Verizon Communications Inc. (VZ) Earnings Call Transcript & Summary

[Audio Gap] infrastructure categories here at Citi Research. I'd like to welcome back Ronan Dunne, Executive Vice President and CEO of Verizon Consumer Group. Thank you for joining us today.

Thank you very much, Mike. Before we keep going, just because otherwise I'll forget [indiscernible] to me is just to remind people that [indiscernible]

Great. With those out of the way now, tell us about [indiscernible] how are you thinking about [indiscernible]

Yes. [indiscernible] was that we have a very clear strategy. We're focused on executing the strategy that's built around a network experience that's truly differentiated, built around the customer orientation to deliver experience and service around that, built around a brand that is built around trust and innovation and from an investment point of view, built around a strong financial discipline. So those 4 elements are very consistent. What I'm really looking at is doubling down on the momentum we have in 2019. We had a strong performance in 2019. I'm sure we'll get into some of that. But really, what that did was it laid a platform of foundation for growth, and we see the opportunities to really lean into those trends as we build out and accelerate our 5G deployment, continue to innovate around the experience. And in the latter half of 2020, particularly the opportunity to really expand our participation in the home environment, which is a big piece of the new opportunities we see in the 5G space.

Great. Well, maybe just thinking about the future and if you can help us frame what Verizon is building to. So as you think about customer broadband -- consumer broadband, whether it's in their home or on-the-go with their mobile connections, how is this going to look in terms of 5 to 7 years of what customers consuming -- how they're consuming and how you're building towards that future?

Yes, sure. So I think I'd start by just reminding you that the core strategy we're executing against is really this idea of a platform business. We see ourselves as fundamentally a information-led platform business. So network as a strategy, distribution as a strategy and then billing and service as a strategy. So within the context of that, we see the opportunity for the network to go very, very broad, whether that's serving Verizon-branded customers with wireless products or expanding out the product set that we offer. We also see the opportunity for in network as a service with our partnerships with the MSOs and with our wholesale arrangements. So when we look at broadband, we see that as an opportunity, very much built around network as a platform, which allows us to expand out the offering. And I think over a 5- to 7-year period, what you're seeing is you'll see 3 trends. One is I think you'll see the blurring of the lines between wireline and wireless, it will be ubiquitous connectivity. You will see that driven by both the delivery, the bearer mechanisms in a 5G millimeter wave sense, but you also see it in the services that people are taking. So the ability to do the same things, whether you're at home or on the move. I think within that, the trends in content, where I see the fragmentation of content ownership and more core cutting and core shaving will also lend itself to that so that people will effectively reconfigure their bundle to their needs rather than buying a defined bundle, which is either coming from a wireline provider. So in that 5- to 7-year horizon, I see Verizon being in substantially more homes across the U.S., but really being the connectivity provider of choice providing the platform for the services that consumers most value. An example in the fourth quarter, Disney is a good example for me, that's a good example of that, network as a platform with distribution as a platform, a 100 million consumer platform that's accessible to the best brands for digital products and services allows our customers to start to -- with our curation to start building their own solutions, the content I need, the experiences I want on the platform that best delivers for me. So quite a bit different, I think, from the shape of what we have today.

And so as you think of where the business and the company is today and where you might be in 5 to 7 years or beyond, is the goal simply to be the best broadband provider in the home and on-the-go, period? Is that what you're building towards?

So I think that's the platform that earns us the rights for a much broader relationship with the customer. I think the exam question for all carriers is demonstrating that you have the trust within your brand to participate in the value that sits above the pure connectivity layer. And I think that's something that we absolutely aspire to do in the business model, I think, areas of multi-access edge compute, MEC, will be a significant shift in the participation in the value that sits above core B2B connectivity. And I think in the consumer space, whether it'd be in the worlds of AR/VR, live experiences, other things, I think, relationships like ours with the NFL, with others will start to evolve out the participation that a carrier has in delivering the high-quality branded experiences that may today be associated with live music, live sport, artists, other things like that. So I don't think it's -- we're the broadband provider of choice. By being the broadband provider of choice, we earn the right to participate at a level that means our growth will absolutely be founded on our broadband and our connectivity growth but our ability to participate in value-add above that will broaden out our ARPU opportunities.

