on CapEx, as we said in the prepared remarks, our first priority is to invest in the business, that hasn't changed. And the guidance that we gave at $16 billion to $16.5 billion is all in and sufficient to address all of the growth initiatives that we have in the business. And we're going to continue to invest in the, the wireless RAM. We talked about 90% of our plant sites have C-Band, and we expect to be substantially complete with our C-Band build here in 2026. And the remaining C-Band additions, just for some color, are mostly on small cells where lower CapEx is required. And then from a fiber perspective, we're not slowing down. Dan touched on this. We'll continue the fiber build pace at at least 2 million times passed, which is at least the combined pace of both Horizon and Frontier from last year and 40 million to 50 million passings over time. We have the Tillman partnership as well that can -- we can scale and build to our standards at very good economics.

And then in terms of our CapEx spend relative to history here, we really have narrowed our focus to mobility and broadband. And as we said earlier, we're applying the same rigor to CapEx as we are to OpEx. And noncore areas that are not aligned to growth, including legacy areas are being significantly reduced and/or eliminated and that includes areas such as business wireline, nondirectional products, technology as well, wholesale, legacy copper and voice platforms and even projects with too long of a payback. So the team has done a great job in finding unit cost efficiency as we build both in wireless and in fiber, cost for Prem Pass, et cetera. So there's a lot of good work being there, and that helps us get to a lower CapEx envelope, but we're very focused on being very efficient with our capital deployment this year.

Yes. Maybe just a little bit. I thought it was a pretty comprehensive answer. Look, network excellence across mobility and broadband is foundational for us, and we will not compromise on that 1 iota. Look, $16 billion to $16.5 billion, yes, I may be old fashioned, but that's a lot of money. When I think of $1 billion, I think it's a lot of money. When i think of $16 billion to $16.5 billion, it's a tremendous amount of money. Honestly, I don't know if we need all $16 billion to $16.5 billion for our CapEx projects, but I think it's a responsible number to have there. As Tony said, there are a lot of things that we spent pretty heavily on in the last couple of years. They're predominantly complete. We're almost done with all of our nationwide 5G advanced stand-alone features as well. And so I feel really good about this CapEx envelope. We'l be able to do all the things we need to go do. And as Tony said, we're not going to invest in places where we're losing money right now. As I mentioned, I think last quarter, we have a number of places where you add it all up, and we're losing $1 billion to $1.5 billion a year in margin. Like we are either going to sunset those, retire those or divest those things, and there's no need for us to continually invest in places where we're just going to lose money forever on that.

And so I think the team did a great job here, frankly. This is one of the easier places where we were able to look aggressively at our CapEx, and I think we'll feel really comfortable at these levels.

The next question will come from John Hudlick of UBS.

Great. Maybe 2 questions, if I could. Maybe first for Tony. Any [indiscernible] parts or components you could give us on the flat service revenue growth in mobility or the organic EBITDA growth on a consolidated basis? On the service revenue side, there's a lot of moving parts, you got better subscriber growth, probably a nice wholesale growth, but there's probably a higher promo than we saw last year. But so any color there on that or the organic EBITDA growth would be great.

And then for Dan, you gave us the volumes on the postpaid phone side. What about the broadband side? Any color you can give us on sort of what you expect in volumes this year, certainly as it relates to both fiber and fixed wireless would be great?

Okay. John, so I'll start on the revenue and EBITDA. So we -- on the revenue side, we guided to 2% to 3% mobility and broadband service revenue growth. And right after we closed Frontier, we were in market with competitive offers there to attract the Frontier customers to the Verizon network and experience. As Dan mentioned, we see strong convergence opportunities, particularly where we under-index in those Frontier markets, and we do see convergence improving our churn profile.

As we said, in terms of revenue composition, we expect to have flat wireless service revenue in 2026 as we lap prior year price increases, as Dan mentioned, about 180 basis points or so of headwind, absorb the ongoing promo amortization, so that's continuing, and work towards driving sustainable volume-based revenues and doing that in a very disciplined way. To give additional context, maybe some assumptions in the revenue guide. In terms of tailwinds, obviously, on the mobility side, we said we expect volume growth of 750,000 to 1 million postpaid phone net adds, and we're writing good business, and that's the focus there. We also have areas like perks and step-ups. We continue to see growth in customers taking perks as well as step-ups to premium plans. And then on broadband, continued volume growth in both FWA and fiber, including Frontier.

Frontier put on almost 500,000 net adds this past year. So we have now combined 16 million, over 16 million broadband subs in the base, and that includes a little over 10.5 million fiber customers. And then also prepaid, our prepaid business continues to perform well. Six straight quarters of volume growth has translated also into revenue growth.

In terms of headwinds, I mentioned promo amortization, and that pressure will continue and be a headwind in 2026. And we're still lapping, as Dan mentioned, pricing actions from 2025, and we'll work our way through it. But as we said, 2026 is going to be a transitional year for revenue as we push on volume-based growth across both mobility and broadband and setting up for a stronger revenue profile exiting 2026 and doing it in a very fiscally responsible way. So that's on the revenue.

On the EBITDA, while we didn't guide on the EBITDA, I can certainly share some additional context for you. Obviously, it starts with the revenue growth that I just described. Frontier brings a substantial EBITDA contribution with it as well. And in the prepared remarks, we said we expect EBITDA to grow at a faster rate than adjusted EPS. When you factor in the Frontier acquisition-related interest expense, that's about $1 billion, and the depreciation and amortization from the asset base that we acquired, which is about $1.5 billion. So when you look at the EBITDA, it's an acceleration in the EBITDA growth rate and great operating leverage.

And then when you look underneath that, from a cost transformation perspective, we mentioned that we're carefully examining all areas of our cost structure to run leaner and be more agile. And we have $5 billion of cost transformation in our plans for 2026, and that work is already well underway, whether it's the continued decommission of legacy elements in the network, including copper, and you think about the legacy areas as well in Frontier, whether it's customer experience and addressing customer pain points and reducing call volumes, or on the IT side in terms of rationalizing platforms and including AI enablement. On the workforce side, we reduced our workforce by 13,000 in the fourth quarter, 80% of which were off payroll in Q4, with the remainder coming off payroll in the first quarter. And then we mentioned the Frontier integration, and we said we expect 2x the operating expense run rate synergies, so at least $1 billion of synergies by 2028, and those synergies will ramp as we execute on our integration work.

And when you think about the EBITDA and the cost reduction actions that we have in place, it allows us to do a number of things. First, run more efficiently. The second thing it allows us to absorb the transitional year for revenue. It also allows us to invest in the customer experience and return a significant amount of capital to shareholders. So we see a great path for both EBITDA and EPS growth. And I'll hand it to Dan.

Yes, it's hard to expand on that. A comprehensive answer. I'll just say this. I think all of this kind of hangs together and integrated all in my view. But one of the reasons why we have such high churn rate, one of the reasons why we've been losing share over the last several years is because we keep raising our pricing without corresponding value. And that is the primary reason why our customers churn. And the #1 rule of getting out of a whole is stop digging. And we're just not going to do that again. And if we did just do what we were doing in previous years, we would have guided to 4% to 5% revenue instead of 2 to 3. But then at the end of the year, we would have had another couple of billion of things we have to lap and higher churn rate and would be deeper in the hole.

And so our view is, as we go into 2027, that 180 basis points of headwind goes away for us. We start now to have volumes based revenues coming in. We do 750,000 to 1 million net postpaid as well as continue to aggressively move in our broadband and convergence place. You only have several billion dollars of revenues coming in there. And so that's how you create sustainable long-term revenue growth. And then when you combine that on top of us being ever more efficient every year, and we're looking at $5 billion this year and we see billions more as we look forward into 2027 and 2028. We're just at the beginning of our efficiency journey. And then we're buying back shares, and you can really see that you have both top line and adjusted EPS growth that it sets us up for having a delighted customer base because we're doing the right thing. And hopefully, a delighted shareholder base because we're creating a model that can create sustainable long-term growth, both on the top line and the bottom line.

Your last question will come from Michael Rollins of Citi Group.

I also want to express my thanks to Brady, and welcome Colleen. Dan, you've been very clear about the problems that come from empty price increases. And I'm curious if you could discuss the opportunity for the alternative. Just given the maturation of industry penetration rates, do you see opportunities for Verizon and/or the industry to inject more value into these services to capture better ARPUs over time? And is there a sense if that is an opportunity when Verizon can go after that?

And then just secondly, on the cost side, Tony, I think you were just talking about the different layers of getting savings. Can you discuss what Verizon has identified for savings after 2026, specifically for '27 and '28 as you're looking to continue to fund the top line strategy as well as the new capital allocation targets that were set today?

Well, because I love cost as much as I do revenues, I'm going to jump on that. Look, I see kind of 3 waves of efficiency. The first wave is basically what we talked about today on the call, take out pockets of underperformance, structural inefficiencies, unnecessary layering of management structures, take people off of the places where we are no longer focused going forward. That was the first, but the second wave is taking complexity out of our business. And that's about looking at the customer promise that we have, the value proposition that we have. And complexity adds a ton of cost internally to us. And so we're going to go heavy at this end-to-end customer experience at our value proposition and it's going to be around simplicity and reducing complexity because that's really important.

And then the third thing is when you take out your complexity, then you automate your processes that are left. And so there there are 3 waves that we have identified that we understand quite well and that we're very comfortable with.

On the values basis this kind of pricing, and can you add more value into it? I think the answer to that is yes. I think that is the answer, but it comes with brand trust. And so everything we are trying to do this year -- we have a 3-year plan. We've got very concrete metrics for the 12 months. And I know what we want to do and then I actually have a vision for where we want to be in 3 years from now as well. But the first thing is stop doing things customers hate. No rocket science on that. Fix the end-to-end experience, again, not rocket science, but hard to do on that. And then you start to regain trust. And when you start to regain trust and you can start to put either promises or incremental value in it, then like I'm not saying that we don't do price increases, I'm saying we will not do price increases without value. But I do think that there are lots of places where we can add value.

Honestly, I think some of the broadband stuff that we're doing, where you're putting 1 gig plus out there, that's real value to customers. And so I think there are areas where there is value that we should be able to capture through the appropriate pricing, but we're not going to capture temporary value short term at the risk of upsetting our customers and increasing our churn. Again, that defeats the purpose of long-term sustainable growth. And that is what this transformation is all about.

Perfect. Great way to end. Brad, that's all the time we have today, and thanks, everybody, for being on the call.

This concludes the conference call for today. Thank you for your participation and for using Verizon Conferencing Services. You may now disconnect.

Good morning, and welcome to Verizon's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time.

I would now like to turn the call over to Mr. Brady Connor, Senior Vice President, Investor Relations.

Thanks, Brad. Good morning, and welcome to our third quarter 2025 earnings call. I'm Brady Connor, and on the call with me this morning is our new Chief Executive Officer, Dan Schulman; and Tony Skiadas, our CFO.

Before we begin, I'd like to point you to our safe harbor statement, which can be found in the earnings presentation on our Investor Relations website. Our comments this morning may include forward-looking statements, which are subject to risks and uncertainties. Factors that may affect future results are discussed in our SEC filings. This presentation also contains non-GAAP financial measures, and you can find reconciliations of these measures in the materials on our website.

With that, I'll turn the call over to Dan.

Thanks, Brady, and good morning, everyone.

On behalf of the Board and everyone at the company, I want to start off by thanking Hans for his leadership and passion and his many contributions to Verizon over the past 8 years.

Hans executed a series of technology-related investments that have positioned Verizon for success. By building an enviable network and a strong foundation we can leverage going forward. Hans has been a friend for many years, and I appreciate your support as we enter this new chapter. Personally, I could not be more excited about the future of Verizon, and I am honored to be its next CEO.

As most of you know, I come to this role with extensive experience in the technology, telecommunications and wireless industries. In fact, I began my career as an assistant account executive at New Jersey Bell and then spent 18 years at AT&T eventually becoming the President of its consumer division. So I have deep roots in the telecom sector and in many ways, this is like coming home for me. In the years since I've had the privilege to help lead and grow some of the most iconic consumer brands in the world, including AT&T, priceline.com, Virgin Mobile, American Express, PayPal and now Verizon. Those experiences have provided me with a strong perspective on customer-centric growth. And of course, I've served on the Board of Verizon for the past 7 years. So while I am only a few weeks into my tenure as the company's CEO, I've had a front row seat into the company's evolution since 2018, and therefore, come into this role with a rich perspective of where Verizon is coming from and what the opportunities are.

For many years, Verizon has led the industry with our reliable and scalable network, and we will continue to advance our network leadership. As you know, we're significantly investing in cyber and in the power of convergence with our acquisition of Frontier, which we expect to close early next year. Verizon has deep strength and incredible potential, but the blunt truth is we haven't captured the customer growth opportunities this strong foundation enables. Verizon is at a critical inflection point. For years, our priority was clear: build the best and most reliable network.

With that foundation firmly in place, our next chapter is about serving and delighting customers by building the industry's best overall value proposition and the best customer experience on top of it. We must shift to a customer-first focus and redefine our trajectory. This is not a course correction. It is a fundamental change in our strategic approach to customers. The only way we can drive sustainable value for our shareholders is by significantly raising our game and winning responsibly in the market. This is about financially disciplined growth, winning with the right customers at the right economics. Volume growth and profitability growth can go and will go hand-in-hand. We are fully committed to achieving both simultaneously.

Before I elaborate on my vision for a revitalized Verizon, I'm going to hand it over to Tony to cover our third quarter performance.

Great. Thanks, Dan, and good morning.

Before I begin, I just want to take a moment to congratulate Dan on his appointment as CEO of Verizon. The leadership team and I are excited to work with him in creating this new chapter for our company. First and foremost, we remain on track to deliver our full year financial guidance, which includes our previously raised expectations for adjusted EBITDA growth adjusted EPS growth and free cash flow.

In Consumer Mobility, we delivered strong postpaid phone gross adds up 8.4% from the prior year. However, gross add growth was offset by churn of 0.91%, which resulted in postpaid phone net losses of 7,000 in the quarter. We continue to see healthy retention benefits from our converged customers. At the end of the quarter, more than 18% of our consumer postpaid phone base took a converged offering more than 200 basis points above last year. We see significant opportunities to increase convergence in the Frontier footprint after we close the transaction. Importantly, converged customers on fiber have a mobility churn rate that's nearly 40% lower than our overall mobility base. We also saw a 16% year-over-year increase in consumer upgrades in the third quarter tied to our best value guarantee, which is resonating with customers.

Moving to core prepaid, we delivered 47,000 net adds, our fifth consecutive quarter of positive subscriber growth. The strength of our key brands as well as the continued expansion of total wireless distribution positions us to continue to grow our prepaid business. Verizon business delivered 51,000 phone net adds. As expected, we continue to see disconnect pressure in the public sector, in part from ongoing government efficiency efforts. This was more than offset by strong demand from small and medium businesses and large enterprise customers as we continue to be the provider of choice for businesses.

Shifting to broadband. We once again delivered solid results with 306,000 net adds. Our broadband base is up 1.3 million subscribers from a year ago and is now over 13.2 million subscribers. Fios internet delivered 61,000 net adds, our best quarterly result in 2 years. Given the demand for Fios, we're working to bring it to more and more premises within our footprint.

In addition, we recently announced an initiative with Tillman that will enable us to bring our best-in-class Fios broadband offerings to even more households and businesses. The agreement combines Tillman's network design, build and operations capabilities with Verizon scale, distribution strength and brand power. We will focus on markets outside of the Verizon and Frontier footprint, expanding our Fios business to new places across the country and driving more convergence in these markets.

Fixed Wireless Access net adds were 261,000 for the quarter. With approximately 5.4 million FWA subscribers, our annualized revenue has surpassed $3 billion and continues to grow. We believe FWA can be a long-term sustainable business. In addition, we recently announced an agreement to acquire Starry, which will enhance our MDU capabilities, combining our scale and resources with Starry's technical and go-to-market expertise.

Moving to financials. Our third quarter performance keeps us on track to deliver on our financial guidance for the year. Third quarter consolidated revenue was $33.8 billion, up 1.5% from the prior year period. We delivered over $400 million of year-over-year wireless service revenue growth in the quarter. Wireless equipment revenue was 5.2% higher than the prior year, driven by higher gross adds and upgrade rates. Wireless service revenue was up 2.1% from the prior year, driven by continued ARPU growth from targeted pricing actions and further adoption of fixed wireless access and add-on services. Perks continued to provide a high-margin revenue stream, and we look forward to offering additional benefits for our customers. Additionally, prepaid revenue grew year-over-year for the first time since the TracFone acquisition. As expected, we faced the promo amortization headwind in the quarter, and we expect this headwind to continue. However, our underlying customer economics remain healthy.

On the expense side, we have work to do to further reduce our cost of services and SG&A. As Dan will outline, we will be looking at cost with the new lens and will be focused on driving significant cost savings across all aspects of our business. Consolidated adjusted EBITDA was $12.8 billion, up 2.3% year-over-year. Year-to-date, we have generated almost $1.3 billion more in adjusted EBITDA compared to 2024, driven by a combination of pricing actions and cost reduction. Our adjusted EBITDA growth of 3.5% through the end of the third quarter is at the top end of our guided range. Adjusted EPS was $1.21 in the quarter, up 1.7% year-over-year, driven by growth in adjusted EBITDA.

