Verizon Communications Stock

Good morning, and welcome to Verizon's Third Quarter 2026 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded.

I would now like to turn the call over to Colleen Ostrowski, Senior Vice President, Treasurer and Head of Investor Relations.

Thanks, Brad. Good morning, and welcome to our third quarter 2026 earnings call. I'm Colleen Ostrowski, and on the call with me this morning are our Chief Executive Officer, Dan Schulman; and Tony Skiadas, our CFO. .

Before we begin, I'd like to point you to our safe harbor statement, which can be found in the earnings presentation and on our Investor Relations website. Our comments this morning may include forward-looking statements, which are subject to risks and uncertainties. Factors that may affect future results are discussed in our SEC filings.

This presentation also contains non-GAAP financial measures, and you can find reconciliations of these measures in the materials on our website.

With that, I'll turn it over to Dan.

Thank you, Colleen, and good morning, everyone. Thanks for joining us. It's been just over a year since I had the privilege to become the CEO of Verizon. As I reflect on the past 12 months, I'm incredibly proud of the Verizon team. We made bold decisions, we dramatically turned up our collective intensity, we put our customers front and center, and we vowed to reclaim our market leadership and play to win. We have accomplished a lot, and today's Verizon is in a fundamentally better position operationally, financially and competitively.

Q3 was another proof point that this is a structurally different Verizon. Our transformation has taken root and our results show it. In the third quarter, we delivered significantly improved performance across almost all of our key metrics. Our postpaid phone net additions were up 820% year-over-year to 406,000, our strongest Q3 in 5 years. Importantly, we also delivered 137,000 postpaid net account additions, our best quarterly net account performance in over a decade.

This is growth that pays. Every new line we added delivered revenue. There were no free lines. We now expect our postpaid phone net adds for 2026 to be 1.1 million to 1.2 million, more than 3x last year's result.

Overall, postpaid phone churn was 94 basis points, an improvement of 4 basis points year-over-year, while consumer postpaid phone churn was 87 basis points, also down 4 basis points from last year.

Year-over-year, our Q3 promotional cost of acquisition and retention once again declined, acquisition by 41% and retention by 30%.

In broadband, we delivered 314,000 net adds, and our mix is continuing to shift towards fiber, which now makes up nearly half of our broadband net adds. That is a deliberate choice we have made. Putting customers at the center of every decision we make has changed how we go to market and what we are willing to sell. Our operating philosophy is to deliver the connectivity experience that each customer segment demands, not simply the network and technologies we happen to have available.

Between fiber and FWA, we have the assets to deliver great value in broadband. But it also demands a more sophisticated, segmented approach to FWA. Where we can't deliver the speed a particular segment of customers expect from Verizon, we won't sell it. We began to implement that philosophy earlier this quarter. And as I told the team, we should never drive for a net add metric that runs counter to our customer-first philosophy.

I'm very proud that our product and network teams have responded to our customers' need for greater FWA speed. Using our millimeter wave spectrum, we have developed an innovative solution that will enable us to deliver a 1 gig FWA product in metro areas across the country, complementing our fiber belts. Over the medium term, it is our goal to substantially increase the number of premises we can serve with 1 gig of speed by an incremental 10 million to 15 million through FWA, and that is over and above our 40 million to 50 million fiber build. We will begin to scale our new high-speed FWA service beginning this quarter and throughout 2027 and beyond in order to deploy the enhanced capabilities and performance our customers expect from us.

Our 1,700 megahertz of millimeter wave spectrum has suddenly become a differentiated and competitive advantage. And it also has a dual benefit in that it will create substantial incremental efficiencies and capacity in our existing C-band spectrum. This is a technological breakthrough for us, with significant positive implications.

In addition to strong operational metrics, we also had a strong quarter from a financial perspective. Mobility and broadband service revenue grew 2.9%, a further improvement from the 2.8% we delivered in Q2 and the 1.6% we delivered in Q1. More importantly, we expect that Q4 mobility and broadband service revenue growth will accelerate to approximately 4%. Wireless service revenue once again improved sequentially, and we expect to see year-over-year growth in Q4.

Our Q3 adjusted EPS of $1.31 grew 8% year-over-year, and we now expect our 2026 full year adjusted EPS growth to be 7% to 7.5%, up from our previous range of 6% to 7%.

Free cash flow of $7.8 billion was our highest quarterly free cash flow since 2020, growing more than 12% year-over-year in Q3. Consequently, we are raising our full year guidance for free cash flow growth to approach 12%, up from our previous guidance of 9% to 10%. We anticipate our full year free cash flow will also be our highest total since 2020.

To summarize, this quarter, we delivered our strongest third quarter line and account growth in years at our lowest cost to acquire and retain in more than 3 years. Our mobility and broadband service revenue growth continues to accelerate, and our free cash flow and adjusted EPS continue to grow. This is high-quality growth delivered in a fiscally responsible manner. We are not buying customers. We are winning them on revenue-positive terms and keeping them longer.

When you compound stronger net adds with net account growth, sequential [ ARPA ] growth, structurally lower churn and healthier unit economics, you get exactly the kind of operating leverage you're seeing in our adjusted EBITDA, adjusted EPS and free cash flow this quarter and in our raised full year guidance.

Let me spend a moment on a few key strategic initiatives. First, the customer value proposition we launched in mid-June continues to deliver beyond our expectations. Simplicity, Verizon One and our loyalty program are resonating with our customers. Our loyalty program enrollment is scaling quickly across our base, and the customer feedback data, whether it be Net Promoter Score, overall customer satisfaction, or first call resolution is moving in the right direction on every dimension we track. All of our extensive efforts to focus on the end-to-end customer experience are paying off and showing up in our year-over-year improvements in our churn rate, our increasing postpaid phone net adds and accounts, and the simultaneous reduction in our cost to acquire and retain customers. This is a fundamentally different financial and operational model than in years past.

Second, convergence continues to compound. Our Frontier integration remains ahead of plan. Postpaid phone customers are attaching our broadband solutions, and our broadband customers are attaching postpaid phone service, with both cohorts churning materially less than single product customers. And we are seeing over 55% of our new fiber broadband customers take 1 gig or more download speeds, driving significant incremental ARPA and customer satisfaction.

In Q3, our overall broadband ARPU increased year-over-year. We continue to anticipate our fiber passings will exceed 32 million by year-end. And over the medium term, we remain on track to deliver 40 million to 50 million fiber passings, with an incremental 10 million to 15 million premises covered by our new high-speed FWA technology. Our goal is to have the largest footprint in the country of premises covered with at least 1 gig of download speeds.

Third, our transformation program is on track, and it is delivering results earlier than we initially expected. The 10 transformation work streams we launched earlier in the year are producing tangible improvements for customers and meaningful cost reductions across the business. Our $9 billion cost reduction plan across our OpEx and CapEx remains fully on track, and the operating leverage in this quarter results reflects the pace at which those savings are showing up. We are increasingly running our transformation through our newly completed AI tech stack for applications that help us better serve customers, increase our network performance and drive cost reductions and productivity increases.

Fourth, our network performance continues to improve. Customers notice and they are voting with their wallets by staying. The spectrum we won in the AWS 3 auction is already enhancing our network, and it will enable us to further improve our capabilities and performance in key metro areas as we continue to deploy it.

Finally, AI infrastructure is becoming a real growth driver for Verizon. Today, we announced that we have signed a dark fiber agreement with Amazon Web Services valued at over $2 billion, building on the Google agreement we announced last quarter. These 2 contracts are a clear signal that the largest builders of AI infrastructure in the world are choosing Verizon as a strategic connectivity partner. We now have an active pipeline of additional hyperscalers, neocloud providers and large enterprise clients we are in negotiations to have us supply them with either dark or lit fiber connectivity.

I'm also pleased to report that we are seeing momentum with numerous partners to use our network hubs for AI inference edge computing. And that momentum is already turning into signed deals. Our first long-term contracts are expected to generate hundreds of millions of dollars in revenue over their term. We now have signed contracts for approximately $4 billion. And based on the demand we are seeing, we expect both our fiber and edge computing to add meaningfully to our future growth.

All of these revenues come with attractive margins, and we will begin to see their impact in 2027. These are long-duration contracts with high-quality counterparties that leverage our fiber capabilities and existing real estate assets. The incremental capital required to deliver against these agreements is modest and success-based and tied to defined contracts.

And we've locked in the fiber to deliver. Last month, we announced a multiyear, multibillion dollar agreement with Corning for more than 80 million miles of fiber through 2032, supporting both our fiber broadband expansion and the long-haul backbone that AI hyperscalers need. Taken together, this opportunity significantly extends our addressable market, our revenues and our profits. And we will talk about how it helps to drive our 2027 growth on our next earnings call.

In the past year, we have delivered on our promises and raised the bar every single quarter. Given the strength of the third quarter and our visibility into the fourth, we are raising our annual guidance for postpaid phone net adds, adjusted EPS and free cash flow. And we now expect mobility and broadband service revenue growth to be in the upper half of our 2.5% to 3% range.

We are growing the right way through healthier customer relationships, stronger network performance, disciplined execution, lower costs with revenue-positive net adds and now account growth. In many ways, we have redefined how we compete with a new business model for the mobile industry. When we put our customers front and center, the aperture for growth at Verizon opens substantially.

We believe that the momentum we are seeing in Q3 will continue. Our leading indicators: churn, net adds, customer satisfaction, network performance, broadband cross-sell, cost-out execution and our hyperscaler pipeline all point in the same positive direction.

This is a multiyear story, and we are just getting started. We have not yet captured the full multiyear benefit of the $9 billion cost transformation. We have not yet fully scaled our new consumer value proposition. We have not yet begun to recognize significant revenue from our AI Connect business. And we have meaningful additional capacity to return capital to shareholders through both our growing dividend and incremental buybacks. Each of those is a tailwind into 2027, and we look forward to sharing our 2027 outlook with you at our next earnings call.

I'd like to thank all of our employees. Your efforts to satisfy our customers are inspiring. The customer-first mindset, the operational rigor and the urgency you are bringing every day, that is what is showing up in our results.

And to our shareholders, we are hyper-focused on earning your confidence with continued execution. Over the past year, we have delivered a step-function improvement in our competitive positioning and our financial profile. And we believe the trajectory from here is even more compelling.

And with that, let me turn the call over to Tony.

Thanks, Dan, and good morning. Our third quarter represents another key milestone in our transformation as we continue to see the benefits from our efforts reflected in our operational and financial results. This starts with our significantly improved performance in both postpaid phone and postpaid account net adds. Growing both lines and accounts is important to us, and we delivered our best account growth in over a decade.

Postpaid phone net adds are almost 900,000 better than in the same period last year, with broad-based improvement across our Consumer and Business segments. This gives us significant flexibility to deliver on our increased guidance of 1.1 million to 1.2 million postpaid phone net adds for the full year, and do it in a fiscally responsible manner. Continuing our momentum from the third quarter, we also expect to have positive account growth in the fourth quarter.

Our investments in the customer experience and innovation are working. Customers love our Simplicity plan. We are writing high-quality business, and we're pleased with how it's driving both account and [ phone gross ] adds. This successful launch delivered 266,000 consumer postpaid phone net adds in the period. This represents our best third quarter performance in 5 years.

The strong uptake of Simplicity enable us to accelerate our plan for volume growth in a meaningfully more cost-effective way compared to the more seasonally aggressive offers that we've historically relied on. In fact, our cost of acquisition in the third quarter declined 41% year-over-year. The subsidy-free, flexible and transparent nature of Simplicity has allowed us to win customers in a financially disciplined manner.

We are also winning across customer groups where we have historically under-indexed. We also had solid performance in mobility for Business with 140,000 net adds in the period. Enterprise and small Business customers continue to have strong demand in the period, and we returned to growth in the public sector. Together with our lower cost of acquisition, we are reducing churn while spending less to win and keep customers.

For the second quarter in a row, we drove year-over-year improvements in retention with the overall cost of retention declining by 30%. Our continued focus on micro segmentation our disciplined approach to upgrades and our customer-first focus all contributed to this result. This approach contributed to lower third quarter upgrade volumes year-over-year and, consequently, lower equipment revenue. Notably, upgrade volumes were down over 20% from the prior year. Additionally, with the success of Simplicity and our focus on giving more choice to customers, we expect the trend of lower upgrades to continue in the fourth quarter.

In broadband, we continue to take share and we've now added over 1 million customers year-to-date. Similar to mobility, we're taking steps to improve the overall customer experience, including simplifying our fiber pricing. We are looking to compete more on our value proposition and less on promotions.

Our third quarter fiber net adds reflect sustained demand for our products while also driving towards better customer lifetime values and margin performance. Our fiber build is on track and we continue to expect to end the year with over 32 million fiber passings. We continue to see a shift in the net add mix between fiber and fixed wireless access. We are focused on growing our FWA base and further segmenting the market. We see opportunity to meet the rise of AI-based applications and are bringing gigabit speeds to more and more consumers and businesses. We are scaling our MDU program, which will enable us to deliver fiber-like speeds over an FWA connection.

Overall, our operational results continue to outpace our expectations. We are very pleased to have added nearly 1.7 million mobility plus broadband subscribers in the first 9 months of the year and are confident that we will finish 2026 strong.

The improvements in our volumes in the third quarter are reflected in our financial results. The benefits of providing better business and cost savings efforts continue to drive adjusted EPS growth and strong free cash flow generation. Additionally, in the quarter, we saw our mobility and broadband service revenue growth improve as volumes continue to scale and promo amortization headwinds moderate.

Total revenue for the third quarter was $34.3 billion, up 1.5% year-over-year. Similar to last quarter, mobility and broadband service revenue growth of 2.9% was offset by lower equipment revenue, which was down 9% from the prior year as we drove significantly lower upgrade volumes. Additionally, wireless service revenue was just over $20.9 billion. We continue to expect to return to wireless service revenue growth in the fourth quarter.

Our improving revenue profile and cost efficiency work continues to drive strong profitability. Our third quarter adjusted EBITDA was $13.8 billion, up 8% year-over-year. Our adjusted EBITDA margin of 40.2%, up 240 basis points year-over-year, is our highest reported and demonstrates the power of our business transformation. We saw improvements in both Consumer and Business as we continued to write profitable growth.

We are also continuing to make great progress on our $5 billion operating cost efficiency program and expect to meet our goal for this year. Our efforts on cost of acquisition and retention drove our lowest net equipment subsidy in 2 years. We are also making meaningful strides on network modernization, copper decommissioning and advertising and marketing spend to optimize our expense profile. As we look ahead to 2027, we expect to drive further efficiency gains in our cost structure. The Frontier integration is also on track to deliver over $1 billion in run rate operating cost synergies by 2028.

Our third quarter adjusted EPS of $1.31 was up 8.3% year-over-year and reflects our continued progress on profitable growth. We now expect adjusted EPS to grow 7% to 7.5% for the full year.

As mentioned, our cash flow generation remained very strong in the period. Cash flow from operations was $29.9 billion for the first 9 months of the year, up over $1.9 billion or nearly 7% year-over-year. We continue to benefit from working capital improvements due to our ongoing cost efficiency work as well as lower upgrades.

Capital expenditures were $11.9 billion through the end of the third quarter. We are on track to meet our full year guide of $16 billion to $16.5 billion inclusive of success-based capital related to AI Connect.

The net of these resulted in free cash flow of $18 billion, up 14.3% for the first 9 months of the year. We expect this to be an industry-leading result, and it represents both the strength of our year-to-date results and the operational momentum of the business. With this strong result and the underlying performance of the business, we are now raising our free cash flow guidance to approach 12% growth for the full year. The strength of our cash flow allows us to execute on all aspects of our capital allocation framework, which remains unchanged. Our first priority continues to be investing in the business, and we remain on track with our mobility and fiber builds. Further, customers are already realizing the network performance enhancements being delivered by the AWS 3 spectrum licenses we won during FCC Auction 113.

We've also continued to execute on our deleveraging plan in the period. Our net unsecured debt to consolidated adjusted EBITDA ratio at the end of the quarter was 2.3x, which represents a 0.2x improvement from the prior quarter. We remain on track to reach our target leverage range during the 2027 time frame.

Lastly, year-to-date, we've returned $12.8 billion of capital to shareholders, up 49% year-over-year. This includes $8.8 billion of dividends and $4 billion of share repurchases. We remain committed to growing the dividend and delivering enhanced returns to our shareholders through share repurchases. We continue to expect to repurchase up to $4.5 billion for the full year.

To summarize, our third quarter results demonstrate our continued progress in delivering for our customers and our shareholders. Our transformation continues to progress, and we have good momentum heading into the fourth quarter and beyond. We've added nearly 1.7 million mobility and broadband subscribers this year, a major improvement year-over-year. We're driving improved retention. We're drastically reducing our cost of acquisition and cost of retention. We're driving some of the best account growth we've seen in years, and we're doing all of this while producing record-high margins and strong free cash flow.

We continue to execute on all 4 pillars of our capital allocation framework, delivering improved shareholder returns, while investing in the business to ensure our network excellence. And we are well positioned to capture future growth opportunities, including within our AI Connect business.

Our plan is working, customers are responding positively, and we're driving meaningful returns for our shareholders. We're pleased with the progress we've made, and there's more to call. We are playing to win.

With that, I will now hand the call over to Colleen to take your questions.

Thank you, Tony. Brad, we are now ready to take questions. As a reminder, we would ask you to please limit yourself to one question. .

[Operator Instructions] And the first question will come from John Hodulik of UBS.

Can we talk about pricing and volumes in the postpaid market and continue with that commentary? It looks like you've got some nice momentum on the volume side, both from accounts and gross adds. Can that continue as we look out into '27? And can you talk about what's resonating with customers that you're seeing such strong demand?

And then on the pricing side, I think you guys have talked about some potential room for targeted price increases as churn came down. Can you just talk about your overall view on sort of pricing power in the industry?

John, it's Dan. We obviously had a good strong quarter on both lines and accounts. That's the first time we've had that kind of account growth in over a decade. But the thing that I'm most proud about in the quarter is kind of the way that we did it. I always tell the team that our business model is a multivariable equation, that solving for just one variable is insufficient and it's not acceptable. And net adds are easy if your cost of acquisition goes way up and you give away free lines.

I don't consider free lines to even be net adds. I think they're churn waiting to happen. And this quarter, if we operated in the same way that we did a year ago, we could do multiple hundreds of thousands more net adds, if you give away free lines and free phones. That's why I'm so proud of the Q3 results, because not only were our postpaid net adds up 9-fold from last year -- in fact, when we presented that to the Board, they questioned whether that was a typo or not. And our postpaid net accounts, best in a decade.