And to attack these opportunities, Verizon made a very significant change about a year ago, maybe a little more, by deciding to go to a consumer and business group. And we've seen this before in the industry. We've seen different trials of this over the years. What makes this change for Verizon successful maybe to some of the mixed experiences of the past in the industry?

I think timing is a really, really important consideration here. I think previously, we have pitched technology way before it's been ready for prime time. And we've said we're going to change the world with 3G and 4G. In many respects, 5G is actually delivering the promise that was first talked about in the 3G and then more recently 4G world, where you truly can talk about ubiquitous connectivity where this idea of wireline/wireless just simply isn't relevant. I think there's also a generation of people who will never ever have a fixed connectivity in their home. So I think that is one factor. I think the second factor is that for us as a business, the timing was right. There were some leadership changes, and we are reorganizing ourselves, but it allowed us to focus very much on the fact that I believe, fundamentally, we're in the experience business, not simply in the technology business. To do that, you have to look at the customer opportunity end-to-end and saying, I'll turn up on Tuesdays and Thursdays wearing my Fios hat and Wednesdays and Fridays wearing my wireless hat, just makes no sense whatsoever from a customer point of view. And we started to see that already even in simple things that if you're in the Fios footprint, now you transparently get a better deal from Verizon when you show up and buy more of our products. It wasn't always clear to our customers that there was a connection between the 2, because it didn't look like we treated them differently because they were buying more of our products and services. So even at a basic level, I'm seeing improvements in my churn, the Fios footprint, I'm seeing ARPU and growth there because customers are saying, "Oh, now you value me enough to offer me an even better deal on your other services." So even at that basic level, it works.

Are you ready for our first live survey question?

Sure.

Let's pull up the first one. So the question is, does Verizon have the right investment priorities to drive future growth of revenue and earnings? And you have remote controls in front of you. Would you like to vote?

I'll watch for the answer.

It's anonymous. So they tell me. So I'll run through the choices. First, it's yes, continuing to focus on wireless network leadership and drive cost efficiencies. Choice 2 is, no, needs even greater investment in network and spectrum. Then, no, should pursue vertical integration opportunities. No, needs to change asset mix by selling wireline and/or adding a wireless. And no, for other reasons. And we'll go to our polls. [Voting]

Okay. So should be turning to the results. Some deep number crunching going on here. We'll come back to the results in a second. I'll give them some time to run the numbers. So maybe just talking about what's happening from a marketing perspective. So as I think about the last few years, Verizon moved to unlimited. You followed that up this summer -- we've got the answers. So on yes, it's 40%. No, needs even greater investment network in spectrum, 46%. And then vertical integration is 7%. This is for the people who are on the webcast. Change asset mix is 1%, and no for other reasons is 6%. As you think about the future abilities to grow, how do you think about the Verizon strategy?

So if I parse this, I think it sounds like 86% of people like our strategy and some think that the strategy would be even better if we had access to more spectrum. I think it's probably an objective way of looking at that. And listen, our view is we have all of the assets we need to execute the strategy we have, but what we as a management team seek to do and hopefully we are doing is demonstrating to investors that we are a management team that if the opportunity came for an even deeper investment in some of those key assets, it's a management team that you would back to execute against that opportunity and to deliver value from that. So I don't see any inconsistency at all in that between the approach that we're taking. And the truth is, when there are opportunities out there, we are open-minded. We have a very, very clear focus on the strategy we're going to execute. And if we have even better opportunities to execute against that strategy, we'll be very open-minded about that.

And so then coming back to the question we were talking about, just the changes at Verizon Unlimited, took a step forward promotionally this summer. Then you introduced the Disney+ promotion after Apple Music, what, about a year to 2 years ago. So something fundamentally changed about the way Verizon is approaching marketing and a distribution strategy for maybe years past. And how is that playing out?