The cash generation of the business continues to be strong. Cash flow from operating activities was $28 billion for the first 9 months of the year, up over $1.5 billion or 5.8% compared to the same period a year ago. CapEx through the end of the third quarter totaled $12.3 billion compared to $12 billion in the prior year period. We're on track to meet all of our investment goals for the year and deliver within our guided range or better. The combination of our continued CapEx efficiency and our ability to drive profits to the bottom line resulted in third quarter free cash flow of $7 billion. This represents a nearly 17% improvement year-over-year and the highest reported in our industry by nearly $2 billion for the period. For the first 3 quarters of the year, we have generated $15.8 billion in free cash flow, an increase of 9% compared to the same period a year ago. In September, we raised the dividend for the 19th consecutive year reflecting our continued commitment to shareholder returns.

Net unsecured debt at the end of the quarter was $112 billion, a $9.4 billion improvement year-over-year. We continue to make meaningful reductions to our debt throughout the year, resulting in our net unsecured debt to consolidated adjusted EBITDA ratio dropping to 2.2x as of the end of the third quarter. This puts us inside of our target leverage ahead of schedule and before the Frontier closing. We're focused on generating strong cash flow and committed to paying down our debt. We also remain committed to our long-term net unsecured leverage target range of 2.0 to 2.25x. This is not going to change.

Looking ahead, we remain on track to close the Frontier deal in the first quarter of 2026. We have received approvals from 11 of 13 states and are making good progress in the remaining jurisdictions. Integration planning is on track. And through the third quarter, based on their public disclosures, Frontier is performing extremely well across both their fiber build and customer growth. While we continue to execute within the parameters of our financial guidance, we recognize there is significant opportunity ahead.

And with that, I will turn the call over to Dan.

Thank you, Tony.

When I look at our performance objectively, Verizon is clearly falling short of our potential. And as a result, we are not delivering the shareholder returns our investors expect. Despite investing significantly in network leadership, we have not been able to translate that into winning in the market. And consequently, we are not generating the financial profile necessary for share price appreciation. Our stock performance reflects this reality. My mandate from the Board is clear: unlock the growth potential of our platform while delivering strong financial results.

Today, I intend to discuss my priorities and areas of focus. Our plan will not be about incremental change. We intend to aggressively transform the culture and financial profile of our company operating under the principles of being bold, customer-centric and executing with financial discipline with a focus on shareholder value. For the past few years, our financial growth has relied too heavily on price increases, a strategic approach that relies too much on price without subscriber growth is not a sustainable strategy. Every year, it gets harder to grow as we lap past price increases and experience higher churn. This cannot continue, and there is no question that meaningful change is needed. As we shift to a customer-first culture, we will simultaneously drive a much more efficient cost structure, that fully supports our incremental investments in delighting our customers. I reject the premise that delighting customers and winning in the market means that margins will decrease. I think this industry and clearly, Verizon are only scratching the surface of increased bottom line performance.

My top strategic imperative for Verizon is to grow our customer base profitably across our mobility and broadband subscription businesses. I strongly believe that growing volumes is essential to drive sustainable long-term revenue and adjusted EPS growth. We are going to compete and grow responsibly across all market segments. And over time, meaningfully increase our share of net adds, particularly in postpaid. We aim to win fairly by having the best overall value proposition and delighting our customers across all elements of the marketing mix. This is not going to be about promotional activities that can be quickly imitated. It is about true innovation, not easily replicated by our competitors.

We will leverage our network excellence to drive growth, but we cannot rely on it exclusively. Network quality is now foundational. Winning in the marketplace demands a revamped and superior customer value proposition and requires full attention to the entire customer experience. We will significantly elevate our game across multiple dimensions. We will work relentlessly to serve our customers, ensuring that every customer is fully satisfied with their Verizon experience. We must make it much easier to do business with us. You should expect bold execution powered by sophisticated and smart marketing, actions that strengthen loyalty and the elimination of practices and processes that detract from the customer experience. Raising rates without corresponding value rarely, if ever, delights customers.

Our primary objective is to build loyalty and drive significant improvements in retention to optimize the lifetime value of our customer base. Verizon will no longer be the hunting ground for competitors looking to gain share. We are reinventing how we operate to make Verizon more agile and efficient. You should expect disciplined execution across marketing, operations and service. We will invest significantly across all elements of our marketing mix and customer experience to drive mobility and broadband growth, and we will fund these investments by aggressively reducing our entire cost base. We will be a simpler, leaner and scrappier business. This work is overdue and will be multi-year and an ongoing way of life for us.

In addition, as some of you know, I am a strong believer in the growing power and resulting opportunities created by AI. We have barely scratched the surface of how AI-powered innovation can transform our customer experience. I intend to use AI as a key tool to simplify offers, improve the customer experience and reduce churn through smart, consistent and more personalized marketing and offers. And we will leverage AI throughout the company to make it easier for our employees to delight our customers and to dramatically improve service of reducing cost and complexity across the vast majority of our business processes. While we narrow our focus to invest in key growth areas, we will also aggressively sunset or exit legacy businesses where we don't see a clear path, profitable market leadership. We have a large opportunity to unleash meaningful margin improvement by doing so. And we will talk about this in more detail in January.

Convergence is one of our most significant near-term growth opportunities. The pending acquisition of Frontier will enable us to serve approximately 29 million fiber passings, creating a massive cross-sell opportunity. Our wireless share significantly under-indexes in Frontier's territory, and we intend to address this on day 1. This will create a significant runway to capture mobility volume from our broadband customers and cross-sell broadband to our existing mobility base, driving meaningful revenue synergies. I recently met with the Frontier senior leadership team. Their focus and performance is impressive. The results are trending above the expectations when we signed the deal, and I am looking forward to having them join the Verizon team. We will continue to expand our fiber footprint through our own build and with strategic partnerships.

I expect the actions we are taking will enable us to generate higher free cash flow in 2026 and 2025, even when we include Frontier. Our business is generating strong cash flow today, but I believe it can be even stronger. I am committed to prioritizing the customer experience, while maximizing returns for our shareholders and doing both in a fiscally responsible manner. I am closely examining not just our operating expenses, but also our capital spend, and our capital allocation framework. I believe that elements within our framework can change to optimize our capital structure and shareholder returns.

This includes an ironclad commitment to our dividend, continued debt repayment and value-creating capital return. In short, we will be much more deliberate in how we allocate our spend to execute our strategy. Of course, we'll continue to invest in the business and we will do so with a critical eye towards growth areas. You can expect our capital envelope to support the completion of our C-band build-out and our long-term objectives for fiber expansion, while preserving our financial capacity and flexibility for strategic investments as the landscape evolves.

To summarize, we understand changes needed, and we are aggressively making those changes. Our goals and our priorities are clear. First, delighting our customers to meaningfully increase our share of industry net adds. Second, cost transformation, fundamentally restructuring our expense base. Third, capital efficiency, optimizing how and where we invest and fourth, accelerating shareholder returns by increasing our bottom line growth, and a steadfast commitment to our dividend. You can expect to see a tangible difference in the way Verizon competes. Going forward, we will aggressively compete and fundamentally redefine what it means to be a Verizon customer. I'm confident in our strategy, our assets and the team's ability to execute. We have the network, the scale, the brand and now the strategic clarity and commitment to drive sustainable growth.

We are planning to win, and this will be a different Verizon than the market is used to. This will not happen overnight, and there's no one silver bullet. It will require hard work, strategic focus and thoughtful execution. Importantly, much of the critical planning and evaluation is already well underway. We will provide 2026 guidance during our January earnings call and we will report progress against these objectives quarterly. Our shareholders and our customers have been patient. It is now time for us to deliver.

Thank you, and Tony and I look forward to your questions and comments.

Brad, we're ready for questions.

We will now begin the question-and-answer session. [Operator Instructions] Your first question will come from John Hodulik of UBS.

Great. And good to talk to you again, Dan. Dan, can you expand on your vision of the company and what you expect to accomplish, say, over the first 100 days? And specifically, if possible, can you touch on or provide more details in terms of how you expect to turn consumer volumes?

Nice to hear from you, John, and good to work with you again. Look, let me take just a quick step back. I'm extremely excited about Verizon's potential. We are building off tremendous assets. We've got an excellent network. We have got an iconic brand. You've got tens and tens of millions of loyal customers. We have a really talented team, but it's clear we need to enter a new chapter. The existing status quo is not acceptable for us. And I wouldn't be here if I wasn't fully confident in our ability to pivot.

The vision has 3 pillars basically to it. The first pillar is about shifting from being a technology centric to being a customer-centric company. This is about delighting our customers. This is about growing through retention basically. My aspiration is I want us to have the lowest churn rate in the industry. And when you talk about growing through retention, it is about creating the best value propositions segmented by the various segments in the market looking at all elements of our marketing mix quite thoughtfully and looking at creating the best customer experience possible. This is the full reboot of what Verizon means in the marketplace.

And this is not about onetime noneconomic promotional activities. That's not how you're going to win over the medium and long term in this marketplace. It's about being thoughtful across all elements of the value proposition and marketing mix and winning responsibly. And that's kind of what we intend to do, and we are well underway throughout the organization in making that shift. But I don't want to underestimate or underplay how big a shift that is for us, but it is the way that we win over the long term. Second pillar that happens simultaneously with delighting customers because we want to drive shareholder return simultaneously. I want to deliver sustainable revenue growth, accelerated bottom line adjusted EPS growth.

And as I mentioned in my script, the dividend is sacrosanct to us. We are going to examine every element of our OpEx and our CapEx, and we are going to fully fund all of our initiatives with OpEx savings and drop them to the bottom line so that we can accelerate EPS growth as well. And finally, the third pillar kind of supports all of this is a full review of our CapEx spend and our capital allocation. You can expect us to continue to invest heavily in growth areas with the path to profitability, whether that be completing our network, expanding our network, fiber aspirations, other opportunities as they become available to us in the ecosystem. We have a tremendous amount of financial flexibility on the balance sheet. We're going to do a hard look at portfolio rationalization and divest and exit legacy businesses where we don't see a clear path to profitability.

As Tony mentioned, we'll continue to pay down debt. We'll continue to be steadfastly committed to our dividend. And we will review, frankly, other opportunities to return capital to shareholders. And so I think just to summarize, we want to win responsibly in the market. We're going to do that through, let's call it, kind of growth through retention, looking at all elements of how we delight customers and at the same time drive shareholder returns. We think we can do both, and we're committed to that.

The next question comes from Ben Swinburne of Morgan Stanley.

Dan, thanks for all the helpful commentary in your prepared remarks. I had 2 questions sort of tied back to your comments. You made the point, Dan, that you think the reliance on price increases has been misguided or were not productive and not sustainable, I think it was your phrase. I think there's a view in the market that Verizon's back book is overpriced relative to sort of where the consumer is. And I'm curious if you agree with that probably oversimplified generalization? And more specifically, how do you drive share for Verizon higher in -- particularly in consumer without going through sort of a painful kind of back book repricing exercise, which I'm hearing from your financial commentary about accelerating earnings growth and free cash flow that you're not expecting.

And then I just was curious, you guys were very clear on your balance sheet and leverage targets. But would you be open to flexing the leverage higher if the right opportunities presented themselves. There's a lot of spectrum in the market, more coming from the FCC down the road, you have this Tillman agreement. So just curious if you could talk a little bit about the potential to take leverage higher, at least temporarily if the opportunities were there.

Ben, thank you for all of your questions. I hope I remember a couple of them at least. Look, I think my view on our approach into the market is to be quite thoughtful and financially disciplined. I think that we need to look at the reasons why customers are leaving us. And there are basically 4 that customers there are more, but these are the top 4 are price increases that we've done that customers run into some friction in the experience with us and we need to fix that. There's a value perception. I think I call it a value perception, not pricing. Because the value is all about price to value. And I feel we offer good value and -- but there's a value perception. And then there's obviously competitive intensity. There are a lot of offers in the industry.

Our game plan is going to address all of those pain points for our customers. We want to have the best-in-class experience. I want to leverage things like convergence. I want to create segmented and targeted value props and offers. I want to think carefully across all of the marketing mix. The are marketing 4 Ps. I always throw a fifth one in there, which is [ prayer ]. But I think like pricing is the last refuge of the marketing desperate. It is what you pull when you have nothing else in your quiver. And frankly, we have a ton of things to pull in terms of creating incremental value for our Verizon customers. And so although I won't go into specifics on how we're thinking about this because it's still early days and I'm actually never going to go into specifics because I don't want to tip off our competitors on what we're trying to do in the marketplace. But I think that we can begin to take our fair share of the new to the industry, postpaid adds, we're going to start off by increasing it because today, we take somewhere between 0% and some very low percent of the new-to-industry postpaids. We're clearly losing share, and that's not a sustainable path for Verizon. So we'll win eventually, our fair share of industry net adds going to reduce our churn to being the industry best. I want to responsibly win in a fiscally prudent manner. So hopefully, I hit a couple of your questions, at least there, Ben, anything else that you want me to hit on? Tony?

No, that was really helpful, Dan. I appreciate it. Just I was curious on the balance sheet, any openness to flexing up if you had the opportunities?

Sure. Hi, Ben, it's Tony, good morning. So a couple of things there, very comfortable with the long-term leverage target. And as you know, we've had a long and demonstrated track record of execution with the balance sheet. The target is very appropriate for the company of our size, and the way we expect it to perform in the future. And I think you heard Dan talk about that. We have strong cash flows, as you've seen, we reiterated our guidance for the year at $19.5 billion to $20.5 billion for 2025. And as you heard Dan in his prepared remarks, we expect to have higher cash flows in '26 versus 2025. And that leverage target gives us the ability to invest for growth. And it also gives us a lot of flexibility and balance sheet capacity to be opportunistic should the need arise from a strategic standpoint. As we talked about, the deleveraging is on track. We're now inside of our long-term leverage target at 2.2x. We have Frontier coming in, as we said previously, that will add about 0.25 turn to the metric and that will be for a short period of time. So we are going to operate outside of it for a period of time. But the overall goal is not going to change. The focus is generating strong cash flows and execute across the entire capital allocation framework, and that includes continuing to pay down debt.

The next question will come from Michael Ng of Goldman Sachs.

Good to be reconnected with you, Dan. I just have 2. First, are there any parallels between Verizon and PayPal that informs your view of the opportunity for improvement? Where in the Verizon business, do you see the biggest need for a change agent. And then second, Verizon's Perks and MIPlan seems like a strategy where it puts it closer to a super app strategy relative to peers. Is this something that is important to your strategic blueprint? Any opportunities or key benefits that you would call out?

Nice to hear your voice again, Mike. I look forward to seeing you again as well. I think when I think about kind of when I first started at PayPal and now first starting here with Verizon, there are definitely some similarities. One of the big things that we did at PayPal when I first came on was declare that we were going to be a customer champion. And declaring you're going to be a customer champion kind of easy words. But if you're really going to be a customer champion, it takes hard work and it takes challenging your business model as well. It means doing what customers expect and addressing all of their pain points and then figuring out how to delight and surprise them going forward.

At PayPal, that was giving customers full choice on how they could pay, not by forcing them to pay with what was the highest margin funding instrument that they had in their wallet for us. And that unleashed a huge amount of growth for the company. And I think the same thing can happen here. We're going to invest heavily in our value proposition. We're going to fund all of that cuts in our cost structure. We have a tremendous amount of opportunity to be more efficient to be scrappier. In many ways, this is a turnaround for us and making sure that, culturally, we're ready to make that move from being technology-centric to being customer-centric. It takes some time, but there is no question that what I saw on PayPal, I see here in Verizon too.

The team here wants to reclaim their market leadership. And they will do anything that they can. Big companies are extraordinarily good at responding to a crisis. They're not necessarily good at day-to-day, but responding to a crisis, they're amazing. And this is really a clarion call to the company to refocus, regain our leadership by focusing on customers, delivering what they want, not doing things that don't delight customers. And so there are a lot of similarities, obviously, very different industries, different ways of thinking about it. And when you talk about the value prop and things like super app versus how we might think about that. Just give us a little bit of time to develop our thoughts more from where we are at a full effort underway right now, and you'll hear more about that as we go into January and beyond.

The next question comes from Mike Rollins of Citigroup.

Dan, welcome back, and congratulations on taking over as CEO. You mentioned a few times the importance of convergence. I'm curious to get your perspective on where you would like convergence to go over time in terms of the physical fiber footprint, how many passings you want to see that get to and the path potentially to get there as well as how you're looking at fixed wireless and whether it's time to incrementally invest in fixed wireless as also a way to drive more broadband business for the company. And then just secondly, following on your comments about accentuating the growth side of the business and deemphasizing or exiting legacy businesses. Curious if you could put more context around that as -- when you look at the Verizon portfolio in totality, how much of Verizon do you view today as strategic and growing versus legacy. And what are the ways you're trying to better frame that internally as well as externally for shareholders?

Yes. Mike, it's great to hear from you again. You've been around this industry for a long time, and I appreciate your thoughts and your questions. I'm a very big believer in conversions. I think it is extremely powerful. I think it offers not just meaningful revenue synergies, but as Tony mentioned and as we see, when you combine mobility with fiber, you see churn rates that are almost 40% less than what we see with our traditional mobility. And I think thinking innovatively about how we bundle together broadband writ large, and that includes both fixed wireless and fiber with our mobility to drive both incremental broadband revenues as well as incremental mobility revenues will definitely be on the plate. So expect us to continue to invest in our broadband footprint and our fiber footprint as well as our fixed wireless as well, but also expect us to think about that innovatively as I mentioned, because I think there's a ton of opportunity in that.

