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Speaker 1: Welcome to the Bloomberg pim L Podcast. I'm pim Fox.

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Speaker 1: Along with my co host Lisa Abramowitz. Each day we

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Speaker 1: bring you the most important, noteworthy, and useful interviews for

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Speaker 1: you and your money, whether at the grocery store or

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Speaker 1: the trading floor. Find the Bloomberg pi L Podcast on iTunes,

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Speaker 1: SoundCloud and at Bloomberg dot com. Well, his stock is down,

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Speaker 1: but he's ready to get up and fly, and he's

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Speaker 1: here to give us a little bit of Oh come on,

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Speaker 1: love is Gary Kelly. He's the chief executive of Southwest.

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Speaker 1: They are great to have you with Hi, Mr Kelly,

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Speaker 1: It is great to be with you. I was able

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Speaker 1: to get all three of these things together in one

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Speaker 1: It was not even an I am so all right,

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Speaker 1: So let's let's go with that water, talk about what's down,

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Speaker 1: talk about what's up, and then tell us about you know,

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Speaker 1: what's next. You know, it was a great quarter. Let's

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Speaker 1: start with the second quarter. Our unit revenues were up

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Speaker 1: right in the range that we had anticipated, and that

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Speaker 1: was a nice improvement. And we saw some increase, uh,

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Speaker 1: we saw some growth in in our average fairs. And

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Speaker 1: hold on, I mean I make your pardon, I don't

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Speaker 1: mean I'm interrupted, but I mean, if if if they

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Speaker 1: all what you're saying is accurate, and I and I

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Speaker 1: got that from your perspective, then why would the stock

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Speaker 1: be reacting the way it is? And also, um, in

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Speaker 1: your mind, does that mean that you're somehow you weren't

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Speaker 1: able to telegraph whatever has upset the market. You haven't

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Speaker 1: been able to telegraph that information to them. Question cut

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Speaker 1: out there a little bit, But I think I got

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Speaker 1: the gist of your question. Well you know, um, I

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Speaker 1: know you cut me off, and I'm gonna go ahead

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Speaker 1: and finish. Anyway. We we had a very strong quarter.

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Speaker 1: We beat consensus by fourth cents. We were right in

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Speaker 1: line with our revel new UH expectation, even with some

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Speaker 1: drag from our new reservation system. Our expectation according to history,

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Speaker 1: given the timing of when Easter falls in second quarter,

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Speaker 1: the timing of fourth of July holiday, is that we

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Speaker 1: would see a little bit less growth year over year

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Speaker 1: in the third quarter. And that's exactly where we end up.

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Speaker 1: So we will have less cost pressure year over year

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Speaker 1: in the third quarter. It's a strong earnings outlook and UH,

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Speaker 1: you know, in terms of our plans for this year,

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Speaker 1: we're actually on our head of plan and looking forward

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Speaker 1: to UH I think a really strong year again. I

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Speaker 1: think that. I'm looking at the share price and it

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Speaker 1: is down almost four percent. And based on some of

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Speaker 1: the commentary that I was reading this morning, people are saying, well,

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Speaker 1: you know, UH, the revenue for each seat flown a

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Speaker 1: mile climb only one percent in the current quarter, and

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Speaker 1: that was below expectations. And there continues to be a

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Speaker 1: pretty high cost for UH just running the business, including gas.

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Speaker 1: Is there any plan to lower those costs? Well, on

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Speaker 1: the ladder that that's not true, but I'll speak to that.

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Speaker 1: But again, we were up one and a half percent

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Speaker 1: UH in the second quarter, so I would expect this

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Speaker 1: the third quarter year over year according to history, if

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Speaker 1: everything else is equal, to be up something less than that.

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Speaker 1: So those expectations were just unrealistic. If that's what the

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Speaker 1: disappointment is now. The other thing to to remind you

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Speaker 1: of is that there is a drag of almost a

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Speaker 1: percent in the second quarter and again in the third quarter.

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Speaker 1: UH So if you adjust from our new reservation system,

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Speaker 1: adjusting for that, we would be up more in the

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Speaker 1: two and a half percent range and the two percent

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Speaker 1: range a year over year for second and third quarter.

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Speaker 1: On the cost I had. Fuel prices are up some

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Speaker 1: what year over year in the second quarter, but we

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Speaker 1: would expect them to be down comparatively and down yet again.