Yes. I think the answer is exactly that. So we've had as our group CMO colleague, Diego Scotti, who's been with us now for about 4.5 years maybe, and I've been there for 3.5 years. And while it may be more visible in the last 18, 24 months, I think the strategy that the wireless business and now the consumer business has been focused on has been pretty consistent over that. We've built certainly the U.S.'s best network and probably one of the best wireless networks in the world. My initial view when I arrived and we weren't offering unlimited was that having built the best network, we were the ones who should be demonstrating that we have both the confidence and the opportunity to use that for our customers' advantage and we did that in February of '17. And really, since then, it's been orienting the business around this idea of a brand, a trusted brand that innovates on customers' behalf, shows leadership. I think it's fair to say that a few years ago, we might have been accused of responding to all of us we're doing in the marketplace. That's not what I do when I go to work every morning. And I think what you're seeing is consistently executed strategy, which is perhaps more visible to you all now over the last 12, 18 months, but which we've been executing now for 3 years, which is really about putting the customer front and center, focusing on delivery of experience and really leveraging the quality of the engineering and asset base that we have. And with that, yes, we've invested in growth. So I've been really pleased with the momentum we've seen in the business this year, have been really pleased with the response that the customer base and the market overall has had to some of our innovation and really delivering on a critical consideration for investors is that in an unlimited world, is there incremental revenue growth opportunity? And what we've demonstrated is that there is. And our customers love our mix and match approach. It gives them real choices about moving from meter to unlimited. But then moving up the stack within the unlimited portfolio. We see the opportunities to take that same insight, mix and match and bring that to the traditional wireline business and really shake that up as well and watch this space on that. And I think what that has meant is in the summer, we repositioned our portfolio again, and that allowed us to continue our investments in growth, targeted repricing within the base, refocusing on our premium relative to the market and expanding out the sort of experiential differences with things like Apple Music and Disney. So I think the context is very, very clear. Now we consistently execute against it, and -- but we're not talking about detailed Q4 numbers, but it's fair to say that the momentum we saw in Q3 followed into Q4. We were very pleased. We trade it right through to the back end, really strong, and we're really pleased how we finished out the end of the quarter. It is positioned as well and what you'll see in 2020 is more of that same, that willingness to invest in the network, invest in the experience and invest in growth where the opportunity is there and really prime the pump for the arrival of 5G during the course of this year and into next year.

So as you look at all the things you've done, the rate plans, Disney+, is there something that you're finding is really contributing to incremental success in the market off of what you did in the third quarter? So one or 2 things that really you find resonating, whether it's in your consumer base or also on the business side.

Yes. So look, I think the key with what we're doing is that what you should see it is, is it's sophisticated base management. It's making sure that it's not one size fits all of 100 million consumers and my ambition is to be able to personalize the experience for every single one of them. And that in a very practical sense means that I can optimize how I serve, I can improve the outcomes, I can invest my CRM dollars more efficiently. So that's the work that we're doing, and you will continue to see more of that. And the Disney+ is a great example of value to the customer is significantly higher than the cost to me. So you will see that as part of engagement and loyalty, customers choosing to consume more of my services because they like the Disney+ environment, but also potentially staying longer with me as a result. So that type of targeted focused investment means that we can use our scale where it's appropriate to negotiate a great deal with Disney and then personalize it into individual customer needs and customer segments. So as a platform, I should expect that to continue. So you should see more things which represent next moves in network as a platform, next moves in distribution as a platform and next moves in service and billing as a platform. On the billing side, we act bill on behalf of for YouTube TV. There's others who don't have that infrastructure. And therefore, their go-to-market is hampered. So I think you should see that we have a strategic formula. And what you should see is the individual experiences and executions in that will reflect the fact of targeting within our overall base.

I'm asked often what Disney+ is doing for Verizon. Can you share any details on the early results from the promotion?

Yes. Sort of subscribers and other things is for Disney. The reason why we're there is we saw the experience with Apple Music and probably because we've been doing Apple Music a little longer, it's easier to refer. Apple acknowledged that their partnership with Verizon is the best carrier partnership that they have in the world. What we've said is we've been very pleased with the number of customers who've taken the 6 months free and then chosen to move to a paid service, either by paying $10 a month, in which case, we get paid for being the retailer on that or by moving up the tiers within our unlimited plan to access it for free. So we have evidence there that it has attracted customers, helped with retention, but also has expanded customers share of wallet that we have. We would expect to see the same characteristics with Disney. But I think it's important to understand for people thinking about fourth quarter results is the investment in Disney is, to some extent, there is an element of upfront investment but the investment in Disney will pay off not in the first weeks, but across time. And the math is simple, is that if a family stays with us for a month longer because they're on Disney, the value to us is multiples of what the cost of that services. So that's attractive. So I think you should see that as a commitment to long-term investment in the base, not simply only in the acquisition market.