And as I mentioned in my opening remarks, we'll continue to invest appropriately and aggressively in that expansion. In terms of kind of portfolio optimization, I think that's what you were talking about, kind of legacy versus broadband and mobility. Clearly, we're focusing on broadband and mobility. There are other areas, by the way, that I think we can focus that are maybe potentially large opportunity areas. Clearly, AI infrastructure is booming, and we can be a part of that and should be a part of that. But we have parts of our business that are costing us billions of dollars of margin. And I think we can think much more clearly about how do we invest in growth areas and divest or exit those that are not that for us and are actually hemorrhaging margins for us. We'll spend more time on that in January and lay that out for you in more detail, but you can probably imagine what we're thinking about and talking about on that. But I'll be more specific about that, and Tony and I will both be more specific about that as we get into early next year.

The next question comes from Sebastiano Petti of JPMorgan.

Dan, congratulations on the role. I look forward to working together. Just maybe following up on the 2026 free cash flow. I mean, we're -- I understand the cost efforts will help -- basically help fund a lot of the growth initiatives that you're discussing here today and the pivot and your vision for the company. But relatedly and basically to Mike's question, and it's about the longer-term fiber footprint. How do we square 2026 free cash flow growth? I mean it sounds like CapEx is coming down this year, implication would be free cash flow probably trends towards the higher end of the range. And as you -- and Frontier is burning $1 billion of cash today. And so just trying to help understand that, the question we've been getting incoming from investors this morning.

And then secondarily, I guess, just maybe thinking about the accounts growth in the -- accounts decline in the quarter on the consumer as well as on the total wireless segment. Anything to help square there? It was the highest losses we've seen since the first quarter of 2020, rather, the pandemic quarter. So just helping us understand the trajectory there, and how we should be thinking about that trend over time as you kind of focus in on convergent.

Sebastiano, just on your question on free cash flow. So look, in the prepared remarks, we said we expect free cash flow growth to 2026 year-over-year. And that's all in, including Frontier. So some points on that, but that gives us confidence in that statement. So first, we have a very good starting point. The cash flow generation of the business continues to be very strong, and we have the strongest free cash flow in the industry. So we start there. And then in terms of actions, and I think Dan covered this multiple times, you should expect to see significant cost transformation. Dan talked about running leaner. Those plans are already underway.

In terms of the portfolio, we're looking at everything and everything is on the table for us. So -- and it also entails being very efficient with our capital spend. And what we said in the prepared remarks that we expect 2025 to get all our initiatives completed and will be likely at the lower end of the range or better, and that's the goal. And then as we look ahead, we said prioritizing investments focused on both mobility and broadband and being very efficient with our capital spend. We know how to do this, and that includes maintaining network excellence and also making sure we deliver on the promise for customers. And as Dan said, areas not aligned to growth will be deemphasized. And those actions are underway, and we're acting with a sense of urgency. So we'll be back in January with the full view of that, Dan?

Yes. Look, on account growth, I mean it just plays basically into what I was talking about before. The status quo doesn't work for us. We're going to be much more aggressive in delighting customers, and that has to happen. Look, it's a competitive industry, and all attractive and great industries are competitive. That's why people come into them because they're super important industries and most industries follow the rule of 3, and wireless is no different in that. I think about competition, a little bit how I think about gravity. When I get out of bed in the morning, I don't think, oh my gosh, gravity is pulling me down, it wasn't around, I could jump 20 feet high in the air, same way about competition. If it wasn't around, I'd have 100% share, but it is.

And both AT&T and T-Mobile are excellent companies. And with strong leaders with John and Srini, I have a ton of respect for both of them and their companies. But I feel like there's still plenty of room for growth in this industry. And on how you count it, somewhere between 5 million and 8 million new postpaid subs that enter into the industry every year. There's obviously switcher pools that are available. There's new and growing services, whether that be convergence or AI-powered infrastructure that can come in. So there's a lot of opportunity in the industry.

The key here for us is to win smart and responsibly, focus on what our customers want, not on our competitors. I feel like we can win this fight the right way. We earn it every single day. There's no need to ratchet up high promotional spend. We want to be competitive. Obviously, we want to be consistent, but there's no reason for us to be rationally aggressive to win our fair share out there. So we'll focus heavily and you'll see that on creating the best value propositions, they'll be very different than what you see today, make sure that we have the very best customer experience, and we are going to do everything in our power to make sure we delight customers. And again, thoughtful around all elements of the marketing mix. Look, we want to be so good that prospects want to come to Verizon, and our Verizon customers never want to leave us in. So a lot of work to do underway with that, but we feel good that we've got a head start on that, and we know what we want to go do.

The next question comes from Michael Funk of Bank of America.

Dan, welcome back and congratulations to you. So Dan, I heard you loud and clear on growing through retention. So curious to hear from you, what strategies or tools you think best for reducing churn? And then how we should think about these as being proactive versus reactive when you think a subscriber might be on the verge of churning. And a couple more, if I could. So curious to hear if you think about utilizing AI to address the efficiency offers you laid out for us in retention as well. And then you threw in your comments about AI infrastructure is booming and love to know what that means for Verizon as an opportunity?

Bunch of good questions on the -- as I mentioned, we have a pretty good idea of what's driving churn. And so we have a pretty good idea on how to address all of those. In many ways, this is a multipart complicated business. And otherwise, it's pretty straightforward, honestly. And so we just need to hit these things one by one to reduce churn, continue to grow by retention, but also we'll have the right offers in the marketplace. We'll be competitive. And I think -- you'll start to see evidence of that even beginning this quarter. But as I mentioned, this will take some time as well. When you want to turn around your entire offering to the marketplace, when you want to redefine the culture, financial profile of a large company like Verizon, we need to do it in a very thoughtful, prudent manner, but with a nod to urgency and moving as fast as we can. We're going to be a much scrappier company than we've been before. We have a lot to do, and we're going to go out and do that.

On AI, I have spent a lot of time before I got here within the AI community help advise some of the CEOs in the AI community. So I haven't really keen understanding of where it's going. I think AI is the only technology I've seen in my lifetime where it does a step function improvement every 2 to 3 months the models that we have today are by far and away the worst models we're ever going to have. You can see anywhere between 300% and 600% improvement in those models over the next year. And obviously, they are becoming more and more powerful, and they are able to do more and more things.

The other thing that AI is doing is clearly shifting the way the internet operates on its head. The internet is much more of a wide cast broadcasting and AI is much more narrow cast, much more individualized to you. I think that, as I mentioned, we are just scratching the surface of how we use AI inside Verizon. AI can obviously be used to be more efficient to do things and satisfy customers in ways that we can't do today and do so at a much lower cost, and that goes for across multiple functions inside any organization, including Verizon. But really importantly, AI can be used to dramatically improve the value proposition that we put in front of customers.

To your point, we can anticipate when customers want to upgrade when they have an issue, what that might be proactively address it before it happens, tailor and customize offers at micro segment levels that can radically change kind of where Verizon is today and frankly, where our industry is as well. And so I think that AI is today, a very large opportunity. And as the years go on, will be an increasingly large opportunity for not just Verizon, but American industry.

Great. Thanks, Mike. Brad, we have time for one more question.

Your last question will come from Peter Supino of Wolfe Research.

Dan, nice to meet you in this way. I wanted to ask you 2 questions. One about costs and the other about fiber. On costs, I wonder if you could discuss the nature of the cost opportunities you see if there are some common threads or themes through them. Verizon looks productive on a headline sort of benchmark to peers level? And then on fiber, Verizon is on course this year to pass about 650,000 homes incrementally with fiber organically. And at the same time, it's laying out $10 billion to buy Frontier. And the 2 seem somewhat inconsistent in the sense that it's a rather slow organic fiber expansion in a rather aggressive external fiber expansion. I wonder if you could sort of reconcile those and let us know what you think an ideal organic expansion rate for Verizon's ILEC footprint for the organic fiber extension might be over time?

Yes. So Peter, on fiber, I'll start there, and I'll hand it to Dan on the cost. So on few things here. So number one, I mean, fiber is not new for us. I mean we've been at it for 20 years, and there's plenty of room out there in our combined -- outside of the fiber footprint that we have today and with Frontier to be first on fiber. And as you saw recently, we signed a deal with Tillman to further expand our broadband build and maybe just some aspects of that deal. It's a capital-light partnership and it gives us the opportunity to go outside -- in markets outside of the pro forma footprint that we have and Frontier has and to increase the convergence opportunity.

And look, in this case, the fiber is going to be built to our standards, leveraging the Verizon brand and bringing Fios to more and more locations. It's a long-term deal, and it gives us a lot of optionality in the footprint to go in the future and really to go outside the footprint with good economics, and we did not have that ability before. And to your point, we're on track with our 650 (sic) [ 650,000 ] in terms of premise passed and Frontier, as you saw the results last night. We're also pacing to their fiber build. So we're not stopping. So -- and I think you see that in the results in the quarter and where we're heading and with the deal with Tillman, we have a lot of runway ahead with fiber.

And then I'll hand it to Dan on the cost.

Yes, thanks for the question. First of all, our goal is to reclaim our market leadership. It's as simple as that. And we need to invest to be the best in the marketplace. And that's going to take significant investment to go and do that, and we're fully committed to that, and we're fully committed to covering all of those investments through cost reductions, and redeployment of those cost reductions into our value proposition.

Cost reductions will be a way of life for us here. Honestly, I'm not that interested in comparing our productivity ratios to others and looking at how productive can we be as a company? What is the right place for us to invest, where are the right places for us to be leaner than we have, how do we use technology to do so. This is all about satisfying our customers, but there's tremendous opportunity for us to be a more nimble and agile organization.

Thank you, everybody inside the company knows that we need to invest in our value proposition, that we need to be customer champions, and that there's a lot of area for us to find efficiencies. We'll talk more details about that as we're working through our plans, but we see plenty of opportunity to be the most efficient company in the industry. Again, we're looking at every element of our OpEx and our CapEx spend to make sure that we invest wisely that we capture the growth areas in front of us and that we drive bottom line performance for our shareholders.

Yes. Great. Thanks, Peter. Brad, that's all the time we have today.

This concludes the conference call for today. Thank you for your participation and for using Verizon Conference Services. You may now disconnect.

Great. Well, good morning, everybody, and welcome to the first company sessions of the Goldman Sachs Communacopia and Technology Conference. I have the privilege of introducing and hosting Hans Vestberg, who's the Chairman and CEO of Verizon. Prior to becoming the CEO in 2018, Hans worked as Verizon's Chief Technology Officer and President of Global Networks. Prior to joining Verizon in 2017, he served as Ericsson's CEO. My name is Mike Ng, and I cover U.S. telecom here at Goldman Sachs. We have about 35 minutes for today's presentation. Thank you so much for being here this morning, Hans.

Thank you for having me.

Yes, Hans, around this time last year, you announced the Frontier acquisition. Verizon is targeting 30-plus million fiber passings by 2028, 35 million to 40 million over time. Could you just talk a little bit about how Frontier fits into the broader Verizon strategy and some of the opportunities that you see as you think about the integration of Frontier?

Yes. And I guess my team has posted my safe harbor behind me. So -- now the phone is calling as well. Yes, I will. So safe harbor statement. I might say something that is forward-looking, so just be aware of that.

Let me talk about the Frontier. So yes, 1 year ago, we basically announced the acquisition of Frontier. It was based on that we did the strategy of how we're going to continue to roll out fiber outside our ILEC footprint. And of course, when we have done that strategy, we realized that the footprint on Frontier were very good buy versus build for us timing-wise and even value-wise as we closed it.

So that was the first. The second one is, of course, that then we're going through all the regulatory approvals. We have all the federal approvals. We're now working down the last couple of states here that we believe is going definitely on track to close in the first quarter as we have said all the time.

So all that you can park and then you can sort of move on and see what are the synergies. We -- our early indication when we talked about synergies was $500 million in cost synergies. We haven't talked about our revenue synergies. But for obvious reasons, we see a great opportunity for convergence here.

I usually say when it comes to convergence, when you have mobility and broadband together, I mean fixed wireless access customers, they have a high degree on convergence, Fios lower and Frontier the lowest. So that's sort of the opportunity we have.

So we're very excited over it. Of course, it almost is connected directly to our footprint because this was ex Verizon business or assets. So the connection of it and doing the integration. I would say no acquisition is easy. It's always complex. But in all acquisitions we have done in the last 15 years, this is probably the easiest from integration point of view if you exclude spectrum, because spectrum is way easier.

So we're very excited over it, and we think we're going to have multiple opportunities both for revenue and cost synergies. We have not come out yet and say how many passings we're going to do where you said plus 1 million, and it's plus, plus, plus 1 million. We want to have better visibility on when we close, and then we're going to have an investor update with how much passings, how much capital allocation we're going to do, what type of revenue synergies do we see? And all of that, we will, of course, come in with one full package and how much CapEx we want to spend.

So it's a lot of things still to unpack on it, but everything is going according to plan and we're really excited for it. And the good news is also that Frontier has been performing really well since the announcement of the acquisition. They are on plan with our -- what we assume their business plan. And sometimes it's very easy. You buy something, it takes 18 months before we close. There's a lot of things happening. So far, Frontier has been executed extraordinary well. We're very pleased with that.

That's great. And just as a quick follow-up, when you think about some of the synergy opportunities, just qualitatively, what does that look like? Is that Frontier service in Verizon stores...

Yes, there's a lot of -- but yes, one is, of course, in the footprint of Frontier we have more than 1,000 stores. Of course, we can use that as a better distribution. We can use our IT systems in order to enhance the service levels and also the efficiency of deployment. So there's a lot of things we can do given our footprint that we can combine with them.

Then we can have things to learn from them how they have been reinventing themselves. Remember, they went bankrupt. So you think a little bit different than when you have an ongoing concern. So we have things that we need to learn from them that we can involve in our business. So all-in-all, there's a lot of cost synergies. I'm also very excited for the revenue synergies for us to continue to drive convergence, step-ups and all of that, and of course, seeing that we have a harmonized technology stack.

Great. I wanted to ask you about some industry news this morning. There was a lower orbit satellite provider who acquired some spectrum. And could you talk a little bit about your views on that, whether that's as a competitor to broadband or in the future as a competitor to mobile wireless service and what the...

So I read the same news that you are doing. So I don't have any other. But no, I think that, again, the portfolio, spectrum is, of course, an interesting piece of business. This is -- the majority is, of course, satellite spectrum. We are working with all the LEO and GEO players in order to have both backhaul or direct to device. I think this is just giving more opportunities for us to have more supply. I mean I can only read what I'm reading, but I see this is creating more opportunities to do direct-to-device connection with satellites in especially areas where we cannot build because of requirement of international park and things like that.

So I still believe that emergency or texting and calling in these areas will be important as a service that we will provide to our customers. Today, we have ASC doing it, we have our iPhone, we have Skylo. So we have this sort of covered. This will just create more opportunities in the market and partners for us to go there. But it's a little bit early to say. But clearly, this was in the cards as they sold out what it did last week or 2 weeks ago that now their operations will be less of operation company, and now they are selling out the spectrum.

Great. And shifting gears, maybe we can talk a little bit about consumer wireless and the industry and the market. We've seen quite strong market activity, high gross additions, higher churn at the beginning of the year. Could you just give us an update on what you're seeing in the wireless market for consumer at the industry level? Where do you see churn trending and what is normalized churn...

So what we saw in the first year was somewhat, I would say, elevated competition, higher promotional intensity. I don't think it's strange to be honest. I mean the market is shrinking because of the demographics of the U.S., it's not a growing market. We have less immigration, so it's less customers on the consumer side coming in. So it's a little bit more competitive. So that's what we saw. The other is that we now have over 40 months, that's how long a consumer keep their phones. So sooner or later, people will start doing upgrades of their phones. We incentivize that even in the second quarter with our new offering. So I think that was pretty normal and that, of course, increased a little bit of the intensity.

We are coming in and out. As always, we are financially disciplined, but we see opportunities will come in. Second quarter, we're a little bit more aggressive. That, of course, has elevated churn in the whole industry, which is not strange neither. So I think it's just a sort of a -- some sort of an impact of what -- where the industry are, in which way we are and which sort of coming into the third wave of wireless. I mean the first wave was sort of extraordinarily expensive to have a mobile phone. The second was mass market, you can still build market share and grab a lot of new customers. Now we're in a satellite and consumer wireless market, and then you need to work different there.

And our strategy has been very clear that we are building our vertical stacks, we're building our horizontal stack because we believe that we can continue to grow our service revenue, even though volumes might be smaller when it comes to new customers. That's why we build a whole Perk system, adjacent services, access and loyalty programs and seeing also you can do all the step-ups and the convergence. That gives us, I would say, several vectors of growth that we didn't have before.

I mean just the perks -- we will have -- last year, we had, I think, 7 million perks. This year, we said we're going to go to 10 million, then we upgraded to 14 million and now we believe we're going to have 15 million perks. So it's going way faster than we thought. We basically have exclusive agreements with all the Netflix of the world, Apple One of the world, the Paramount+ of the world, Disney+ of the world.

So this is a unique way for us to build something that nobody else has been building and it's good revenues. And as Sampath, the head of CEO Consumer Goods said, this is good margins as well. So all-in-all, that's how we're building this market going forward. And I think that's very important because the next couple of years is going to be a little bit more tighter new customers coming into the market, and we will have that together with also all the multibrands we have on the prepaid. So we can address any market segment, and we can scale it upwards with growth.

Yes. I mean there's a lot there that I would...

Yes, there's a lot on that one, I heard that sort...

I would love to dive more deeply into a lot of those things, but maybe just starting out with the replacement cycle that you mentioned has approached 40 months at this time. One of the topics that is on the mind of investors today is just the upcoming iPhone launch, right? And yes, we'll get it tomorrow. So I was just wondering if you could talk a little bit about the launch of the iconic phones, what do you think that does as it relates to the promotional intensity of the market? And do we see a pull forward of that upgrade demand early this year that may make the back half more...