But the quality of all those were exactly what we wanted. No free lines. Every single line and account came with revenue. And the cost to acquire those net accounts and net lines were down 41%. Postpaid churn continues to come down, it's down 4 points. I think we can continue to do year-over-year declines as I look ahead and I think we can even do better than where we are. But cost of retention was also down 30%. And if you remember, last year, churn rose every single quarter.

And I said a year ago that we were no longer going to be prey, that we were going to stop losing market share, and that was true this quarter. And we did all of that in what I think was a very fiscally responsible manner. I mean we're competing the right way to win in the market. We aren't competing on promotions or free phones or subsidies, which, by the way, to me, gives no one in the market any competitive advantage. Anybody launches something against us, we can respond in 2 hours. And if somebody tries to hit us, we hit back harder. There's no competitive advantage gained.

The way to gain competitive advantage is to make sure that you look at your overall end-to-end customer experience, your value proposition, the strength of your network. Because there, you can create sustainable and lasting competitive advantage. And clearly, our value proposition is resonating with our customers. Simplicity, Verizon One, our loyalty plan, as Tony said in his remarks, our customers love it, and we're seeing it in all of our results.

What I really like about it is for that segment of the market, it's ARPA accretive. And as we look ahead, we expect to see net account growth in Q4 as well.

In terms of pricing, I've always said like, I'm not against taking up pricing as long as we add value to that. In the past, we took up pricing without adding any value to customers. And eventually, that comes back to haunt you. Your churn starts to go up, you lose the trust of your customers. We've added a tremendous amount of value in the last year, and there's potentially room for us to adjust that price-to-value equation by increasing pricing as well. I think we're in a place where we can start to think about that.

John, just to add a couple of things. Our gross adds were up 11% in the quarter, and that's driven by new to Verizon. And Simplicity being subsidy-free and transparent for customers, as Dan mentioned, allowed us to win a fiscally responsible way. And across segments where we've under-indexed, for example, in single-line and 2-line accounts, we performed extremely well.

And we also delivered very strong margins in the quarter as well. Our EBITDA margin was over 40%, 40.2%, and our reported EBITDA was the highest that we've reported. So we're really proud of that and doing it in a responsible way.

The next question comes from Frank Louthan of Raymond James.

And we've had no response from Frank. We'll move on to Michael Ng of Goldman Sachs.

I just had 2 on Verizon AI Connect. First, great to see the momentum in that business. Could you talk a little bit more about the pipeline and the opportunity for the future hyperscale and neocloud deals that you talked about in prepared remarks for both distributed compute, but also edge?

And then second, anything you could share as it relates to the details of these deals? For instance, how long are the typical deal wins? And anything you could share as it relates to the expected cash margins?

Yes, Mike. I'll start off and then maybe Tony can add. I guess the way I would put it is AI Connect is a real business for us and a tremendous opportunity, and we're seeing that momentum. Customer demand across dark fiber, lit fiber or edge compute locations is exceptionally strong. I mean, obviously, it represents a significant growth opportunity for us and a large new and it's a rapidly growing TAM for us, addressable market.

As I mentioned, we already have approximately $4 billion of signed deals, and we're just getting started on that. And that includes hundreds of millions of dollars of revenues from our edge computing locations, and we're just scratching the surface there. Obviously, with the explosion of agents right now, the need for distributed inference computing, move from GPUs to CPUs, like the assets we have for that edge computing are exactly in the right place, and we're seeing a ton of demand for what are scarce assets.

From a financial point of view, these revenues come with attractive margins because of the demand and the scarcity of that, and we will begin to see their impact in 2027. There's no change to our 2026 CapEx envelope. And as I said in my remarks, we'll see some modest success-based CapEx associated with AI Connect in 2027.

We are clearly an attractive option and partner for the most demanding of customers. We know how to build networks. We have assets in place. We are amongst, if not the best-in-class, in terms of service and performance. We have a solid balance sheet. And we now have plenty of supply because fiber itself is a scarce commodity as well. We're obviously really pleased to be partnering with Google and Amazon and others. And this is going to be an exciting new growth vector for us over the years to come.

Yes. And just to add to that, on your question on the deals themselves, the deals are very customer specific. So no 2 deals are alike. So it's very much to customer specifications. As Dan mentioned, we're very happy with the Amazon deal that we announced this morning.

And on the Google deal, we've already -- we're already processing orders for fiber, so we're moving along there. And as Dan mentioned, these are very good margin deals for us, and they'll start layering into the results in 2027. And it's growth on top of our core business as well, which is really important for us, and we're really excited about the potential.

The next question will come from Michael Rollins of Citi.

So I'm curious if you could discuss your latest thoughts on the potential impacts from a possible LEO and Starlink entry into the core mobile business. And if there's any developments on how you're looking at strategic alliances with LEO constellations in the category and whether or not you would offer an MVNO to LEO constellations, including Starlink.

Mike, I'll take that. First of all, I appreciate the question and the concern. I'll just start off by saying my operating philosophy in general is to be very thoughtful, the analytic and to never take anything for granted. I always have my eyes wide open. Clearly, the tech and the wireless landscape is rapidly evolving, and we need to rapidly evolve along with that.

That's why I've been so demanding from everyone at Verizon. I mean I just don't want us to get incrementally better. I want us to leapfrog, I want us to think about not improving by 10%, which is great, but that we improve by 10x. How do we do that in months, not years? And I'm pushing hard on everyone. So that we can shape the market and not react to it. And I want to be sure that we're always in a position to play to win.

I also operate under the assumption that everything SpaceX says they will do, they will do, and that they will execute flawlessly. That's my operating assumption on it. I think assume anything else makes no sense from my perspective. And everything that we've seen so far, all of their announcements, everything we're hearing in the market, and I'll talk about that in just a second, is, so far, the path that we've basically predicted that they would do. We always knew that they needed a terrestrial network to have any chance at providing a competitive service. I don't really need to rereview the satellite beam physics, but just suffice it to say that without a terrestrial network, their addressable market for broadband services is relatively small. It's in very rural areas. And their service just can't compete with the terrestrial network. In suburban and urban areas where like 98% of our revenues are, we're somewhere between 100 to 1,000 times more efficient than they are. And when you think about wireless, it's even more difficult with them to compete on a satellite basis.

So I think that SpaceX realizes this, and they're exploring a potential path to creating a terrestrial network. It's not surprising. They said it on their call. So I think we should take it quite seriously. And from what we see and what we hear in the market, because there are no secrets in the market, we know exactly what they're going to do. We know what their RFIs are. We know who they're talking to on towers. We know who they're talking to put terrestrial equipment in place. Like inside the industry, we know exactly what they're thinking about doing it.

And if they build a terrestrial network, it will basically look and feel like every other network, right? There's no magic wand. There's no secret sauce. There's no shortcut. There's no radically lower structural cost advantage. If they build one, they're going to look at 65,000 to 80,000 macro sites. They're going to need backhaul, some combination of fiber and maybe some satellite. They're going to need RAN. They're going to need a tremendous amount of spectrum. And assuming that's the case and assuming they try to go do that, it's going to take a minimum of 4 to 6 years to fully build that out. It's going to cost hundreds and hundreds of billions of dollars, I assume somewhere between $300 billion and $0.5 trillion over the next, like, 7 or 8 years. And then they need to build retail, customer service, back-office systems, et cetera. And all of that gets them basically the same network and saving capabilities and same cost structure as what we have today.

And then sometime over the next 4 to 6 years, they have the possibility of becoming the sixth, not the fourth, the sixth competitor in the market. And frankly, at that point, welcome the opportunity to compete against them. It's very hard to throw a punch against something that doesn't exist. But once they come into the market, we will be ferociously competitive.

We already have America's best network in terms of coverage, performance and reliability. We already compete against 3. I mean 2 of our competitors out there offer free wireless service, and we are not only competing extremely well, but we're now holding share and beginning to gain share. And you can sure, over these next 3 to 5 years or 6 years, we're not going to be standing still.

I mean 4 to 5 years from now, we will be 2 to 3 generations better than where we are today. We'll have high-speed broadband, gig-plus coverage across the country with our millimeter wave, which has now become this tremendous advantage for us with 1,700 megahertz of millimeter wave, 2x that of any of our competitors. We'll put that and deploy that we are ahead of most people and already experimenting with what 6G applications will look like. We are going to have a host of AI-enabled new value propositions using our data, our information, our AI tech stack to create new products, new services to be able to play into edge computing and all of the applications around that, whether it be robotics or agents.

In 3 to 5 years, most of our base will be fully bundled and we will be massively more efficient and massively more optimized in terms of our cost structure. And of course, AI Connect is going to be a major business for us.

So we are more than ready to compete on our network, on our value prop on our service and much more. And there's no reason to think that with the same network, same cost structure, that we won't be very successful by continuing to grow our business and compete strongly.

I do think there is a role for satellite, for sure. In remote areas, it's a great service for those customers. And I do think there are ways that we can work together, either directly or through our JV, with satellite providers, to provide a complementary service and a differentiated value proposition.

I will say, and I'll repeat it again, that there are no back doors to any of our MVNO agreements. And I see absolutely no benefit whatsoever to extending an MVNO deal to any satellite provider. I don't buy into the idea of this prisoner's dilemma. That's ridiculous. There is no benefit to Verizon extending an MVNO deal. And we look forward to being able in 4 to 6 years to finally punch back, and we'll punch back hard when that happens.

The next question will come from Sean Diffley of Morgan Stanley.

That was very clear, Dan. I wanted to hear your thoughts on where you see fixed wireless fitting into the broader equation in the next 3 to 5 years. You mentioned hit some speed standard issues, I guess, intra quarter. Maybe just double-click on that. Walk us through what those are. You mentioned a kind of 1 gig fixed wireless product in metros, if you could elaborate? And do you guys have enough spectrum to scale where you want to be in this business?

Yes. Okay. Those are a lot of questions. Let me try and get as many of them as I can. First of all, on broadband, fixed wireless access and conversion. So we continue to take share. We did 314,000 FWA and fiber net adds. We've done over 1 million year-to-date. We have 17.4 million broadband subs in our base. We have strong ARPUs. We actually have growing ARPUs in our broadband service, were up year-over-year in Q3. And we're seeing no discernible impact from any alternative providers.

So broadband and conversions are going to be key priorities for us. There will be substantial growth drivers in both the short and the medium term. The strong consumer demand, really pleased with the uptake of Verizon One. And increasing demand for higher download speeds. I think that will just continue to increase with what's happening with AI.

And I would just point out, when I was talking about satellite, their physics get even worse as you have higher and higher broadband speeds to serve. The congestion happens much quicker at that -- at those levels. So there are 2 implications that became very clear to me. One is we need to be way more sophisticated and segmented in our go-to-market approach. Like I want to assure we sell consumers the right service to meet their needs versus selling what we have available in our network. If a customer needs 1 gig of speed and we can only offer them 300 meg, we shouldn't sell the service. It's just going to be something that disappoints the customer. And a customer need is always going to supersede any internal metric, from my perspective.

And then the second implication was like we need a much wider footprint in which we can provide 1 gig or more of speed. And that really was the genesis of our millimeter wave solution. How can we take this massive spectrum holding that we have, 1,700 megahertz of spectrum, that was largely underutilized, and turn it into a competitive and differentiated advantage for us? Not just against competitors, but in serving our customers as well.

And our goal now with this new service, and we trialed it and now we're having operational success with it, we'll start to roll it out this quarter and into '27 and beyond, is to have the nation's largest high-speed footprint with a medium-term target of 50 million to 65 million prems passed with 1 gig or more of download speed. People ask me like, are you still comfortable with the 8 million to 9 million of FWA by 2028? The answer would be absolutely, we are. But the truth of the matter is now that we have high-speed FWA offer, we'll go well beyond that now, because we have a lot more capabilities, we have a lot more capacity to do that.

And clearly, another obvious ancillary benefit is it makes our entire network more efficient. It offloads C-band capacity. It gives our network more capacity and runway. And it significantly alters our spectrum positioning. And by the way, that rollout, which will start in Q4 and, again, do it market by market in '27 and beyond, is much more cost efficient than rolling out fiber, significantly so. There's no right of way, no digging, no permitting.

And so we would expect to see our broadband pickup throughout 2027 and beyond on both fiber and a revamped high-speed FWA service. I think you'll see broadband convergence be a substantial growth driver for us. And these new solutions provide technological competitive advantage that others don't have.

And when it comes to like spectrum in general, I think there's a lot of thought around spectrum, obviously, a lot of speculation. You got upper C-band coming in the first half of next year. That's 160 megahertz speculation. Will SpaceX be a part of that or not? Remember on that, that that will take 4 to 5 years to clear. And you need different equipment associated with that. So even if SpaceX, and I'm assuming they bid in it. I'm not sure one way or another what we will do, given our new spectrum position, but say they get some spectrum, they can't deploy that for 4 or 5 years. I mean it's just -- it is spectrum that is, I think, reasonable spectrum, but it takes quite some time to clear.

And we'll evaluate our spectrum needs. We always look at build versus buy. We look at densification alternatives. I'm really pleased with the network efficiencies that our guys have done in terms of improving our network capacity. And now we have the ability to put our millimeter wave spectrum to use. I mean it's early days, but it is a technological breakthrough, and it's very exciting. We have basically 2x that of our competitors. I like the way our millimeter wave spectrum is laid out. It's a real competitive advantage. It will offload C-band. And it reframes the way that we're thinking about our spectrum needs.

The good news is, as Tony has pointed out, is we have plenty of flexibility. We have very strong free cash flow. Our balance sheet is in really good shape. We'll hit our leverage targets early next year. And our priority is to invest in our business, then keep growth in our dividend per share, pay down debt, return to our leverage ratios and return capital to shareholders.

I think at the end of the day, as I think about all the things the team has done, all the work they've done around creating some innovative solutions and capabilities, is all of a sudden our spectrum position is suddenly in a much better place than we expected and there is a robust pipeline of upcoming spectrum auctions beyond '27 that give us additional flexibility.

So all in all, the picture has changed quite a bit for us. We have a lot of flexibility. And we'll be thoughtful about how we approach the market.

Brad, I believe we have time to take one more question.

Your final question will come from Greg Williams of TD Cowen.

Just had one on the rise of agentic AI and the talk about use and potential impacts on ARPU?

I'll take that one. I guess. Look, clearly, we are entering into the age of AI, of agents, I think AGI, depends on who you talk to, is 1 to 3 years away. I mean it's clearly upon us. Quantum hitting shortly thereafter, robotics through that. All of these things are going to fundamentally change the face and nature of every single business.

And I'm pretty excited about the opportunity that that affords us. We have an opportunity to dramatically improve our productivity and our cost structure. We are already utilizing AI to increase customer satisfaction, whether that be fixing issues before they even pop up to customers, and our network through our customer service. It's going to open tremendous new TAMs for us. AI Connect, talking in 6 months, we've already signed up almost $4 billion of signed contracts. There are going to be all sorts of new value props that we develop using our data, our network infrastructure, our quite extensive customer relationships and our trusted brand. And so you're going to see a very different Verizon going forward with all sorts of new adjacencies opening up for us.

Look, I think as I look out over the next couple of years, there'll be something like 8.5 billion people in the world, but I think there could be at least 100 billion agents. There is going to be an explosion in data traffic, and our network will become a scarce and crucial asset. And we will price it as such. You'll see different pricing plans. You'll see us take advantage of our national fiber network backbone to be competitively differentiated.

Consumers and agents will need a trusted and safe and secure environment to protect against fraud and to protect their privacy. And we'll be sure that we won't allow agents to access our platforms unless we're 100% certain that it's truly a customer and not a rogue agent, and that the purchase decisions that that agent is doing are aligned with what a customer is giving them permission to go do so. I do think purchase decisions in wireless are complex. They have to do a lot with coverage and quality, speeds, family plans, perks, loyalties, converged bundles. It's not a straight to straight price comparison.

And I do think that's possibly a huge opportunity for us to deliver agents to our consumers to sell more. You think about our bundles. Our bundles are always better than any stand-alone offer out there. And you can imagine how much more bundles, of how much more subscriptions we could get utilizing agents who can go and find the right password, which is typically a lot people don't change because they don't remember their passwords.

And so I think there's a huge opportunity for us to drive incremental revenues, for us to be able to utilize Verizon dollars, our new loyalty structure with agents so they can go out and purchase things with that. And so overall, I see a tremendous opportunity, and it is something that we are doubling down on to take full advantage of everything going on with agentic commerce, but with AI in general.

I'd say just to wrap up, I think there are really like 3 big takeaways for the quarter. I mean, obviously, our results were really strong for the quarter. And what I'm most pleased about is the momentum that we see as we're going into the fourth quarter. As Tony mentioned, we're off to a strong start. And we have strong momentum going into 2027.

Second thing is that AI Connect is now real. In 6 months, we have $4 billion of signed contracts. It's a large and growing TAM, and we have strong momentum in that.

And finally, this technological breakthrough with millimeter wave is now a real substantial strategic asset and competitive advantage for us, [ and all our ] relative spectrum position has flipped, and our goal there now is to be the largest high-speed provider in the country at the lowest cost. And when I say lowest cost, it's to deploy.

So thank you, everybody, for your time. We appreciate it, and look forward to conversations in the future. Colleen?

That's all the time we have. Thank you all for your time today.

This concludes the conference call for today. Thank you for your participation and for using Verizon Conference Services. You may now disconnect.

Great. Good morning, everybody. Welcome to the Verizon fireside chat at the Goldman Sachs Communacopia + Technology Conference. My name is Mike Ng. I cover telecom here at the firm. And it's my absolute privilege to introduce Dan Schulman, who's the CEO of Verizon.

Thank you so much for being here, Dan. It's an absolute pleasure.

Thank you, Mike.

So Dan, I was hoping we could just start out with a big picture strategy question. It's been just under a year since you became CEO, and you've led an incredible operational and financial turnaround of the business. Could you talk a little bit about what surprised you the most and how that's shaped how you think about the company's longer-term strategy?

Yes, sure. First of all, it's great to see you, and thanks for having me, and thanks, everyone, for being here. I'd also reference the safe harbor that was up there that I'll be at least talking about the future a little bit, and that always involves risks and uncertainties. So I just wanted to point that out.

It has been a year. Time flies when you're having a good time. And I would say, in general, I'm pretty pleased with the progress that we've made. It's a big company. This often take time to turn around. There are 4 things that I really wanted to emphasize when I came in. The first is I wanted the company to stop being overly engineering focused and really be obsessed with our customer. And I told them I'd measure our success on that on 2 things was churn going down because for the last 3 years, churn has been going up, and I wanted to see churn come down. And I also want to see our net adds, especially on the postpaid phone side, go up. And if that happened, I figured we're starting to make progress being customer obsessed.