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Speaker 1: In so fuel is actually a huge contributor to the

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Speaker 1: strong earnings and very strong cash flow. We have some

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Speaker 1: cost pressure this year because we were finally able to

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Speaker 1: conclude some labor contracts after many years of negotiations fourth

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Speaker 1: quarter a year ago, and so you're seeing sort of

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Speaker 1: the unusual comparison year over year if you adjust for that,

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Speaker 1: um we we have actually very solid earnings growth in

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Speaker 1: the second quarter, and again I would expect that for

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Speaker 1: the balance of the year. Are you looking into getting

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Speaker 1: even bigger airplanes? Because there's this feeling that, you know,

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Speaker 1: people are looking really just to get from one place

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Speaker 1: to another for the cheapest possible price. Uh, and it's

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Speaker 1: getting harder and harder to lower prices further. So is

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Speaker 1: there a way to more people in You know, I

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Speaker 1: think there's different you're I think you're asking a couple

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Speaker 1: of different questions there. But the the answer, the straight

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Speaker 1: answer to your question is yes. I think over time,

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Speaker 1: we would expect that the average number of seats per airplane,

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Speaker 1: and our fleet will continue to grow, but that will

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Speaker 1: be within the existing fleet that we operate. So, in

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Speaker 1: other words, are our our future will be the Boeing

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Speaker 1: seven thirty seven Max eight, which has one seventy five seats,

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Speaker 1: or the Boeing uh UH seven Max seven, which is

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Speaker 1: a future deliverable and it will have a hundred and

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Speaker 1: fifty seats. So I would see a larger proportion of

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Speaker 1: our fleet UH in the higher seating category going forward.

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Speaker 1: Today we have about of our fleet in the larger

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Speaker 1: aircraft and I think that proportion will grow in the future.

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Speaker 1: If you could speak a little bit about the capacity

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Speaker 1: issue in typical in many cases airlines increased capacity and

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Speaker 1: variety of markets UH, and then they bump up against

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Speaker 1: UH further UH, you know, lack of lack of demand.

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Speaker 1: Where are you seeing the capacity increases coming and where

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Speaker 1: have you held off? Well, our capacity this year was

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Speaker 1: expected to grow in the three and a half percent range,

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Speaker 1: UH was our early forecast, and we'll be coming in

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Speaker 1: somewhere between three and a half and four percent, probably

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Speaker 1: in the higher end of that range. That's you know,

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Speaker 1: low single digits. That is very much in line with

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Speaker 1: nominal GDP growth uh and we we have record load

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Speaker 1: factors um and at this point the term in the

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Speaker 1: industry is that we're spilling demand, meaning that we're not

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Speaker 1: able to carry all the travelers who would like to fly.

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Speaker 1: So for us, just speak for Southwest, our capacity is

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Speaker 1: very much in line with demand and the thing that

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Speaker 1: we're gonna unfortunately, and Gary, I'm so sorry to cut

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Speaker 1: you off. We're gonna have to leave it there, but

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Speaker 1: thank you so much for joining us. We truly appreciated

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Speaker 1: Gary Kelly as president chief executive officer of Southwest Airlines.

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Speaker 1: Up right now, we want to take a look at

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Speaker 1: the corporate debt markets. We have seen the extra yield

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Speaker 1: that investors are demanding to own, the dead over benchmarks

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Speaker 1: shrinked near the lowest in the post crisis era, and

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Speaker 1: there are a lot of concerns that we are in

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Speaker 1: a bubble. Joining us now is Cliff Marine, Deputy chief

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Speaker 1: investment officer at Mass Mutual Financial Group, overseeing about a

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Speaker 1: hundred and sixty billion dollars and his goal is to

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Speaker 1: make sure they don't lose money. Cliff, in an environment

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Speaker 1: like this, how do you view corporate debt at a

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Speaker 1: time when spreads look incredibly rich. And we are in

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Speaker 1: a you know, sort of slowly growing world, but also

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Speaker 1: one that is rife with political risk. Where where do

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Speaker 1: we go and are we in a bubble? Well, we

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Speaker 1: think that we're in this very low growth environment with

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Speaker 1: low economic growth, low interest rates, low inflation. We have

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Speaker 1: very strong corporate profits, which is very good for corporate bonds,

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Speaker 1: and that is actually accelerated and fueled the stock markets.

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Speaker 1: So we're in this environment where we're in a perfect

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Speaker 1: world for the stock market and for commercial real estate.