Yes. And remember, for almost 3 years, we have been having downward trends on upgrades. So that sooner or later, we'll have an upward trend, and we believe it should be mid-single digit to high growth of upgrades this year, which probably will happen, still to be seen is, of course, the launch of Apple, what that means to our customers. But of course, if many Apple customers have taken sort of iPhone 16 in May, they might wait and see what's going to happen with this launch.

So we're going to see how it's going to turn out in the rest of the year, but definitely, we are going to have growth on upgrades this year, which is just logical after years of that decline and also with the promotions we have put into the market. But it's still very exciting. The Pixel 10 come out, I would say, great phone, also very good traction on that one. So we see all these new devices coming out and being exciting.

I've always said that when you see a real boom in upgrades is when you go from a G to another, 3G to 4G or 4G to 5G and 6G is not even in the plan right now. It's probably a couple of years out or a real hardware redesign. Those are the moments where you see that consumers really throw themselves in, "and I need this phone, I need to upgrade it". Other than that, we have seen that the softwares are so good and the changes in between different versions has been a little bit smaller. So people have kept the phone way longer.

Yes. I was wondering if I could get your thoughts on the reaction to changes in device prices. I think the expectation for tomorrow is that we see some de facto price increases on some of the models and how do the carriers, how does Verizon react to something like that? Is it more about making sure we get consumers upgraded to certain...

There was many assumptions in that question and things that I cannot answer or I shouldn't answer. But historically, we have been very disciplined. We have a tiered model for our promotions. Basically, if you take the highest plan for us, ultimate plan, then you get a certain amount of promotion money. If you take the medium, you take less. And if you take the lowest sort of the welcome plan, we give you 400. So we always tiered the promotions. We have thought that was a good idea to incentivize our customers. So we're going to see what's going to happen in the future. I can never talk about the future pricing or whatever we're going to do in the future. But that's historically how we have been dealing with different prices.

Okay. And one of the things that you mentioned in response to the first question on consumer wireless was just perks and the platform. And perks is something that I thought is really interesting, right? I think you guys have talked about $2 billion of annualized revenue mid-30% in that market.

In less than 18 months. .

In less than 18 months. And I think it has been like a good driver of ARPU and should continue to be...

And the penetration is still low. I mean we still have probably 2/3 on our myPlan. So first of all, getting everybody on myPlan and then, of course, also start getting a penetration on every account on perks is still we have a way to go. I think what we -- what you realize when you have the size of the business we have, you need to take it in steps, you need to have the wholesale channel, digital as in the stores being prepared to do it.

So it takes some time. In the beginning, when we had these perks, didn't even sell. But right now, it's selling. And of course, the value proposition is that we now have the best value because if you take a plan from us, you take a couple of perks that value nobody can compete with. So we definitely have the best value for our consumers, the postpaid right now. We just need to market it better, and we will.

Yes. So it's a revenue and profit driver, and it also helps with the price value perception.

Yes, price value perception, the loyalty and then we also have starting with the adjacent services like the high-yield account, bank account that we will now have together with Openbank. We have the credit card. So we're just building different services that have a brand affection that is connected with our brand, but also it resonates for our customer. And it has to be sort of flexible. Customers need to be picking and choose. We cannot tell, "Hey, if you take this plan, it's included". Our consumers doesn't like that. They want to have the flexibility and want to have the optionality with doing it.

We still are the only one that can do a mix and match inside this wireless account, meaning if you have four lines, you can have one line on welcome plan, one on ultimate, no other competitor can do that. And that came from the consumer research we did 2 years ago that customers want that flexibility and optionality in move around. We have it both on the wireless, then we have it on our perks. We have it on all other adjacent services as well.

So part we are building based on the consumer insights we have. And now it's more about branding and seeing that the distribution channels can really handle the volumes of different products that we have.

Yes. And just on the topic of perks. Perks is one way that Verizon can be an AI beneficiary, right? Because you're distributing Google [ Advance. ] That's how consumers are getting Gemini in many instances. Could you maybe just talk about that aspect of it, right? The AI apps and how that could potentially help...

Yes. And so one of the perks is, of course, that we have the Gemini Pro AI app that we are also offering like a perk. So yes, we see that as also softwares that can be enhancing the consumer experience you put them in. But remember, we are doing this on consumer wireless. We're also bringing the Perk system into myHome, meaning broadband, we are gearing up for doing it on prepaid.

We are starting it also in the SMB sector where we're also working the same because I think that's the way of working this in the future to have sort of a vertically integrated stack for your customers, and they can pick and choose what they want. You need to have the best network in the bottom that is performing and with flexibility and then you build upwards.

So yes, you're right, this is giving us a great opportunity to engage with our customers, way more often than come into the store once a year and doing your upgrade or buying your phone.

Yes. And thinking about this all a little longer term, I was wondering if you could just describe how you think about wireless revenue growth in terms of subscriber growth versus pricing, on the subscriber side, should we be thinking more about nonphone subscribers to the extent we get new types of devices or is there a pricing opportunity because of some of the platforms that you mentioned?

Yes, if you look in the future, I think we now have created so many vectors of growth on the consumer side that we grow on. Of course, new customers are always important, but we have so many other areas we can grow in right now. And we just need to see that we deploy the capital in the right area, which has the best return on investment.

So if that's perks or high-yield bank accounts or insurance, we will do that, if it's to acquire new customers, we will do that. And the financial discipline and the team is extraordinary. Then on the business side, we have been always very good balance between volume and price and whatever offers we have.

Recently, of course, we've some impact on the public sector for obvious reasons, when we see downsizing in the public sector with our market share, we have some negative impact on that. The other sectors are performing well for us, and we have, I would say, a high market share there. So we're very -- so we have all of that.

And then on top of that, what I see in the future is, of course, that the innovation of the network-enabled devices, meaning devices that are using the network for their applications, for the processing, et cetera. We build a whole metro network and the edge capabilities 5 years ago, way early maybe. But that's really what we're going to see when AI will start to have devices that are going to connect with the network in a totally different way.

They're probably a couple of years out. But that is the next boundary of wireless growth for us, where we're both going to have new -- I would say, new offerings for these type of devices. And of course, the manufacturer of the device needs to have edge capabilities from us that we can charge as well. So you're going to have dual revenue streams. So that's what I see happening also over time here.

And then adding to that, of course, all the AI being built with our business side, the AI Connect, which have a great opportunity right now with lit and dark fiber for all the routes that needs to be built. And then over time, edge processing, edge capabilities, which we also already have in our data center. So there's multiple new vectors of growth that we have been building on for years, and we built our network to be prepared for it that is coming in the next years to come.

And then we have the vectors of growth here and now with the perks, adjacent services, myHome, myPlan and all of that we have built the last couple of years, so we're excited on it. And you saw my -- when we finished the second quarter, we now are growing our EBITDA with 4%, which we haven't done for a very long time. We upgraded our guidance in the second quarter for the full year. So yes, the team is doing a great job. We have a great team that is super focused on doing the right thing for our customers and then bringing that together.

Right. And you guys were early with AI Connect with the product forming...

Yes, we were very early with that. Yes, all the edge computing, we were probably 5 years too early, but now we have all the capacity at the edge, which will be beneficial when the large language models are done sort of and you would bring it to an AI application where an enterprise, for example, that's going to move out to the edge for transport cost, latency, security and privacy, and that we're going to be very well placed to take care of that serving 98% of the Fortune 500.

Yes. And just kind of wrapping up on consumer wireless. I was wondering if you could...

Is he talking about that?...

Okay. Briefly. And I was just wondering if you could talk about what current trends have looked like? How has back-to-school performed for instance?

Yes, nothing special. I think this third quarter is always the quarter where everybody is waiting for the iconic launch. So even though back-to-school, I think what I'm really encouraged is our prepaid business, which has been doing really well. I mean I think it's 3 quarters of growth after the acquisition. We had some 5, 6, 8 quarters of negative growth. Now we're growing that business. The team is doing a great job. We have seven brands, we've the Visible, the Total Wireless and of course, Straight Talk in a couple of other Walmart Family. And all of them are distinguished segmented in the market, and these are perfect for back-to-school and things like that.

So no we -- I'm excited over the prepaid portfolio and sometimes we have this conversation with investors, yes, but postpaid is important. I would say, I mean, high-end prepaid is profitable -- more profitable than low-end postpaid. So for me, again, the strategy is very clear, build the network once, having as many profitable connections on top of the network, prepaid play a very important role there. Some prepaid offerings have limitation of usage. So you can make a good profitable business on any type of connections as long as you have the right requirement around them. And that's why I see the base of our prepaid that is plus 20 million is very important for us, and we can do quite a lot with it, and now we're growing as well.

Yes. And maybe just following up on prepaid since you mentioned it. Could you just talk about how that strategically fits into the broader portfolio, has the characteristics of prepaid changed relative to how we may have perceived it a decade ago?

I think that when you work with brands, there's a brand perception of your brand in the consumer world that you want to have. And of course, Verizon has a good brand. I mean premium brand, high-quality brand, the highest brand value in the industry -- in the world, in our industry. So of course, that tells you something when you want to approach it. That means also that some consumers might say, Verizon is not for me. That's why we built Total Wireless, which we have built up now in 1.5 years, which is a high-end prepaid, for example Visible, 100% digital, where customers don't want the store, no hassle.

They just want to buy the things online and nothing else. So we're trying to -- we have the whole portfolio with Walmart, which is another cohort of customers that like that type of business. So I think that it's important when you're in consumer business and when you want to extend the TAM, you need to be true to your brands and the brand perception you have and what type of brand values you are building, and that's why the whole prepaid is playing a big business for us.

We have never had this prepaid to postpaid convergence. But over time, we're building that muscle right now with many of the stores, we're building with Total Wireless, for example.

Yes. Shifting gears to broadband. Obviously, the market has been incredibly dynamic over the past several years. Your fixed wireless product has performed very well, 5 million subscribers, on its way to 8 million to 9 million by 2028. Could you just talk a little bit about fixed wireless access? Is it a transitional technology? Is it a good business? What does the returns look like relative to fiber?

It's a great product, and it fits very well in this portfolio of vectors of growth. Certain consumers, certain business customers really like fixed wireless access for the simplicity, you self-install, you get it quickly, and it's really good performance. Then, of course, we're also going to have fiber, so -- but there are different customers there. It's a long-term strategy to be in fixed wireless access. We are developing and improving all the time. We are now also starting with our multi -- MDU solution, multi-dwelling units, meaning high rises, where we're going to do fixed wireless access to high rises, which has not been a market we have penetrated before, basically, taking between the tower on one building taking a very broad spectrum tranche, sending capacity over and then using all the cabling in the building and suddenly you can also address multi-units. So we see more development on fixed wireless access and opportunities.

And then on top of that, of course, being able to see that the business side is using fixed wireless access much more. I mean when we did our business case on fixed wireless access, it was basically built on consumer.

Right now, we see very good traction on fixed wireless access on small and medium businesses, retail, retail offices using fixed wireless access for their primary broadband solution because it's so easy and so quickly. So this is a technology going to be here. Some of you might remember that when we launched it, we were first in the world basically with it. Nobody believed it even would work. I think the industry has proven that this is one of the great innovations for 5G. I mean everybody talks where are the big things from 5G? Fixed wireless access is definitely the biggest innovation of 5G so far together with Private 5G networks and edge computing.

Yes. And how do you think about balancing your capacity between fixed wireless and mobile?

Yes. So the capital expenditures that we have on mobility are in a very clear priority. Number one, we build for mobility for the mobile case. The C-Band we bought in 2019 or '20 for $52 billion. We will finish between 80% and 90% of that build-out will be done this year. So what we're doing is that we build a C-Band for mobility and then our adjacent business case is fixed wireless access. So we don't build our wireless spectrum for fixed wireless access. That's a secondary business case on the mobility.

So during 2016, we want to finish basically the C-Band deployment as we planned. And then it's more about capacity and business opportunities. And then, of course, we're going to have the opportunity to build more tune to fixed wireless access, where the mobility will be the secondary business case. But right now, the team is focused on finishing the C-Band deployment. And again, this year, we're going to finish between 80% and 90% of the plan. And then in '26, we're going to finish that out.

Yes. And as part of just the broader broadband strategy, is fixed wireless, a business that helps you gain market share versus cable? Is it going to improve broadband penetration for the market like overall, just wondering where you think we are kind of from an industry broadband penetration...

Yes. We have seen the loss. I mean we have been between 300,000 to 400,000 new net adds every quarter for many quarters, right now in a mix of fiber and fixed wireless access. In the end of '24, I already said that we're going to have a little bit lower net adds on fixed wireless access, not because we're not deploying fast, it's because we go from urban area to suburban and rural areas where we build our C-Band and there's less density of houses. So the passings on fixed wireless access is a little bit lower.

At the same time, we're now ramping up our fiber from 400,000, 450,000 passings in '24 to 650,000 this year. So we're now looking forward to enjoy that increase in fiber that we're doing on the Fios footprint. So as I said in the second quarter, we're going to be having a stronger second half on broadband, meaning Fios plus fixed wireless access in the second quarter -- second half of the year compared to the first half of the year.

Okay. Great. Maybe moving to capital allocation leverage. Lots of moving parts here with the pending closure of the Frontier acquisition. Could you just talk a little bit about how long you expect it will take to reach your target leverage? And are there things that perhaps you haven't been particularly prescriptive about as it relates to tax benefits from the One Big Beautiful Bill Act that should help on the Frontier side, which you guys haven't quantified yet that may help you reach your target leverage sooner?

Yes. So the bonus depreciation that was part of the Big Bill that was approved here in August. That has a positive impact for us, $1.5 billion to $2 billion this year. So -- on cash, which is, of course, sizable money. But the capital allocation is very clear. Number one, we put it into our business. This year, we increased our CapEx because we increased our fiber build somewhere $18 billion, $18.5 billion, depending on where you are on -- where you believe you are in the guide.

But more important, of course, we're investing in our business by buying Frontier. We have not come out to say what the capital intensity will be when we have Frontier. I will do that in one package. But historically, we have, by far, the lowest capital intensity in the industry. In the world basically, where we were last year, 12.7% capital intensity, which is low. I mean the Europeans are probably up to 20s and our competition here is 300, 400 basis points higher. Fiber is a little bit higher density. So the mix is going to probably go up a little bit, but I will come back with that. So that's number one.

Number two is continue to put our Board in a situation to increase our dividend and for the ones that are following us, the press release on Friday, confirm that 19 consecutive years of growing our dividend. Again, we added $0.05 for the next year. So a very good increase on dividend again and that we have done for 19 years.

And then we're paying down our debt. So far this year until the second quarter, we paid down almost $7 billion in debt -- $6.9 billion. So our leverage is 2.3. We want to go to 2.25. So we're definitely on our way. When we buy Frontier, we will come up a quarter of a notch, I would say, 25 basis points on our leverage. But given the cash generation we have right now, I think that we will continue to work well on. And then after that, I mean, if we have proceeds left, we will start considering buybacks, which we don't have in the plan right now. But given how quickly we're moving here, we definitely want to consider that as soon as we get there. So no, we're very clear on capital allocation and see that we honor our shareholders with good returns back. And of course, given the size of the buybacks, the return on our yield is really high.

Great. And maybe just in the last couple of minutes here, I was just wondering if you could talk about one or two things strategically that you'd like investors to take away from this conversation as it relates to the 3-year outlook.

No, I think that what investors should look at Verizon is, first of all, extremely stable, very solid balance sheet. And of course, more vectors of growth than we have had in many, many years. And then topping that with also more opportunities of cost reductions in many, many years with AI coming in. So I think we're coming into a new era of business, we are best positioned with the best network, the biggest distribution, highest market share in every sector we're into, and then we're adding Frontier. So of course, we are excited. We are -- we have a team that is executing. I think that's -- and we are very prudent with our capital allocation. I think that's what we want the investors to see and knowing about our stock.

Excellent. Well, Hans. That was a fantastic conversation. Really appreciate you coming out here today. And thank you, everybody...

Thank you so much. Thank you, guys. Thank you.

Welcome back to Citi's 2025 Global TMT Conference. For those of you I haven't met, I'm Mike Rollins, and I cover communication services and infrastructure for Citi. Disclosures are available at the back of the room. And if you don't have access or would like another copy, please e-mail me at [email protected].

With the housekeeping details out of the way, we're pleased to welcome Tony Skiadas, Chief Financial Officer of Verizon. Tony, thank you so much for joining us today.

Thanks, Mike, and good morning. Before we get started, I need to draw your attention to Verizon's safe harbor statement and our SEC filings, which can be found on our Investor Relations website. And my comments may include forward-looking statements that are subject to risks and uncertainties.

So with that out of the way, we can get going. Thanks for having us.

Excellent. Yes. Thanks for being here. So maybe if you could set the stage for us in terms of what you've been working on and what are your current priorities at Verizon?

Sure. So at the top of the house, the team is very focused and aligned on driving wireless service revenue, adjusted EBITDA and free cash flow. And within that framework, growing both mobility and broadband and extending our leadership there. And if I break it down to the operational components from a revenue standpoint, continued revenue growth when you think about on the consumer side, myPlan, myHome, on the business side, My Biz. So we have a great value proposition for customers and then continued work on cost efficiency to make the business more efficient in serving our customers. So that's extremely important to us.

And then on the network side, continuing the work that Joe and the team are doing on rolling out C-band, and we're making great progress there. And then from a broadband perspective, growing both FWA and Fios, it's really both and expanding our broadband portfolio. And then obviously, we have Frontier coming into the fold as well.

