Verizon CFO Matt Ellis notes the intersectional importance of lower capital intensity and revenue/margin growth
Looking at the next few years, Verizon CFO Matt Ellis sees a clear path to grow revenue by 4% by 2024 while capital investment will peak this year and normalize by 2024. The combination of revenue and margin growth, lower capital intensity and increased free cash flow sets the stage for the company to reduce leverage and potentially engage in share buybacks.
Speaking this week with Simon Flannery at the Morgan Stanley Technology, Media and Telecom Conference, Ellis reiterated the plan to reach 175 million C-Band PoPs by year-end and reviewed Verizon’s plan for 5G monetization which applies a network-as-a-service strategy to five vectors of growth: mobility, nationwide broadband, B2B solutions including mobile edge computing and private networks, the value segment bolstered by the Tracfone acquisition, and network monetization via wholesale services.
To the nationwide broadband ambitions, this includes Verizon’s Fios footprint in the Northeast, and fixed wireless service using LTE and both mmWave and C-Band 5G. According to Ellis, “Obviously, we’ve had a great Fios business. We said that will grow from a little under 7 million subscribes end of last year to 8 million by the end of 2025, but then bringing fixed wireless access to the table here…WE said we expect to be the 4 million to 5 million subs by the end of 2025 with fixed wireless access. So really good progress that we see ahead of us there.”
In fact, based on executive commentary at an investor event last week, Verizon sees its growing broadband business as the second biggest service revenue driver behind mobility. That 4% revenue growth figure translates to some $110 billion in 2021 to $124 billion by 2025.
In terms of capital spend, Verizon set aside an additional $10 billion to bring its C-Band spectrum online. Ellis said the spend last year was $2.1 billion in 2021, $5 billion to $6 billion this year to support the expansion to 175 million PoPs, and $2 billion or $3 billion in 2023. That’s on top of the more than $18 billion in 2021 capex and between $16.5 billion and $17.5 billion in 2022 capex guidance. After C-Band is fully deployed in 2023, Ellis said annual capex will level out around $17 billion.
“So when you combine that with the revenue growth, you get to some capital intensity numbers we haven’t been at for a very long time.”
Also of note, Ellis said that where C-Band is deployed, the operator is seeing 5% to 15% of network usage on that mid-band spectrum. He noted this obviously gives the 5G subs better performance but opens up LTE capacity giving those subscribers a better experience.
With regard to delivering mobility and home broadband using the same network, Ellis pointed out that peak mobility network use is in the 6 p.m./6:30 p.m. timeframe whereas home broadband usage kicks up later in the evening. “So it gives us the opportunity to more efficiently utilize the capacity we built into the network.”
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