Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Verizon agreeing to buy rival telecom operator Frontier Communications FRO
Speaker 2: about nine point six billion dollars in cash, giving an
Speaker 2: enterprise value of twenty billion dollars. This is the New
Speaker 2: York Phone Johant looks to expand its high speed internet business.
Speaker 2: Let's bring in Verizon CEO hands Verspeg. We welcome you, sir,
Speaker 2: and look, it wasn't long ago that you actually owned
Speaker 2: some of these assets. Why go back into wyline? Why
Speaker 2: are we seeing this convergence again?
Speaker 3: Thank you for having me. First of all, I think
Speaker 3: this is very straight into our core strategy. We are
Speaker 3: sort of in mobility and broadband serve basically all types
Speaker 3: of customers in the market CONSUMERSMBS, large entervice and governments.
Speaker 3: This is just extending the offerings and optionality for the
Speaker 3: customers well have. So this is a really good decision
Speaker 3: by us to do with an economical right. And on
Speaker 3: top of that, as you mentioned, yes we own these
Speaker 3: assets before, but they weren't totally different type of assets.
Speaker 3: There was basically a copper based business. Nowadays Frontier is
Speaker 3: more than fifty percent of the revenue is fiber and
Speaker 3: way more than fifty percent of the DTA is coming
Speaker 3: from fiber, so a large transformation have been done and
Speaker 3: it fits in straight to our strategy.
Speaker 1: Over Isison Hans, good morning. It's ed in San Francisco.
Speaker 1: Frontiers trading at thirty five dollars a sherish below the
Speaker 1: thirty eight dollars fifty cents per share offer. What does
Speaker 1: that tell you about the market's reaction to the offer
Speaker 1: and what you think might happen next.
Speaker 3: I don't tell me so much is so early in
Speaker 3: it's it two hours of trading. I think first of all,
Speaker 3: we feel really good about this deal from also from
Speaker 3: closing it and seeing that this is a possible transaction
Speaker 3: from many angles, because given that we believe it's going
Speaker 3: to take eighteen months and all the regulator bodies, of
Speaker 3: course will be a thorough job. But this is improvements
Speaker 3: for customers. Were going to get more choice, and not
Speaker 3: only that, we can only bring our mobility broadband to
Speaker 3: these customers. At the same time, we also have the
Speaker 3: offerings that we have on our broadband today, which is
Speaker 3: everything from streaming services, other services that we have on insurance, etc.
Speaker 3: So we're going to bring a lot on new opportunities
Speaker 3: for the custom base or frontier. So I'm really positive
Speaker 3: on this acquisition.
Speaker 2: Can you tell us a little bit about the future
Speaker 2: as well. The short term is the convergence trade is
Speaker 2: wireless wireline content, but then there's AI. Then we're talking
Speaker 2: about the Internet of Things as we've been talking about
Speaker 2: for years. Hands where does that come into play.
Speaker 3: It come definitely to play in these assets, and as said,
Speaker 3: we expect this to take in a take eighteen months.
Speaker 3: We're already right now have a sort of AI prepared
Speaker 3: network with a lot of compute and storage at the
Speaker 3: edge of the network. We decided already some six years
Speaker 3: ago to fiber all our transport show. We are really
Speaker 3: prepared of it. The frontier acid is just coming in.
Speaker 3: There's an extension of that and we can meet even
Speaker 3: more customers to have a processing storage at the edge
Speaker 3: of the network with the fiberized transport show. This is
Speaker 3: really also another advantage we're getting with even more assets
Speaker 3: in the ground, and of course serving consumers with home
Speaker 3: broadband together with our mobile and home offering is of
Speaker 3: course a strength in the overall acquisition where we're doing.
Speaker 1: Hans, We have a question from an audience member on
Speaker 1: Bloomberg Technology, who notes the twenty fifteen sale of wireline assets.
Speaker 1: But I think the question that he and many others
Speaker 1: have is what's changed around the economics in this deal.
Speaker 1: You said, the economics work, but give me specifics and
Speaker 1: what's different, particularly for fiber in twenty twenty four.
Speaker 3: So if you look at a deal right now at closing,
Speaker 3: we believe that's going to be a creative of growth,
Speaker 3: revenue growth anibita on day one, so that's really good economics.
Speaker 3: And then it's going to take some twelve months and
Speaker 3: EPs and cash flow will be a creative as well.