And then from my perspective, I have three priorities. First one is supporting the leaders in the business and ensuring we have laser focus on operational performance and execution day in and day out.

Second for me is executing on our financial guidance for the year. And we raised our guidance this year for adjusted EBITDA, EPS, and free cash flow. So that's something we're very happy with the progress we've made.

And then third, generating strong cash flows and executing on our capital allocation priorities. So the first half results were strong and set us up well to deliver for the year.

Great. So if we take a step back, one question that we're asked about is the opportunity for Verizon to sustain annual financial growth, including on the revenue side. And I realize this is not the forum where you're going to want to give maybe explicit guidance. But what is the market underappreciating about your financial model and how you view the opportunity to sustain that multiyear annual growth?

Yes. We've had good revenue growth in the first half of the year. We had $1 billion of service revenue growth, up 2.4%. So we're making good progress there.

In terms of your question on underappreciated areas, there's a few. I would start with the value construct we have with myPlan and the perks with the adjacent services. And if I zoom in on perks, perks are a great business for us. They give great value to customers and also provide good revenue, good margins for us.

If you think about a streaming bundle or a hotspot, those give customers exclusive savings, which is great for them and also great for us. So we have -- we said we're going to have about 15 million perks in the portfolio. It brings about a $2 billion annualized run rate within it is probably. And we have about 58% of the base on myPlan right now. So there's a lot of opportunity to continue to penetrate the base with perks. So we see that as a great opportunity.

Second for us is around convergence. And we think convergence is really good. It provides a significant increase in customer lifetime value, which is great. And we have great platforms with myHome and myPlan to provide great optionality for customers, and we can do it with owners' economics.

And the third area, which is emerging right now is the work that we're doing, which we call AI Connect. And I think you've heard Kyle talk about reimagining the wireline assets to deliver AI workloads at scale. And if you think about the dark fiber, the lit fiber, the power space and cooling that we have already in our portfolio, we have the central offices to deliver AI at scale. This is an emerging opportunity for us. We see a lot of demand and interest right now, which is really great. These are going to be custom deals, so they'll take time to mature, but this is something that we see a lot of promise for the long term.

So these are the three areas that I think are underappreciated and I think are good opportunities and prospects for growth for us.

Great. Maybe just staying with the strategic side of the conversation before digging deeper into the operations. On the subject of spectrum, what's your appetite to invest in additional spectrum? And of course, related to this, if you could share some perspectives on whether or not Verizon has taken a look at EchoStar's spectrum position recently? And if it has bands that would benefit Verizon and your customers.

Sure. So we like the assets that we have. When you think about the networks that we have, the fiber network, the wireless radio access network and our spectrum position. And as you know, we bought C-band a few years ago, and we think it's a great asset, and we continue to deploy C-band or about -- we said 80% to 90% of our sites will be C-band enabled this year, and that's moving along on track. And we have the assets we need to execute on our strategy.

To your question on spectrum, spectrum is the lifeblood of the wireless industry. So we all know that. And it's fair to assume that we look at everything. And if there's opportunities for value creation at the right price and it makes sense for us, we'll do that. As you saw last year, we did the transaction with Frontier. And we think that's a great asset, and we look forward to bringing that into the portfolio. And as we said at dinner last night, we haven't been shy about spectrum over the years. So we'll continue to be opportunistic.

You referenced earlier the 2.4% growth, which I think is for wireless service revenue?

Right.

And so, what are the underlying drivers that you're capturing for wireless service revenue growth? And how are you set up for the back half of the year relative to the guide of 2.0% to 2.8%?

Sure. So the first half of the year, we're very pleased with the progress on service revenue. We had 2.4% growth in the first half of the year, so $1 billion of wireless service revenue growth. And the drivers that we saw in the first half of the year will also carry into the second half of the year.

And if I can drill down on that, there's quite a few of them. The first one is around pricing. We took pricing actions earlier in the year and more recently in the third quarter. That provides a tailwind to service revenue. I mentioned perks and adjacent services on myPlan. That provides a great tailwind to service revenue as well.

And we're continuing to see strong premium mix, customers taking premium plans on myPlan. And then, when you think about fixed wireless access, fixed wireless access continues to grow. We did over $700 million in revenue in the second quarter, and we're taking healthy share there.

And then, prepaid. Prepaid, we've had four straight quarters of volume growth. And now we're finally reaching an inflection point on revenue where it's been a drag of prior years, we're going to see that now turn to positive revenue growth.

So all of those factors are driving the revenue growth. And then we'll see what happens with volumes as well. And then, partially offsetting that is the promo amortization, as you know. And we said for 2025 that, that promo amortization, the headwind would peak. So it is peaking as planned right now. But when you step back from that and you look at the revenue growth without the promo amortization, the customer economics are actually very healthy, and that's what we look at in terms of revenue generated.

So when we think about just the growth drivers, one of the notable updates on 2Q was Verizon pulled back from the aspiration to do better on consumer postpaid phones this year over last year. What's happening within the competitive landscape? And maybe you can give us an update in terms of what you're seeing in the third quarter with respect to the environment.

Sure. So it's a competitive market. So that's nothing new for us. The first half of the year was very competitive. We have a great value proposition with myPlan and the best value guarantee that we launched in April, and our offers are hunting right now.

We've said we're measured on wireless service revenue, adjusted EBITDA and free cash flow, not net adds. So we think it's very important. We think volumes are important for the business, and we'll drive volume growth where it makes sense and in line with our financial guidance. And those are the guardrails we have. So it's not going to be net adds for the sake of net adds. And we don't think that that's the right answer and that we're going to be very disciplined in our approach.

We have a flexible investment envelope that between Kyle, Sampath, Hans and I, we can work through that. And we can pulse in and pulse out where it makes sense. And you've seen us do that, that to your question on the third quarter. But we're going to do that in support of our financial guidance and be disciplined in our approach, and we'll find the right -- we'll pick our spots.

Can you give us an update on churn and what you're seeing there? There were some comments this week from Verizon about churn. And maybe just help frame what you're seeing.

Sure. Churn is core to what we do and churn improvement is core to what we do day in and day out. We saw elevated churn in the first half of the year, both from the competitive environment and also from the pricing actions we took earlier in the year. And the goal is to continue to reduce churn. We still have more work to do. Churn is still elevated. So we still have work to do in the back half of the year. We have a lot of tools to get there, and the focus is to do it in a disciplined way. And what I mean by that is, we have our best value guarantee, for example, that's one way to lower churn.

Another way is around convergence. Where we see convergence, we see lower churn. We have a converged bundle, customer is stickier. Where we have C-band deployed, we see lower churn. So and then the work that Sampath and the team are doing on customer experience and the enhancements with AI will also improve churn over time as well. So there's a lot of tools to get there. We still have more work to do, and that's the focus of the team.

So if churn is maybe up this quarter and the switcher pool is larger, is there a way to think about that in terms of -- does that mean that gross adds are better? So just from a net growth perspective, you're kind of where you wanted to be? Or is there just kind of this maybe deliberate shift on customer economics that you're taking? Maybe you could just help unpack a little of that for us.

Sure. We have a great value proposition with the Best Value Guarantee that we launched in April. So it comes with a 3-year price lock free phone guarantee, and Basin New treated the same. So, and that offers hunting well.

And in the second quarter, we saw a really strong gross add production. We saw 19% gross add growth. We're continuing to see good gross add growth in the third quarter. We'll see where we end up at the end of the quarter. The execution in our stores continues to be very strong as well. So the team is doing a great job. We'll have to see in terms of what happens in the competitive environment and with the device refresh cycle coming up here in the next couple of weeks, we'll see what happens with all that.

But as I said before, we're going to stay focused on our three measures: service revenue, EBITDA, free cash flow and be disciplined in our approach to growth.

And maybe just thinking about ARPU performance. I mean, you mentioned the perks and some of the things, pricing actions that are helping ARPUs, but you also have these price locks now. Like how does that feed into the ability for Verizon to use price or ARPU mix as a lever to grow service revenue in the future?

A few thoughts there. So we launched -- as I said, we launched the Best Value Guarantee back in April, and I said it comes with a 3-year price lock and the free phone guarantee. And we think that offer is actually hunting very well for customers, gives customers a lot of optionality on myPlan, which is great to see.

There's a lot of ways to grow revenue beyond pricing, as I mentioned earlier, whether it's volumes, whether it's perks or adjacent services, premium mix, FWA, et cetera. So there's a lot of ways to get there.

In terms of your question around pricing, I can only talk about the pricing actions we have taken. I can't talk about anything we might do in the future. We did take some pricing actions at the beginning of the year, the first quarter and also more recently, and those will provide a tailwind to revenue. And as we evaluate pricing opportunities, we always evaluate those opportunities with the value proposition for the customer in mind, and we have a great value prop with the best value guarantee on myPlan. So, and we think that's the right construct for us.

And then you mentioned upgrades, and we're approaching the seasonal refresh opportunity. So what have you been learning about the customer interest to upgrade during this cycle? And what do you expect to come out of the competitive landscape as we're going into this?

Sure. So we've had probably up until April, we had about 8 straight quarters of declines in upgrades year-over-year for many, many quarters. So customers were hanging on to their phones for for over 40 months. So when we launched the Best Value Guarantee in April, obviously, that changed the dynamic because now we offer a free phone upgrade, and that's tiered by revenue.

So if you have an Ultimate plan, you get one device. If you're on a welcome plan, you get a different device, but you still get a device. So we saw the upgrade rate tick up in the second quarter. We still remain financially disciplined. We had good EBITDA growth in the quarter and the first half of the year as well.

As I think about it, we said mid-single digits in terms of upgrade rates for the full year. We're running above that right now. We'll have to see what the device refresh cycle, what happens in the back half of the year. And the reason for that is our offers are hunting well right now, and the offers are resonating in the market. So -- but we'll see how the -- we'll see some of the device refreshes next week. We'll see what happens with the reaction to that, and the take rate around that.

But as always, we'll be very disciplined in our approach in terms of upgrades and retention.

And maybe just taking a step back. So if the promotional environment is a little bit more costly right now, and there's more device sales with your upgrade comments. What does that mean for margins and profitability for the back half of the year for Verizon?

Sure. So upgrades, you can ask the question, do upgrades hit margins straight up. And the question (sic) [ answer ] is, it depends. And some of it is an investment in retention. So we look at it that way. The other thing that upgrades can do is drive traffic into the stores and have a customer look at taking either perks or converged bundles. So there's a lot of ways where we can make an investment in the business.

We did see upgrades tick up significantly in the second quarter when we launched the Best Value Guarantee. We expected that, and we expect it to shift the dynamic, because we had so many years of declines in upgrade rates. So -- and like I said, we have a great value proposition, and it's actually resonating right now.

So no change in your perspective?

No change in our perspective. And as always, we'll be ready to go in the fourth quarter as we always are.

And then, when you think about the cost structure, what are the opportunities to extract more efficiencies, whether it's through AI, copper decommissioning, maybe walk us through the opportunities to really improve the efficiency and margin profile over time.

Sure. So we've made a lot of progress on cost transformation in the first half of the year, and that's reflected in the EBITDA results. We had 4.1% EBITDA growth, $1 billion of EBITDA growth. So making good progress on cost transformation. A lot of work has been done by Sampath and the team on customer care, including enhancements with AI that's driving some of that. We're also seeing good work on the business side with our managed services portfolio and the work that Kyle and the team are doing.

We're seeing savings from that as well. And then, you mentioned on the network side, taking legacy elements out of the network. And we have obviously more work to do there, but we're making good progress. And then, some of the other areas like IT and real estate. And then we also did a voluntary separation program towards the end of last year. And starting in the second quarter, we started seeing a full run rate benefit of that as well. We're operating with lower headcount.

So we continue to focus on making the business more efficient, and that's reflected in the results, and that's something that's an ongoing process for us and in our DNA.

And maybe -- and sorry, just coming back to the upgrade subject again. What are your thoughts that maybe first half pulled forward volume? And so, even though you're running ahead of the upgrades right now that you might have pulled some of this forward and so this upgrade cycle might not be as robust as maybe it would be seasonally.

Yes, it's a good question. When we did the Best Value Guarantee, we knew we would shift the upgrades and pull them forward. The question is, now with the refresh cycle, are people waiting or not? Hard to say. We'll know that probably in the next few weeks as this all starts to shake out. But as I said before, we'll be disciplined in our approach. It's possible that some of that got pulled forward, but we'll have to see how it plays out in the back half of the year. And as I said before, we're -- as always, we'll be ready to go when these things launch.

And when you look at the math of Best Value, is it driving up the percentage of subs that are on what I'll call like an active EIP program, even if it's being subsidized, but they're kind of in that category such that there's an opportunity to -- just from that to significantly improve churn, because just more people are on fresher device plans.

Yes. I think, as we get folks on to myPlan, myPlan has a great construct when you think about the -- you pick your network and you can pick your perks and adjacent services. And if you want a Netflix, Max or you want a hotspot, we have all of those things and/or adjacent services like insurance, handset insurance. So we have great optionality, and that makes it stickier for customers. And we have -- as I said earlier, we have about 58% of the base on myPlan. So we're making good progress there. Obviously, more work to do to get more folks on myPlan, and we do see better ARPUs on myPlan. So that's the focus of the team.

And maybe circling back to FWA, you referenced some of the opportunities earlier. Can you give us an update on how the footprint expansion is progressing and the opportunity to improve the quarterly cadence of net adds for that?

Sure. So with FWA, the goal for us is to build a long-term sustainable business with plenty of runway. And that's what we're doing with FWA. And as evidenced over the last few weeks, it's clear that the industry has adopted and embraced FWA, which is great to see, and it kind of validates the thinking on FWA. And it's a great product.

We have over 5 million subscribers in our base right now, 5.1 million and well on our way to our 8 million to 9 million subscriber target by 2028. And we put on about 600,000 FWA net adds in the first half of the year, and we're taking meaningful share, which is great to see.

In terms of how we think about deployment of the network, the primary use case for C-band is mobility and a secondary use case is the optionality for FWA. And we continue to roll C-band out. We said 80% to 90% of planned sites, and Joe and the team are on track with that.

And as we roll out C-band, that will continue to provide optionality for FWA. The cadence will be a little bit different as we now roll out into Tier 2 and Tier 3 markets, I think suburban markets, rural markets. Obviously, the density is a little bit different there. So obviously, that will impact the pace of growth. But we're not stopping. We're going to continue to press ahead. We let customers really like the product. The NPS, and you've heard this from Sampath many times, the NPS is really high, and it's a great product. So we're very happy about the progress there.

Are you seeing any incremental opportunities to invest in that product to drive additional revenue versus the fallow capacity model?

So as we look at FWA, as I said, the use case first case is always mobility and then FWA. There's always opportunities to go back and look at a use case for FWA. And the question is, what is the return on that investment? If the return on investment makes sense is, once we get through the build and achieve the build, there's always a chance and opportunity to come back around and look at those use cases, it would be whether the return makes sense for us, but we always have an option to do that. And if we do that, that means we're being extremely successful. So -- but we always have the optionality to do that, but there's no success-based capital right now for FWA.

And the MDU opportunity?

Yes, sure. So one of the things we wanted to do this year was roll out an MDU solution, which is bringing millimeter wave to an MDU and then running that through the coax in an MDU. And we started launching that product. As with any new technology, we're going through the growing pains of that right now. We think it's going to be a great product. The goal is to have gigabit speeds for us, and we're working through some of that right now to ensure the customer experience is what our customers expect from us in terms of network performance.

So the team is working through that. And that will scale over time. So as we work through the growing pains, I expect that to be a contributor to open up more prems for sale in FWA.

And maybe switching gears to fiber. Can you give us an update on the Frontier process close and the financial opportunities that brings to your shareholders?

Sure. So the Frontier is moving along in terms of the regulatory process. It's on track. We've secured approval in 8 out of the 13 states where we need to get approval, along with the FCC and the DOJ. And we're going to work with the remaining states. That's already in progress to ensure we can get the deal closed. And what we said is the first quarter -- by first quarter 2026, and that's on track. And we're working through each state's process to get that done.

And we're excited to bring Frontier into the fold. The work going on right now, there's a lot of integration planning that we're doing right now with Sampath and the team and the Frontier team to ensure we can hit the ground running on day 1 and make sure we can serve our customers on day 1. So that's extremely important.

We talked about when we announced the deal last year, synergy targets, and we said at least $500 million of operating run rate synergy by the third year. So we do see a lot of opportunity in the Frontier footprint, both from a revenue standpoint and also from a cost transformation standpoint as well when you think about the legacy network as the fiber -- put more fiber into the network.

So there's a lot of opportunity there. And what we've said, what Hans and I have said is that we get closer to closing the deal and get clarity around the closing time line. We'll come back on what the build pace looks like in the combined footprint going forward, what the CapEx will look like, synergies, integration costs and capital allocation as well. So we'll come back on all of that real soon.

And just to remind our group, that synergy number doesn't include certain things like tax or interest or some of the other things that could be helpful.

Yes, there's no revenue synergies in there, and there's an opportunity to go further, and that's the focus. And as I said, we'll come back with a full view on that real soon. Stay tuned.

And maybe then zooming out, when I think about the larger strategic ambitions for Verizon over a number of years, it feels like it's been about being a leading provider across the whole U.S. of mobile and broadband and that brings us to the convergence conversation. And so as you look at what Frontier gives you, your FWA, your mobile business, how do you look at Verizon's convergence opportunity and leveraging that to grow in the future?