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Speaker 1: Now back to corporate bonds. What is good is there

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Speaker 1: there are very low defaults. There are some industries that

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Speaker 1: are in a in a risk position today, like retail,

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Speaker 1: like real estate associated with retail, like commercial malls. And

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Speaker 1: then the auto industry is under a bit of stress

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Speaker 1: with a excess of used car which has put price

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Speaker 1: pressure on used cars and on new cars. But that

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Speaker 1: we're watching that. There may be some downgrades, but we're

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Speaker 1: really not overly concerned with the auto sector. The retail

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Speaker 1: sector is a very much concerned. We don't have much

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Speaker 1: exposure there, but that sector is going through undo stress

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Speaker 1: from Amazon and from online sales of products in the

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Speaker 1: traditional brick and mortar retail stores are really in trouble,

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Speaker 1: So you don't think that we're in a bubble. Well,

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Speaker 1: the corporate spreads are very tight, the fundamentals are strong.

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Speaker 1: The question is how long will this continue? And the

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Speaker 1: stock market is going to trade very similarly. When we

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Speaker 1: see a break in the stock market, will probably see

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Speaker 1: a break in corporate bonds. The market that hit first

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Speaker 1: is most likely the high yield market, which has the

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Speaker 1: most risk, which is similar to the stock market cliff.

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Speaker 1: One of the things that I've most recently read has

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Speaker 1: to do with foreign credit traders, people from outside the

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Speaker 1: United States who want to buy lots of US debt

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Speaker 1: and they can't seem to get enough of it. Is

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Speaker 1: there still a nice, ready willing buyer out there that

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Speaker 1: you know, American companies can can sell them some more debt.

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Speaker 1: The technical backdrop of the corporate bond market is the

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Speaker 1: strongest I've ever seen. There's unsatiable demand from unsatiable so

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Speaker 1: that the corporate corporate buyers from foreign countries are also buying.

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Speaker 1: Our yields are higher than they are in Europe, higher

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Speaker 1: than they are in Japan, so our bond market looks

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Speaker 1: pretty attractive. When you're getting a spread over treasury. Now,

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Speaker 1: the spread, as Lisa said, is very low. Investment grades

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Speaker 1: around a hundred basis points high yield is three seventy

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Speaker 1: five basis points approximately. That's very low when you compare

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Speaker 1: that to historical basis. But the fundamental backdrop is also

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Speaker 1: strong right now, So you were saying that this is

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Speaker 1: supportive for both stocks and commercial real estate, and if

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Speaker 1: there is a blip in the stock market, you will

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Speaker 1: see a commensurate blip in corporate bonds. I'm wondering, as

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Speaker 1: somebody who is trying to avoid losses, how do you

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Speaker 1: maneuver in this type of market where you're seeing positive

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Speaker 1: correlations between stocks and bonds, And I should add treasuries,

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Speaker 1: while they often move opposite to risk, markets, have often

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Speaker 1: moved in tandem with them in the central banking era.

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Speaker 1: So are you changing your allocations in order to prevent

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Speaker 1: this type of kind of double OFSS scenario. We're viewing

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Speaker 1: this market as an issuer's market. This is a great

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Speaker 1: time to issue debt. If you're a company or corporation

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Speaker 1: and you want to issue debt, now is the time

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Speaker 1: to do it. You're gonna get very low interest rates,

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Speaker 1: very low spread over the treasury right, so it's a

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Speaker 1: great time to do it. We are a long term investor.

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Speaker 1: We invest mass mutual for decades, not for quarters. So

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Speaker 1: when we buy a bond, we're doing work on it

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Speaker 1: such that we're not depending on the secondary markets to

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Speaker 1: trade it. We're planning to hold it to maturity. So

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Speaker 1: we have a lot of our portfolio in illiquid private

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Speaker 1: placement debt, infrastructure debt, commercial real estone, commercial real estate

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Speaker 1: loans on buildings like this that are secured by buildings.

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Speaker 1: So these are ill liquid investments. They get spread premium

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Speaker 1: of basis points. If interest rates go up, the value

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Speaker 1: of the bond may go down, but we're playing to

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Speaker 1: hold these for a very long time. I'm wondering, though,

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Speaker 1: I'm hearing this same refrain from a lot of investors

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Speaker 1: that have buy and hold capital. Our valuation is getting

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Speaker 1: too stretched. In the private markets as well, they are

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Speaker 1: getting stretched. Companies are lending or borrowing more on a

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Speaker 1: debt to EBA da A a leverage basis um. There

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Speaker 1: are covenants that we get in the private dep markets

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Speaker 1: you don't get in public bonds. When you buy a

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Speaker 1: public investment grade bond, it's just a promise to pay

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Speaker 1: from the company and there are virtually no covenants with it.