We're often asked about the kind of future growth in wireless. Maybe we could turn to the next live survey question and ask our audience what they believe the biggest threat to Verizon wireless is from a revenue and cash flow perspective and look at this over a 3- to 5-year period, not for any specific quarter. And the choice is our current competitive environment with the 4 national carriers, a merged T-Mobile and Sprint, cable insurgency, DISH insurgency or expecting other new entrants, whether it's Apple, Google, Amazon, and we'll go to our polls. Again, you're welcome to vote.

I have a view. Let's see. [Voting]

Okay. So 8% is the current competitive environment. 37% is merged T-Mobile and Sprint. 30% is the cable insurgency. 17% DISH and 8% possible new entrants. So how do you look at managing through this uncertain future competitively?

So hopefully, what you all are seeing is that we're not a business that's waiting on the outcome of somebody else's strategy, we're consistently executing a strategy which is customer-focused, whether that being B2B or in the consumer space. That's the most important thing. And I think you've seen the evidence of that being very effective. I think in the context of some of the questions is, is the competitive landscape going to change because of the merger? The shape of competition may change, but the nature of competition, fundamentally, in my view, isn't going to change. I think interesting, 17% of people think that a DISH insurgency is the single biggest thing. Even if that were true and I'm not sure I'm convinced on that is that probably not in the next 3- to 5-year time horizon. And so what I'm really focused on is making sure that we are deepening our engagement and relationship with our customers. We're broadening out the range of products and services that we can offer and really going into the home. And I think the question, therefore, of cable insurgency is, I would read in that proxy for some of your investors, jury is still out in relation to 5G home? Well, the great opportunity I have is to execute on that and really make sure that it's a wireless insurgency and cable franchises rather than a cable insurgency and wireless franchises.

And just finishing on the cable MVNO topic. How do you look at that business in terms of what the cable companies are doing in the marketplace versus your wholesale relationship versus the risk that other carriers in the industry might want to also serve those same wholesale cable opportunities?

So the first thing I would say is that we see these as strategic relationships. I personally invest a lot of time. And then the origins of these relationships were really around a spectrum trade many, many years ago. At that same time, nobody in Verizon would have articulated network as a platform as a strategy. That's the strategy that I've been focusing on since I arrived. It's a strategy I executed in my previous CEO role in the U.K. So I've been very committed for a long time to this idea of, if you build a network of the quality and breadth that we have that not all of those opportunities for that network are represented by the branded offering coming from Verizon. So we don't see and I personally don't see any conflict with a deep long-term strategic relationship with MSOs and other wholesale providers and my overarching Verizon-branded strategy. And hopefully, I represented myself out to my MSO partners in that thing.

Moving to 5G, can you unpack Verizon's 5G strategy? And what should -- both the consumers and the investors gave us a little teaser earlier on some of the things. But how is this going to unfold during 2020 for Verizon?