The second thing is I really felt like the culture at Verizon needed shaking up. We really needed to start to play to win. I'm a pretty intense guy. I'm very impatient. And Verizon's a big company. It's bureaucratic. It's hierarchical. It's process-oriented as opposed to results-oriented. It's very risk averse, and we were moving very slowly. And I was tired of the company being more prey than predator in the market. And so I basically have a mantra there that every single day matters. I mean we have almost 100,000 people in the company. We should be doing amazing things every single day. And that intensity, I'm beginning to see that in every meeting that I go to.

The third thing was I really wanted to redefine our business model. I wanted to become the most efficient telco in the world. In month 2, we cut almost 13,000 people. I said what people thought were ambitious OpEx and CapEx targets, they're really not that ambitious, but $5 billion in OpEx savings, $4 billion in CapEx savings, and we'll exit the year with over $5 billion in OpEx savings on a run rate basis. And I see plenty of opportunity in '27 and '28 to continue that. I also felt like we really needed to break through like a traditional business model. The business model of most of the carriers, including Verizon, it's very subsidy focused. That's how you win customers. That's how you retain customers by giving away handsets. And I felt that really did not need to be the case that we needed to redefine the rules of competition and that we could win in the market, but be very fiscally responsible. And I think you're beginning to see that happen.

And finally, the fourth thing is we need to have real serious returns to our investors. For the past 5 years before I became CEO, our stock was down something like 30%, 35%. We have gone from first in market cap to last in market cap. Our forward PE was one of the lowest, if not the lowest in the industry. And you've seen -- and if you looked at our adjusted EPS, free cash flow over the last 5 years, it compounded at negative 1%. This year, we've guided now to 6% to 7% for adjusted EPS, 9% to 10% on free cash flow. Our revenues will go from 1.6% in Q1. So we think there'll be 4% on mobile and broadband in Q4. And we're likely to do 3x the amount of postpaid phone net adds that we did a year ago.

So I would say, in general, I'm pleased with the direction of travel. There's a hell of a lot more that we need to do to reach kind of my expectations, but we're kind of on the right track right now.

Great. That's a fantastic overview. You talked a little bit about the subsidies. So I was wondering if you could talk about Verizon's consumer go-to-market strategy. The company has undergone a reboot with simpler plans, right, Verizon Simplicity, Verizon One and new loyalty plans. So could you talk a little bit about some of the things that Verizon has done to improve customer centricity and how that has actually translated into improving operational KPIs?

Yes. I mean I think we're still relatively at the beginning of our journey of being customer obsessed. Look, I've thrown billions of dollars back into our end-to-end customer experience. Last quarter, we hit an all-time high for customer satisfaction in our Consumer division. But everything from the time you walk into a store, the time you get your first bill, when you call customer service, everything. I want everything to be. I know it can't be this, but I want everything to approach perfection. And that's hundreds of things we need to do.

But that's why you can create real competitive differentiation. We have an initiative inside the company. We call it, every customer has a name. And it basically means like we treat you with respect. We treat you like you're a family member, like you're a friend, and that matters to people. And I'm beginning to see churn have been going up for 3 years in a row. Now churn is coming down year-over-year. I expect that to continue. And like our simplicity plans that we put out there, our new value proposition, we spent 6 months in deep customer research before we put those out into the market. I wanted to look at 3 things. I want to look at like what were customers telling us they wanted in the market, what might competitive response look like and what might our financials look like.

And what I told the team is like when we put something in the market, I don't expect to see our financials dip. And then we tell everybody, don't worry in a year from now, they're going to go -- like I want to see continued improvement in all of our metrics, and we spent a ton of time talking to customers, doing deep financial modeling around it. And what we saw when we launched is maybe the best launch of a new value proposition that I've been a part of. We put in the market, immediately, we saw our net adds go up. We're off to a good strong start through the quarter right now on our net adds, a lot of it due to our new value proposition. ARPA for those new adds is accretive and going up. And the interesting thing about simplicity is there is no subsidy on that. And we are winning in the market and not having to give away free phones to go and do that. So that's a big deal when that happens. It's a fundamental change in our business model. Our cost of acquisition is at 3-year lows right now, and that's been going up year-over-year over year. And we're now seeing that go down consistently as well as our cost of retention as well.

Great. And just on postpaid phone -- postpaid account, excuse me, net additions. The company has guidance for postpaid phone account net additions of 750,000 to 1 million -- sorry, I think those are phones. It's phones, not accounts, excuse me.

I'll keep you on it.

Thank you, Dan. In the second quarter, you had the best quarter for consumer postpaid phone nets. So the company is making great progress. So could you talk a little bit about the full year target and the expectations for the rest of the year?

Clearly, we'll be at the top end of our guidance for that. The quarter is off to a good strong start. Well, not really off to, it's ending on a good strong start. And I think the things to point out on the postpaid phone net add side. Number one is, obviously, we're doing well in driving net adds. But this quarter, for the first time in at least 3 years, will be positive phone net accounts, which is a really important element. It will be the first time in a long time that we've had good phone net adds, but good phone net accounts as well.

And our -- the way that we're competing now is fundamentally different than a year ago. Every single net add coming in right now has revenue associated with it. I don't really understand this counting a net add as a free line. I know a lot of people do it. But from my perspective, bringing in a free line doesn't really count as a net add. In my view, it doesn't add to revenue growth. It's churn waiting to happen. And so from my perspective, like if we're going to win a customer, it's got to be real. It's got to be because of our value proposition. There needs to be revenue associated with that line or that account coming in. So our basis of competition is different. Every account coming in on Simplicity, which is the majority of our net adds, there's no subsidy associated with it.

And so I'm feeling pretty good about the way that we're competing. I mean if we competed the same way we competed last year, like our net add, we'd blow through it, but a lot of them would be free line. So that is not what we're going to do, we're going to bring in quantity and quality at the same time and at a low COA, cost of acquisition.

Great. At the beginning of the discussion, you talked about the focus on getting churn down and 2026 has always been described as a more churn reduction-led subscriber growth year. Could you talk a little bit about what's driving the churn outlook in a little bit more detail?

Yes. I think churn is one of the most important metrics in our business model. But I think of our business model, and I say this all the time inside the company, it's a multivariable equation, like you can't be successful on one thing and think that you're doing well. It's easy to drive net adds if your cost per acquisition goes way up, like give away free phones. So like you can drive a lot of net adds, but that doesn't work for me. You can take churn down if you take your cost of retention way up. Like I want to see our churn come down and our cost of retention come down. And you're seeing that cost of retention is coming down double digits. Churn, I think, was down 5 points year-over-year in the quarter. I expect to see our churn continue to have year-over-year improvement as we go through the rest of the year.

And basically, churn for us was a lot of self-inflicted wounds. We've been raising prices for the past 3 years before I came in without added value. And I'm not against price increases. I think price is a very important component of value, but you have to add real value if you increase prices. And so the first thing I told the team, and they wanted to do another price increase as soon as I came in, as I said, no, I stop that because it's a short-term win. Like your revenues go up in the short term, and it looks like you're winning, but you're not because your churn continues to go up. And it's a short-term win and a medium- to long-term disaster when you go and do that.

And so we stopped raising prices immediately, customers noticed that. We invested a lot into the end-to-end customer experience because customers fire companies all the time when they have a terrible experience. You may not know about it, but all of a sudden, there's a disconnect because they didn't understand the promotion. It was too complicated. They heard one thing in a store, saw another thing on their bill, heard another thing when they called into customer service. And my view on that is like let's fix our end-to-end process. And then let's put out a really good value proposition in the market, track new segments, make sure it's fair and honest. And now what we're beginning to see is a very sophisticated modeling going on, very sophisticated segmentation, really listening to what a customer needs, satisfying it the right way. And so hopefully, you'll continue to see churn improvements and at the same time, see our cost of retention go down.

Great. It's a great segue to talk a little bit more about the Verizon Simplicity plan, very competitive price for the 1 to 2 line value segment. Maybe talk a little bit about what areas of the value segment that you think Verizon has the biggest opportunity and why? And then where do the market share gains in the value segment actually come from? Is it prepaid? Is it somewhere else? I just would love your thoughts on that.

Well, we're very focused on segmentation right now. As you know, I'm a very big believer in the power of what AI can do inside our company, not just in terms of productivity improvements or increases in customer satisfaction, but radical changes in our value proposition that we can put in front of consumers and small businesses and eventually get to segments of one, like we have over 300 data points of information on every single individual customer. Before the advent of AI, it was impossible to correlate all of those things, but now we can start to put together very sophisticated value propositions for ever smaller segmentation.

Simplicity really was aimed to go after more of the 1 to 2 lines where we have been losing the youth market in which we were disproportionately low in share. And then Verizon One was all about convergence and going after actually the more high-value customer base. I'm really pleased with what I'm seeing on Simplicity, it started off strong and it's continued strong. Our port ratios have improved dramatically from where they were. I think we're taking share in that youth market now. And as I mentioned, ARPA is strong, base migration is well under what we modeled. And so I think there's kind of upside as a result of that. And it has radically redefined our business model in terms of how we compete in the market.

We've separated out mobile pricing from device, and we give customers optionality on what they want to go do, but they have a simple, fair, honest mobile price and then they can figure out how they want to either bring their own device or have different financing options for a new device if they want to go that way. So in general, I'm pretty pleased with the segmented approach that we have. And certainly the metrics are well exceeding what we initially forecasted.

Great. And just on that device piece, we're very close to the announcement of the new iPhone. You spoke a lot about device subsidies. Is Verizon getting away from device subsidies completely? Are they being more selective? Maybe just talk a little bit about how device subsidies and financing fit into the new value prop.

Yes, I think for too long, Verizon and actually the mobile industry had a belief system that the only way you could attract customers or retain customers were by giving away free phones. And that kind of became dogma and everybody just -- probably everybody in this room just kind of accepted that, that was the way that it was going to be. That's just not true. And we are proving that right now. You can separate out mobile from device. And I don't think there needs to be the transfer of value from the MNO industry to the OEM industry, the way that it was.

I think we're going to work very closely with all of the OEMs. I think there are ways we are growing again. I think there are ways that we can grow our volumes, and we're pretty much the #1 customer of any OEM. And I think we can grow our volumes together, but in a fundamentally different business model approach. You're not going to see phones on us even with new launches. That's just not going to happen because it doesn't need to happen. Customers are keeping their devices longer. New devices are coming out. We'll be competitive in that. Fourth quarter is always a little bit more of a promotional period. But I don't think we need to be anywhere in terms of what we used to be. I'm a very competitive guy. We have metrics out there. We've committed to them. We will meet those metrics. But the basis of competition, not just at Verizon, but I think inside the industry is shifting and will continue.

Great. Last earnings call, Verizon mentioned that Simplicity is ARPA accretive, which was a little bit counterintuitive, but I think it's because Simplicity is subsidy free, so there's no promotional or impact. But could you talk a little bit about ARPA? What's Verizon's outlook for ARPA growth? Will it grow in 2027?

I always like to think before I answer your questions. So, I guess to the first thing you said, yes, I believe ARPU will grow in '27 year-over-year. It could grow as soon as fourth quarter. That's a possibility in terms of year-over-year ARPU growth. It's been growing sequentially this whole year. We said that our wireless service revenue will be flat this year, which by math means that it will be up, and it will be up year-over-year from everything I can see in the fourth quarter as well.

In general, our mobile and broadband service revenue has gone up every single quarter. As I mentioned, it started at 1.6% in Q1. I think we'll exit around 4% in Q4. ARPA, whether you look at simplicity being ARPA accretive, you look at Verizon One, which is a great converged offer. But the interesting thing on Verizon One is that over half of our customers are upgrading to 1 gig or more speed. So that's driving ARPA up as well. And so I think there's like a really kind of good engine evolving inside the company right now. You've got net adds growing, that net accounts growing. You've got record low COR and COA happening, and you'll start to see ARPA growing. Like that is sort of the magic formula when you can put all that together along with good unit economics, cost controls around that. And that's clearly the direction and momentum that we're on.

Great. I'd like to shift to a discussion around broadband. The market has obviously been very dynamic over the last several years. Could you just talk a little bit about the competitive state of the market, how you think Verizon is positioned to sustain subscriber growth across both FWA and fiber?

Yes. I think we did something like around 350,000 broadband net adds last quarter. We're clearly taking share, and we're having a good quarter around broadband as well. And I think we'll continue to go do that. We have a really good value prop out in the market around both broadband and convergence. And I don't mind, Mike, I think of broadband as broadband. Like customers don't really kind of go, oh, I'm doing FWA. I mean they have no idea what FWA is or fiber. I mean, a little bit more on fiber, they have an idea of that. But it's basically what's your download speed and what's your upload. And increasingly, uplink and upload will be more and more important in the AI age.

And so I think whether it be FWA, which, by the way, we have more open for sale than we've ever had. We're also doing some really interesting experimentation around our spectrum holdings, everything from low band up to millimeter wave, which I think has the potential to unleash a lot more capacity for us. It's early days. I'm not going to talk a lot about that right now. But I think we'll have a ton of room in capacity on FWA. And on fiber, we'll do at least 32 million homes passed this year on fiber, well on our way to our 40 million to 50 million homes over the medium term. So broadband is a real important element of our connectivity seems to be doing quite well for us right now and it should be a growth driver going forward.

Great. I know that Starlink has been on a lot of investors' minds. So maybe a 2-part question. Number one, could you talk about Starlink satellite impact on fiber and FWA, the broadband business? And then I was just wondering if you could share your views around the potential threat of a Starlink mobile direct-to-consumer service. How viable do you think that is? How is Verizon planning to respond, if at all?

Well, we've seen no, 0, discernible impact on our broadband growth from any LEO, low earth orbit satellite provider, including Starlink. The more I dive into the physics of satellite, and I'm deep into the physics of satellite because I want to understand it inside and out. The more convinced I am, whether it be broadband to the home or direct-to-device that satellite is a complementary service and even over the medium to long term, not a direct competitor. They just can't compete without a terrestrial network in urban and suburban, where, call it, 95% to 98% of our revenues are, we're 100x, in some cases, 1,000x more efficient than they are.

And there is a place for satellite, and it is in the very rural where -- and it's a market, it's a distinct market. But it will never pencil out for us to build a network out there, and it's very complementary to what we do. I mean, today, Starlink offers 400 megs to a home for broadband for $130. Just to give you an example, we offer 500 meg where you get both broadband at 500 meg and mobile for $70. So we are a better service at half the price. And that's just because we just have so much more efficiency in urban and suburban. I do think satellite will be a very valuable partner with us, and we are clearly looking forward to working with all of them and providing enhanced value propositions. But I would say it's going to be complementary. And even though you didn't ask the question, we see absolutely no advantage in extending an MVNO to any LEO provider nor are there any backdoors whatsoever to any of our existing MVNO relationships. So we see satellite as a partner. And I do not see it as a viable competitor in the medium and even longer term.

Great. In the last 5 minutes, I wanted to squeeze in 2 more questions. One, very exciting kind of new business with the hyperscale fiber deals that you guys have been doing. There's a $1 billion-plus deal with Google to provide dark fiber connectivity linking data centers. So could you just size the broader opportunity within data center interconnections? What is Verizon's key competitive advantage in this business?

Yes. I have to say I'm actually really excited about the AI infrastructure opportunity for us. I mean, look, we're just kind of fortunate on this. We are in the right place at the right time to be a part of one of the greatest capital expenditure things around AI infrastructure that we've ever seen in our generation. It opens up a quite large TAM addressable market for us. It's growing quite rapidly, and we have the right assets in place and experience to take advantage of it. I mean compute, the demand for compute, I heard that from Sarah yesterday. I mean, it's insatiable. And at first, it was how do you optimize racks inside a data center and then how do you interconnect racks inside a data center. And now it's basically how do you connect data centers together to provide ever greater compute.

And for there, there is absolutely the need for dark fiber connectivity. We've been the leaders in both metro and long-haul fiber build. We have a lot of dark fiber capability. We just did a big deal. We announced it yesterday with Corning. I mean fiber is in short supply as well. And we have now got a full supply of that. I'm really happy about that deal. It's a good one for both our companies, but it enables us to do all the build that we need to without being supply constrained because the demand for that interconnectivity is quite large, and we'll continue to build on that drumbeat of announcements that we had. There's also a big demand for inference computing. So that's basically computing at the edge for low latency applications, robotics, gaming, autonomous driving, remote surgery.

And as we decommission our central offices, take copper out of them, which, by the way, is a great cost savings for us and a real opportunity. But they're power-ready, already permitted, and we have thousands of them to be able to deploy. We're already signing up deals where people are coming in. We'll talk about some of those at our next earnings call. But that ability to take advantage of what were decommissioned central offices and now can be inference edge computing is tremendous as well. And so it just opens up a brand-new vector of growth for us on top of a growing connectivity business. So we'll be more and more specific about that, but you'll start to see revenues and noticeable revenues beginning next year on that.

Great. As we wrap up the session, I was just wondering if you could tie it all together for us and talk a little bit about key focus areas as Verizon transitions from the turnaround to playing more offense as we wrap up 2026 and head into next year.

I mean, I think it's a new Verizon right now, clearly. We are playing to win in the market, and I think our results are beginning to demonstrate that. And I clearly feel like this new business model, this new financial model is clearly taking hold right now. We have a ton of cost opportunities still to be more efficient. But as I would say inside the company, no company cost-cuts its way to greatness. Those cost cuts are just about being more efficient, enabling us to invest back in our business and return value to shareholders. And I see a lot of continued opportunity for that as we go into '27 and '28.

And we have increasing momentum every quarter right now. And so you're beginning to see that. I mean, the difference between our financials a year ago and our financials this year are night and day difference. And so I'm pushing the team very hard. I am far, far from being complacent about where we are right now. In fact, I'm probably more intense than I've ever been on it. But it's because I see the opportunity in front of us, and I want to grab it. And so we have good momentum, but a lot of work to do, a lot of progress to still make, but we have very high aspirations, and I want to aim for those.

Great. Well, Dan, thank you for participating in our conference. It's been a privilege to have you on stage here.

Thank you so much, Mike, and thanks, everybody.

Good morning, and welcome to Day 2 of our Global TMT Conference. Before we begin, disclosures are available at the registration desk. And for those of you that I haven't met, I'm Mike Rollins, and I cover communication services and infrastructure for Citi. We're pleased to welcome Tony Skiadas, CFO of Verizon.

Tony, great to see you. Thank you so much for being with us today.

Thanks, Mike, and great to be here. And before we get started, I need to point you to Verizon's safe harbor statement and our SEC filings, which can be found on our Investor Relations website. And my comments may include forward-looking statements that are subject to risks and uncertainties.

So with that, Mike, we can get started.

Wonderful. Well, as typical, it's been an extremely busy year for Verizon, maybe busier than some. What are you focused on right now? And how should investors think about your priorities for the balance of the year?