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Speaker 1: In the private dep market, you do get a package

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Speaker 1: of financial covenants which give you a lot more protection

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Speaker 1: than you think, and we think there's substantial value to those.

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Speaker 1: I like that idea of protection, and I'm wondering if

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Speaker 1: you could just speak to that a little bit, because

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Speaker 1: you know, it's everything is great when everybody's making money,

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Speaker 1: but then when all of a sudden, you know, we've

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Speaker 1: gone through bond market declines, and people who have lived

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Speaker 1: in the ups and downs of the volatility, maybe you

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Speaker 1: could just talk a little bit about what do you

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Speaker 1: think is going to happen next, it's going to upset

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Speaker 1: the system and how people are are they ready to

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Speaker 1: deal with it. We're overdue for correction, and we don't

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Speaker 1: have as much liquidity in the markets as we did

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Speaker 1: before because the banks have pulled back their trading capital

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Speaker 1: because of regulatory legal reasons, So we are overdue for correction.

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Speaker 1: The liquidity is being provided more by the buy side

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Speaker 1: than the cell side today, so we are actually welcoming correction.

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Speaker 1: We welcome a correction to more normalized spread levels and

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Speaker 1: yield levels. We will be able to buy assets at

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Speaker 1: higher yields. And as long as you do your fundamental

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Speaker 1: credit work on investing, you're gonna you're gonna be fine

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Speaker 1: if you just buy things for a trade. But what's

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Speaker 1: going to cause it at this point, Well, we have

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Speaker 1: geopolitical issues and risks. We have great risks. Um, we

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Speaker 1: have political risks in our country. But the fundamentals are

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Speaker 1: still very strong. I mean, you look at second quarter

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Speaker 1: earnings coming out right in the middle of this, up

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Speaker 1: nine percent for the most part, seeing some very strong

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Speaker 1: stock response from companies that perform well and some very

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Speaker 1: poor performance of companies that don't. So what's good is

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Speaker 1: the market is trading on fundamentals of companies and that's rational. Rational, Okay,

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Speaker 1: that makes sense, I mean rational. You know what's rationalists?

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Speaker 1: You can actually it's like a little bit of art

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Speaker 1: and science to estimate the future value and a little

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Speaker 1: less so it's more just math when you're trying to

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Speaker 1: estimate future debt because you know you're always going to

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Speaker 1: have debt, right, that will always be with us. Thanks

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Speaker 1: very much, Cliff Marine. He is the Deputy Chief Investment

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Speaker 1: Officer for Mass Mutual Financial Group, helping to manage more

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Speaker 1: than a hundred and sixty billion dollars of assets. Well,

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Speaker 1: I want to turn our focus now to corporate bonds,

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Speaker 1: the electronic trading of them. We have seen a growing

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Speaker 1: prepared proportion of this. Traditionally over the counter market gravitate

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Speaker 1: towards these electronic trading systems. And here in the house

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Speaker 1: with us as Rick McVeigh, his chairman and chief executive

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Speaker 1: officer of Market Access, which is really the dominant in

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Speaker 1: investment grade corporate debt trading in the US electronically. And Rick,

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Speaker 1: I want to just talk about your company just reported earnings,

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Speaker 1: and one big question in the market right now is

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Speaker 1: the high yield bond market. Uh, this is a one

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Speaker 1: point three trillion dollar market in the US, and there's

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Speaker 1: a question of you know, how much can electronic systems

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Speaker 1: move into this area. There hasn't been as much penetration there,

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Speaker 1: So what's your plan and what's your view on that? Sure?

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Speaker 1: Thank you, Lisa. And the high yield market has been

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Speaker 1: slower to move electronic, but we have seen very good

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Speaker 1: growth over the last two or three years. So like

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Speaker 1: investment grade credit, there is an increasing trend toward more

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Speaker 1: electronic trading and yield. Can you give us a sense

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Speaker 1: of just the numbers with respect to how much of

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Speaker 1: the investment grade corporate debt market has traded electronically versus

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Speaker 1: the high yield market right now. Sure, I think if

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Speaker 1: you look at institutional investor trading, a little over twenty

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Speaker 1: of the US high grade market trades electronically and probably

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Speaker 1: a little less than ten percent of the high yield

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Speaker 1: market trades electronically. So it is earlier days in high yield.

