VZ
#Sure.
Thanks, <UNK>.
I will take the data center; I will pass the other question on top line over to <UNK>.
On data centers, we are proceeding with the sale of our data centers.
We are currently in negotiations and we should have something to formally announce to everyone here early in the fourth quarter.
So more to come on that, but we are progressing with the sale of our data centers.
<UNK>.
At this point, yes, we are in negotiations with one individual.
Good morning, <UNK>.
So your question about 2017 and where that GDP-like top-line growth will come from, let's break it down by the different parts of the business.
Predominately in Wireless, as we've said, we've been doing this transition.
You've seen the year-over-year service revenue trajectory continue to improve.
We are at negative 6.2% in the first quarter; that came down to 5.4% in the second quarter and 5.2% this quarter.
So as we go into 2017, we now have 60% of the base on the non-subsidized pricing.
That will continue to expand and that will obviously be a contributor to the improvement in revenue next year.
And as <UNK> mentioned earlier, we expect to get back to year-over-year growth by the end of the year in service revenue.
We expect to see consistent trends within the Wireline business, but remember we only have one quarter of Frontier in the 2016 comparison as we get into 2017.
And then, as you saw in our comments, we continue to make good progress in IoT and the video advertising space and we continue to expect those pieces to continue to contribute to the revenue as we head into 2017.
So when you add all those things up, we are confident at this point in time that we will be on track to deliver the GDP-type top-line growth and look forward to giving you more color commentary on that in our January call.
Hello.
Jay, let's move to the next question.
Thanks, <UNK>.
Look, I'm not going to get into the agreement.
Obviously, we're under nondisclosure with Comcast on that agreement and the other cable providers.
But, look, we knew what we entered we bought the licenses back several years ago.
This is a wholesale agreement and, as Lowell and I have repeatedly said, we would to the agreement today again if we had to.
It's a good agreement for Verizon Wireless.
It's a good wholesale agreement.
I can't speak the economics of what they're going to do.
You'll have to ask them that question.
But, look, as I've said before, the wireless pie continues to grow.
Everyone wants to get a piece of this pie.
The industry itself will continue to grow around that pie, so it's not like I believe the industry with the carriers will lose share to anyone.
I just think there's going to be more opportunity for growth.
If you look at the future and you think about the LTE densification projects that we have going on and then you look at the whole 5G world for fixed wireless, that's going to enter into a whole new growth trajectory for the entire industry.
Again, we will compete against the competition.
We will compete against new entrants in the marketplace.
We will wait to see what is launched.
And, as I said before, we will respond where we need to respond and we will wait to see what happens.
Sure, <UNK>.
Thanks for the questions.
I'm going to answer the first one.
I'm going to have <UNK> answer the Wireline one.
On IoT, look, we see the telematics piece of this to be a really high growth engine for us and, as I said in the prepared remarks, we're looking at a 24%, without Telogis, growth rate year over year.
And mainly most of that is all driven via telematics and hum, so we will continue on that.
As far as the margin profile goes, look, these companies are still maturing.
They are profitable, but we expect that the margin profile will continue to grow as we leverage onto these platforms.
The other thing, too, to note that in the IoT world, since it is a platform-based technology, whether you look at IoT or smart cities, these are all very what I would call minimally capital-intensive type businesses.
And that would go for video as well.
When you think about the return on invested capital, you get there much quicker than, say, on a network-based type platform.
So we are expecting that the ROI on this will happen relatively quickly, but the margin will come and we will talk more about that as we grow this business.
<UNK>, on Wireline.
Yes, so had a good quarter in Wireline, as you saw.
The EBITDA margin improved to 21.2% so you are starting to see some of that improvement we have been talking about, especially as we got out of the impacts from the work stoppage.
As we said, we expect that the new union contract would generate $500 million of cash savings through the term of the contract spread across 2017, 2018, and 2019, so you should certainly see that come through.
We believe that you will continue to see the Wireline margin expand.
We had a good expansion in the past quarter and you should see us continue to make progress on that as we go forward into the fourth quarter and then into 2017.
Thanks, <UNK>.
I'll take the first; I'm going to put the earnings one to <UNK>.
For the 5G, obviously we've been mainly centered around the lab testing of 5G.
We are now moving out into the commercial trial, which we are going to span out across several different cities with several different types of testing with different OEMs.
To give you an example, one city may be a very dense city, going into multidivisional areas; another one might be more urban with just looking at single-family homes, so we are going to test this in very different types of commercial environments.
The big issue that still has to be answered, quite honestly, is the scaling of the technology.