Sure. And it has been a busy year and an exciting year, and let me frame it for you. So at a macro level, the team is very focused on 4 things. First, growing our mobility and broadband business and doing it in a fiscally responsible way. You've heard us talk about that. Our second priority is investing in the business and in the customer, and we've seen our evolution with our value proposition. Third is delivering on our guidance for the full year, and we'll talk about that as well. And then fourth is generating strong cash flows, paying down debt and returning capital to shareholders.

And evidence of that is our first half results were very strong. And let me just share a couple of a few highlights from the first half of the year. From an operational perspective, our mobility and broadband net add growth, we added over 1 million net adds for mobility and broadband net adds. And underneath that, our phone net adds improved by over 500,000 this year. So we're making great progress on volumes.

And then from a financial perspective, in the second quarter, we had our highest ever adjusted EBITDA margin of 40.1%, which is the first time in a long time. Similarly, our adjusted EPS grew by 6.6%. And our cash flows were up 24% in the second quarter and up 16% for the first half of the year. So we're generating strong cash flows. And we returned $9.4 billion in capital to shareholders through dividends and share repurchases, and that's up 60% year-over-year. So as we said on the earnings call, this is a structural change and an inflection in our results and a step function change in what we've seen from prior years.

And the way I'd frame it is what's happening inside the company. It's a growth transformation, not just a cost transformation. And it all starts with the customer. And as you know, you've seen our value proposition and the ongoing work we're doing there with Simplicity and our loyalty programs, those are performing well. And we have a relentless focus on the customer. And what we say is we put the customer at the center of everything we're doing. And we're driving our growth through targeted retention, and you see our churn down 5 basis points year-over-year. So we'll continue to make progress on retention and through segmentation. So that's great to see.

We're also taking cost out of the business. And we talked about at the beginning of the year, a $9 billion cost program, $5 billion of operating expense savings and $4 billion in CapEx savings, and that's proceeding on track. And also, we're leveraging AI, both from a cost efficiency perspective, but also from a revenue generation perspective with our AI Connect business. And we announced the deal with Google recently, so we'll talk more about that.

And then lastly, we have the Frontier integration, and that's proceeding on track. And we're starting to see some of the benefits from that, and we talked about our synergies, at least $1 billion of synergies by 2028. So that's pacing along as well.

If you think about what's coming in the back half of the year, the focus is largely the same, growing our volumes, both mobility and broadband in a responsible way and doing that through retention and finding -- we've said if we can get 5 basis points of churn improvement that gets us more than halfway to our growth targets. And that's what we're seeing, and that's just an example. But that's what we'll continue to focus on that, growing the top line and the bottom line, as we outlined in our guidance.

And we raised -- in the second quarter, we raised our EPS guidance -- adjusted EPS guidance of 6% to 7%. And we also raised our free cash flow guidance to 9% to 10%. So the team is very focused. We're proud of the first half accomplishments. We still have more to do and the team is executing with a lot of urgency right now. So we're excited.

Great. Well, this gives us a lot to unpack and dig deeper. You talked about pivoting to grow as part of the strategy and transformation. So as you've connected with your investors over the last number of months, and recently, what are some of the underappreciated revenue opportunities for Verizon?

Sure. When I step back on revenue, what I would say is we're executing on our plan and driving volume growth as a catalyst for sustainable long-term revenue growth. And as you saw in the second quarter, Mike, our mobility and broadband service revenue grew 2.8%. That's up 120 basis points sequentially. And we talked about our outlook for the balance of the year with the third quarter growth rate approaching 3% and the fourth quarter approximately 4%. So that's an acceleration in the growth rate.

Underneath that, we also said that we expect a transitional year in revenue as we drive towards more volume-based growth. And we talked about our wireless service revenue being around flat this year. That's still our expectation. And we see an improving trajectory in the second half of the year, and we expect our wireless service revenue to grow in the second half of the year, which is great to see. And what gives us confidence around that are 3 facets. First is, as I mentioned, improving volume profile. So we added -- we had a lot more net add -- phone net adds, over 500,000 year-over-year, so that we're starting to see the green shoots from that.

The other thing is the promo amortization headwinds that we've been talking about for a couple of years. They peaked and now they're easing in the second half of the year, and that's a function of the work we're doing on Simplicity. So we continue to see great opportunities for revenue growth. So -- and then obviously, when you talk about convergence, that's the other area that we can continue to drive growth, particularly where we under-index in some of the Frontier markets in wireless. So there's a lot of optionality. And then we have things like perks that are growing roughly 40%. That'll drive revenue growth and service revenue growth. And perks give us great revenue and also great margins. So customers can also step up to premium plans as well. So there's a lot of ways to get our growth rate up.

And then to your question on some of the underappreciated areas. First, I would say, is churn and churn improvements and what that does to our business model, allows us to be more efficient in growing our business and not relying on expensive subsidies and promos. So we're starting to see that. And Simplicity is the great -- is -- we did a lot of work and a lot of research around Simplicity. It allows us to decouple the handset and the service pricing. And that's -- we think that the financial benefits of that we expect to accrue over time. And more and more customers are coming on to Simplicity. And then with convergence, we have a long runway to go there with the Frontier acquisition and continue to deploy fiber and customers attaching wireless to that.

The other thing that's coming is AI Connect, and that's an exciting new revenue stream for us. You saw the deal we signed with Google recently that is in an excess of $1 billion, and it's a great start and we have a lot more deals in the pipeline. I'm sure we'll talk about it. But it's a growth vector above our core business. So that's great to see. So when you put that all together, the actions we're taking are driving durable improvements in revenue and set us up well to finish the year strong and get us ready for 2027.

So 2 follow-ups on Simplicity.

Sure.

So when I look at the Simplicity Plan and what you've put into the market, and you were talking about how better phone net adds in the back half of the year is more about churn reduction. But when I look at Simplicity, that feels to me like it's actually helpful to drive store traffic and potentially gross adds.

Absolutely.

So like how does that set you up specifically? Because it seems like that's in addition to everything you're doing on the churn side.

Sure. And as I mentioned, we did a lot of work before we launched Simplicity and our loyalty program. So that's an ongoing evolution of our value proposition. And Simplicity is hunting well. More and more customers are taking Simplicity. As I said, it decouples the service pricing from the handset. So customers -- it gives customers a lot of optionality and a lot of choice, whether they -- what level of service they'd like. And also if they need a device, there's options there. If they don't, they can bring their own as well.

So -- and it can certainly drive store traffic, particularly in like single-line, 2-line accounts where we've historically under-indexed. So we like what we're seeing thus far. We launched it back in mid-June, along with leveraging our World Cup investments. So it was a great launch. Team did a great job launching those solutions for customers, and we're happy with the progress thus far. And it's driving us towards our net add targets as well. So we said we'd be at the upper half of our net add guidance range of 750,000 to 1 million, and we're pacing towards that.

And then in terms of ARPU, so the other side of Simplicity is to decouple the subsidy and charge for the device, you're offering a lower price point. And it's particularly notable for 1, 2 lines where the industry has had a behavior of charging more for that first line, marginally less for the second, right? And so for that onesie, twosie line, especially, is there a risk on the ARPU side that you have to take a hit to that to get the growth, to get the unbundling of the subsidies?

Yes. The way we look at it, Mike, is on a cohort basis. So if you look at an ARPA overall, obviously, a single-line ARPA is much different than a 4-line ARPA. But we look at the ARPAs on a cohort basis, so single line, 2 line. And we see great opportunities for growth, customers being able to attach things like perks and other adjacent services and even take broadband. So there's a lot of optionality there. And when it comes to account growth, we're really focused on growing both accounts and lines. It's both.

Maybe just for a moment, flipping over to the cost side, and then we'll come back to wireless again for a few more minutes. So on the cost side, you've got this $5 billion in-year savings goal, but that's in year. So help us think through the exit rate opportunity and where you could take this over time?

Sure. So our $5 billion cost program is on track, and maybe I'll just unpack where some of that's coming from first, and then we'll get to the future. So the largest part of that is around our network operations and network operating costs. If you think about taking legacy elements out of the network, taking copper out, monetizing with fiber, recycling that copper, lower access costs with a larger footprint and also integrating Frontier. So that's one of the largest areas.

Some of the other areas we're focused on is advertising and marketing efficiencies. Team has done a great job there. The one thing we have seen is structural improvements in both our COA, our cost of acquisition, and our cost of retention. Cost of acquisition was down 15% in the second quarter year-over-year. Cost of retention down 17% year-over-year. And those are structural things, particularly on cost of retention, the segmentation and micro segmentation work that we're doing and that we're operating with a leaner workforce as well.

And then as we look ahead, there's certainly more opportunities to take cost out beyond 2026. So we see opportunities in 2027 and 2028. That continues to be centered around the network. So we still have a lot more work to do on the network side as we modernize. And as I mentioned, Frontier is in the fold now, so driving synergies there. More work to do on our AI and tech stacks, so -- and further deployment of AI, both in the network and in areas like customer care. So we certainly see opportunities there, real estate, et cetera. So there's a lot of areas that we're still getting after.

And customer experience is probably the largest and one of the biggest areas that we have in front of us in terms of improving the customer experience and making sure we're investing back in the customer. And that's really important for us because when you think about it, the cost cuts and the efficiencies allow us to do 4 things: number one, run more efficiently, and you see us doing that. The second part is investing in the customer experience. And we invested in our Simplicity and our loyalty programs. That requires investment, and those investments come from the cost cuts. Third is addressing and working through the transitional year in service revenue. And fourth is returning significant capital to shareholders.

So it allows us to do those 4 things. And the first half results gave us the confidence to raise our adjusted EPS guide to 6% to 7% for the full year. So a lot of great work, but we still have a lot more to do.

So the size of dollars that we're talking about and the percentage change in a single year are quite large. And this is quite a transformation, yes. What are the risks that there's this unintended consequence or consequences in the next 1 to 3 years where because of the cuts that you're making today, at some point in the future, that could negatively affect either your service or your customer experience or your go-to-market?

Yes, it is a significant number. As we said at the outset that we're taking bold steps. These are bold steps. And one of the things we did, and this is both on CapEx and OpEx is we put a lot of rigor around this, making sure that the areas that we're focused on are aligned to growing our mobility and broadband business and areas that we're not were reduced. But this is also about reducing friction in the business and with our customers and making sure the customer experience is improved and simplifying our business as well and simplifying our processes, and that takes investment. And those cost cuts are funding those investments along with our loyalty programs and things like that.

So we're very, very focused on making sure that the cost cuts make us efficient, but they're also allowing us, as I said, to invest in the customer and in the customer experience, and that's what we're focused on.

And maybe just taking a step back on the wireless market again. So maybe a question for you first on some of your indications. So account growth. This has been a focus of getting that back to positive. Are you on track to deliver positive accounts in 3Q and potentially in 4Q?

Sure. So what we've said is it's important for us to grow our relationships with customers, whether that's at a line level or an account level. Obviously, an account level and both are important, by the way. At an account level, obviously, we can add more lines. We can add perks, customer can take broadband. And that's a great ARPA customer. It's a great -- it's a sticky customer as well. And we talked about on the earnings call in July about account growth, and we do expect our accounts to grow in the third quarter, and our focus is to continue to grow accounts and I'm confident that we will.

Very helpful. And what are you seeing more broadly just competitively in the wireless category? And if I could just add to this question just a little bit, like we're in an environment where it seems like device replacement might be lengthening. You've talked about convergence. You talked about the focus on lower churn. Is there an opportunity that we get back to just the switcher pool shrinking and just the pace of activity in the industry slowing? So I'd love to get your thoughts on all of that.

Yes, sure. So I'll start with your first question on the competitive market. It's a competitive market. Like nothing has changed in that regard. So we don't expect it to change. And our focus is competing on the strengths of our offerings and our network. And we have a great value proposition with Simplicity and our loyalty programs and with myPlan. We have a lot of optionality for customers. And with Simplicity specifically, that's hunting extremely well. And we like what we're seeing thus far. More and more customers are taking Simplicity. So I feel good about that. You mentioned also device refresh cycles. I know today is Apple's...

Is that today?

Yes, sounds like it, seems like it. You talk about device refresh and upgrade. So we can talk about some of that as well and how we think about that. But our focus is to grow in a responsible way and grow both with gross add growth, but also with retention and the work we've done to segment the customer. As I said, our cost of retention is down and our churn is down 5 basis points.

And that's a focus of continuing to bring down churn as well back half?

Absolutely. Absolutely. That's a heavy focus of our team. And we've made great progress and we're -- it's a daily grind and the team is really focused on continuing to reduce churn year-over-year.

And so with a smart phone cycle, I think we're 4.5 hours away...

We are actually...

Yes. 4.5 hours and counting down. What are your expectations for this cycle? Can you share with us like what you think is going to happen with subsidies during this cycle? This is always a big focus.

Yes. Obviously, like you will wait and see what happens later today with the launch. So I really can't comment on any of that. But in terms of upgrades and upgrade volumes, maybe we can start there. And I think you saw in the second quarter, our upgrade volumes were down over 20%. And really, that's a function of 2 main drivers. First, customer choice. Customers are choosing to hang on to their devices for longer periods of time. And the average upgrade cycle is now around 43 months. So it's elongated by 2 months since last year. And again, customers are happy with the devices they have.

The second, as I mentioned, is the work we're doing on targeted and segmented retention. And as we said, not every problem needs 4 free handsets to solve. The team has done a great job continuing to segment the base and being very disciplined in our approach to retention. Look, with upgrades down over 20%, our churn came down as well by 5 basis points. So we're very, very focused on that. And we have a lot of options, too, for customers.

As we mentioned about Simplicity, gives customers optionality for the device needs. If they want the latest and greatest device, we have options for them. That's called Simplicity Plus or Simplicity Pro, and we have those options available to them. If a customer wants to bring their own device, they're more than welcome to do that, and they can bring their own in Simplicity as well. So it's very flexible. And it gives customers a lot of choice and flexibility in their connectivity needs. And the discipline has supported the strong cash flows that you see. We've modeled, and we have strengthened our business to model a variety of outcomes. I don't have a crystal ball to tell exactly what's going to happen, obviously, in the fourth quarter. But we've been through this before, and we'll see how it plays out.

And you mentioned the different tiers that you have with Simplicity. What are you seeing in terms of like the mix of up-tiering from customers relative to what you typically see in a rate plan menu?

Yes. Look, I mean, customers -- it's early days on Simplicity. So we're almost 90 days in now. So we're still -- and we're still learning. But we like -- more and more customers are coming on Simplicity, some -- many are bringing their own device, which is great to see. And obviously, that keeps a lot of subsidies in check, which is extremely important. And again, as I said earlier, where we see good strength is in 1 and 2 line accounts, and that's performing well. And we expect customers will take perks and other things that will continue to drive sustainable ARPA growth.

Convergence, you mentioned a few times. What should investors know about how Verizon's approaching convergence differently? And how far away are we from like a tipping point where just the momentum that you get from convergence, you could see more of a benefit to churn or more of a benefit to cost items or profitability?

Yes. So convergence is real. I would say it's working. And it's demand-led, which means it's being driven by the customer. And we're seeing -- now with the Frontier deal closed, we're seeing those cross-sell economics that we expected. Mobility customers attaching fiber, fiber customers attaching mobility and both cohorts churning materially less than a customer with a single product from us.

In terms of opportunity, 20% of our mobility base has a broadband service with us. So we have a lot of room to run. As we said, we under-index in wireless in the Frontier geographies. So obviously, the team has been working at that with urgency. And then from a churn perspective, we see 30% lower mobility churn when customers have both mobility and broadband services with us. So it's a very sticky customer. And obviously, they can attach things like, as I mentioned, perks adjacent services to continue to grow or they could -- they could get increases in speed tiers as well. So there's a lot of optionality there.

We just launched our Verizon One product, which is a converged offer. It's very simple, $70, mobility and broadband included, taxes and fees included. So very, very easy for customers, very transparent. So that was launched also at the end of June. So we're very happy with that. And obviously, it's early days as well, but we like keeping it simple and that's really the focus.

And then from a cost perspective, we have owners' economics there on both our wireless network and our fiber network. We've added Frontier into the mix. We also have the partnership with Tillman as well to build fiber at a very efficient rate at our specifications. So we can earn the margin on both products as a result of having the owners' economics. So we're really pleased with our progress thus far, and we have a lot of room to run.

What about fixed wireless? And as you're pushing into these MDUs, can that accelerate the quarterly rate of fixed wireless net adds?

Yes, absolutely. And our fixed wireless business continues to grow. We continue to take share. So we're very pleased with that. And the multi-dwelling unit or MDU solution that you're referencing is another opportunity to expand our market. And we're able to do that using millimeter wave technology. So using our wireless millimeter wave spectrum, delivering high-quality broadband in MDUs. So that's a great opportunity to continue to increase our TAM in the FWA space. And customers want high-quality broadband. And this is another way to deliver more open for sale for us. So we're excited about it.

On the satellite front, are you seeing any increased competition from LEOs, whether it's in wireless? I realize early days with direct-to-device or particularly on broadband? And how do you see the risks and opportunities across these categories, mobility and broadband from these LEO constellations?

Yes, sure. I'd start more broadly by saying satellite is -- we see satellite as complementary to our business. And as you know, Mike, 99% of our network covers where people work and live. And we use partnerships such as AST, Skylo, Globalstar, for example, to complement our network in more rural and remote geographies. And this is about density. It's about uplink, it's about urban and suburban, where we generate over 95% of our revenues. And satellite works well in sparse terrain and where a cell site either doesn't make sense for us. But it's not -- it's a market, it's just not our market.

We compete where the density economics reward us for our fiber and our wireless networks. And those take many years -- it's taken us many years to build. And the best example I can give around density is I know you and some of your peers joined our network engineering team on the visit to MetLife Stadium to see some of the experience we provided for fans at the World Cup. And you got to see our fiber network, our wireless network, our distributed antenna system inside the stadium along with using our spectrum assets to deliver a very rich experience for customers. And that takes decades to build. And we're going to compete on the strength of our offerings and the strength of our network.

I also know the satellite MVNO question is always lingering. So I'll just reiterate what we said at earnings is that we don't see a satellite MVNO as an option for us. It doesn't add to our distribution nor does it give us the ability to sell something we can already do today.

So yesterday, you announced a deal to buy a lot of fiber.

Yes.

80 million fiber miles?

Yes, it's a lot of miles.

Lot of miles. So what are you seeing in terms of the TAM for this hyperscale AI fiber opportunity? And then is there any updates on the pacing to get to the target of 40 million to 50 million fiber passings in your footprint?

Yes, sure. So maybe I'll start with the last part of your question on fiber. So we're deploying fiber at an aggressive pace, and we said we'd see over 32 million passings this year and that's progressing as planned. And we're well on our way to the 40 million to 50 million passings that we set over the medium term. So that's humming along.