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Speaker 1: But we are optimistic about growth in high yield for

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Speaker 1: two reasons. One, as we have moved towards all to

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Speaker 1: all trading, we're finding more connections that create matching opportunities

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Speaker 1: in high yield. And when we do the transaction cost

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Speaker 1: savings average about a quarter point in those trades, So

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Speaker 1: as investors experience those savings, they're trading more high yield

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Speaker 1: on the platform. Just to be clear, all too all

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Speaker 1: is opening up the system to anyone on either side,

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Speaker 1: So it could be an investment investment firm or a

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Speaker 1: dealer that is making an offer and creating that liquidity

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Speaker 1: and looking to buy on the other side. So um

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Speaker 1: with respect to those numbers of US investment grade corporate

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Speaker 1: bonds traded electronically in less than temper cent and HIG yield.

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Speaker 1: Where do you expect that proportion to go, say, in

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Speaker 1: the next five years. I think the growth and electronic

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Speaker 1: trading will continue. And if we are at the beginning

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Speaker 1: of a movement by central banks to reduce monetary stimulus

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Speaker 1: around the world and rates start to rise, I would

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Speaker 1: be even more optimistic about the growth and electronic trading. Uh.

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Speaker 1: There are many benefits for both dealers and investors, especially

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Speaker 1: as we are connecting global institutional participants into one central

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Speaker 1: electronic marketplace. Investors and dealers are seeing more trading opportunities

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Speaker 1: than ever before, transaction costs are coming down, and importantly,

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Speaker 1: liquidity risk in the system is being reduced. And I

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Speaker 1: think those three key drivers will continue their growth rate

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Speaker 1: in electronic trading and we will see a material increase

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Speaker 1: over the next five years. So you're not going to

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Speaker 1: put a number on it, well it uh, you know

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Speaker 1: they I think the direction of travel is very clear.

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Speaker 1: It's hard to know exactly what the adoption rates will be,

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Speaker 1: but I do think that if the market direction reverses

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Speaker 1: and we are seeing higher rates and mutual funds are

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Speaker 1: experiencing outflows, that is the time where our trading system

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Speaker 1: and other central marketplaces will show the most value, because

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Speaker 1: that's the time when the secondary market really becomes the

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Speaker 1: focus and people need liquidity from a variety of different

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Speaker 1: sources to manage those outflows. Just uh, you remember, of course,

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Speaker 1: the high yield uh, the collateralized more real estate, collateralized

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Speaker 1: loan obligations, all the debacle of the housing crisis, uh,

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Speaker 1: much of which was funded by loans that seemingly have

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Speaker 1: been written in the first place. And wondering if you

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Speaker 1: could tell us what's what's the bond market equivalent of

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Speaker 1: a collapse today and what is the equivalent of what

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Speaker 1: would that do if it was the stock market? And

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Speaker 1: we know what happens when the stock market crashes. Shareholders

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Speaker 1: lose their money. But when bond holders lose their money,

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Speaker 1: the first thing they do is they call the lawyer.

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Speaker 1: And and well, I mean, and it's and this is

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Speaker 1: the way the game is played. Yes, So I'm wondering

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Speaker 1: if you could just comment on that. Sure, Well, I

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Speaker 1: think we're in a totally different environment today than we

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Speaker 1: were in oh seven, where uh there clearly had been

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Speaker 1: an excess of leverage built up in the credit markets

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Speaker 1: and structuring UH had grown beyond UH any normal level

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Speaker 1: that really led to the collapse afterwards. Student debt doesn't

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Speaker 1: count well. Student debt is is an issue, right, And

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Speaker 1: what has happened as central banks have pushed rates closer

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Speaker 1: and closer to zero is investors have been reaching for

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Speaker 1: yield and taking on more. But what's going the other way? Right? Well,

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Speaker 1: I think it's we are in the early days of

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Speaker 1: potentially going the other way. You're seeing central banks talking

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Speaker 1: about reducing their balance sheet holdings of bonds, but we're

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Speaker 1: raising interest rates. That's I mean, we we just got

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Speaker 1: the FED. I mean, that's clear that they're going to

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Speaker 1: raise well. And and actually, Rick the point that you're

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Speaker 1: making earlier about how if there is an increase in

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Speaker 1: interest rates, or if there is a dislocation, albeit perhaps

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Speaker 1: not as severe as in the credit crisis, that there

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Speaker 1: will be more electronic adoption, which I thought was a

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Speaker 1: fascinating point. And I'm wondering. You know, some people would