For each small cell, how much can each small cell deliver to how many households and still deliver a consistent 1 gigabit speed or some speed that is comparable to a broadband connection to the home.
So that still has to be answered and we expect to gain more knowledge around that in 2017 with the number of commercial trials that we're going to launch.
So at this point that's really all there is to talk about from a 5G perspective.
<UNK>, I will turn it over to you.
Good morning, <UNK>.
In terms of the EPS growth for next year and where that should come out, you start with the top line and we've already talked about how you get to that GDP-type growth next year and the changes year over year that you should expect to see.
Then you layer in on top of that the continued cost improvements we talked about in Wireless.
Obviously it started last year with the restructuring of the business.
We continue to make good efforts in reducing the cost to run the business, whether that's reducing the number of calls we receive, reducing the transaction times, moving more of the transactions online, etc.
, etc.
, and you should see more of that continue.
Wireline we have the full-year benefit of the new union contract coming through.
You've seen some of the headcount changes that we talked about that will continue to help us expand the margin there.
And then in the other parts of the business, whether it be the IoT or the videos, we continue to add scale there; the margins there should improve.
So when you add those things up you're going to get to an improvement in EPS that we think is in line with what the expectation out on the Street should be.
Thanks, <UNK>.
On Yahoo, look, Lowell and <UNK> have both commented on this recently, so let me just reiterate what they have said.
We are still evaluating what it means for this transaction.
This was an extremely large breach that has received a lot of attention from a lot of different people, so we have to assume that it will have a material impact on Yahoo.
Lawyers had their first call yesterday with Yahoo to provide us information, but from what I understand that's going to be a long process.
So unless Yahoo comes up with different process, it's going to take some time to evaluate this.
Until then, we haven't reached any final conclusions around this issue.
As far as the privacy goes, look, I think there's a couple things here.
Obviously we take privacy and security of our customers extremely seriously.
We live under the regulation of the FCC, which has a very high standard for carriers around privacy.
And what we are looking for is that the FTC and the FCC come out with a common rule that makes it competitive across the entire ecosystem and that the rules are more consistent, so that everyone can compete equally and there is no winners and losers within the ecosystem.
We look forward to reviewing the final order of privacy from the FCC and, hopefully, the FTC and then we will have to react to that.
But, look, we are operating AOL today under the current environment and we will continue to operate and, as you saw, we continue to grow AOL under that purview of the privacy regulations.
So I think we will just have to wait to see where this all comes out, but we are hoping that it is an equal playing field across the board.
<UNK>, why don't you take this one.
I think what this one comes back to, <UNK>, is ---+ and <UNK> talked about it.
Within the base the continued growth of our 4G smartphone base, we had net adds of 357,000 4G smartphones during the quarter.
That is obviously contributing.
We saw very strong adoption from our existing base to the new price plans.
We saw a number of those customers step up in terms of the buckets they are purchasing.
And so I think you see that we have a very strong relationship with our base and our consumers continue to take full advantage of the network.
We've seen video use or total usage on the Wireless network up about 45% this year and you continue to see that show up in the ARPA trend.
So, yes, as you think about heading into 2017, we expect to see ---+ especially as we've got 60% of the base now on the non-subsidized pricing, we expect to continue to see some strong ARPA trends as we go forward into next year.
Well, the Note 7 has been recalled totally and won't be relaunched, so obviously that's a permanent change to the lineup.
We are bringing in new phones for the fourth quarter.
As always, Apple is always generally in a backlog situation for the industry.
I don't expect that to change, at least not early in the fourth quarter.
But other than that, <UNK>, have anything else to add.
No, that sounds pretty much it.
We would expect Apple to get caught up as we go through the quarter here and we will see how that plays out.
I will have <UNK> do the feature phone one.
Let me just answer the unsubsidized/subsidized Edge phone.
As you know, we have allowed our base to upgrade and choose whether they take a subsidized or an unsubsidized plan, so that currently is the policy that we have.
And we will have to review that policy as time goes here into the fourth quarter, first quarter of next year.
So there may be some shifts within that going forward, but right now that policy still holds.
And that's why you see some of the separation between the number of people who have moved to the unsubsidized plan versus the number of people who are currently on a device payment plan.
We will update that in the fourth quarter as we go.
<UNK>, on feature.
Yes, so I think what you are seeing on feature phones is ---+ and <UNK> mentioned this in our earlier remarks ---+ that you are seeing some part of the move to prepaid has come from the feature phones.