On your first part of your question around AI Connect and what we call AI Connect, we're excited about that. That's a new revenue stream above our core business. And as you saw back in the second quarter, we announced a deal with Google, a long-term deal with a value in excess over $1 billion. It's long duration. And it's a great revenue stream and a great start for us. We have a lot of other demand and deals in the pipeline, and we see this as a multibillion-dollar opportunity for us. So the team is obviously working that pipeline with urgency. And it comes -- the AI Connect business comes in 3 different flavors. First is power space and cooling in our -- with our central offices. So this is reusing assets we already have. It's building dark fiber, fiber routes or -- and some customers may want wave or lit services as well. So there's a few different ways that we see growth opportunities there.

And as I said, the Google deal is a good start. We see a lot of demand. Hyperscalers want the Verizon network. We have -- we've been building fiber for a long time. We have over 2 decades of building fiber, carrier-grade, low latency, high throughput networks. And this is very much in our wheelhouse to do. And we're very confident that we can help support and deliver on the AI economy and the infrastructure providers. So we're very excited about the opportunity.

You mentioned the deal that we signed with Corning, and that's both for consumer fiber but also to support the AI deals as well. And that shows the confidence that we have in the opportunity and the commitment we have towards deploying fiber. So we're very excited about it.

From a deal perspective, each deal is customer specific. We've got a lot of questions around that. And I would be careful not to extrapolate one deal to the rest of the pipeline because every customer's needs are different. But in terms of like returns and margins on these deals, we like what we see. The margins on these deals are very good. If we have -- for example, if we have a tenant on a fiber route, if we get -- we like that margin, really -- it's a good margin. If we get 2 or 3 tenants on that route, it's very, very attractive for us.

The other optionality that we have is we can run fiber for our own needs as well to reduce our transport costs. So this is a revenue stream. As I mentioned, that's above our core business, and we expect it to be meaningful in our results in 2027. So the team is getting after it with urgency, and we'll -- you'll hear more about it soon.

Great. So we'll try to do 3 more topics in 3 minutes. So first, CapEx. So you talked about building fiber, investing. Like how should we be thinking about CapEx, whether it's this year and into the future given that there may be more opportunities to pursue revenue and TAM?

Sure. So our first priority is to invest in the business and sustain our network excellence, and that's what we're doing with our capital program, $16 billion to $16.5 billion. So this year, that's all in and focused on mobility and broadband. If you look underneath, we continue on the mobility side, deploying C-band, and we said we'd be substantially complete this year, and that's on track. And we're deploying fiber, as I mentioned, to at least 32 million premise passed. So that's moving along. And we put a lot of rigor around that to ensure that the programs that we have are really aligned to mobility and broadband growth.

And in terms of the $4 billion of savings in CapEx, we talked about deemphasizing areas that are not aligned to growth and a lot of rigor and work was put around that.

In terms of deals and AI infrastructure deals and capital to support those deals, for 2026, that's included in the $16 billion to $16.5 billion that we see. In terms of next year, we're not going to guide on '27 yet. So we'll come back in January on how we think about our capital program for 2027. And we expect that the AI Connect, these will be success-based capital.

Okay. Capital allocation. So how are you thinking about investing in the business as you're just describing relative to what you're returning to shareholders? And since we are ahead of what could be a significant spectrum auction next year, do you have to start like putting some money aside to like prepare for what you may or may not invest in spectrum in the future?

Yes, sure, Mike. Our capital allocation policy and priorities are very disciplined. Our first order of business and first priority is investing in the business, as I just talked about with our capital programs, but also investing in spectrum. And we just acquired AWS-3 spectrum in Auction 113, $3.2 billion. So investing in the business also includes M&A, including the deal we just closed at the beginning of the year with Frontier.

Our second priority, capital allocation priority is the dividend. And we said our commitment to the dividend is ironclad. And we've raised the dividend for 20 straight years. That's a track record we're extremely proud of. And our goal is to put the Board in a position to continue to increase the dividend in the future.

Third, and to your question around balance sheet and leverage, having a strong balance sheet and delevering is extremely important to us. And we've -- as you heard on the earnings call, we paid down the Frontier debt 6 months early, and we've made progress on our long-term leverage target as well down to 2.5x, and we expect to be at our leverage target in the 2027 time frame.

And our fourth capital allocation priority is share repurchases, and we said we would repurchase up to $4.5 billion in shares this year. Through June, we already had repurchased $3.5 billion in shares. So we're making good progress on capital returns. And we're able to execute on all 4 pillars of capital allocation simultaneously while we're executing on our transformation.

And then the second part of your question, look, we always look at things, spectrum and other assets and we're always going to do that, whether it's a build versus buy lens. And we have ample capacity, if it makes sense for our business. And we're still focused on deleveraging and that comes from EBITDA growth. And it comes from strong cash flows and paying down debt. So that's our focus.

And so to close this out, as investors begin to think about '27, what do you want them to know about Verizon's prospects for next year?

Yes, sure, that we're executing on our plans, making significant progress on our transformation, growing responsibly and making sure that we return capital to shareholders and also investing in our business. I mean those are really the key pillars that I started out with in the beginning. And you see us doing that. I mean we've made a lot of progress in growing our mobility and broadband business, doing it through churn improvements, being more efficient, investing in our value proposition and in the customer and in the customer experience and returning cash to the bottom line and generating strong cash flows. And the first half of the year, we feel very good about the results. We have more to do, and we're excited about what's ahead. So thanks, Mike.

Thank you very much. Thanks.

Good morning, and welcome to Verizon's Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time.

I would now like to turn the call over to Colleen Ostrowski, Senior Vice President, Investor Relations.

Thanks, Brad. Good morning, and welcome to our second quarter 2026 earnings call. I'm Colleen Ostrowski, and on the call with me this morning are our Chief Executive Officer, Dan Schulman; and Tony Skiadas, our CFO.

Before we begin, I'd like to point you to our safe harbor statement, which can be found in the earnings presentation and on our Investor Relations website. Our comments this morning may include forward-looking statements, which are subject to risks and uncertainties. Factors that may affect future results are discussed in our SEC filings. This presentation also contains non-GAAP financial measures, and you can find reconciliations of these measures in the materials on our website.

As a reminder, on June 29, 2026, we filed an 8-K with the Securities and Exchange Commission, which disclosed our agreement to form a joint venture with BT Group plc to combine our international wireline businesses. As such, the net assets that Verizon will contribute to the JV are now classified as assets and liabilities held for sale and have been moved from Verizon Business Group to Corporate and other.

With that, I'll turn it over to Dan.

Thank you, Colleen, and good morning, everyone. When I stepped into this role last October, I said we were going to do three things: put our customers at the front and center of every decision, run the company with operational discipline and translate that into accelerating financial performance for our shareholders.

In Q1, we highlighted the first proof points. Today, with our second quarter results, we see clear and compelling evidence that our transformation is driving a structural and meaningful inflection in our results. Tony will take you through our financials in more detail. But in a nutshell, we are accelerating across every key metric. And consequently, we are raising our mobility and broadband service revenue, free cash flow and adjusted EPS guidance.

Our operational metrics continue to shine. In the quarter, we delivered 184,000 postpaid phone net adds, a meaningful step-up from Q1 and an increase of 193,000 from last year. Our consumer Q2 postpaid phone net adds were our best in 5 years, and our overall postpaid phone gross adds for Q2 were our best in the last 8 years.

In the first half of 2026, our postpaid phone net adds are up 537,000 versus a year ago, and we continue to expect postpaid phone net adds to be in the upper half of our 750,000 to 1 million range for the full year. In addition, we added 348,000 broadband net additions, continuing the share-taking momentum we have built over the last several quarters. In total, our mobility and broadband net adds for Q2 were over 550,000.

I'm also particularly pleased to say that our net new accounts have also been positive for the past 2 months. It's been a long time since we have been able to say that we are now growing both accounts and lines. Importantly, we are driving our postpaid phone net add growth in a fiscally responsible manner. Consumer postpaid phone churn was 84 basis points, down from 90 basis points in Q1 and 95 basis points in Q4 of last year. And it is an improvement of 6 basis points from a year ago. Verizon's overall postpaid phone churn also improved by 5 basis points from last year as our business group also drove a meaningful improvement year-over-year.

I want to pause on our churn number because it is one of the most important metrics in assessing the health of our business model. Consumer postpaid phone churn of 84 basis points is a step change for Verizon. As all of you know, our churn have been steadily rising quarter after quarter, and it is now down year-over-year and down sequentially for the second consecutive quarter. At the same time, we are improving the quality of our gross adds and lowering our cost to acquire and retain our customers. When you compound lower churn with healthier acquisition economics, you get exactly the kind of operating leverage you are seeing in our financial results. In fact, our financials all accelerated in Q2.

Mobility and broadband service revenue grew by 2.8%, up from 1.6% in Q1. We see this trend continuing to accelerate in the second half of the year. And as a result, we are now guiding our Q3 mobility and broadband service revenue to approach 3% year-over-year growth, and our Q4 mobility and broadband service revenue is now anticipated to grow at approximately 4% year-over-year. For the full year, we are now guiding revenues to grow 2.5% to 3%, the upper half of our previous 2% to 3% range.

Our bottom line also outperformed as our adjusted EPS grew by 6.6% year-over-year to $1.30. As a result, we are raising our adjusted EPS guidance to 6% to 7% growth for the year. And one of the stars of the quarter was our free cash flow of $6.4 billion, up 24% year-over-year, one of the strongest cash flow quarters in our history. Consequently, we are raising our full year guidance for free cash flow growth from approximately 7% or more growth to 9% to 10% growth. This is in sharp contrast to the past 5 years when both our average annual free cash flow and adjusted EPS grew at approximately negative 1% during that time frame.

We also completed $1 billion of share repurchases in the quarter, bringing year-to-date buybacks to $3.5 billion, already ahead of our full year commitment of at least $3 billion. We are now raising our full year buyback target to up to $4.5 billion, reflecting both our accelerating free cash flow and our conviction that Verizon's stock at current levels represents a compelling use of capital. These results reflect the operating discipline we have been building across the company.

I want to spend a moment on what is actually happening underneath these numbers because the drivers of our model are more important than any single metric. First of all, our overall customer economics continue to improve. In Q2, our consumer promotional cost of acquisition improved by approximately 15% year-over-year, while our promotional cost of retention also improved by approximately 17% year-over-year. It's also important to note the net adds we are bringing into Verizon are of higher quality. Remember that we are no longer acquiring lines with 0 revenue.

We delivered Q2's net add and churn performance at those lower cost levels. And with our new value proposition, we expect our cost of acquisition and retention to continue to improve. That combination, higher quality net adds, better volumes, lower churn and lower unit cost economics is the engine behind the adjusted EPS and free cash flow performance you are seeing, and it is a meaningful and structural shift in our business model. It will also drive improving revenue growth as we add more net subscribers across postpaid, prepaid and broadband, and begin to benefit from a reduction in our promo amortization headwinds. In Q4, we will also lap the year-over-year headwind from our decision to keep our pricing in line with the value we provide. As I've said, we will not raise prices without adding corresponding value for our customers.

Second, the network is delivering. Following the actions we took after the January event, our network performance metrics have improved sequentially every month as we embed sophisticated AI models that allow us to autonomously fix network issues in minutes as opposed to hours. And with our success in the AWS spectrum auction, we will add to our network superiority.

Third, convergence is real, and it's working. Our Frontier integration is ahead of plan. We are seeing the cross-sell economics we expected with converged mobility and broadband customer cohorts churning materially less than single product customers. With 348,000 broadband net adds this quarter, we continue to take share.

Fourth, the transformation work streams I described last quarter are producing tangible results, and we are fully on track to deliver at least the $9 billion of OpEx and CapEx savings we said we would. The 10 transformation initiatives we launched are no longer plans on a page. They are showing up as lower cost to serve faster customer journeys and a step change in productivity across the organization. We are rapidly becoming an AI-centric company in how we operate and the operating leverage we are experiencing in our results reflect that. Our $9 billion cost program for this year is on plan, on pace and is a multiyear tailwind that will continue to bear fruit in the years ahead.

Before I wrap up, I want to highlight several important initiatives we recently launched. Each of these will fundamentally improve our ability to serve our customers while driving incremental value for our shareholders. Our new consumer value proposition launched in mid-June, and it is delivering well beyond our expectations across every metric. It is built on a single idea that our customers should not have to do anything, no plan changes, no upsells, no fine print to get more from the company they have chosen. They should get more just for being our customer.

And there are three elements I'd like to highlight. First, we launched the most comprehensive loyalty program in our industry. Every Verizon customer, not a tier, not a segment, not a subset, has access to our full loyalty program with no plan change required. It includes monthly cash back, a redemption catalog that is genuinely differentiated from anything in this industry and the elimination of activation and upgrade fees. We do not feel it is appropriate to charge a customer to join our network or upgrade their device. We are redefining what it means to reward customers for their loyalty.

Our second innovation is simplicity, a radically transparent and simplified wireless plan, $45 with our best network performance. One plan, one price, no games. We are taking the complexity out of choosing a wireless plan and trusting that a clean, honest offer wins. We are separating phone subsidies from our wireless pricing. That translates into better transparency, more flexibility and choice for customers and meaningfully better margins for Verizon.

And finally, we launched a fully converged nationwide plan called Verizon One, $70 for mobility and broadband together, all taxes and fees included on one bill with integrated servicing across both products. This is what convergence is supposed to feel like for a customer. One price, one bill, one call if you need help, nationwide coverage, all backed by one company accountable for the entire experience. Nobody else in the industry is delivering that today.

Our new value proposition is a structural repositioning of the Verizon brand around customer value and it's just another step in our journey to put the customer at the center of everything we do. Lower consumer postpaid churn, healthier net adds and a lower cost of acquisition and retention. Those numbers tell you that we have already begun to compete differently.

Simplicity, Verizon One and the loyalty program are the customer-facing expressions of that shift. They are designed to drive volumes, further reduce churn and enhance the lifetime value of our customers. We have been deeply thoughtful and fiscally conservative in how we have built this proposition. The economics have been pressure tested. The loyalty program is funded within our existing operating envelope and every assumption underpinning Simplicity and Verizon One is grounded in disciplined modeling. The new value proposition and loyalty program are additive to our financial profile. They are fully contemplated in our outlook. They do not require us to spend our way to growth, and they are designed to compound the operating leverage you are already seeing. As I mentioned, our initial results are extremely encouraging across every metric.

Our second announcement is our 50-50 joint venture with BT that combines our respective international wireline assets into a single focused entity. The combined JV will serve over 3,000 joint enterprise customers and represent roughly $4 billion of combined revenue at formation. We expect to close this transaction in the second half of 2027. The deal sharpens our focus on where and how we win. It improves the financial profile of the remaining business immediately. We expect that we will realize annualized savings of approximately $200 million versus our current course and speed.

And most importantly, it allows us to significantly improve our ability to serve our enterprise customers. By uniting Verizon's network strength and international enterprise wireline team with BT's deep historic footprint, we are creating a stand-alone leader in the global connectivity market dedicated to supporting the digital future of multinational organizations.

Our third announcement is also quite consequential because it foreshadows where our revenue growth profile is going from here. We recently signed an agreement with Google valued at over $1 billion to use Verizon dark fiber to connect their data centers. We have other deals that we expect to announce by year-end that, taken together, are expected to be worth multiple billions of dollars in revenue over the next several years. These are long-duration, high-quality contracted revenue streams from some of the most demanding infrastructure customers in the world.

We believe that this is just the beginning. The build-out of AI infrastructure across the United States is one of the largest capital cycles of our lifetime, and Verizon is uniquely positioned to participate in it. We own one of the most extensive long-haul and metro fiber footprints in North America. We have spent decades building the kind of carrier-grade, low latency, highly resilient transport network that hyperscalers need to connect compute to compute, model to model and region to region. We built that infrastructure for a different era, but it has turned out to be exactly the right asset for this one.

We are also in the early stages of retrofitting many of our central offices into data centers for inference edge computing with multiple conversations underway with partners who are eager to utilize these power-ready and permitted locations. We are moving quickly to expand our TAM in the rapidly growing AI infrastructure market. The agreements we have signed are the leading edge of a strategy that will become a meaningful incremental leg of growth for Verizon. We expect this initiative to noticeably contribute to our revenue growth starting next year and to grow substantially from there.

I want to emphasize what that means in combination with everything else I've said today. In the back half of 2026, our mobility and broadband service revenue growth is expected to accelerate with Q4 forecasted to grow by approximately 4% year-over-year. That acceleration is independent of the incremental AI infrastructure revenue that begins to layer into our results starting in 2027. Said differently, our core business is accelerating and a new revenue growth vector arrives on top of it next year.

This is a very different revenue growth profile than Verizon has had in a very long time, and it is the foundation of why we believe that we are at the beginning of a multiyear growth story.

When I gave our initial 2026 outlook back in January, some of you rightly questioned if we could deliver this kind of acceleration in a single year. After almost a year into my tenure, we are not just on track. We are significantly raising the bar, and we are doing it the right way through healthier customer relationships, stronger network performance and disciplined execution.

Tony and I believe that this is what a disciplined focus on customers and shareholders look like. We are innovating and investing in the full end-to-end customer experience. We are investing in our network. We are investing in our broadband footprint and the convergence opportunity. We're investing in our AI tech stack. We are growing our dividend, and we are paying down our debt. We are returning incremental capital through buybacks, not as a onetime event, but as a sustainable feature of how we run this company going forward.

Every one of those levers is moving in the right direction, and that is a function of the operating discipline across the company. The momentum we have in Q2 is driven by our leading indicators, lower churn, quality net adds, increased customer satisfaction, network performance, convergence and OpEx and CapEx efficiency, and they are all pointing in the same positive direction. The back half of 2026 will be stronger than the first half, and 2027 should be stronger than 2026. This is a multiyear story, and we are early in it.

I want to thank the Verizon team for all your hard work. These results are yours. The customer-first mindset, the operational rigor and the urgency you are bringing to this transformation every day. That is what's showing up in our numbers. And I want to thank our shareholders for believing in us. We want to earn back your confidence with execution, not with promises. Halfway through the year, the financial profile of Verizon is materially different than it was a year ago, and the trajectory from here looks to be even more promising.

With that, let me turn it over to Tony to walk you through the financials in detail.

Thanks, Dan, and good morning. Our second quarter results reflect another strong quarter of execution, driving further momentum with our operational and financial performance. The transformation efforts we put in place are gaining traction as we continue to make progress around the customer experience while positioning ourselves to be even more efficient.

As you heard from Dan, we are increasing our 2026 guidance for mobility and broadband service revenue, adjusted EPS and free cash flow. This marks the second quarter in a row of raising components of our original full year guidance. This was a direct result of strong operational execution and the progress we are seeing in the business.