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Speaker 1: argue that right now we're already seeing an electronic revolution

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Speaker 1: through e t f s, and that people are simply

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Speaker 1: trading e t F shares shares of UH, these exchange

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Speaker 1: traded funds that own baskets of debt instead of trading

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Speaker 1: the underlying debt. How has the adoption of e t

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Speaker 1: F s and the trading and their shares affected the

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Speaker 1: business of actually trading the underlying debt on electronic systems. Well,

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Speaker 1: it's it's kind of interesting, right, because the e t

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Speaker 1: F business has grown UH significantly as you point out,

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Speaker 1: and is becoming a more and more important part of

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Speaker 1: the overall market as it's a highly efficient way for

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Speaker 1: people to invest in fixed income. So along with that

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Speaker 1: growth in credit, we are also seeing the highest levels

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Speaker 1: of trace volume ever UH and the traces the bond

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Speaker 1: pricing reporting system that is kept by FINRA, so it

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Speaker 1: sort of shows the volumes secondary market volume. So there

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Speaker 1: are two things going on there. One is that is

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Speaker 1: the direction to travel with the e t F business

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Speaker 1: that you point out. Secondly, low rates have led to

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Speaker 1: a a significant increase in corporate debt outstanding in the

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Speaker 1: in the US markets and in fact the global markets,

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Speaker 1: so we're seeing market volume in corporate bonds and e

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Speaker 1: t F growth go hand in hand. It's also been

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Speaker 1: an important component of our growth because et F trading

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Speaker 1: is all about efficiency in scale and so most of

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Speaker 1: that business gets done electronically, so it's been a good

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Speaker 1: thing for market Access and electronic trading, not just with

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Speaker 1: the e t F fund managers, but also with the

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Speaker 1: community of market makers and a p S that's surround

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Speaker 1: the the e t F business. I want to thank

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Speaker 1: you very much for coming in and spending time with us.

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Speaker 1: So Rick McVeigh, thank you. Thank you for having a

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Speaker 1: chairman and the chief executive of market Access. One stock.

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Speaker 1: I am watching today Verizon biggest gain in eight years

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Speaker 1: and this shares up almost six percent after reporting earnings

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Speaker 1: that blew estimates out of the water. To get a

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Speaker 1: sense of just how good they were and how long

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Speaker 1: this can last, I want to bring in our own

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Speaker 1: John Butler, senior Telecom Services and Equipment analyst for Bloomberg Intelligence. John,

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Speaker 1: what stood out to the most about THESA earning? The

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Speaker 1: thing that hit me the most were subscriber editions. Um.

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Speaker 1: You know, this is a company that quarter and in

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Speaker 1: quarter out for I'm going to say the last six quarters,

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Speaker 1: they've been bleeding subscribers, and UM, I think if you

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Speaker 1: look at the rise in their whole tack, their whole

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Speaker 1: approach to the market has been and kind of remains

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Speaker 1: the same. They're sort of the premium price provider in

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Speaker 1: a market that is very price competitive. In other words,

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Speaker 1: they charge more, They charge more than everybody else. They say,

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Speaker 1: all right, we offer you something better, but we're going

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Speaker 1: to charge you more, and everybody says, forget you right.

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Speaker 1: And so the big change for Verizon came in February.

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Speaker 1: They came out with an unlimited plan and it made

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Speaker 1: all the difference in the world. But interestingly, and I'll

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Speaker 1: let you continue, I'll stop interrupting you, but I thought

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Speaker 1: it was super interesting how much revenue are they giving

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Speaker 1: up by lowering their price because their their actual income

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Speaker 1: was in line with expectations, even though they blew the

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Speaker 1: subscriber increase out of the water. Yeah, there is a ice.

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Speaker 1: And speaking of prices, you could see it in their

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Speaker 1: average prices, which where you know, they declined more year

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Speaker 1: on year than they did in the first quarter, and

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Speaker 1: so suddenly you're seeing that immediate pressure on price. Um.

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Speaker 1: But you know, in their mind, do you continue to

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Speaker 1: give up subscribers that potentially could have a very long

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Speaker 1: life to them? Where do you want to give up

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Speaker 1: a little bit on price? And then focus on where

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Speaker 1: you're headed in the future for them, as we know

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Speaker 1: the future lies in A O L, Yahoo and five G.

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Speaker 1: John Lowell McAdam is the chairman of the chief chief executive.