Yes, sure. So in terms of convergence, in terms of broadband, we do both. We do fiber, we do FWA. And we have a great mobility business. So when you put that together, we have great offerings for customers. About 18% of our customers have the converged bundle, which is great to see. And that's moving up at a steady pace.

But I think you've heard us say many times, our view of convergence is that, it's demand-led and meaning it's dictated by the customer. And we have a great value proposition when you think about myPlan and myHome. They're very similar constructs. You pick your network, you pick your perks. So it's very similar and gives a lot of options for customers.

We have the owner's economics on the networks when you think about our wireless network and our fiber network, so we can handle this. And we'll be ready as it ticks up. And questions have come up about how high the percentage can go. We think it can double over the next few years. But again, it will be dictated by the pace of the customer from the customer standpoint.

Maybe shifting gears to capital allocation. Can you give us an update on the leverage, where you are versus your target and what Frontier does in terms of influencing that?

Sure. So we're very pleased with the cash flow generation of the business. We had strong cash flows in the first half of the year. We raised our free cash flow guidance for the full year to 19.5% to 20.5%, both on the strength of the operations of the business and also tax reform.

And we said tax reform would provide $1.5 billion to $2 billion in cash tax savings in 2025 and a significant benefit in 2026. And the focus of the team has continued to be to delever the balance sheet. And we've taken about $7 billion off the debt stack in the last year, and we're getting closer to our long-term leverage target. Our unsecured metric right now is 2.3x. So we've made a lot of progress in delevering the balance sheet. And we said our target is 2x to 2.25x.

So we're making good progress. Frontier adds a quarter turn to that. So we have to work our way through that. But the focus for us is continuing to generate strong cash flows and continuing to pay down debt, and that's what we've done.

Maybe just switching gears again to Business Wireline. What are you seeing in that business? And is there light at the end of the conduit, so to speak, in terms of stabilizing this business on a revenue basis and a profitability basis?

Yes. When I look at the business segment, Kyle and the team have had three straight quarters of EBITDA growth. And you mentioned the secular declines in wireline, and that's probably not going to change. However, what we do see is, Kyle and the team have grown both mobility and FWA quarter after quarter after quarter. And the revenue is skewing more wireless.

So obviously, that's better for margins. And it really starts with the wireless revenue growth that's driving some of this. And then you add in things like private networks, and we're seeing good demand right now for private networks and in the future, AI Connect. So the revenue profile is shifting.

And then, the team is doing a lot of work on cost transformation to improve the margin profile and whether that's getting customers off of legacy products and solutions, that's extremely important. The team did a lot of work on managed services and the delivery of managed services, and we're seeing savings right now.

And the other thing we're doing is being very disciplined at the deal desk and not writing low-margin deals. So if it's not good business, we're not going to do it. So Kyle and the team are very focused on writing good business, and that's extremely important. And we're operating with lower headcount. So the team has done a great job, and we're positioned to have EBITDA growth this year, and that's great to see.

Zooming out on the wireless landscape again, I think the team this week referenced the possibility of industry growth, postpaid phones slowing in future years. And can you frame what could drive that slowdown in industry growth? And we've had like -- I feel like a few years now where we've expected a slowdown each year and...

It doesn't happen.

It hasn't happened significantly yet. But at the same time, if it does, why -- and what's Verizon's sensitivity on the volume side to that possible slowdown?

Look, I mean, the wireless business has been very resilient and the demand and the priority for connectivity continues to remain high. So that's probably some of the resilience that you're seeing. And obviously, some of this is influenced by immigration, by prepaid to postpaid migrations, younger demographics in terms of kids getting phones and things like that. So there's a few things influencing that. But even with the slowdown, we've said longer term, our view is more 80-20 in terms of price volume. And we're not there at this point. But obviously, we've been able to manage through it. And as I said, it's a very resilient business. And the demand is still very high and the customers are very resilient as well.

And when you define the 80-20, just to help our audience here, that's not explicitly a postpaid phone formula, right? That's a formula for the whole business.

That's right. That's right. That's looking at, it perks adjacent services, you're looking at everything. We're looking at all of it. So when we say that, we're looking at the entirety of the portfolio.

Can you give us an update on how you're thinking about returning capital to shareholders? You have a dividend right now. What's the outlook for return of capital?

Sure. So we have a very disciplined capital allocation framework that has four priorities. The first priority is investing in the business. And you see us doing that with our networks year in and year out this year, $17.5 billion to $18.5 billion in CapEx. A majority of that will be spent on the network and a big focus on deploying C-band. So that's always the first priority.

Second priority for us is the dividend. We have a long track record and a proud track record of 18 straight years of dividend increases. And our goal is to put the Board in a position to increase the dividend once again.

And third priority for us is a strong balance sheet. And as I said earlier, a lot of work being done to delever the balance sheet and get to our long-term target -- leverage target, and we're making great progress there. And then, we said once we get to our long-term leverage target of 2x to 2.25x, we would consider share buybacks. We're getting close. We're not there yet. But as we get through the Frontier deal, there's line of sight to that, but we have work to do between now and then.

And just thinking through what else you could do maybe in a strategic fashion, is there room to further optimize assets within Verizon? For example, you still have a video business. You may have some legacy real estate. What can you do to sort of accelerate the goal to more of your strategic focus in the future?

Yes. Mike, we've done a lot of work in pruning the business over the years and narrowing the focus, whether it was selling our media business or other assets. And we'll continue to look at optimizing the portfolio. That's something we do all the time. And if there's an opportunity for value creation at the right price at the right economics, we'll do that. And that's something we're always focused on. And if there's a way to make the business more efficient, we're going to continue to do that.

Tony, thanks for joining us today.

Great. Thank you, Mike, for having us. Thank you.

Thank you.

[Audio Gap] The telecom infrastructure, software analyst at BofA. Jessica and I welcome you to, I think it's a 32nd Annual BofA media telecom conference. So thank you for being here with us today. We're going to kick right off today with Sampath from Verizon, Sampath, thank you for being here. I think we have a safe harbor they want us to show. So should be on the screen over there. So please see that because you say anything 8-K worthy today. So thank you again.

Thank you.

Thank you for being here today. A lot has been going on in telecom recently. So I wanted to stick maybe to the current events to kick off. Last week, AT&T announced the acquisition of spectrum from EchoStar. So I guess what are your thoughts on Verizon spectrum position and the need for additional spectrum to meet capacity needs?

Michael, thanks for having me here today. And congratulations on picking up the telecom vertical. Welcome to the family.

Welcome back, right?

Exactly. Verizon, we really like our spectrum position that we have here today. We've made some investments in C-band as well as some opportunistic investments. And our goal is to run the best network on earth. And for the last 32 times in a row, we won the J.D. Power best network. And sometimes, we've done that with the least amount of spectrum. Sometimes we've done that with a lot of spectrum. But historically, we run one of the most efficient networks.

So if you look at number of subs over a unit of spectrum, we are the highest in the industry. And that's not by chance, in spite design and how we architect the network. Having said that, we always look for opportunistic places. It's built by conversation for us on spectrum. And sometimes build as you go and build more sites, by also may require a build depending on whether it's compatible with your current spectrum position or the radio position you have or not. You saw the recent transaction with EchoStar 3.45 GHz and 600 GHz. I can tell you, both of those were not compatible with our radio portfolio that we have at the moment. But we continue to be opportunistic and financially disciplined. You see that with U.S. Cellular, where we picked up some spectrum. It's 2 megahertz average for the nation, but in certain pockets, it's 25 megahertz, which really excites us to do that.

So opportunistic, financially disciplined, and it's a build and buy on every single transaction we look at.

Okay. And just to be clear, so you mentioned some spectrum network is already capable of carrying that, others not. The AWS-3, your network is capable today of that being a software overlay. AWS-4 would actually be an equipment upgrade. Is that correct?

Yes, that's one way of looking at it. But when you look at the build and buy conversation, sometimes you just -- you get a spectrum, you turn it on, sometimes you get a spectrum, you have to build some capacity around it. It depends on our radio portfolio. And rate portfolios also don't stay still. They have a way of evolving; new technologies come in, we plan ahead. so at the moment, that may seem like it, but look, this is a build by conversation that we've had. And it's a similar philosophy we've had for the last 25 years when it comes to spectrum.

SP1 Okay. And I'd leave that conversation there for the moment. I wanted to switch to competition, a lot of discussion in 1Q and 2Q of this year about elevated competition in 1Q, churn obviously ticking up year-over-year. I think last quarter, there was some commentary around how much of that churn increase was competition versus price increase that we're taking across the industry. And I believe it's around 10 basis points of the year-over-year increase is attributed to competition versus pricing. So looking forward to the second half of the year, do you still believe that 10 basis point increase is going to be persistent for the second half of the year? Is it reasonable it might come down?

We are in a competitive environment. But what we tend to find is we're also writing very good quality business. The type of lines we bring in, the credit class of the lines we bring in, the add-on services, the converged offering that customers tend to buy. The overall CLV of the customer, we are bringing in are very good. So cost of acquisition, cost of retention is slightly higher year-over-year, but it's kind of offset by the better quality business that we are writing. We are extremely financially disciplined. So you'll never see us do promotions that don't make sense financially. We've stuck to that knitting and that's played off well.

Overall, the switcher pool has increased year-on-year; similar to the back half of first quarter, second quarter is the highest switcher pool. The switcher pool continues to remain high in the market there. So because of that, that does drive some churn in the space. For Verizon, there's also an added thing of price ups. We've done some strategic price ups over the last -- this quarter and late last quarter and some of that drives some churn in this space.

But when you think about it, our business is managed around service revenue, wireless service revenue, adjusted EBITDA and free cash flow. Those are the 3 most important metrics for me as an operator that we focus on. Quantity has a place in it. Volumes has a place in it, but we take a much more holistic view of how do you create long-term shareholder value, and it is to drive more free cash flow in the business. We've raised our guide $2 billion on free cash flow, some from tax legislation, some from just significantly better EBITDA that we are seeing in the business.

So taking a holistic, long-term view of the business, wireless service revenue, EBITDA and free cash flow is how we like to get measured.

Okay. And others, others focus also on migrating prepaid subs up to postpaid and claim that, that is a -- that's a good plan, right? It's NPV positive for them. Why doesn't Verizon pursue a similar strategy?

Look, we do that. But it's -- I like everyone of my customers to go through a credit check, go through social security, have a social security number. And that's how you build a sustainable long-term business. Our average FICO score in our base -- for the phone base is 720. It's an extremely strong base that's resilient in most economic times, and that's the kind of base and customer base we want to build. On the welcome plan, which is our initial entry-level plans, we are extremely attractive for prepaid customers. We do attract a fair share of prepaid customer.

But what we don't do is auto-migrate customers from prepaid to postpaid because our prepaid offerings are great. People are there by choice, and we want to take care of them within the prepaid category itself.

And I understand your comment about being financially focused and service revenue, EBITDA upside to free cash flow. The market points is myopically focused, though, on postpaid phone net additions. So what are you doing to increase your share of net adds to bring your own churn rate down, which you can also been a few in the ad side. I think last quarter, you talked about customer experience being part of that toolkit that you have an AI in there. Maybe talk about what you're doing, what you can do to improve net adds at Verizon.

Yes. There are 2 ways to increase long-term net adds. One is do better on gross adds and second is reduce your churn. It's just simple math there. On the gross add, we've had 10 quarters of really strong gross add momentum in our business. If you look at last quarter, we had very strong gross add. In this quarter, in July, we were not aggressive in our promotions by design, we pulsed in and out, but as we got back onto a more normal cadence in August, we saw gross add momentum really build up.

So we're seeing good momentum in our gross adds this quarter as well. So I think that driven by our sales engine, marketing, value prop has done exceedingly well for us. We do have more work to do on the churn side of the base. Some of it is competitive churn. Everyone's churn has gone up with it, but we do have, I think, once at least in half a generation opportunity to be the leader in churn.

And the first piece of that is value proposition. Really compelling value prop for base and new customers. Our Verizon best value guarantee gives every customer, whether it's existing customer, new customer, the same deal on upgrades, which they really like as well. So that's the first piece to it. The second is take out friction in the journey. And I think that's where AI has helped significantly. There are 5 journeys that make up almost 80% of all the friction we have in our process. It's things you would expect, it's authentication, account management, technical support activation.

And we've done a lot of work using AI and generative AI to proactively identify some of those issues. For example, you order of phone, the phone gets lost somewhere in transit, we know it got lost in transit. We don't need the customer to call and tell us that. So how do we quickly get in front of that, intercept that and proactively solve for that. That's the number one.

The third is the activation process, how smooth it is, how great the onboarding process is. So we've still got more work to do in the CX space, but I think AI has been a great enabler for us. And if we do that longer term, you'll see churn in a much better place. The last point I'll make is price value perception. This is an area where I think we have some opportunity. You can't be the best network and still not be expensive. I think that's the message we're going to have to convey to our customers more clearly, more crisply and we've got work to do that.

And I get the back office stuff like the better customer experience and all of that and reducing churn completely agree on that. We talked just last night a bit that this perception of Verizon amongst consumers that it's the high-end brand, it's expensive, I think [ BBG ] was a word used last night. And that's been a very persistent perception, right, even after you've made some changes to your value proposition and perks and everything else. So what do you think that Verizon has to do that you have to do to change that perception? Is it simply tweaking the marketing message? Or do you have to totally tear it down and rebuild the marketing message to go-to-market to change that perception and increase the gross adds side of that growth add churn equation.

I think we've done a lot of the work on getting our gross add machine in a very good place. You've seen 10 quarters of consistent gross add momentum. And that happens because our value prop is hunting. My Plan, My Home, the Verizon Best Value Guarantee, I think it's the most differentiated offering in the space. It also has some other collateral benefits in revenue that we can talk about. But overall, it's a very compelling value prop.

We do have more work on price value perception. And I think that goes back to showing what value we are able to give customers. For example, we don't do promotion roll-offs. So we don't bring you at a teaser rate and then bring you up in year 1 and year 2. Customers find that extremely annoying, we don't do that. They want flexibility. Different members of the family can take different types of plan. We have no problem with that. Choice, you can start and stop any time.

So I think we have a lot of the different elements. We're going to have to do a better job of convincing our customers that we do give you more value than our peers do, but we do have the sales machine to go with it.

Okay. And then in the past, you gave us a pretty detailed buildup of how you thought about industry net additions, right? There was this humungous population growth. There was -- they was immigration, that was prepaid to postpaid. And obviously, that never has been inflated the last few years by the immigration element, which will likely be lower in 2026.

So can you give us your thoughts on what your model is spitting out or at least maybe the piece parts for 2026 as you think about industry net adds? And then with that same question, how you're thinking about the switcher pool, right, evolving over time?

I think in 2025, we had an estimate of between $8 million and $8.5 million for the whole ecosystem -- the wireless ecosystem. Q1 was a little softer. Q2 was slightly better. So when you net those 2, we are largely on plan for that. Over a period of time, as immigration comes down, there tends to be a 6-, 7-month lag in that. As immigration comes down, that number will lower over a period of time. I don't have a great sense for what '26, '27 look like. But between now and the end of the year, we will get a better handle on that.

The switcher pool is driven by 2 things: net adds coming into the market, new -- what I call new to the wireless category, pre to post migration and customers switching within existing carriers as well. So there are 3 different elements of the switcher pool. Interestingly, the new-to-Verizon portion is new to the wireless category portion, is actually the smallest portion of the switcher pool. A lot has to do from pre to post as well as people just switching amongst themselves.

So those 2 will continue to remain healthy, which will give us opportunities to continue taking gross add and eventually net add share in the market.

Okay. I wanted to shift for a moment to Frontier Fiber and Fixed Wireless. So you've kept your fiber passing target for a while now. Obviously, you have the Frontier deal expected to close, I think, in first quarter of '26 is still the target date. And then the last maybe lever to pull is the CPUC, right? So just help us think about how you're approaching your thoughts on fiber, the right fiber passing target and then also FWA fits into your broadband strategy? And also any thoughts on the CPUC and what they're asking for would be helpful.

Yes. We are working through our planning of the integration. It's going on in full swing right now. And we feel pretty confident that in Q1 2026, we'll be able to close the transaction, which is what we've said all along. We've gotten the DOJ and the FCC in a very comfortable place. They've signed off on the transaction. We are working with the 13 states right now that require us to get approval from the local POCs that we have.

We have work to do in a few of the states, but it is typical of any transaction. We know the states very well. We have worked with them for many years. We have presence there. We have large employee pools there. We operate networks there. And we also took the TracFone transaction through as well. So we know what it takes. So putting all that together, we still remain confident that Q1 2026 is when we'll close on the Frontier transaction, and it's all hedged down in integration planning to do that.

When we close in Q1 2026, we think about sources of value on the particular transaction. There are a couple of them. One is bringing Mobility to the Frontier base. We have less than our fair share of Mobility in the Frontier base. If you look at our Fios base today, we have 400 to 500 basis points higher than average share. So we do expect the Frontier base to catch up on that. So there's some upside for us in the Mobility.

Second is for our Mobility base there, bring the Frontier offering to that base of cross-sell.

Third is our really low churn. In Q1 2025, our Fios churn was 1%. We want to bring that level of operational rigor to the Frontier base as well.

Last is new products and services that we have, whether it's perks, whether it's some of our insurance products, bring that to the Frontier base. So we have a really compelling value prop on synergies, both on the cost side and on the revenue side for the Frontier base that we work on.

We're going to have to come back, Hans and Tony and myself in some combination, going to have to come back and talk about how we think about our build plans beyond Frontier close. Right now, we've said it's 1 million plus, but that's the work that we have to do between now and close and come back and share what our long-term fiber aspirations are.