Yes. So just the quick reprise is that in some respects, Verizon in people looking at the 5G strategy is a victim of its own success. I have a 4G LTE network that serves the entire country and provides speeds that, in most cases, are higher than the available DSL offering for customers. So I'm not scrambling using 5G technology to make up for the fact that I don't either have coverage or capacity in my 4G LTE network. So what we've done is we focused on the ability of 5G, the real 5G to be a fundamental game changer, and that is with bandwidth of 500 megs is the original standards identified. You have the ability with that level of bandwidth to make a huge difference. To do that, you're in the millimeter wave environment. So our focus on the millimeter wave has been very much pioneering. We absolutely recognize that. We went and launched the first millimeter wave network more than 2 years ago now. And that's been an investment for us in not just proving out the technology, but making sure that we were in the front of the drive to deploy. With that, all of our infrastructure and all of our spectrum is capable of deploying 5G. So it's not like we can't do what others have been doing in recent weeks. But on the basis that from what we've seen so far, that doesn't provide any differentiation in either speed or coverage relative to Verizon. We're making sure that we are building our millimeter wave capability and momentum so that, that will facilitate in the areas where we have the most of our traffic, which is about 70% of it in the major urban areas. We will make a major enhancement to the network and the capabilities that it provides. At the same time, the arrival of dynamic spectrum sharing during the course of 2020 will allow us to enable all of our other spectrum assets for delivery of 5G in the same way as others have already done on a fixed allocation basis. And what that builds for us is an opportunity to enhance the network reputation that we have already but then also broaden out the offering. And that's particularly where the 5G home offering comes up. But this idea of yield management, when we went to unlimited, we saw our traffic grow by 98% in the first year. But peak air traffic went up by, I don't know, 23% or something like that. Why? Because we reshaped the usage of our network. We see that opportunity both in 5G and in 4G to maximize the yield on the network. So that's why we're committed to investing heavily in building out significant expansion of the capability and capacity of the network and then evolving products and services that allow us to yield, manage and sell more of that capacity more efficiently. 2020, we'll be doubling down on the momentum we have. We finished the year with 31 markets launch and mobility, we will continue to drive hard. And when I talked to Kyle, who runs our network, there's only 2 things I asked for, more and faster.

Is there going to be a 5G super cycle for devices in 2020?

I think that is a great question. And without getting drawn into very, very specific, we would see a significant expansion in the availability of 5G devices during the course of 2020. We also see the movement in the sweet spot on the average selling price of handsets. We will see millimeter wave devices below $800, below -- later in the year, below $600. So therefore, coming into the mass market. I think there are certain handset manufacturers who have yet to produce 5G handsets that are very heavily represented certainly in my base. So I think as and when that happens, that will be a catalyst, I think, to the 5G adoption cycle. But whether there's a super cycle or not, I'm not sure yet.

Okay. You mentioned 5G Home. How big -- you said the second half of '20, you'll be looking forward to that, like, how big could that be initially? And how fast can you get to that 30 million home initial bogey that you've set out for the company?

Yes. So the key and the reason why the second half of 2020 is important, just a reminder for people, is that when we first launched in our first 4 markets and the results of those markets have been very positive and reassured us both of customer appetite and of executional capability. And those were on the TF standards. So pre the 5G NR -- the first 5G NR CPE for home is now deployed in Chicago, but it's effectively using smartphone chipsets rather than CPE chipsets. So they're low power. And as a result, footprint is significantly smaller. So second half of 2020, the high-powered CPE will arrive and every DB in the CPE has given us about an extra 7% increase in the coverage area. So very, very significant. So that's really the key because the deployment of our 5G network is not -- there aren't 2 networks being deployed, a mobility network and a home network. There's only one network being deployed. But as it's deployed, the complement of the high-powered CPE will allow us to have a much wider footprint per node that's deployed, and that obviously makes for marketing efficiencies and other things like that. So that's really key. Around the time horizon, I think it's reasonable to say and I think Kyle Malady did a while back is we see a 5- to 7-year time horizon for that. Depending on other criteria, that may be faster, but it's really off the back of some of the areas that we will focus our mobility offering initially will be dense traffic areas, but low residential. And so it's very much a mobility strategy with a secondary product of home rather than us as if we're changing our overarching mobility deployment to try and accelerate home at the expense of the overall 130 million customer base.

So we'll go to our next live survey question, which is a question that many of you have seen before at this conference. Do you believe 5G wireless will be an effective competitor to fixed broadband services? Yes, no, or maybe/undecided?

Easy question.

We'll go to our polls. [Voting]

And the results, so 64%, yes; 25%, no; 11%, maybe/undecided. Are there certain things -- you mentioned the power. Your experience with millimeter wave, both from the mobile context, I realize there's only a limited number of devices right now. But from a mobile context, but also the higher-powered chips that you're seeing, are there other things that are underappreciated by the investment community in terms of what Verizon is going to be able to deliver to the customer, the experience, whether it's outdoors or indoors with 5G?