Speaker 3: And the reason it takes twelve months is there are
Speaker 3: some integration costs coming up in the beginning. So definitely
Speaker 3: a very economic sound business for us. But I said
Speaker 3: the assets we sold previously was, of course in a
Speaker 3: totally different standard. The Frontier team has put in billions
Speaker 3: and billions of dollars to fiberrize the network to be
Speaker 3: the next generation, and many of the metrics that they have,
Speaker 3: you know, Sharen, penetration, et cetera, are fairly similar to FiOS,
Speaker 3: and FIUs is of course the best fiber network in
Speaker 3: the States. So there's a lot of similarities on that
Speaker 3: and that we can offer to our customers.
Speaker 2: And some anas were a little bit surprised by the
Speaker 2: timing and the fact that you're going all in on
Speaker 2: convergence now a bold step. Some call it because of
Speaker 2: your leverage and your commitment to reducing reducing your debt.
Speaker 2: Why do this now? Are you worried about leverage?
Speaker 1: No?
Speaker 3: I think for we have a very strong balance sheet
Speaker 3: and as we said this morning, at closing, this will
Speaker 3: be maybe zero point two zero point three notch on
Speaker 3: our leverage, which is very very low. We still are
Speaker 3: committed to our capital location. Number one invest in the
Speaker 3: business and that's what we're doing today. Number two committed
Speaker 3: to the dividend, and you might have seen yesterday we
Speaker 3: came out with our dividend which was for the eighteenth
Speaker 3: consecutive year we increased our dividend. And then is to
Speaker 3: pay down our debt. We are have been paying down
Speaker 3: our debts since we bought a C band. We still
Speaker 3: have some eighteen months here that we're going to continue
Speaker 3: to pay down the debt, so we're going to be
Speaker 3: in a really good position balance wise when the deals
Speaker 3: Comeing to fruition.
Speaker 1: Hans, what opportunity is there for you in data center
Speaker 1: interconnects DCI in the context of AI. Look at what
Speaker 1: like Lumen's done with Microsoft, for example.
Speaker 3: I think that the difference here is that we have
Speaker 3: so many assets in the ground when it comes to
Speaker 3: fiber and central office. Many of these central offices of
Speaker 3: course have compute, storage power, et cetera. And many of
Speaker 3: the AI solutions when there is a real product, they
Speaker 3: actually need to be way closer to the users, the corporations,
Speaker 3: et cetera. And that means that because the transport costs
Speaker 3: and many other things, it will be hosted at the
Speaker 3: edge of the network. That's how we build the Verizon
Speaker 3: Intelligence Edge Network in twenty eighteen when we started with
Speaker 3: the Journey, which we now is just adding frontier to it.
Speaker 3: So I see a great opportunity for us on the
Speaker 3: B to B side with this footprint to serve customers
Speaker 3: that want to host AI at close to them, a secure,
Speaker 3: lower transport costs, and et cetera.
Speaker 2: You're just announcing one deal, and you know we always
Speaker 2: love to push forward. Hands are you going to continue
Speaker 2: to be acquisitive when it comes to convergence.
Speaker 3: I think, first of all, we are really happy with
Speaker 3: assets we have and now we're adding Frontier. I don't
Speaker 3: think we need much more. We're going to be the
Speaker 3: biggest and wireless we're going to be clearly the ones
Speaker 3: having the largest broadband offering with fixed fires access and
Speaker 3: fiber in the market, we have the largest distribution and
Speaker 3: the customers, so we're going to be in a really
Speaker 3: good position to see that we execute for our customers
Speaker 3: but also for our shareholders. So I'm really happy with
Speaker 3: assets we're going to have and we have today. When
Speaker 3: it comes to convergence, I think what is important in
Speaker 3: convergence we will have the scale of economy for both.
Speaker 3: We will have the ownerships for the wireless network and
Speaker 3: the fiber networks and fixed fires access. If customers want
Speaker 3: to make the convergence, we will have the economics for
Speaker 3: doing it. I don't believe it's going to be sort
Speaker 3: of you you discount one product for customer taking both.
Speaker 3: That's not really there's two great products. And we all
Speaker 3: know mobility in broadband is a centure for day society.
Speaker 3: I mean everyone needs it. Division corporation, a private person
Speaker 3: or a corporation. You need these services that are even
Speaker 3: more important today than we're five years ago and Veriecon
Speaker 3: is number one and basically every segment of that and
Speaker 3: this is just fortifying it. So, yeah, we're going to
Speaker 3: see convergence, but it's not like we're going to discount products.
Speaker 3: There are great two products that we're going to offer
Speaker 3: our customers if they want to join. We have improvements
Speaker 3: on Scheren of course, if customers both have mobility and
Speaker 3: broadband with us, and so we're going to see how
Speaker 3: that places out in the market, but clearly we're going
Speaker 3: to be the best position in the market when it
Speaker 3: comes to convergence.
Speaker 1: Verizon CEO Hans Vesperg, thank you very much.