We remain extremely bullish about fiber. What we are seeing is our ARPU is growing nicely. Our churn is at all-time lows. And our year 1 penetration always seems to be better in the next year than the previous year. Every new cohort we bring in seems to have better penetration. All of that really bodes well for a good long-term franchise in fiber. We've been in it for 21 years. We know fiber really well and the added benefit of convergence.

Michael, if you look at it, around 18% of our Mobility base is converged right now. That number a year ago was around 16%. So we've had 200 basis points improvement in convergence in a single year. And we think that number could probably go to double and eventually go to top out at 40% if our base is converged. So we have all the benefits from convergence in the transaction as well that we've planned.

That brings us to the conversation of FWA. We've said we want to get to 8 million to 9 million customers in FWA. When we said 4 million to 5 million on the first tranche, we got there a year earlier. We're working extremely hard on the 8 million to 9 million as well. What we are finding is the NPS of FWA is really, really strong. It's as good as fiber. Part has to do with the customer experience, the value prop, the price point at which we sell and how quick we are able to turn up customers in the space.

The business is so good. We have some of our competitors who historically have not been in the FW space get super excited about FWA. I think it just validates our FWA strategy. So what we are finding is we're also now getting into MDUs with our FWA offering. That's going a little slower than what we had anticipated. Just classic operational issues when you scale up a new technology and a new operational framework, it's going a little slower. So you'll see us slightly slower on FWA, but it's a moment in time piece as we scale up our MDU solution. But we remain extremely bullish about that piece. The convergence benefits holds well.

And I'll go back to the fiber in a second, but I want to stick to MDU comment while we're on it. When you say a little slower in FWA, do you mean just on the MDU side than you anticipated? Or do you mean lower net adds you have been posting in FWA?

Yes. Look, we've always want -- we said between 350,000 and 400,000 our total overall broadband will be on the lower end of that. But a lot of it is by design because we want our MDU product to have gig capability. We want it to be almost between fiber and FWA the way we think about it. So we're doing a lot of work from a technology and operational perspective to build that plant up to do that.

It's going to take a little while. We know that. Second is we are also rolling out FWA in Tier 2, Tier 3 markets where the density is less. So it just takes longer to get there. But what we are finding is customers are extremely happy. The NPS is really high. We are really bullish about FWA and the economics are great. We're also driving better ARPU, better premium mix than even we had anticipated a year ago.

So it's a very compelling value prop for FWA. We're just doubling down on that even more.

And for the MDU solution, is the friction simply an installation issue where getting approval from building owners and then, I guess, dropping plant down risers, whatever you're doing, right? Or is it a technology issue where the technology is not working the way that you thought it would?

We have a lot of experience in footprint in the Fios footprint working with building owners because to get fiber into our Fios into buildings, you have to work with building owners, landlords and management companies to get in and build it through the risers. So we have that experience. We're just taking that same experience and scaling it to out of footprint in places where we don't have a local like franchise. That takes a little while.

And it's also point to multipoint on millimeter wave is a new technology. We are working to fine-tune it. We're talking to get to the right parameters on RF that give us consistency, but also I want to get to near gig speeds in every single apartment in the MDU as well.

So those 2 things are working its way through the machine. And we're very bullish about the opportunity long term because in FWA, look, we've committed to 60 million homes of FWA over a period of time. And a good portion of that is going to be MDUs where typically competition tends to be lower. So we'll go in and be able to take share there.

Okay.

Thank you for that clarification. And so it sounds like as we get closer to the Frontier deal close, we might get an update on the fiber strategy, at least how you're thinking about fiber. And you mentioned the 1 million-plus target today. What are the practical limitations, though, for fiber passings per year? Obviously, you have labor, you have provisioning, you have permitting. So what's the upper bound practically, for how much -- how many homes a Verizon could pass per year?

We were the first in the -- probably in the world to do fiber in 2004. We are 21 years into the race. Almost most of the technology that's used in fiber, Verizon had some way of co-inventing it or co-creating it with some of our partners. We can scale that machine very quickly.

And also understand Frontier comes with a really strong build machine today. Last I read, they're doing 1.3 million passings every year. It's a really strong build machine there that we'll inherit after we close well. So there really isn't any cap to do it. But we'll have to work through what's the opportunity in front of us, how much is a LEC opportunity, how much is an out-of-footprint opportunity, how long it takes to ramp up, whether it's labor, materials. This is something we know how to operate. But between now and Frontier close, we'll come back and talk about that in a lot more detail.

Okay. I want to shift to convergence for a second. I think the phrase that was used last quarter before was demand-led convergence. And I go back a long time in telecom, heard Mike Armstrong at a conference in maybe 2000, 2001. So the only bundled product the customers has wanted was when he offered a Jiffy Lube coupon, right? So you have to incentivize the convergence demand. So what's changed in the marketplace today over the last 25 years that you think consumers will actually demand a converged product. They want to buy their broadband or their wireless together? Or do you have to keep incentivizing that demand through promotions like perks or discounts or other activities?

I think the Verizon model of convergence is a demand-led model. What that means is there is pull from the customers to buy 2 products from the same company. And that pull is largely driven by the fact that you offer world-class products on both the sides. We don't believe in giving away one product free to hold on or sell the other. It's not our model. We also don't believe in giving really deep discounts to convince customers to buy 2 things because then the true value -- economic value gets lost in the discounts that we have.

So for us, we think about it as single-digit discounts, single-digit percentage discounts with the best Mobility product as well as the best broadband product put together in a way where the experience is good and convenient for customers.

We see that -- we see a 40% to 50% reduction in churn, both on fiber and on Mobility. So we have existence proof that convergence works. We have existence proof from 16% Mobility-based converged to 18% now that we've been able to grow it, and we are leaning into it real hard to do that piece.

But when you have a product that's not world-class and maybe 2 products that are not world-class, then you're going to have to use a lot more promotions to incentivize people to get there. In our case, our Mobility is the best Mobility product in America. Same with our broadband, whether it's FWA or Fios, it's incredibly strong. So that value prop is pretty compelling for us to do that.

Picking up a comment from 2001, when you have a long distance and a local loop, which was what was bundled back then, both were not differentiated product. The dial tone was the same everywhere as well as the long distance was the same. Hence, the promotional intensity environment was significantly more.

In this case, you have world-class products and customers just have to be convinced that they're getting 2 amazing products at a good economic value.

So what I'm hearing today is that longer-term goal is to have a premium fiber footprint, premium wireless network then offer a converged solution that customers demand. I'm also hearing that FWA in the short term, MDU may be a little bit slower because some technical -- some issues to work through, they'll be resolved over time.

We'll get an update or may get an update on an expanded fiber footprint as we get closer to the Frontier deal. But there seems to maybe a quarter or 2 in between now and then when those 2 things come together and you can actually offer a premium or the premium product. So should we take away then that during that time, we might see churn a little bit elevated because you don't have your best product to throw at the market?

We do have our best product in Fios and FWA today. We have less of it. Once we get Frontier, we get significantly more homes. But today, we do have a best product in the space. Our broadband churn is at an all-time low right now. It continues to get better quarter-over-quarter as we work through the system.

On the phone side, I said, look, there are 2 different factors at play on churn. One is the competitive environment that we are in; and two, some of the price ups that are strategic price ups for us; it's a combination of two, that churn has remained high and slightly elevated levels, and it has been persistent. But over a period of time, we do anticipate that coming down to a BAU level.

And then how do you -- you're looking at your own -- at your budget, do you have a separate line item in there for FWA and FWA build-out? And is part of the reason maybe you're not pushing deeper into some of the rural areas because you're still focused on improving the network quality that may have slipped over time in those areas. Help us think about FWA build-out and the capital required.

If you look at our FWA capacity, it is purely fallow capacity. We build the plant for Mobility, for Mobility coverage, Mobility capacity. And in the process, we get FWA capacity that we are able to sell to customers. We don't have FWA-specific success-based capital in our plan today.

The 8 million to 9 million customers on FWA that we've committed to over a period of time assumes no incremental capital to build out that network. It's purely fallow capacity there. Once we get to 8 million to 9 million, we'll come back and propose if we want to build any additional capacity, it will be success-based capacity. Of course, we've done some pilots. We've done some trials. We feel extremely good about the ROI on some of those plant builds. But right now, our 8 million to 9 million is within our capital envelope, and there is no extra capital needed for that.

Okay. And just for capital allocation in general, what are your thoughts on the longer-term capital allocation between CapEx, dividend, debt buyback? What's the messaging there?

Look, our capital allocation strategy has been very consistent. Step one is fund the business, whether it's fiber, whether it's spectrum, whether it's -- provide the right capital for growth of the business, fund the business to drive sustainable long-term service revenue growth, adjusted EBITDA growth and free cash flow growth. That's step one for us, and we are not changing from that commitment to do that.

Once we do that, we want to put our Board in a position to raise dividend every year. We've done that for many, many years, and we want to continue to put them in a position to raise dividend.

Third is leverage. We do want -- we've committed to going between 2 and 2.25 on leverage. Over the last year, we've reduced our debt -- unsecured debt by $7 billion. And even today, if you see -- if you take out the mark-to-market adjustment, our leverage ratio is at 2.25, but it's without the mark-to-market adjustment. So we have a long-term view of getting debt between 2 and 2.25.

And then lastly, what is left over, we look at share buyback. We look at other ways to return cash to our shareholders. That ladder is super important to us. The priority of that is super important. We are going to fund the business whatever is needed to grow long-term sustained growth of service revenue, EBITDA and free cash flow.

And there's always a push and pull between business unit managers like yourself and then CFO and other management about capital allocation and budget. Verizon, like others, is benefiting from bonus depreciation. So if other management came to you and said, "Sampath, here's an extra $500 million or $1 billion to spend on your business unit." How would you allocate that capital? Would it be for -- would it be accelerating the network improvement? Would it be on the marketing side, customer retention? Where would you spend that capital if you had it?

I think we are in a moment in time where our broadband business is growing extremely well. Verizon takes more than 50% of all the growth in the broadband business comes to Verizon, whether it's FWA, whether it's our Fios business. And this is today pre-Frontier. Once Frontier comes in, you'll see that number significantly grow higher.

So definitely growth in the broadband business is something we are committed to, and it's got a lot of runway for us. We still have single-digit percentage share in the broadband space right now. For a company our size and scale and so deep in the telecom infrastructure here, we have a lot more runway in the broadband space to do that.

Second is, look, we'll get to 80% to 90% of our C-band coverage on our macro sites by the end of this year. Once we do that, we have an option to go back and look at selectively densification of the network, which is typical of any new deployment. First, you want to get it on to existing sites and then look for new sites in certain Tier 2, Tier 3 markets where we have opportunities to grow. So that will be another opportunity for us.

Third is customer experience. We've made a lot of progress on it, but we do have an opportunity to shine and be the #1 in customer experience.

So those are some of the areas where we think we can invest in longer term for sustained growth.

And you touched on the C-Band densification -- sorry, C-Band deployment getting to 80%, 90% by year-end. Can you meet your capacity needs that you forecast longer term through, I guess, it would be densification, spectral efficiency is another one, 4G, 5G, 6G without having to add to your spectrum portfolio?

Yes. Over a very long period of time, the Big Beautiful Bill that was passed at 600 megahertz of spectrum, but that's going to take between 4 and 10 years to come into our hands depending on exactly how the thesis plays itself out. So in the medium to long run, every carrier needs more spectrum. We know that. But in the short term, we've planned for it. The C-band spectrum we bought was substantial. We're still in the process of rolling it out. So we have the right spectrum we do.

But look, always we'll remain opportunistic in this space. Certain markets, certain spectrum bands that make sense for us, we'll look at it on a build-to-buy basis. Longer term, everyone needs more spectrum. We are no exception to the rule. But in the short term, we're really comfortable with our spectrum position.

Okay. I wanted to shift to prepaid for a moment, as this business has actually been improving at Verizon quite a bit in the last year. What do you attribute the improvement to? And what can we expect?

Our prepaid business has had 4 quarters of growth. It has had 4 quarters where we are #1 in market share growth in the quarters, and we continued that trend going forward. Last year, it was almost a $600 million service revenue drag for us. In 2025, that's going to turn positive and it's actually going to contribute to overall service revenue growth.

So a pretty big turnaround of that business. Let's break down the fundamentals. It's a similar playbook that I deployed on the postpaid side, which is operational rigor, focus on sales, get the sales machine up, get the value prop in a good place. It's a very similar playbook that the teams have done there. Nancy Clark, who runs that business has done an outstanding job of laying out and working through that playbook.

We have some very cool assets. One is our brand portfolio. We have 8 brands in that space, hypersegmented, focused on really good segments. Think about it, Visible, which is our digital-only brand does extremely well for digital natives. Then we have Straight Talk, which has the vast majority of share in Walmart. Walmart has 120 million people walk into a Walmart store every week. They see the brand. They like the brand, and we have a great relationship with them to grow that piece.

Third is Total Wireless. It's a brand we are growing right now. We are adding 3 new exclusive doors of Total Wireless every single day. Today, we'll add 3 more doors. So we are really scaling up distribution in that. And we've gone and changed the value prop on all of these brands. So the portfolio is hunting well. Our distribution is hunting well. Marketing is doing well.

But most importantly, we are giving value to customers in the value segment. Customers feel they don't need to go to postpaid because their needs are served in the prepaid/value segment. That's where we are extremely focused on. I see good growth in that space, segmentation, high-quality execution and expansion of distribution.

And just going back to your earlier comments on total industry growth and the immigration impact. And I presume most new arrivals aren't postpaid to begin with, I don't have much of a credit score. So should we expect that it's going to impact your prepaid business more as you were talking about 2026 earlier and the impact on net adds?

Last 4 quarters, immigration has come down significantly. We've done the best in the prepaid we've done in a very, very long time. And partly because we are not that exposed to new-to-America customers. New-to-America customers take place in 2 places. The first is the really low end of prepaid. We have less than our fair share in that space. It's a relatively low-margin business. We don't play very aggressively in that space. So we are less exposed to that. Second is prepaid-to-postpaid customer, the migration space. because a lot of them were postpaid in their host countries when they came here and they want to get to postpaid. That's not a place we play in earlier there.

So both those places, which are more immigration sensitive, we don't have large presence in. So our prepaid business has done exceedingly well over the last 4 quarters despite low immigration. We continue to see good trajectory growth in that because of the hyper-segmented approach that we have.

Second is the value and the value prop of prepaid is very different today than it was 5, 7 years ago. Earlier, it was all about cheap, economical, smaller package plans. Today, a lot of our plans in prepaid are unlimited because of the high-quality network. They just pay differently. So we've evolved the value prop to attract a very different base. And that's why we feel comfortable that we can grow this base for a long time.

And I wanted to wrap up my questions, so let me maybe a minute or 2 for the crown if there are any out there. Just -- just going back to profitability and EBITDA. And I'm thinking about copper, right, decommissioning. FCC has also prioritized at least helping the carriers decommission older copper plants. So do you have any thoughts on timing, speed, potential savings over time?

We started doing network transformation or NT almost a decade ago. Coincidentally, it was the first job I had when I joined Verizon. So it's a project very close to me. Joe Russo has done an amazing job of massively expanding our copper recycling and network transformation business. In the Fios base, in the Fios wire centers, almost 1/3 of our wire centers actually have no copper in it. We migrated all our customers over to fiber.

So we have a lot of upside in taking the copper, recycling the copper, getting it into an all-fiber footprint. We know how to do that. We do expect over the next x years, you'll see that program accelerate and then start contributing to some of our cost-saving programs as well.

Okay. Maybe a question from the audience, Anna? We should have a microphone. Here we go in the back.

So on potential additional fiber acquisitions, local fiber acquisitions. So in the Frontier transaction, you're actually buying the company with the copper assets, with the central office and all the other ILEC network. But obviously, in AT&T's transaction with Lumen, they're really only buying the fiber passings. My understanding, there's no regulatory approval. It's really more of an overbuilder type kind of strategy.

Did you think about pursuing that kind of strategy with Frontier? And then as you go forward beyond Frontier, there's other assets in the U.S. that could be consolidated. What are the pros and cons? And how do you think about what model might be best?

We've operated ILEC assets for decades. We like owning the full infrastructure because we think if you just own a portion of the infrastructure, we're not able to give the customer the best experience when it comes to it. So we like to own the infrastructure or at least control the whole infrastructure in some capacity to do that. But we remain extremely open and always looking for opportunistic places for us to go and invest.

But right now, all our attention is focused on getting Frontier closed, getting that integration done and extracting value from that right now. But we know how to run broadband in very different forms right now. But as a philosophy, we like to own our own plant. And that's why most of the -- almost all the fiber stuff we've done has been on our own balance sheet. That shows conviction that we like the business so much that we're willing to put it on our own balance sheet versus use third-party balance sheets to do that.

So that should give you a sense for how committed we are to fiber, but more importantly, we know how to run and operate fiber at scale.

Okay. We're going to wrap it up there. Sampath, thank you so much for coming out. If anyone has meetings over at 2 BP, there is a passage way back here behind us. Elevator is going direct to the 15th floor where the meetings are being held one-on-one desk, obviously, out front if you need any help. But everyone, thank you again for attending.

Thank you.

Sampath. Thank you. Great to see you again.

Good morning, and welcome to Verizon's Second Quarter 2025 Earnings Conference Call. [Operator Instructions].

Today's conference is being recorded. [Operator Instructions].

I would now like to turn the call over to Mr. Brady Connor, Senior Vice President, Investor Relations.