Let me begin with our operational results. In mobility, we delivered 184,000 postpaid phone net additions, an improvement of 193,000 from the prior year. This performance was driven by a 5 basis point year-over-year reduction in postpaid phone churn, reflecting the improvements we are making with the customer experience. As Dan mentioned, consumer postpaid phone churn was down 6 basis points year-over-year. This result led to consumer having positive postpaid phone net adds in the second quarter for the first time since 2021. Additionally, we had solid business phone net add results in the quarter, driven by year-over-year improvement across all customer groups. Overall, postpaid phone net adds were 239,000 for the first half of the year, an improvement of 537,000 from the same period last year.

We are writing good business, and we continue to focus on growing volumes primarily by reducing churn. The key to reducing churn is becoming a customer-centric organization, and we are well on our way. In mid-June, we launched an industry-first loyalty program for all customers with Verizon Dollars and Verizon Shine. We also introduced our Simplicity and Verizon One offerings, which streamline our go-to-market approach. As Dan mentioned, the early results are very encouraging. We believe that the launch of Simplicity will be a key long-term driver for margin expansion. Further, the double-digit growth in app traffic since the launch is a concrete sign of interest in our programs and likely a leading indicator of churn improvement.

The growing benefits we're seeing from churn reduction are allowing us to drive more of our net adds from retention, enabling lower spend on both COA and COR. We are being disciplined and targeted while also reducing churn with better segmentation. To that end, our second quarter upgrade volumes were down nearly 27% from the prior year.

Moving on to prepaid. Our offerings continued their consistent volume growth and positive revenue contributions in the second quarter. Prepaid net adds were 73,000, our eighth consecutive quarter of positive net adds. As a result, prepaid revenue was up approximately $90 million year-over-year or nearly 5% growth. We continue to take share in broadband with 348,000 net additions in the quarter. Notably, we now have over 17.1 million total broadband subscribers in our base.

Fixed wireless access and fiber delivered net adds of 193,000 and 155,000, respectively, demonstrating our continued success in capturing our broadband opportunity with both technologies. We continue to build out fiber at an aggressive pace and remain on track to end the year with over 32 million fiber passings. We like what we're seeing from the Frontier markets, both in terms of generating fiber net adds and our execution against a significant cross-sell opportunity. We recently launched Verizon One, which is our first unified go-to-market approach for mobility and broadband for both fiber and FWA. It is one of the many steps we are taking to improve the customer experience and make it easier to do business with us.

Overall, our operational results for the first half of 2026 are a step function improvement in where Verizon has been over the past several years. We added over 1 million mobility plus broadband subscribers in the first 6 months of the year, positioning us well on the path to deliver long-term volume-based sustainable revenue growth.

Moving to our financial results. The quality of the business we're writing and our cost efficiency efforts continue to drive strong adjusted EPS growth and industry-leading cash flows. We are accomplishing this even in the midst of our transitional year for mobility and broadband service revenue. As Dan mentioned, we drove an acceleration in our revenue growth rates compared to the prior quarter. Mobility and broadband service revenue was $23.4 billion, up 2.8% year-over-year and 120 basis points better sequentially. Wireless service revenue declined 0.7% from the prior year to $20.8 billion.

Total revenue for the second quarter was $34.3 billion, down 0.7% year-over-year. Sequential improvement in mobility and broadband service revenue was offset by lower equipment revenue, which was down nearly 20% or over $1.2 billion from the prior year as we drove significantly lower upgrade volumes, another demonstration of our more disciplined approach as we structurally evolve our business model. The inflection in growth we saw in the second quarter, combined with our expectations for the rest of 2026, give us confidence in raising our mobility and broadband service revenue guide. We now expect to grow mobility and broadband service revenue 2.5% to 3% for the full year.

In addition, we continue to anticipate wireless service revenue improving in the second half of the year. Importantly, we are confident that the headwinds from promo amortization have peaked and that these pressures will ease across the second half of the year and into 2027. Our cost efficiency work continues to drive operating leverage. As evident in our results, we're making tangible headway in our $5 billion operating cost efficiency program. We're also making great progress with the Frontier integration and remain on track to deliver over $1 billion in operating cost run rate synergies by 2028.

Second quarter adjusted EBITDA was $13.7 billion, up 7.2% year-over-year. Adjusted EBITDA margin was 40.1% and represents the highest that we've ever reported. Adjusted EPS was $1.30, up 6.6% year-over-year. With the strong year-to-date performance and our visibility into the second half, we now expect to grow our full year adjusted EPS by 6% to 7%.

Turning to cash flow. The high quality of our business and our customer relationships continue to generate strong free cash flow and support a healthy balance sheet. Cash flow from operations was $18.4 billion for the first 6 months of the year, up over $1.6 billion or nearly 10% higher year-over-year. This was primarily driven by improved adjusted EBITDA performance and continued working capital benefits primarily tied to lower upgrade volumes. Capital expenditures were $8.2 billion through the end of the second quarter. We are executing towards our full year guide of $16 billion to $16.5 billion as we continue to focus on future growth opportunities within mobility and broadband.

The net of these resulted in industry-leading free cash flow of $10.2 billion for the first half of the year. This represents a $1.4 billion or a 16% improvement from the prior year. As Dan mentioned, the strength of our year-to-date results and the operational momentum of the business gives us confidence to increase our free cash flow guidance. We now expect to deliver 9% to 10% free cash flow growth year-over-year for 2026.

The strength of our cash flow allows us to execute on all aspects of our capital allocation framework. Our first priority continues to be investing in the business. You saw us taking meaningful action to accomplish that in SEC Auction 113. We're very pleased to have obtained high-quality AWS-3 spectrum that will enhance our network experience in alignment with our commitment to our customers. In total, we acquired 82 licenses for approximately $3.2 billion, which is a slight discount to the original auction price from 2015. The licenses are complementary to our existing spectrum and can be deployed with no capital investment.

This reflects our prudent approach to spectrum acquisition. We expect to have this additional spectrum deployed within weeks of the FCC issuing these licenses. We also continue to deploy fiber at scale to capture growth opportunities, including AI infrastructure builds across the country. As Dan said, we expect the amount of revenue associated with these deals to be in the billions over the next several years. AI infrastructure represents a large opportunity with a new long-term, high-quality revenue stream that we expect to ramp over the next few years.

From a balance sheet perspective, we continue to pay down debt in the period. As of the end of the second quarter, we have paid off substantially all of Frontier's debt 6 months ahead of schedule. Our net unsecured debt to consolidated adjusted EBITDA ratio at the end of the quarter was 2.5x, a 0.1x improvement from the previous quarter. We remain on track to reach our target leverage range during the 2027 time frame.

Lastly, year-to-date, we've delivered shareholder returns of $9.4 billion, up more than 60% year-over-year. This includes $5.9 billion of dividends and $3.5 billion of share repurchases. Our cash generation and the strength of our balance sheet provides significant optionality, which gives us the confidence to raise our full year 2026 target for share repurchases to up to $4.5 billion.

In closing, our second quarter results represent a clear step function improvement across our entire business. Our transformation is taking hold, and we are actively translating operational momentum into sustainable, profitable growth.

There are three key pillars to this. First, our operational momentum is very strong. We added over 1 million mobility and broadband subscribers in the first half of the year. This was driven by customer experience improvements and a 5 basis point year-over-year improvement in postpaid phone churn in the quarter.

Second, disciplined financial execution. We generated our best ever reported adjusted EBITDA and adjusted EBITDA margin. This reflects our relentless focus on cost efficiencies and writing high-quality business as our operating expense savings program remains squarely on track.

Third, we continue to evolve our offerings to be customer-centric. With the launch of Simplicity, Verizon One and our loyalty programs, we are successfully capturing new customers and retaining existing ones with robust economics. We are focused on putting the customer first, growing volumes responsibly and driving meaningful returns for our shareholders. We're executing on our transformation and delivering on our plan. We are playing to win.

Before we go to Q&A, I want to share that our Board of Directors has extended Dan's contract through December 31, 2028. This reflects the Board's confidence in our trajectory, our strong results and the momentum of our ongoing transformation under Dan's leadership. The entire Verizon team is thrilled by this development, and we look forward to building the new Verizon. Congratulations, Dan, from all of us. More details are in the 8-K that we just released.

With that, I will now hand the call over to Colleen to take your questions.

Thank you, Tony. Brad, we are now ready to take questions. [Operator Instructions]

[Operator Instructions] The first question will come from Sean Diffley of Morgan Stanley.

I had a question for Dan on the competitive backdrop and your new value proposition. I was hoping you could provide an assessment on the competitive landscape in wireless and whether you expect it to intensify with a new device launch in the fall. Obviously, the market is competitive but not worsening and you're seeing less handset promos. You guys had your best postpaid nets in 5 years in consumer, churn is getting better. Can you elaborate on which parts of your new go-to-market strategy are resonating most and with which cohorts? And then how should we think about the line versus account growth going forward following the recent momentum with 2 months of accounts growing?

Thanks for that question, Sean. Let me try and address most of it, at least. Let me start off with our value proposition and put that in some context. Our value proposition is just another step in our desire to put our customers front and center. We've been investing in every part of that end-to-end customer journey from the in-store experience to our digital channels to our billing to our customer service. We literally have hundreds of micro initiatives running in the company going after every single pain point that consumers might have with Verizon. And we're making great progress on that. Like you can see our consumer postpaid churn down 6 basis points, down sequentially 2 quarters in a row to 84 basis points. And honestly, that's before our value proposition is really kicking in, and we expect to see improved performance, not just in churn, but in our cost of acquisition, our cost of retention.

I will say we're now 40 days into our launch of our new value proposition. And in all my years in the business, I've never seen a launch go as smoothly and as well as this one did. I think our marketing was bold. It was segmented. It was extraordinarily well received. And consequently, our results across the board are much better than we even anticipated. Our gross adds are about 16% better than we forecasted. And really importantly, our net new accounts are 31% greater than we forecasted. We are seeing tremendous growth in new account growth.

As we mentioned in my remarks, for the past 2 months, we've seen positive growth in our new accounts. And I would expect that for Q3, you will see positive new account growth as well. And the quarter is off to a strong start, quite frankly. We are seeing new segments being penetrated based on the new value proposition. We're getting a lot more 1 and 2 line accounts, a lot more of the youth market, a lot more diverse accounts coming in. And our assumption sets around what would happen in base migration and ARPA. So base migration is maybe 1/3 of what we expected and Simplicity has been ARPA accretive as well.

And I would also just say like every new account onto Simplicity is basically subsidy free, which, of course, that's just a huge structural improvement to our financial model. And it goes to your point around competition. I think the basis of competition is fundamentally changing. It's moving away from subsidies, at least for us, and it's moving to the overall end-to-end customer experience, like what do the products and services look like? What does your servicing look like? What does your loyalty look like? And there's a new basis of competition going on, that is much more structurally beneficial to Verizon. And frankly, we're seeing that throughout the industry.

Our loyalty program has got a ton of enthusiastic reaction from our customers. And really importantly now, we're seeing a huge number of partners reach out to come into our program with very aggressive promotions for our customers. And so, all in, I'd say really -- we couldn't have a better start. We're seeing incremental volumes, a very strong start to Q3. Customer feedback has been positive. And obviously, it's making a big difference in our financials. I hope that answered most of your questions.

The next question will come from Michael Rollins of Citi.

I was wondering if I could drill a little bit more into the subject. So as we've been following the refreshed go-to-market, I think what's interesting is you're taking away, as you described, some of the customer pain points, but that does also take away some sources of revenue. So within the guidance, as you're improving service revenue growth, and you just described the better ARPA coming from the Simplicity plans. Can you further unpack the ways in which you're replacing and improving service revenue growth?

And then secondly, I was curious if you could further discuss the hyperscale fiber opportunity in terms of the revenue? And is that dark fiber, lit fiber? And the types of investments that might be needed on an incremental basis to deliver on those opportunities?

Mike, it's Tony. I'll take the revenue question, and then I'll pass it back to Dan on the AI question. So on the revenue, I would say, look, we made good progress in the second quarter. As we mentioned in the prepared remarks, we're up 120 basis points from Q1, and we said Q1 would be the low point of the year. And based on the strength of the core business, we increased the guide to 2.5% to 3% for mobility and broadband revenue. And we said the third quarter would be approaching 3% and Q4 growing around 4%. And underpinning this is our wireless service revenue.

And as we think about looking ahead, we expect wireless service revenue to be about flat for the full year, which implies that the second half would suggest that we see positive revenue growth. And this comes from a few key areas. I mean, first is the volume growth that you see. Our mobility net adds are up over 500,000 year-to-date year-over-year. And even on FWA, we're up over 1 million subs, 1.1 million subs year-over-year.

As we mentioned in the prepared remarks, the promo amortization headwinds have peaked and will ease across the second half of the year and into 2027. And then we have things like value-added services such as perks. I mean, number of perks are up like 40% year-over-year. So that's driving revenue growth. Prepaid is growing. We're growing volumes and now we're growing revenue, which is great to see. And then we're lapping the pricing increases from the second half of 2025. And as Dan mentioned on Simplicity, we're seeing good green shoots in terms of ARPA accretion and as we look at each segment cohort. So that's very promising.

And we have, as we mentioned on the call -- in the remarks that we have some early wins on AI Connect that Dan will get into in a second. And that's an opportunity for us above the core business, and we expect it to become meaningful in 2027. So when you put it together, the actions we've taken are driving durable improvements in our revenue and sets us up well for the strength as we head into 2027. And with that, I'll hand it to Dan on the AI question.

Yes. But I'd first go a little bit into what you just said. I mean I think we're driving revenue and volumes in the right way. We're redefining our business model as well. The cost structure is improving. Our cost of acquisition down 15%, our cost of retention down 17%. Those are before the Simplicity impacts. And with churn beginning to come down, I think we not only will be able to drive our top line consistently and in an accelerating manner, but also begin to see that manifest itself in our bottom line and cash flow as well.

Mike, let me go into what we call AI Connect, our initiative inside the company. But this is the first time we're talking about it publicly. Our first focus was obviously address our mobility and broadband end-to-end customer experience, fix that, launch our new value proposition, put into place our transformation work streams and assure that we have the right cost structure in place to invest where we needed so that we could drive the results that you're seeing and the returns for our investors. And we're clearly beginning to see signs of that success as we look not just at Q2, but as we look ahead.

But behind the scenes, it was clear that there was a kind of once-in-a-generation opportunity for Verizon to participate in the massive AI infrastructure build-out. As we talked to hyperscalers, alternative cloud providers, enterprises, there is a need for ever-increasing compute power. I mean, everybody knows that everybody is hearing about it. And the way that, that compute power has moved over the last year or so is, at first, it was about optimizing racks, and then it was basically saying how do we combine racks within a data center to optimize compute power. And now it really is about how do you connect data center to data center to assure that you can optimize and maximize the ever-exploding need for compute.

And while that data center connectivity demand is exploding, there's an equal amount of desire and demand to power inference models and applications that need ultra low latency like robotics or remote surgery, autonomous driving and move that out into the edge as opposed to these big massive data centers. And clearly, our long-haul and metro fiber networks, whether that's dark or lit depends on the customer. Some of them want it dark, so they can do the electronics around it. Some of it want it lit. So we do all of the servicing around it.

But whether it's dark or lit, our assets are kind of suddenly in tremendous demand for that data center connectivity. And we have thousands of central offices, many of which were taking copper out of, and we are retrofitting them to be remote data centers that are power-ready, permitted, fully redundant infrastructure. And those -- we did a small trial on that and sold out capability in 24 hours. So we're seeing large demand for that as well.

We're just announcing this partnership with Google for several of our dark fiber routes for well in excess of $1 billion. The demand for these fiber routes that we currently have and that we are building is ultimately limited and that capacity and pricing is -- we're going to have to think about how we handle the demand for that. We're clearly an attractive player with differentiated assets that are in high demand. We've been building carrier-grade fiber routes for decades. We know how to get it done. We understand permitting. We do our own construction. And we have a solid balance sheet and a solid service reputation that the AI ecosystem needs and counts on.

The revenues that we're talking about are meaningful. They've got margins that are equal to or greater than our existing margin structures, and they will begin to impact our revenues and margins beginning next year and grow substantially over the next 5 to 10 years. And as Tony said and I said, these AI Connect revenues are on top of what is an accelerating core mobility and broadband business.

We're fortunate to be in a position where our assets and expertise intersect with this kind of generational demand. All of this is success-based kind of capital that we are putting in. And we see this accelerating business plus our AI Connect infrastructure providing us with a very different revenue future than we've had in a long, long time.

The next question comes from John Hodulik of UBS.

Dan, can we talk a little bit about fixed wireless? It seems that the adds there on a bit of a downward trend. Can you talk about the performance of the product and maybe the runway you see with it? And then number two, I mean, obviously, satellite competition is a key theme in the connectivity space these days. How does your broadband product portfolio and especially fixed wireless sort of stack up to competition from these LEO constellations as you see it evolve?

Yes. Thank you, John, for that question. It's a great one. Look, we're very pleased with our broadband net adds. We continue to take share. As Tony mentioned, we have 17.1 million broadband customers. By the way, 58% of them have mobility as well. So we are doing a really great job at cross-sell, and that's accelerating.

And as I mentioned on our last earnings call, you're going to continue to see a mix shift towards fiber. We're growing our homes passed. We've got line of sight to at least 32 million homes passed by the end of the year. And in our way of thinking broadband is broadband. Where we don't have fiber, we'll offer FWA for a true nationwide service. Customers don't distinguish between the two. They think about like what speed are they going to get? Typically on FWA, we're at least 300 meg down speeds.

And I really like what we're seeing with our convergence efforts here. Obviously, we've got lower churn, but we're seeing increased ARPA as well. It's interesting with our Verizon One product that we just launched, well over 50% of the people signing on to Verizon One are upgrading their speed levels from that. So that's incremental ARPA. We have room to sell them more lines, more perks, that kind of thing. And so from a lifetime value perspective, we just want to drive as much convergence as we possibly can.

In terms of satellite, we see no impact from satellite providers on our broadband penetration and our broadband capabilities. And by the way, that's not surprising. It is very difficult for satellite providers to provide a service that's even close to what we can provide with our broadband services. I mean today's satellites, their beams cover hundreds of square miles even at the very lowest broadband speeds, call it, 100 meg down and 20 up, the ceiling that they can provide service without degrading quality for everyone is very small.

I mean, even if you look 5 years out and assume that the 3 satellites are in place at very Low Earth Orbits that you've got 1,000 gig down, 100 gig uplinks takes 5 to 7 years for them to scale out that. And when they do, maybe they take their beam size down from hundreds of miles to 25 in suburbs and in urban areas, but let's just call suburbs right now. The ceiling for them before they degrade service is 10 to 40 homes passed per square mile at the lowest broadband speed at 100 meg. If they try and compete against FWA at 300 meg, that ceiling drops to 5 to 20 homes per square mile versus what we can do is anywhere between 500 and 2,000.