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Speaker 1: What's his strategy because and I don't mean for the company,

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Speaker 1: I mean for him for himself, because I mean, you know,

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Speaker 1: his compensation is tied to performance of not only the

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Speaker 1: company but the stock. And as to Lisa's point, I

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Speaker 1: can sell you everything. If I'm losing money or if

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Speaker 1: I'm undercutting my competitors, are they taking a page out

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Speaker 1: of the airline industry book? Now? I don't think so, Pam.

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Speaker 1: I think they really had to make this move to

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Speaker 1: unlimited or ultimately you're just standing alone in the market

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Speaker 1: as a shared donor quarter and in quarter out, and

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Speaker 1: that can't go on. You know, particularly with Verizon, they

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Speaker 1: really needed to protect that subscriber base. So in terms

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Speaker 1: of what law is doing in the short term, the

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Speaker 1: move to unlimited, building out the network, getting it ready

433
00:25:34,040 --> 00:25:37,080
Speaker 1: for five G, I think he's making the right moves there.

434
00:25:38,080 --> 00:25:41,439
Speaker 1: In terms of a true long term strategy moving into

435
00:25:41,480 --> 00:25:45,080
Speaker 1: adjacent markets, I think A T and T has a

436
00:25:45,160 --> 00:25:49,000
Speaker 1: better bet and we've talked about that in prior prior

437
00:25:49,119 --> 00:25:53,600
Speaker 1: discussions how a T and T is really looked at

438
00:25:53,640 --> 00:25:58,640
Speaker 1: the core market and wireless, it's commoditized, but content hasn't.

439
00:25:58,760 --> 00:26:00,960
Speaker 1: And so if you move into that market and you

440
00:26:01,560 --> 00:26:04,879
Speaker 1: begin to pull it into the wireless world, you really

441
00:26:04,920 --> 00:26:08,719
Speaker 1: add value and ultimately you regain control over pricing. I

442
00:26:08,760 --> 00:26:11,920
Speaker 1: think I was interested in the fact that they also

443
00:26:12,040 --> 00:26:16,919
Speaker 1: lost fewer subscribers in the landline side on the cable side,

444
00:26:16,960 --> 00:26:19,840
Speaker 1: and I'm wondering how they managed that. Were they also

445
00:26:19,880 --> 00:26:23,000
Speaker 1: lowering prices there? They didn't. It didn't really come up.

446
00:26:23,119 --> 00:26:26,560
Speaker 1: So I don't have a good answer. That's fine, It's

447
00:26:26,560 --> 00:26:29,159
Speaker 1: just I'm just interested in how they all around what

448
00:26:29,200 --> 00:26:31,960
Speaker 1: they got asked about there, which was a good question,

449
00:26:32,160 --> 00:26:35,400
Speaker 1: is what are you going to do longer term about

450
00:26:35,760 --> 00:26:38,680
Speaker 1: um over the top media? So a lot of people

451
00:26:38,720 --> 00:26:43,800
Speaker 1: are snipping their cord or cutting out cable altogether and

452
00:26:43,880 --> 00:26:47,280
Speaker 1: just relying on Netflix and Hulu. And do you know

453
00:26:47,440 --> 00:26:50,600
Speaker 1: anyone under the age of I don't know, pick something

454
00:26:50,640 --> 00:26:54,719
Speaker 1: that's younger than me, which is everything, thank you. You know,

455
00:26:54,880 --> 00:26:58,120
Speaker 1: anybody that is going out and getting the cable company

456
00:26:58,200 --> 00:27:02,399
Speaker 1: to come out and install cable pay the full freight

457
00:27:02,480 --> 00:27:05,159
Speaker 1: for all of that. I did Pim but thank you.

458
00:27:05,280 --> 00:27:08,159
Speaker 1: You fall into the same category. I did too, but

459
00:27:08,240 --> 00:27:10,040
Speaker 1: this was a couple of years. But my point, my

460
00:27:10,080 --> 00:27:13,000
Speaker 1: point is who's no is anybo? Is there any growth

461
00:27:13,080 --> 00:27:16,600
Speaker 1: in people getting came? No? Right, there isn't, And you're

462
00:27:16,640 --> 00:27:19,760
Speaker 1: on the right track there, And I think A T

463
00:27:19,880 --> 00:27:22,359
Speaker 1: and T is too. They have direct TV now, which

464
00:27:22,400 --> 00:27:26,240
Speaker 1: is basically a cable package that can get delivered over

465
00:27:26,320 --> 00:27:28,919
Speaker 1: your phone, so they're sort of applying to that younger