So I think from a consumer point of view, one of the things that's probably talked about, at least in the context of 5G and millimeter wave and ultra wideband is the transformational change on the uplink. Currently, the consumer proposition in 4G is essentially a downlink proposition. You can download content, whatever. But the uplink, people are usually in single-digit bits per second the uplink. In the 5G millimeter wave environment with carrier aggregation plus the ability with much broader spectrum bands is to see 200 meg uplink speeds. The effect of that is in areas of interactivity, in AR/VR, in live entertainment environments, social media entertainments, very, very significant. But it's also significant in areas like mobile edge compute and others where it's not just simply one-way processing, but 2-way for business applications. So I think of all of the things, everybody goes to speed and everybody goes to latency, but it's the fact that it's a 2-way high-speed highway rather than a largely one-way high-speed highway that I think has been less focused on for people today. And I think that's where a lot of the thinking now is being deployed about what are the opportunities for a true interactivity. Some satellite companies in other parts of the world have bought broadband links because they didn't have a return path for engagement. Well, this is a bit like the return path in the wireless space that really says you've got 2 super highways, not just one.

So we'll have a couple of microphones roaming the room for questions. I've got 2 more that I want to get through as well. One is mid-band spectrum. How important is mid-band spectrum to this 5G strategy, getting more of it, expectations for C-band? And then we'll touch on the economy.

Sure. So I think for us, we've been clear with the combination of DSS, the existing spectrum we have and the infrastructure we've deployed and the very significant ubiquitous holdings of millimeter wave. We have the assets we need to deploy our -- and execute against our strategy. Like any carrier, we have choices between density, spectrum and build. And so if there's an auction, like everybody else, we'll show up, we have our math. We understand what those are. And what we've said very publicly is within our overarching financial discipline, if there are opportunities to accelerate our strategy. And I actually go back to your first interactive question where the kind of the 2 blocks. And do I have on any? Yes, I do. Do I think we've got the best engineers on the planet who if I gave them more, we'll be able to do amazing things with them? Absolutely, yes. So I think that's the honest answer.

Any expectations for C-band spectrum or timing?

So look, I think timing, it's interesting, some of our colleagues -- I went to Washington just before Christmas, some of our colleagues were talking on this subject. There's a reasonable degree of confidence that people can get a process out up and running probably into the February meeting to discuss how and then by sort of September, October time, get out of the block. So we're hopeful.

And then on the economy, are you seeing any change in -- whether it's spending patterns, credit, anything that would give you some signals on what's happening with the broader economy?

So nothing material, I would say. We watch things like credit and other things just carefully just to make sure inside the cycle. What I would say is we saw within our own trading, although I don't think that overarchingly in our category that the holidays Black Friday and Cyber Monday were as big as they have been previously, although there were record set more broadly. They weren't necessarily huge with us, and that might be partly the device cycle. What we did see was an increase in our digital mix within that. So we're continuing to see growth of our category, which is relatively smaller from its digital mix than maybe some other categories, and we certainly lead in that. So we saw that. But overall, we haven't seen any significant changes. But we do -- we watch carefully on -- from an economic point of view, I'm conscious that a recession is always just around the corner. When exactly that is, is the question, but we certainly watch that carefully just to see if there's any changes and nothing I would call out here.

See if we have any questions from the audience. So one thing I'm curious about is, in the past, you've talked about the opportunity to migrate customers to higher ARPU plans by moving them to unlimited. But you also changed the rate plans. Is moving to unlimited on these new promotional rates still accretive to the base? And how much opportunity is left for Verizon to go after?