So we're like 100x to 1,000x more efficient. Our speeds and our capabilities are much higher. And it's basically not possible because of physics, not because of execution but because of physics for satellite to effectively compete against the terrestrial network in either mobility or broadband in urban and suburban geographies, which, by the way, is where like 95% to 98% of our revenues are. Satellite does have a TAM for sure. It's probably somewhere between 6 million and 8 million homes in the U.S., but it's in primarily very rural geographies, where building out a terrestrial network, just as cost prohibitive. It doesn't pencil out.

I would also say, although you didn't ask this question, but I've read it in speculation out there, that there is no backdoor to our MVNOs in any structure. And we think that satellite is very complementary to our service. We want to work with the satellite providers, primarily through the JV with T-Mobile and AT&T. But there is no reason that we can see to extend an MVNO to any satellite player, and there is no way that anyone can get access to our MVNOs as well. So I hope that answers your question.

Brad, I believe we have time to take one more question.

Your final question will come from Michael Ng.

It was great to hear about the mobility and broadband service revenue accelerating in both 3Q and 4Q. I was just wondering if you could talk about whether or not that's -- that 4% is a good starting point for how we might think about 2027 for mobility and service -- mobility and broadband service revenue growth, just given that it seems like you're only picking up momentum from here.

Yes. Thanks, Mike. Clearly, our anticipation is that the second half accelerates nicely. As Tony mentioned, our wireless service revenue will turn positive. We're seeing a number of structural capabilities. Our volumes are growing. Our new accounts are growing. Our net adds are accelerating. Our ARPA is increasing. We anticipate it turning positive as well. We're going to be lapping pricing in Q4.

Given what we're seeing on the new model around subsidies, which are going down pretty dramatically, promo amortization is going to turn from being a headwind to a tailwind for us next year, we layer on AI Connect revenues would bet we'd continue to see our cost of acquisition and cost of retention go down. Our cost cutting is on track and is a multiyear process.

So there's a lot of positive momentum that we see. We'll talk about 2027 when we report our Q4 results. But as I said, the second half of 2026 will be better than the first half, and we see 2027 being better than 2026 as well.

That's all the time we have for questions. Thank you all for your time today.

This concludes the conference call for today. Thank you for your participation and for using Verizon Conference Services. You may now disconnect.

Good morning, everyone. I'm Sebastiano Petti, and I cover the telecom cable satellite space for JPMorgan. I want to welcome Dan Schulman, CEO of Verizon. Dan, thanks for joining us.

Thank you for having me, Sebastiano.

Of course. And I think you have a safe harbor to review?

Yes. So I would refer everybody to our safe harbor on our website. I'll be talking about things in the future. And so they're always subject to risk and uncertainty.

Great. Now with that out of the way. So Dan, you're now seven months into your role as Verizon's CEO. And in that time, you've driven some meaningful change across the organization, but perhaps the most notable milestone so far has been returning Verizon to postpaid phone subscriber growth in the first quarter for the first time in 13 years. And so I guess where are we in the transformation story? What inning are we in? And looking ahead, what are the biggest near-term opportunities and priorities for you and your team?

Well, first of all, thanks for having me. I appreciate it, and thanks, everyone, for being here. I would say we're a bit further ahead than I expected in our transformation. It's a big company. It normally takes a lot of time to turn things around, but the company has responded quite quickly to the transformation efforts that we've had. So I'm pretty pleased with that. I think our turnaround is on track and probably gaining momentum right now.

I have four priorities for the year. The first inside the company was a shift to focusing on customers. Everyone talks about being customer-centric, but we were network-centric and engineering-centric inside Verizon. By the way, having the best network, I think, is massively important. I fully intend for us to continue to have the best network in the industry. But it can't be the only thing that you go to market. It needs to be -- the whole end-to-end customer experience needs to be revised.

And the best way for everyone here to measure our success on whether we are truly becoming customer-centric is our churn rate. If our churn rate is coming down, we're being successful. And if it's not, then we have more work to go and do. And churn is really the one metric that I think unleashes our entire business model. And so to me, that's probably one of the most important metrics to look at.

The second thing that I'm focused on is a shift in our culture. Verizon has a pride culture, but we are bureaucratic. We are hierarchical. We are process-oriented versus outcomes oriented. We love to show our work, but results come later, and that's not acceptable for me. We're risk-averse and we move slowly, and all of those things have to change quite dramatically. And what I say inside the company is if we're going to regain our market leadership, we need to play to win. And that is not a trade marketing statement, that is something that I have deep conviction around, and that is resonating inside the company, and that's why you see things like our net adds improving. You see us being able to execute against our cost initiatives. And that is the third priority for me. Let's make sure we are the most efficient telco in the world.

We are taking out $5 billion in OpEx. We are well underway in that. I'd be surprised if we don't come in slightly more than that. We're taking out $4 billion from our capital, from our CapEx, and we are on track on that as well. But that is basically a means to an end. So you don't cost cut your way to greatness. We are taking out costs to do two things. One, to reinvest back in the customer experience, and we're seeing already improvements as a result of that. And the second thing that you do with that is that you go into our fourth initiative, which is return value to shareholders.

And so my view is previously, most people saw us as kind of like a substitute for bond yield because we have a great dividend that we've been -- increased 20 years in a row. My view is we need to have a step function improvement in both our top line and our bottom line performance. We need to show consistency in our revenue growth, continual productivity and efficiency in the middle, in our operating expenses, and therefore, drive bottom line growth and equity growth for our investors. And for the last five years, our free cash flow growth and our adjusted EPS growth rate have been negative 1%. This year, we guided to free cash flow growth of 7%, at least 7%, and we just raised our adjusted EPS growth to 5% to 6%. And so I think those are the four priorities that we're going to pay a lot of attention to. And they'll probably stay with us for the years to come.

So a lot of topics we'll circle back on during the conversation here. But one of the things I want to bring up, and you've been quite vocal about as well is your belief in AI and on the call recently, I think you drew a deliberate distinction between being an AI-first company and being an AI-native company. So I guess with a preference for the latter, right? What does that actually take to get there? And I guess, where would you say Verizon is in that journey today?

Well, we're moving rapidly towards being AI native, which means that AI is going to redefine every single part of our organization, our organizational structure, our productivity, the way we go to market, the way we defend ourselves from attacks. AI is not a nice to have, it's existential. We are one of the first 40 companies to work with Anthropic with their Mythos model. And if you've worked with Mythos, you understand that the only way to defend is to defend through your use of AI models.

It is no longer enough to have great humans in the loop, great processes. This is a whole different world, and it needs to evolve rapidly in the next 6 to 12 months. 85% of our network issues are autonomously fixed, that needs to move towards 100%. If there's an element in our network that is not remotely patchable, that needs to come out of our network, and we need to replace it with things that we can automate rapidly and quickly.

When I look at our whole tech stack, we are putting into place a 4-level tech stack on AI. The bottom is kind of our intelligence layer, how do we structure and format our data, whether it be structured or unstructured, that's where LLMs and SLMs come. On top of that is a kind of a development layer where we gin up our models, we gin up our agents. We watch how they run before we release them into the top level of our model, which is our run time or production level, which is where we put AI into our business functions.

And we surround all of that with control panels to look at safety guidelines, observability, identity management so that we have an entire stack. That stack will be mostly done by July and complete by November. That's a very rapid implementation for Verizon. But based on what I'm seeing in the world right now, that's the pace that we need to go at. And it will have profound implications, it will have profound implications on our cost structure, it will have profound implications on our value proposition, what we can offer to customers. And hopefully, it will enable us to be the most reliable and safe and secure network as well.

Great. So you touched on churn, one of the key drivers behind the year-on-year improvement in your net adds in the first quarter was the churn improvement, churn reduction. And I think you said on the call that you expected that at least half, if not more, of your 2026 net adds would come from the churn improvement. I guess we touched on a lot of this last night, but help us think about what are the business and process changes that are -- you're enabling today. And then, I guess, thinking about, I think you've thrown out a target of 5 basis points of churn improvement year-on-year. Is that still maybe the target we should be thinking about for the year?

I think churn is a reflection of how our customers think about us, how well we're doing and satisfying their needs vis-a-vis our competitors. And so I think churn is one of the most important metrics that we have. Our churn has been going up over the last two or three years. And it's essential and it will be a reflection of how successful we are in our value proposition to watch the direction of churn.

We have reduced churn in the first quarter by 5 basis points from the first quarter. And I would fully expect us to continue to reduce churn. We are incredibly focused on the drivers of churn. We have an initiative inside the company, which is called Every Customer Has a Name. It means that we treat every customer as an individual. We are massively sophisticated now inside the company in terms of what are the churn drivers and what can we do to satisfy customers and delight them. And I think churn is the best way to improve your business model.

My anticipation is that at least half of our net add improvement, and we've just taken up our net add guidance for postpaid, will come from churn improvements, maybe more. We're making very good progress on that. We had 95 basis points of churn in our Consumer division in Q4. We had 90 basis points in Q1, and we exited Q1 at an 85 basis point improvement. So we'll see where we come out in Q2, but that is a way of measuring whether or not we are satisfying our customers. And when you have churn improvement, it means that your Cost per Gross Add also comes down as well. And we have seen our Cost per Gross Add, our retention costs come down by 35% since the height of Q4. And so I would expect that would continue to be something that investors should focus on. We are clearly focused on it inside the company, and we're making good improvements, too.

I guess one of the things we've discussed as well is, given the dramatic improvement in the first quarter, call it, 340,000 net add improvement in the first quarter on a total phone basis. I guess maybe why -- given the magnitude of that, why shouldn't investors view, I guess, the revised upper half or upper end of the net add guidance? Why isn't that conservative, given the momentum coming out of the first quarter?

Because everything we talk about should be conservative. I feel if we say something, we have an obligation to meet it. And if you look at our adjusted earnings per share, if you look at our free cash flow, over the past five years for both of those metrics, we're negative 1%. For this year on free cash flow, we'll be at least 7% up. On our adjusted EPS, we just raised our guidance to 5% to 6%, just took our guidance up for our net adds for postpaid to the upper half of the range. And our revenue growth, and this will be a transitional year for revenue growth, and we should talk about that, we'll be between 2% to 3%, and will accelerate through the year.

So I feel like that's good, conservative guidance. It's a step function improvement from where we've been. But I think at the same time, we want to be as sure as we can be in uncertain environments, things can change, as sure as we can be that, that guidance is guidance that is prudent and it's something that investors can count on.

Okay. And I think still awaiting perhaps a value prop refresh. I think you've talked about central pillar of the strategy is to redesign, to have an end-to-end redesign of the customer experience based around transparency, simplicity, genuine value delivery. I guess, the question is, I guess -- I mean, can you bring that to life a little bit for us? I mean what does that actually look like in practice? I guess how do you -- how will customers feel that difference?

Yes. Well, we've been working on our value proposition since the -- well, since weeks before I went into the job, because obviously, the way to measure whether or not we are satisfying customers is both the net adds that we have, our churn rate and their customer satisfaction levels. We hit our highest customer satisfaction levels in our history last quarter for our customer service.

Our churn is starting to come down. And that's because we are doing lots of small things right now. Our models are much more sophisticated. We're looking at hundreds of variables now as opposed to 2 or 3. It's why our cost per acquisition is coming down, cost per retention is coming down, because we're much more segmented, much more thoughtful about what the customers need.

It used to be, for every problem you had, we gave you a free phone. That was expensive. And if you are having a problem with connectivity at home, a free phone does not address that at all. A femtocell may address that. A femtocell is 1/3 the cost of a free phone, and it actually addresses your problem as opposed to you have a new phone, and you still have bad service at home.

And so we're just going to be much more sophisticated in the way that we think about this. I think we can be much more fiscally responsible and much more customer obsessed by thinking about things on a micro segmentation basis. We will -- we will look at revamping our value proposition, but that value proposition it's not one big thing. It's tons of small things that make a difference. And so the way to measure us is our churn rate come down and do we still continue to add net adds at an accelerating basis going forward?

And so talking about the -- going back to the efficiency efforts on the CapEx side as well as on the OpEx side. So you've announced the goal to cut $5 billion of OpEx in 2026, maybe some upside there, but also reduced pro forma CapEx by $4 billion. So I guess one of the questions we get is how do investors get comfortable that this level of network spend will still allow Verizon to remain competitive?

Well, we're still spending $16 billion to $16.5 billion in CapEx. Frankly, whether we need that amount is somewhat debatable in my mind. We have done most of our 5G implementation. We probably have 10% more to go. We're constantly fine-tuning our network. The fact of the matter is we can have what we consider to be the best network and what is measured by external benchmarks, 7 of the 8 of them, we lead.

I'm going to constantly make sure that we have the best network, that we invest the right way to make sure that, that happens. But we've done a lot of the investment that we need. We'll constantly build out. I'm always measuring. And it's a very mathematical equation. How much more capacity do we need? Do we want to build incremental cell sites? Do we want to get more spectrum into our mix?

But we have a pretty good view of all of that. I think I will never compromise on the quality of our network. I want it to be the best in the industry. I'm quite focused on that. I don't feel network is the only thing that you can differentiate yourself on. I want to have the best network. And when I look at the metrics, we do and I'll continue to invest to make sure, $16.5 billion is a lot of money, but we've done a lot of our investment. I actually think we can probably become more efficient from here, not less efficient and maintain our network lead that we have.

At the same time, I want to invest in other parts of our business. The whole experience to me is crucial from the time that you come into one of our stores, that you're online, that you have customer service from us. It all needs to be the best in the industry. And so we're investing a lot behind that, and I would never under-invest in any part of our business, but I'm making sure that everything we do is as efficient as possible.

I guess, how does that translate to the spectrum side? Is that somewhere in an area you believe -- not necessarily you're pulling back on, but an area that you want to make sure from a spectrum perspective, Verizon is well capable?

Yes. I mean, I look at -- I'm very math-oriented, so I look at everything from kind of what does the investment get us? So do we need more spectrum? Can we add more cell sites and densify what is the trade-off? What is the timing for that? And so I look at all these things as a sophisticated math problem, but I'm not going to lose our best network claims and where we need to add additional spectrum, we will.

But I look at everything kind of as a very sophisticated math equation, where are we, where do we want to be competitively, what's the time frame around that, because you can either buy spectrum or you can add more densification in your network. They have different time frames and different costs associated with them. But I'm not going to lose best network claims for us. That's essential. But best network alone is not enough.

There needs to be surround around it. The value proposition needs to be right. Every touch point needs to be superior. And we're investing. I mean we did cut $5 billion of operating expenses, but I'm investing a lot back into the business to be sure that we have a superior value proposition and that our churn rate continues to come down because we have a superior value proposition.

Sticking with spectrum, you recently announced an agreement in principle to form a joint venture with AT&T and T-Mobile aimed at eliminating wireless dead zones. Given that a definitive agreement has yet to be reached, can you walk us through the strategic rationale? What does this joint venture accomplish that Verizon can achieve on its own? And how do you think about maybe the playing field? What does it mean?

Yes. So we, along with AT&T and T-Mobile, we'll be going into a joint venture to basically eliminate dead zones, partnering with satellite companies. We think that working together that we can create standards as opposed to being three sets of standards for all the different satellite players to work with us. We'll have a common set of standards. We'll be able to leverage our volumes and create value propositions for consumers, and each of us will create our own unique value proposition. But we'll have a common set of standards that we can use across handsets, across the different satellite players.

And we're all eager to provide the best communications to our customers, and we felt doing this together was a way that we could accelerate that and also make it simpler and easier for the industry and our customers. So we're excited about the JV. We think it will eliminate a lot of dead zones. It will create a lot of value for both the satellite companies and for the wireless providers together. And so we are eager to make it happen. And I think it's a big step forward for consumers.

Great. And then sticking with Direct-to-Device. How concerned is Verizon about Direct-to-Device providers eventually going Direct-to-Consumer, whether via a terrestrial network, MVNO agreement? And I guess, what are the -- I guess I want to ask you the follow-up of what are the pros and cons of an MVNO for Verizon since you've shut that down recently. But how are you thinking about that threat?

Look, I think over the foreseeable future like, call it, the next 10 years that satellite is a complementary service to the carriers. If you think about kind of our capacity in urban and suburban, where 100 to maybe 1,000x more efficient than satellite could ever be in those areas. There are probably 5 million homes in the U.S. where satellite can be a more efficient alternative. But for us, the physics of satellite versus terrestrial are really kind of night and day difference and so forth, 95% plus of our customers, we see satellite as a complementary service and very, very hard to compete with terrestrial networks.

Okay. And then for a couple of minutes here we have remaining, you talked about perhaps maybe upside to the $5 billion cost opportunity. But as we think about just Verizon's focus just on efficiencies. As we look out to 2027 or we look out to down the road here, how meaningful or should we expect a similar magnitude of cost takeout kind of going forward into 2027? And just maybe, what are the efficiency efforts above and beyond, we talked about churn, but at a business level, maybe where do you see the lowest-hanging fruit down the road here?

Well, I think my view of the whole model in general is that on revenues. There are five things that are probably going to happen that will start to accelerate our revenues going forward. First of all on -- we decided we were not going to take up pricing again. That's going to lap by the third quarter. And so that starts to be a tailwind for us as we go into the back half of the year and next year. Also, our amortization, promo amortization, which is almost 190 basis points of headwind against us begins to turn as well. And that will start to turn probably maybe as soon as the third quarter of this year.

We also obviously are now putting on quite a number of net adds. Before, we were losing a lot of net adds. Now we say we're going to do at the upper half of our postpaid that will be anywhere from 2x to 3x. What we did last year also, we have accelerating broadband penetration as well. And so that will continue to go. And we also have talked about, we have $1 billion to $1.5 billion of negative margin programs for us, and we are either going to exit those programs or supplement them in different ways where that drag will not happen.

And finally, we have a huge opportunity right now working with AI providers. So there is maybe once in a lifetime opportunity now as AI continues to move where we can use our infrastructure to support that. We can use our central offices to support that. And so I see a real significant opportunity for us as we look forward on that.

On the cost side, we're just going to continue to take out costs year after year after year. And that's just going to be a continual effort for us. AI is going to redefine the way that we go to market, the way we think about our cost structure. We are already seeing where we've started to put AI into place in our, for instance, in our customer service locations where we've had a [ 1,280% ] improvement in customer satisfaction rates, and we're just beginning on that.

And so I think whether you look at the top line, the middle of our income statement, and then obviously, on our bottom line, I can see room for us to consistently improve year-over-year for the next several years. And at the same time, we obviously have a dividend that has gone up for 20 straight years. We are now doing a share buyback. I expect close to $55 billion of return of capital to shareholders over the next three years. And we feel very comfortable with that entire model.