Thanks, Brad. Good morning, and welcome to our second quarter 2025 earnings call. I'm Brady Connor, and on the call with me this morning are an Chief Executive Officer and Tony Skiadas, our Chief Financial Officer.

Before we begin, I'd like to draw your attention to our safe harbor statement, which can be found at the start of the investor presentation posted on our Investor Relations website. Information in this presentation contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. Discussions of factors that may affect future results is contained in Verizon's filings with the SEC, which are available on our Investor Relations website. This presentation contains certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in the financial materials posted on our website. Earlier this morning, information on our second quarter results and supplemental materials relating to today's call were posted to our Investor Relations website.

With that, I'll turn it over to Hans.

Good morning, everyone, and welcome to our earnings call of the second quarter 2025. Our performance in the first half of the year, highlighted by a strong second quarter demonstrate that our strategy is working. We remain committed to disciplined execution and customer-centric innovation. We're growing profitable connections and the value of our customer relationships. While we always see opportunities to improve, I'm confident in the future of our business.

Our financial performance was strong this quarter, with a market-leading wireless service revenue of $20.9 billion, up 2.2% from last year. We delivered an adjusted EBITDA of $12.8 billion, up 4.1% year-over-year, setting another record for the best reported quarter and the second consecutive quarter with growth exceeding our guided range for the year. Strong profitability drove free cash flow of $5.2 billion for the quarter, this brings our year-to-date free cash flow to $8.8 billion, an increase of over $300 million compared to the first half of 2024. Our cash flow from operation underscores the strength of our business and provide us flexibility to execute on our capital allocation priorities, which remain -- as a result, we continue to lead the industry with the nation's best network. Our segmented market strategy, which is a diverse portfolio of offerings is resonating with our customers.

Our customer-first offering, such as MyPlan, MyHome and the new myBiz plan, along with our best value guarantee drove significant sales momentum. We're also deploying AI-powered innovations to enhance the customer experience on the nation's best network. On the infrastructure front, our execution is outpacing our targets. C-band deployment is ahead of schedule.

Our fixed wireless base has surpassed 5 million subscribers, and our fiber build is tracking ahead of its plan. This demonstrates disciplined execution across our entire portfolio. Given our financial performance and the momentum in the first half of the year, we are raising our full year guidance for adjusted EBITDA and adjusted EPS. We're also raising our guidance for free cash flow for the year, driven by our strong cash flow from operations and further supported by the positive impact from the tax reform. Tony will provide you with more details shortly.

Now let's turn to our operational performance. In the second quarter, we delivered over 300,000 net additions across our mobility and broadband platforms. In mobility, we delivered year-over-year improvements in the combined postpaid and core prepaid phone net adds, including the fourth consecutive quarter of subscriber growth in core prepaid. The wireless market remains competitive, and we continue to take a strategic and segmented approach, maintaining our financial discipline. As expected, postpaid phone churn remained elevated this quarter. reflecting the lingering effects of our pricing actions and ongoing pressure from federal government accounts.

We're actively focused on improving retention by strengthening our value propositions, and leveraging our AI-powered customer experience innovations. On upgrades of it being down year-over-year for 8 out of the last 9 quarters, we saw an uptick in the second quarter, driven by our best value guarantee. We continue to expect mid-single-digit growth in upgrade activity for the full year. Our dual fixed wireless access and fiber broadband strategy continues to drive market share gains. A key highlight is fixed wireless access, which surpassed the 5 million subscribers milestone, keeping us firmly on the track to achieve our goal of 8 million to 9 million subscribers by 2028.

We achieved robust broadband growth even as our C-band build-out expands in the left dense markets and despite a softer move environment in our FiOS footprint. We continue to scale our private network business winning a landmark deal to deploy multiple private finder networks across the Sams Freeport. This network will serve as a technology foundation for one of U.K.'s busiest commercial corridors, fueling a multibillion-dollar regeneration project with advanced capabilities like AI and real-time logistics.

Our AI Connect offerings are also generating strong interest. Our sales funnel has nearly doubled to $2 billion since launch earlier the year. While these are often complex deals with longer sales cycles, we're actively engaged in several sizable opportunities. This growth highlights the surging demand for high-bandwidth fiber capacity and diverse routes both leap and dark fiber to serve different customer needs. As AI transitions from centralized training to widespread real-time applications, compute power at the network edge becomes essential. Our existing infrastructure is uniquely positioned to support this evolution. Our network is our key differentiator, consistently delivering top performance.

This quarter, J.D. Power once again recognized Verizon for the best network quality and RootMetrics, first half year 2025 awards named as the nation's best fastest and most reliable 5G network. We're building on this advantage every day. Our C-band deployment is ahead of schedule and on track to cover 80% to 90% of planned sites by year-end, with nearly all sites now stand-alone capable. Our fiber build is tracking ahead of plan, and we're positioned to deliver 650,000 incremental passings this year. Meanwhile, the regulatory approval process for our pending acquisition of Frontier is progressing as planned. We're encouraged by Frontier's performance and look forward to closing the transaction to further accelerate our fiber expansion. As we near the closing of Frontier acquisition, we will provide a comprehensive update on our strategy, broadband expansion and capital allocation considering all stakeholders. We look forward to providing an update in the next few months.

With that, I'll turn it over to Tony to go into the financials in more detail.

Thanks, Hans, and good morning. The first half of the year reaffirms the strength of our business, highlighting the effective execution of our disciplined strategy and significant progress towards achieving our financial goals. As a leading provider of essential connectivity across the U.S., we are committed to offering the best value and delivering the best service and customer experience within the industry. We are focused on driving wireless service revenue and adjusted EBITDA growth and robust free cash flow. The second quarter demonstrated our ability to deliver strong financial results even in the period of elevated promotional activity and broad economic uncertainty. We remain focused on high-quality, profitable growth, recognizing that volume growth is only valuable when aligned with our disciplined financial framework. .

Our goal is to improve volumes year-over-year, but we will not do this at the expense of delivering on our 3 key financial priorities. This past quarter, we achieved strong sales focusing on high-quality customers without overspending for growth. Even with public sector challenges and ongoing consumer postpaid phone churn pressure, we maintained our financial discipline. Within consumer, second quarter postpaid phone gross additions were up sequentially and year-over-year. Our sales execution remains strong, leveraging our attractive value proposition, including the recent launch of the Best value guarantee. As expected, we saw the residual effects of our first quarter pricing actions impact our second quarter consumer postpaid phone churn. Additionally, we continue to see elevated competitor promotional activity. As a result, Second quarter consumer postpaid phone churn remained consistent with the first quarter at that 90%. We have taken a series of actions to address our elevated churn. On June 24, we launched initiatives designed to improve the customer experience, including leveraging AI for more personalized support. In addition, we continue to enhance our value proposition and build customer loyalty through the best value guarantee. We provide exclusive access to the best events and experiences and our refresh app helps customers maximize the value of their plans. Mobility phone net adds, which includes both consumer and business retail postpaid as well as core prepaid were 16,000 for the second quarter. This represents an improvement of $25,000 from the prior year period. Consumer postpaid phone net losses totaled $51,000 for the second quarter compared to 109,000 net losses in the prior year period as we benefited from strong gross adds. Verizon Business delivered 42,000 phone net adds in the second quarter compared with 135,000 net adds in the prior year period. A significant majority of the year-over-year decline was driven by the public sector business. Though we anticipate public sector pressures to persist in the second half of the year, we expect the impact to subside towards the end of the year. Consistent with our wireline approach, we continue to remain disciplined and not pursue low-margin wireless business or overpay for volumes. We remain confident that the team has the tools to execute effectively in the current environment and deliver healthy volumes for the full year of 2025. Core prepaid net additions were $50,000 for the quarter an improvement of $62,000 from the prior year period. This marks 4 consecutive quarters of positive core prepaid net adds, reflecting the strong execution of the team. The visible total wireless and straight talk brands continue to perform well and are progressively building a high-quality business. Overall, core prepaid ARPU rose above $32 and and we have now reached an inflection point where after 4 quarters of volume growth, we expect prepaid to positively contribute to wireless service revenue growth for the remainder of the year. Turning to total wireless postpaid upgrades we saw a 14% increase in the first half of the year as compared to the same period of 2024.

This result was driven by a healthy initial uptake of our best value guarantee program, which is an investment in our high-quality customer base. As Hans said earlier, we continue to expect upgrade activity to increase by a mid-single-digit percentage in 2025 as compared to 2024. Moving on to broadband. We delivered 293,000 net additions in the quarter. We are taking broadband and fixed wireless access offerings by me than compared to prior years. In fixed waterless acnes, we delivered 278,000 net adds for the quarter, growing the base to more than 5.1 million subscribers. Net adds for the second quarter were 32,000 versus 28,000 in the prior year period. FiOS provides customers with industry-leading connectivity and delivers high customer satisfaction reflected in both robust ARPU and consistently low churn rates. We are expanding our Fios footprint and remain on track to deliver 650,000 new passings in 2025. As we talk about fiber, let me provide a brief update on the pending Frontier transaction. The team is working through the necessary steps to complete the acquisition, and we remain on track for an early 2026 close. We have received regulatory approvals from 8 states as well as the FCC and DOJ and and are productively engaged with the remaining state regulatory agencies. Based on Frontier's publicly reported results, the company continues to perform extremely well and remains on track with their fiber expansion goals. Our integration planning efforts are well underway, and we anticipate a smooth transition upon the deal closing. We are looking forward to having Frontier's assets serve as an important catalyst for our fiber expansion and broadband growth acceleration. Turning to our financial results.

We delivered another strong quarter. Second quarter consolidated revenue reached $34.5 billion, up 5.2% year-over-year. This result was driven by solid wireless service revenue and a more than 25% increase in wireless equipment revenue. Service and other revenue rose 1.6%. And Total wireless service revenue reached $20.9 billion in the second quarter, a 2.2% increase year-over-year. Growth was driven by consumer ARPU, which rose 2.3% year-over-year. We realized benefits from recent pricing actions, expansion of fixed wireless access and increased revenue from perks and other adjacent services. Our robust park offerings continue to grow at a steady pace keeping us on track to achieve our goal of 15 million parks by year-end and providing a healthy contribution to service revenue. In addition, prepaid revenue has reached a turning point and was flat in the second quarter compared to the prior year period. We expect prepaid to positively contribute to wireless service revenue growth in the second half of the year. Overall, we are well positioned for continued service revenue growth with healthy underlying customer economics.

Consolidated adjusted EBIT in the quarter was $12.8 billion, which is the highest we have ever reported and an increase of 4.1% compared to the prior year period. Wireless service revenue growth coupled with the benefits from cost savings initiatives more than offset the impact from the elevated upgrade activity. Through the first half of 2025, both wireless service revenue and adjusted EBITDA are up nearly $1 billion from the prior year, reflecting strong operating leverage. Within that result, the business segment EBITDA has now grown for 3 consecutive quarters on a year-over-year basis. From a cost perspective, our voluntary separation program is now complete, generating substantial savings. In addition, we're actively pursuing opportunities within our legacy businesses. These include copper decommissioning and savings from the managed services initiative within our business segment, among other cost efficiency programs. Adjusted EPS was $1.22 in the quarter, up 6.1% year-over-year primarily due to the strength in adjusted EBITDA. Turning to our cash flow summary. Cash flow from operating activities for the first half of the year was $16.8 billion, up more than 1% compared with the same period a year ago. the first half of 2025 came in at $8 billion compared to $8.1 billion in the prior year period. We continue to realize efficiencies in our C-band deployment and Fios expansion, enabling us to effectively meet or exceed our network goals well within our capital budget.

For the first half of the year, the net effect of cash flow from operations and CapEx resulted in free cash flow of $8.8 billion, an increase of 3.6% compared to the same period a year ago. Net unsecured debt at the end of the quarter was $116 billion to $6.9 billion improvement year-over-year. In the first half of the year, our debt reduction was offset by noncash mark-to-market adjustments. Our net unsecured debt to consolidated adjusted EBITDA ratio was 2.3x at the end of the quarter a 0.2x improvement year-over-year and in line with the prior quarter. We continue to make progress towards our long-term leverage target ahead of the closing of the Frontier transaction.

Our balance sheet remains a significant strength of our organization. Notably, we have under $700 million in unsecured debt maturities remaining in 2025. We will continue to focus on reducing debt ahead of completing the Frontier transaction. As Hans mentioned earlier, our capital allocation framework remains unchanged. We will continue to strategically invest in the business, enhancing our mobile and broadband networks support a healthy and growing dividend and paying down debt towards our long-term leverage target. As we've mentioned previously, we will consider buybacks once we reach our leverage target. Our strong operational execution in the first half of the year, coupled with favorable tax reform gives us the confidence to increase our guidance for the full year. Given the strong adjusted EBITDA performance in the first half of the year, we are increasing our full year guidance to 2.5% to 3.5% growth, an increase of approximately $125 million at the midpoint. We are increasing our guidance for adjusted EPS growth to a range of 1% to 3% to reflect the new adjusted EBITDA outlook. We are raising our 2025 free cash flow guidance to a range of $19.5 billion to $20.5 billion. The increase is driven by an estimated benefit of $1.5 billion to $2 billion from their recently enacted tax legislation as well as the disciplined operational execution that drove our strong adjusted EBITDA and free cash flow performance in the first half of the year. Our wireless service revenue and CapEx guidance remains unchanged.

As we get closer to the closing of the Frontier transaction, we expect to provide an update on our broadband plans as well as our capital allocation strategy. In summary, we have a resilient business model with high-quality customer base and continue to execute well on both mobility and broadband. Our second quarter financial performance reflects our disciplined approach to growth and we are well positioned to deliver on our improved outlook in the second half of the year.

With that, I will turn the call back over to Hans.

Thank you, Tony. Our strong first half results reaffirm our confidence in Verizon strategy. Our strategic execution and the ongoing momentum across our business underpin our decision to raise full year guidance. Our focus remains clear. We are committed to growing wireless service revenue, expanding adjusted EBITDA and generating strong free cash flow. We will achieve this through 3 key priorities.

First, building on the network leadership to create compelling customer offerings that accelerate growth in our mobility and broadband businesses. Secondly, maintaining operational excellence and financial discipline across the organization. Thirdly, scaling our next-generation platforms from capturing new enterprise opportunities with private networks to enabling AI at scale and unlocking new revenue streams from our existing assets. The opportunities ahead are significant, and the pending Frontier acquisition will accelerate our fiber strategy. Verizon's unique market position and the essential nature of our services are fundamental to empowering individuals, businesses and society. Verizon has the assets the strategy, and most importantly, the team to deliver sustainable long-term growth. We are excited about the opportunities ahead.

With that, ready, it's time for Q&A.

Brad, we're ready for questions. .

[Operator Instructions] The first question will come from Ben Swinburne of Morgan Stanley.

I want to ask about free cash flow kind of capital allocation and then also the outlook for consumer wireless.

Hans and Tony, you guys have meaningfully more cash flow to play with now. I know you said $1.5 billion to $2 billion this year. I think these tax benefits continue beyond '25, what's the best use of incremental capital at Verizon from your perspective? I know you laid out your priorities. But can you help us think about your ambition to get to buy back sooner build more fiber faster, et cetera, et cetera. And then on the consumer wireless front, should we still expect consumer net add improvement postpaid net add improvement in 2025 versus 2024? I don't think that was reiterated in the prepared remarks. And maybe you could talk a little bit about the churn outlook in the second half, where you'll be moving beyond the price increases and so whether we should still be expecting kind of churn normalization?

Thank you. Let me start with the capital allocation. I think your comments and question there is more than valid. As you saw, we raised our guidance for free cash flow, partly because of our Cash flow from operation is improving, but also the tax reform that we indicated on [indiscernible].

As I said before, I mean, our capital allocation priorities are unchanged. I mean it's, first of all, in our business, and we have increased the CapEx this year compared to SEK 224 million. The dividend, of course, 18 years of increase. We want to put the Board in a position to continue to grow we pay down our debt. We paid down our debt again with almost $3 billion in the first half, and then it will be buybacks. Now we are in a situation where we are just about or in the couple of months from now and the beginning of next year, closing from here. So what I said in my prepared remarks is I want to get a holistic view on all the capital allocation. I mean how we're going to invest in fiber, what synergies we see, how we're going to do the capital allocation priorities.

But clearly, the tax reform is helping us to get faster to the priorities we have. So we feel good about that. But let let me come back to that. So I think we can give you a holistic view on capital allocation. But clearly, we're very excited about Frontier. The performance is great. The synergies are great. And of course, the convergence and the fiber opportunities are also great. So very excited for that. And so far, Frontier has performed really good. On the wireless consumer, I think that our ambition, as was outlined by somebody in the beginning of the year doing better this year, is still valid. The [indiscernible] little difference on that.

However, we're going to continue to be very financially disciplined. For us, we will not sacrifice our financials, but you're still getting a net adds if it doesn't make sense. If it's too expensive. You saw us in the fourth quarter last year being aggressive because we saw the opportunities of creating and gaining a lot of high-quality customers, [indiscernible] to what gross adds in second quarter. So it all depends where the market is and where we go, but Ultimately, our goal is to increase our service revenue and then expand our [indiscernible] and cash flow. That's our main KPIs.

And then on churn, Tony will probably chime in on all of this. But on churn, expected in the second quarter was elevated coming from the prices, but also from the competitive environment. I think the whole industry is up, [indiscernible] put in a lot of very important churn measurements, 624. That now is widening going through our system. All our AI-empowered customer service impacting. So very encouraged about what the team is doing and how they are working on the loyalty and retention of our customers. So that's all a little bit Tony will chime in on all 3, I guess.