Yes. So really, the key was that what we found was that not surprising, the early adopters in unlimited were the people who were the heaviest users who are already through the cycle and understood the opportunity of high usage in smartphones, and so they migrated in the very early stage. You have some optimization and then you move to an accretive phase. What we saw was that the step across from the meter plans to unlimited for people who weren't as big users was just a little higher than maybe was natural. So in the reconfiguring of our plans, one element meant that the bridge to that first step into unlimited was a little easier, absolutely accretive overall. There will always be 1 or 2 optimizers, and that's as it should be, but absolutely accretive. The other thing that we continue to see is the trend of customers to come in, try it, like it and then move up. So actually start in the lowest tier of unlimited and then self-migrate to the higher tiers, not just off the back of promotions but actually saying that I like this, I want more of whatever the particular options might be. So those trends have been good. And so that would -- has meant we've continued to see the meter to unlimited migration. We're now seeing the significant majority of all customers who join us are coming in day 1 into unlimited plans. We've moved past 50% of the base going to unlimited plans, and we continue to see people stepping up within those plans overall. So all those trends continue to be positive. What I would say is in the back of Q3 and early Q4 as we've repositioned us, there will be -- will have been an element of pricing optimization within that, which is entirely as we would have planned. But the value of that is we'll see the extended participation of those customers in the base.

And so finally, I think, almost a year ago, the company outlined its MEC strategy, mobile edge compute strategy. What's the significance of the announcement, I think it was last month with Amazon? And what's the significance to that strategy? And what it means for customer experience and the prospects for how 5G might be used over time?

So a couple of things to unbundle there. The first thing is not just our view, but interestingly, we had former CEO of Cisco came and talked to us recently. And he volunteered his view that 75% of all computing will be done at the edge, was his view over time. So I think there's an industry trend there. And the question is, what's our opportunity to participate in that? And really, it's the ultra-low latency availability there that allows that edge compute to deliver value-add. We started with the people who do most of the cloud computing. Oddly enough, it's a good place to start. And so they will build with us inside our infrastructure, and that's important to say it's inside our infrastructure rather than us putting things out into their infrastructure to facilitate customers. What I would say is that you would expect us to execute in a similar vein to broaden out the offering over time, both in the sense of the physical deployment of MEC capability, but also the choices that our customers have about how they can work with us in that space. And we have our first mobile edge compute center up and running in Chicago, and we have customers already in trialing services in there. The other area which I think will be important maybe from my business is that -- my bet is that in 5 years' time, most stadia in the U.S. will have a mini mobile edge compute deploy inside the stadium to allow them to significantly enhance the management of information inside the stadium for fan experience and also for the delivery of new experiences to fans who aren't actually in stadium in real time, and that will create some really interesting opportunities for us with partnerships like the NFL, with some of the basketball stadiums we have and other things like that.

We've got a question in the back of the room.

Sure.

I just had a question about WiFi offload. If you looked over time in terms of total mobile traffic, how is the portion of WiFi changed? And from a strategic standpoint, if that goes up, is that a good thing or a bad thing for a mobile carrier?

So good question. I'll break it into 2 parts. We haven't seen a significant -- depending on the math that you see, most people would say somewhere between 70% and 75% of all of the traffic that's used on the device is actually on a WiFi network, not on a cellular network. The thing that we see, which is maybe different from others is, in a world of 5G millimeter wave deployment, we don't see the need for WiFi in the future because we have a more secure network environment. We have a much higher performance criteria. And we have the ability to handle sessions, et cetera, et cetera. So our view is that when fully deployed, there are substantial environments in which public WiFi will be eliminated in favor of millimeter wave because of the security, reliability and service capabilities. If you're a cable company and you're looking at how do you balance traffic on the cellular network or whatever, I think -- I'm not suggesting that WiFi hotspots will disappear immediately, but I think what that does is that's traffic management rather than experience management. Our view is the best experience end-to-end is be it on a secure 99.9999% capability wireless environment end-to-end is the best possible experience, whether you're a consumer or a business customer.

And just a follow-up on that. So as you think about the vision of what you just laid out, what are the implications for the number of cells that we need to achieve that and where that sits relative to the current investment pace for Verizon?

So the key there is indoor solutions for 5G. And we're already working on both repeaters and nodes for indoor solutions. That will be that every mile, every industrial environment, every residential block, every stadium will be completely deployed with the 5G nodes in a way that substitutes. So that is within our overall criteria, in the kind of assumptions that we have on small cells, but it really will be repeaters and extenders in the same way as you have WiFi and WiMesh capabilities today.

Ronan, thank you for your time today. Thank you.

My pleasure as always. Thank you all very much.