466
00:27:28,960 --> 00:27:37,040
Speaker 1: demographic with that while protecting that pay TV business for Verizon. Um. Again, Leasa,

467
00:27:37,119 --> 00:27:39,280
Speaker 1: I haven't looked closely at the five US numbers. I

468
00:27:39,320 --> 00:27:43,320
Speaker 1: believe they lost or TV declined year on your while

469
00:27:43,320 --> 00:27:47,400
Speaker 1: the broadband internet side of wireline grew, so net net

470
00:27:47,480 --> 00:27:51,040
Speaker 1: you have growth in that division, um, and really you

471
00:27:51,160 --> 00:27:54,760
Speaker 1: see that trend across the whole sector. Broadband is growing,

472
00:27:55,400 --> 00:27:58,880
Speaker 1: people are trading up to faster connections and paying more

473
00:27:59,000 --> 00:28:02,040
Speaker 1: for it, but the TV is sort of ailing at

474
00:28:02,080 --> 00:28:04,680
Speaker 1: the hands of the internet. Well, but that's what's driving

475
00:28:04,840 --> 00:28:09,000
Speaker 1: the growth in subscribers at Verizon is because they want

476
00:28:09,000 --> 00:28:12,360
Speaker 1: to watch video on their phone, right, So they've got

477
00:28:12,359 --> 00:28:14,560
Speaker 1: the great network and you know, they pump it out,

478
00:28:14,680 --> 00:28:17,400
Speaker 1: so it's sort of an intra segment trade if you will.

479
00:28:17,520 --> 00:28:20,600
Speaker 1: So people are migrating I believe a bit from TV

480
00:28:20,760 --> 00:28:24,639
Speaker 1: to internet, but also again separate from that, you do

481
00:28:24,720 --> 00:28:27,120
Speaker 1: get a trade up effect to higher speed. I want

482
00:28:27,160 --> 00:28:29,680
Speaker 1: to offer up a mad culpa because I've been really

483
00:28:29,680 --> 00:28:33,480
Speaker 1: skeptical about Verizon in my role as a debt columnist,

484
00:28:33,720 --> 00:28:36,280
Speaker 1: and they have a hundred and ten billion dollars of debt.

485
00:28:36,320 --> 00:28:40,080
Speaker 1: They've been packing it on and uh there's been almost

486
00:28:40,120 --> 00:28:42,320
Speaker 1: five percent of it in well, and so it's been

487
00:28:42,320 --> 00:28:45,520
Speaker 1: a big concern if they can't, if they keep bleeding customers,

488
00:28:45,920 --> 00:28:47,720
Speaker 1: how are they going to be able to pay this back?

489
00:28:47,800 --> 00:28:49,960
Speaker 1: So you know, I'm watching the bonds closely today and

490
00:28:49,960 --> 00:28:51,480
Speaker 1: they're not showing the same kind of pop, but I

491
00:28:51,480 --> 00:28:53,320
Speaker 1: think it's kind of interesting area to watch. And just

492
00:28:53,360 --> 00:28:55,920
Speaker 1: to put it into a well that goes back to

493
00:28:56,000 --> 00:29:01,000
Speaker 1: protecting this subscriber base, really is if you suffered too

494
00:29:01,080 --> 00:29:06,280
Speaker 1: much attrition, suddenly perhaps the dividend becomes at least something

495
00:29:06,280 --> 00:29:09,080
Speaker 1: you talk about on a conference call. Yeah, just to

496
00:29:09,120 --> 00:29:11,800
Speaker 1: tell you that the shares of Horizon are up six

497
00:29:12,040 --> 00:29:14,960
Speaker 1: percent right now, though they're down eleven percent so far

498
00:29:15,280 --> 00:29:24,200
Speaker 1: this year. Thanks for listening to the Bloomberg pien L Podcast.

499
00:29:24,560 --> 00:29:28,360
Speaker 1: You can subscribe and listen to interviews at iTunes, SoundCloud,

500
00:29:28,560 --> 00:29:32,760
Speaker 1: or whatever podcast platform you prefer. I'm pim Fox. I'm

501
00:29:32,760 --> 00:29:35,680
Speaker 1: out there on Twitter at pim Fox. I'm out there

502
00:29:35,720 --> 00:29:39,000
Speaker 1: on Twitter at Lisa Abramo. It's one before the podcast.

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00:29:39,040 --> 00:29:41,760
Speaker 1: You can always catch us worldwide on Bloomberg Radio