Look, we will have some people who have feature phones in postpaid stay as postpaid customers and we're very happy to ---+ glad that they will do that, but we also expect to see some of those continue to move into a prepaid environment, which may be a better place for them to be.
We also continue to see people moving from feature phones to smartphones and when we get that we see increased usage with those customers as well.
So we will continue to monitor that, but we are happy with the trends where they are going at the moment.
Thanks, <UNK>.
On the CapEx trends, I think this was all related to the strike that we experienced in the second quarter and we're not going to be able to catch up on that from an overall or year-over-year perspective.
So that's why we've revised guidance to the lower end of our range, but we are still spending around $17.2 billion this year in CapEx.
The other thing, too, is you have to remember we are spending our CapEx around Wireless for LTE densification.
And as we have talked many, many times before, we do our usage projections well in advance of where we believe that usage will come.
Obviously, we know that video is the major driver of the usage with a 45% increase year over year.
I think the stat now is over 90% of our data usage is on the LTE network.
We see that continuing to increase, so we are really preparing for two years out from where our usage is today so we are densifying the network.
And we've seen this movie before where CapEx trends go down and user catches up and then all of a sudden the networks falter.
Look, I think the RootMetrics reports speak for themselves.
Once again, we won hands down across the country.
That is the brand that we live by and we will continue to build and densify our networks to meet our customers' demand before they actually realize they need it.
Jay, we have time for one last question.
I think that's right, <UNK>.
I think ---+ look, we have made some strategic moves here around diversification.
We know that the telematics business is a business that has high potential and, if you looked across the industry, there are a lot of competitors in there, but no one really has a big share within that marketplace.
We want to gain more share within that marketplace and we think we can with the assets that we have accumulated between Telogis and Fleetmatics here.
So we will continue to move in that direction, but I don't think that there's anything large on the table at this point.
We now have to integrate those assets and that's what our telematics group is actually doing right now.
As you saw, we launched hum.
Hum came out of the telematics group; although it is, for the majority, sold through Verizon Wireless, it actually is a product to come out of the telematics group.
So we will continue to innovate in that area.
You are starting to see us do a little ---+ a few things around smart cities, because we believe that with the pre-positioning of 5G and the latency issues, smart cities is going to be an area of growth for the future.
We have demonstrated with certain cities where we are deploying it now that we can actually save them money on a lot of different things and that their payback is relatively quick.
So I think that is just something that we are positioning for the future.
Then around media co, obviously we have the Yahoo asset sitting out there, but to date we have accumulated assets that we believe are really strategic for us to grow this business.
And as we've said before, we know that the wallet share of consumer for communications has been flat for relatively the last 15 to 20 years, so we have to think about a different way to monetize our network capability and that monetization will come through advertising.
It's real simple.
I mean the equation is, if you get more views, you get more advertisers, therefore you generate more revenue.
We see that now with AOL.
Even with the 10% increase in revenue year over year, which is the first time we've given that to you, we are starting to see that advertisers are coming to our platforms.
So now we just have to integrate and execute on that model and we believe we have the right assets to do that.
The long and short of the answer is there is nothing large out there that we need to be successful with at this point in time.
I think the big differentiation here, <UNK>, is we are developing content for short form and really for live.
And that's really the differentiation is short form content, whether that's over-the-top or via mobile.
Also I think the differentiation for us is the integration across our platform.
If you go to AOL now, you're going to start to see Complex come through.
You will see RatedRed and Seriously.
TV in the future come through on that platform.
If you look at the NFL, we've adopted that into the go90 platform and I know there's been some articles around viewership of NFL.
We've actually seen a healthy increase Year over year on our platform around the NFL, so we are headed in the right direction.
The key learnings here have been you need to have the right content that is appealing to the audience that you are going after.
You've seen us make moves; you're going to see us move out of certain content that was originally in go90 that just isn't the right content.
But sports, news, live, original content is the direction that we are taking on this platform and we think we will be successful with that.
Thanks for all the questions.
For one last time I have the privilege to turn the call back to <UNK>.
Thanks, <UNK>.
Before we end, I want to highlight just a few key points.
Number one, we are focused on maintaining leadership in network quality, customer loyalty, and financial performance.
Strategically, we are aggressively building new businesses with revenue streams and ecosystems that are expanding the entire industry.
I am confident that Verizon will remain a leading player in the next growth phase of the industry and create value for our shareholders.
Finally, I want to thank the Board, our investors, and all of you on this call.
It has been a pleasure working with all of you.
It has been an honor and privilege to serve as the CFO of Verizon for the last six years.
Thank you again for joining Verizon and have a great day.