Great. And on the AI infrastructure side, I mean, any KPIs or how meaningful could that be from a top line perspective?

Well, we haven't talked about that specifically. But it's a multi, multibillion dollar opportunity for us clearly, and possibly more.

And then before we conclude here, any final message you'd like to share with the investment community that we haven't maybe perhaps covered yet?

I think we have what I think is a conservative plan in place. We know what we need to execute against. I'm really pleased with what the team has done. But we have a lot more to do, a lot more to prove, and you can be sure we're very focused on it.

Great. Well, Dan, thanks for joining us today, and thank you, everyone.

Thank you, everyone.

Good morning, everybody, and welcome to MoffettNathanson's 13th Annual Media and Communications Conference. And for those of you on the Web, welcome.

I am really delighted this morning to kick off this year's conference with Dan Schulman, CEO of Verizon. Dan and I go way back. We first crossed paths back at -- when he was at AT&T in the 1990s. He brings a remarkable resume to the CEO position at Verizon, serving as not just a business leader at AT&T, but also at Priceline, American Express, Virgin Mobile USA and PayPal. And you took over as CEO in October of last year. So that's a good place to start, Dan.

You've now been in the CEO chair for a little more than 6 months. Granted, you already knew the company well from your time on the Board. But what have you learned in the first 6 months as CEO that you didn't know before you started? And what surprised you the most?

Well, first of all, thank you for having me, Craig. And we do go way back, and it's a pleasure. I always learn a lot from reading all of your reports, and they're always thoughtful and analytical, and I appreciate them.

I appreciate you saying that.

I don't think there were any huge surprises when I made the shift from Lead Director to CEO. It was evident we needed to make changes. Obviously, we have been losing market share for 5 years. We have gone from #1 in market cap to last in market cap. Our forward P/E was the lowest in the industry, which was a reflection of how well you felt about our future growth prospects. And so we clearly needed to make a change. And I had a lot of ideas about that coming in. I mean, obviously, any time you come into an organization, you find pockets of things that are better than you thought and pockets of things that were worse than you thought. But in general, it was as advertised.

So what's the top priority item for 2026? And how do you judge the progress that you've made so far with the turnaround? Because you laid out some pretty clear and tough language about the turnaround that needed to happen.

Yes. We have 4 priorities coming into the year. The first is what I would just call a focus shift where we're shifting the organization from being sort of engineering network-centric to being customer-centric, where everything we do is about putting the customer front and center. It is figuring out that end-to-end customer experience, how we delight customers, address their pain points and do it in a way that no one else can do that. And that's no small task, but the way to measure our success on that, by the way, would be to look at our churn rate. So if churn is coming down constantly, that means we're doing a good job at delighting our customers. And then from there, I would look at net adds. So that's how I look at how are we doing on that shift.

Second thing is the culture shift. When I got there, I feel like the organization was more prey than predator. And we were not playing to win. We were, as somebody put it, gently ceding market share to the other 2 carriers, and that just doesn't work for me. The culture -- I mean, there are good parts of the culture of Verizon, a lot of pride in what we do, but way too bureaucratic, way too risk-averse, scared to make mistakes. Therefore, we move slow. We are -- we love to show our work as opposed to show outcome like process versus outcomes oriented. When I came in, I read this article, like, how is Dan going to get along inside Verizon when it's a company that files paperwork to do paperwork. And so busting through that cultural shift is a very important element for us, and I'm quite pleased with the progress there.

The third focus is I want to be the most efficient telco in the world. And that means we committed to $5 billion of OpEx cuts. That's the -- that's the smallest number that I want to see. Like we are well along...

What's the yardstick for most efficient? Is it revenue per employee? Or is it just...

Cost structure...

So net margin?

Yes. I want cost structure.

Yes.

Yes. We cut out $4 billion from our CapEx, and I feel really, really comfortable with that number. But basically, being the most efficient telco is a means to an end. It is not about cost cutting. It's about investing back into the customer experience. It is about amassing a war chest for us to be able to respond to what is happening in the market. And then obviously, it is about shareholder return, and that is the fourth focus area that I have, which is how do we drive shareholder returns. And there are a couple of ways that we do that. Obviously, we're known for our dividend. That is an ironclad commitment that I have. It's almost a 6% return.

But I don't want to be known for like a bond return. That's not who we are as a company. This is about driving equity performance. It's about driving sustainable top line performance. I'm sure we'll talk about that. It is about being incredibly efficient and productive in the middle and therefore, driving adjusted EPS growth. And if you look at kind of our EPS growth and our free cash flow growth for the last 5 years, our average for both of those metrics has been negative 1%. For this year, it's a step function improvement. Our EPS, we just improved our guidance on that. For adjusted EPS, it's 5% to 6%. Our free cash flow at least 7%. We put into place buybacks, $25 billion over the next 3 years. In the first quarter alone, we returned $5.5 billion to shareholders.

So those 4 things are the things that I'm focused on for this year and quite frankly, probably over the next several years.

So there's a lot in there that we're going to unpack over the next half hour. I want to start, though, you and I spoke a couple of months ago about the need for competitive differentiation in this business. Can you talk about that a little bit? And you mentioned in your remarks a minute ago that the organization was too network focused and not customer-focused enough. Is network superiority, though, still an available position in this industry? And given how important it has been for Verizon historically, is that still important for you in your brand positioning?

Yes. Is that 5 questions in that 1 question? I think it was. Look, objectively speaking, Verizon still has the best network in the industry. If you look at most measures, like 7 out of 8, we have the best network. Having network superiority is incredibly important to me. I want to compete on that. But that isn't the only thing. What I tell the team is network superiority, network excellence is foundational, but it's not enough. I want to do more than that. And really, it is about the end-to-end customer experience. How are we defining that? How are we supporting that? Is there friction in that process or not? And as you well know and everyone knows that there was a lot of friction in that process.

The thing about competitive differentiation is -- and this is good and bad, and this is exactly what I tell my team. There is no silver bullet. So if there was, that would be great, it would be easy to go do. I would have done it already. And by the way, all my competitors would have done it as well if there's a silver bullet.

The thing about creating competitive differentiation is it is some cumulative total of hundreds of things that you have to do extraordinarily well. And I have the team focused on every single one of those metrics every single week. I expect to see every single month, every single quarter, I expect to see us improving on those. I have a mantra inside the company that every day matters. I want to see what we did better today than we did yesterday. And I know that's a bunch of intensity that I have inside the organization right now, but that is what we are driving right now.

If we want to reclaim our market leadership across all elements, we need to be intense inside the company. We need to play to win. We need to do all the small things extremely well because if we do that -- and by the way, just one proof point is last quarter, our customer satisfaction scores when people called into our customer care centers were at a record high. And to me, that's outstanding progress in that. And so to me, differentiation is not one thing. It's not a big bang. It's -- it is hundreds of things that you need to do extraordinarily well. That's why it's hard. But if you can do that, you have a lasting differential value.

One of the basis of differentiation that I think the industry has been increasingly embracing, and it's one of the things I really want to pull out of this conference through all the discussions that I'm going to have with leaders over the next few days is the topic of convergence. Now that you closed the Frontier deal, is it fair to say that convergence is the cornerstone or at least a cornerstone of your go-to-market strategy?

I think it'd be fair to say that convergence is a part of our growth story. But clearly not say that it is a growth story for us. Convergence is really important. I mean we have a nationwide broadband offering and fixed wireless access. It's got extremely high NPS scores, higher than cable companies, for instance, the FWA. We have tons of capacity in our network to drive that. And we also have a large and growing fiber footprint. We'll be well over 32 million homes passed by the end of this year.

And with convergence, you get a number of things. First of all, only 20% of our wireless base has a broadband offering. So a lot of opportunity for penetration there. When somebody does have broadband, by the way, our connection rate of wireless is also industry-leading. It's over 55% and take our wireless service as well. Our churn in general is quite substantially less, about 30% less when somebody takes a converged offering, and that's across both fiber and FWA. And when our ARPA goes up, some people say, oh, convergence is another word for discounting. That is like...

I think it's me who said that.

Yes. Well, I didn't want to say anything. I was giving you the chance not to say that. It's just not true. I mean it actually adds lifetime value. It adds to ARPA. You can charge like depending on what the speed is, you can upcharge for that. And so to me, convergence is a really nice cornerstone for growth. We have some really great assets that we can leverage.

But one of the things that we don't spend a lot of time talking about because you haven't seen it yet and it probably isn't in your model, and I'm sure it's not in anybody's model right now, is we also have a gigantic opportunity in AI infrastructure. We are sitting on some amazing assets, whether they be dark fiber routes, lit fiber routes. We have hundreds if not thousands central offices that are data centers that we've decommissioned, but have power, have permitting, are at the edge and for applications like remote surgery, autonomous driving, et cetera...

So that's our -- this generation version of mobile edge computing...

Exactly. And they're in huge demand. And so to me, you've got a massive incremental leg of revenue growth for us that will start to become apparent as we announce deals going forward. That is another leg of growth. And then, of course, we'll have volumes that are picking up that will drive growth. And then we've got -- the fact that we're -- by the third quarter, we will have lapped our price increases.

So now instead of having a 180 basis point headwind that turns as we go into the third quarter and promo amortization, which most people probably understand, but we were very promotionally intense last year and the previous years. That's how we were driving net adds. That puts pressure on your revenues because you need to amortize that promotional expense on your revenue line. That's about 200 basis points. And my anticipation is based on what we're seeing right now and our ability to drive down promotional intensity that, that will go from a headwind to a tailwind maybe as early as third quarter. So a lot of legs of that stool of growth and convergence being an important one, but you can emphasize it, but I wouldn't overemphasize it.

I do want to go back to convergence one last time for a second, though. You said a second ago that you're getting the 30% churn reduction in both fiber and FWA.

Mixed across those.

So is FWA then a sufficient answer for the -- ultimately, I think you get to maybe 30% of the country covered with your target homes passed with fiber. In that other 70%, is FWA a sufficient solution? Or do you need to keep looking for wireline assets to grow the wireline footprint?

Yes. I know that there are some, not necessarily you, but maybe you who think about kind of what I would call like ILEC 2.0 or something like that. But that is not how I think about this at all. Like we have great fiber assets that will grow to 40 million to 50 million over the medium term. I feel very comfortable with that number. We have an excellent product in FWA that has very high satisfaction rates. We bundle it easily. We have plenty of capacity in the network to continue to push that. We have 6 million customers on it. I think we have guidance out there of 8 million to 9 million by 2028 and very comfortable with that.

So that's going to be a growing part. Fiber will be an increasing part of our mix of broadband. And there are other things going on with spectrum. We have a lot of millimeter wave. We're thinking about ways how do we utilize that more effectively in a broadband fashion, and there are ways that we're thinking about utilizing that. So I think there's a lot of elements that we have. But if you take your argument to its logical conclusion, you would say then, okay, AT&T, Verizon, you guys have a lot of fiber assets. T-Mobile has no fiber assets or very few, then they would be at a massive disadvantage.

And I do get to that what you called ILEC 2.0, where you have Fortress Northeast for Verizon, Fortress South and West for AT&T and so on. But you don't believe that we're headed in that direction.

I don't. I think you're going to have really strong broadband offerings that will be increasingly powerful. And remember, speed is an interesting concept, like on your mobile phone, all of you on -- like it's doubtful that you ever use more than 25 meg of speed on your mobile phone. Speed is really great for speed tests on your mobile phone, but it's good for very little else on that. In the home, if you're at 100 meg, you're probably way more than satisfied on that. Will some people need a gig? Maybe, maybe to show off to somebody or something like that, like -- and we could do 7 gig on fiber, but you've got...

There are no applications for it.

No. It's just the speed test. And so do we have a really good, solid nationwide broadband offer? Absolutely.

Well, I'm going to come back to that, especially the FWA capacity questions and that sort of thing in a second. But I want to sort of dig into the individual businesses, at least as what I still think of as the individual businesses of wireless and so on. And start with wireless. Tell us what's behind the turnaround that you've had in postpaid phone net adds because it really has been a remarkable turnaround in the last just 2 quarters.

Well, I think we have a lot of work to still do there, honestly. And I think we have work to do on both the account and line level on that as well. But look, the first thing is to clearly define what your objectives are, clearly define to the company, like we are going to play to win, like it is not a marketing slogan. This is like look into my eyes, I fully mean that we're going to win...

So this is predator, not prey as you described earlier.

Yes. I've been a Mixed Martial Artist for 40 years. I also know the best way to win a fight is to not get into a fight, like because any time you get into a fight, you're always going to be hit. But in the fourth quarter, basically, it's like we're getting into the ring and we're not going to lose. It's as simple as that. And we -- and I have a huge war chest to go spend, but that's not really my way that I want to compete. Like my way I want to compete is to be segmented financially and fiscally responsible, and I want to close the bottom of my funnel. That's like the best way to win. But in the fourth quarter, we got into the ring, and we said like if you're going to hit us, we're going to hit back hard, and we're going to win.

First quarter was very, very different than that. The first quarter was about how do we think about segments of the market? How do we think about segmented offers into the market? How do we move away from free handset being the answer to everything? How do we stop giving away value from MNOs to OEMs by just giving away free handsets on everything that goes on? How do we lower cost of acquisition and how do we drive a better customer experience? And because we're not raising prices without value anymore, are we going to get more customer loyalty? And so in the first quarter, it was predominantly about shutting down the bottom of the funnel. We exited the quarter on the consumer side at 85 bps of churn, which is a really good number.

And so my view as we go forward is our cost of acquisition, our cost of retention was down 35% from Q4 levels exiting the quarter. I see us being able to stay at those lower levels because we're just smarter about how we're talking to customers and offering like N -- if N is the best model, N minus 1, which costs half that in an acquisition, actually plays to like 80% of the base. They love that offer. And so we're just -- we're so used to doing things the way we did them as opposed to being massively analytical, very sophisticated modeling segmentation of not like 4 segments in the market, but hundreds and thousands and hundreds of thousands of segments. I mean that's the sophistication that we're driving towards. And I feel like we'll continue. We took up our guidance for net postpaid adds.

But for me, like that will happen. To me, it's now about how do we also drive account growth? How do we drive ARPA growth? How do we do all the things that are right for the business model? Start with churn reduction, start with your cost of acquisition and your COR. Start to measure people like not on -- like no more free lines, like I don't really want to measure a free line as a net add. It's low calorie. And so I told the team like that doesn't cut it anymore, no more free lines going forward. ARPA will naturally turn just because you have price -- lapping price increases, lapping promo amortization, volume growth, AI infrastructure growth, that will naturally turn as we go through the year. And account versus line, now that I'm driving the company towards being obsessed with customers, customers are accounts. And so like both accounts and lines are important. You want to drive account growth and you want to drive as many lines with that account as you can as long as they're like real lines.

Yes. How do we reconcile that difference? Because in the first quarter, you added 55,000 postpaid phone net adds, but you dropped 127,000 accounts. So you can't even calculate the number of lines per account in that -- just -- but you're obviously adding lines to accounts really quickly if you're shedding accounts and adding lines. What's going on there?

Both have to improve, like our account growth did improve year-over-year, but it was still negative. It will continue to improve going forward, especially as we focus more and more on customer and less and less on lines per se. But I would say that account growth will continue to improve and ARPA absolutely will grow as the year goes on.

So I'm going to come to ARPA in a second, but I just -- so AT&T -- I struggled with this when I was sort of trying to digest the last quarter's results across the industry...

Don't struggle.

AT&T lost share of the subscriber growth market, but they actually gained share of the account growth market. Yours was the opposite. You -- so if you looked at market share between you and AT&T alone, you're gaining share of subscribers, but losing share of accounts. That's obviously not sustainable. What's -- but how do we even analytically understand that?

I don't know. I can't really talk for others in the industry. I do know that we want to grow our accounts, grow our number of lines and drive our ARPA up. And I think that's how you should look at us. So to me, both accounts and lines are important. ARPA is important. And then just look at our top line revenue growth and that, that should guide you the right way. Good enough.

And the ARPA, you said a couple of minutes ago that you thought it would turn in the third quarter. It was down 1.9% year-over-year last quarter despite the fact that you had a big uptick in the number of lines per account because, again, you were losing accounts and adding lines. So is that all promotional amortization that's really weighing that much on?

No. Half of that was the network outage.

But even with that, you were down 9, 10...

Yes, about 9. And then a ton of that is promotional amortization.

And that's the -- you've talked about changing and moving away from this industry addiction to giving away free phones. Talk more about that. What does that future look like as you move away from free phones? How do you get customers who have been trained for 20 years now to expect free phones every time they turn around to be weaned from that expectation?

No, it's not customers that need to be weaned. It's the industry that needs to be weaned. That's just the way that the industry has done things. Look, I can't speak for the other carriers. But what we've seen through our segmented offers, both on the retention side and the acquisition side is that you can be much more sophisticated in what you offer to a customer, listen to them, understand what they need. 20% of the market is latest edition free phone addicts, and we'll have offers for those. 80% of the market is not like that. And again, I don't know what the other carriers are doing, but I listen to them, just like you listen them on their phone calls.

I think everybody is coming to the conclusion that we can be -- that we're transferring too much value from MNOs to OEMs for no good reason. Like if it makes sense, so be it. And will there be promotional times where people will be out there? I'm sure that will happen as well. But in general, I think you're seeing it already with Verizon. We can be way more profitable, drive bottom line performance and top line performance and net adds in ways that we haven't done in a long time by being a lot more sophisticated, a lot more fiscally responsible and a lot more customer-centric.

We've talked mostly about the retail wireless business. I don't want to miss the opportunity to ask about the wholesale wireless business and in particular, the MVNO that you've got with cable. The question I get most often from investors in Verizon is, is cable friend or foe?

To me, they're friend. We have an extremely accretive arrangement with them. And I'm happy to be really close partners with them. And I think my attitude is -- I ran an MVNO as well. So I know inside and out. I understand the pressures that they have on them. I understand the opportunities that they have as well. It's great that they're on our network. But because we are thinking of each other as partners now and not as foes, there's a lot of opportunity that comes with that, too. I want to really think carefully about how we think about our networks together and what can we do on that front to be helpful to each other. And so I see a lot of opportunity, and I'm good friends with Chris and Bryan and Mike, and we're going to figure out opportunities to work closer together.

Interesting. Okay. Let's go back to FWA for a second. You talked about the capacity you've got for FWA, but you've had now 10 straight quarters of lower year-over-year net adds. Is -- what's going on there? Is that just the introduction of new FWA competitors competing in each market? Is it the beginning of competition from LEO satellite? Or what is the reason why the FWA business seems to be decelerating?

Well, I mean, one, we have 6 million people already on it. Again, we'll get to 8 million to 9 million by 2028. We also now have a lot more fiber than we have. And when we go and sell, you should expect our mix shift to move more towards fiber than FWA. But we're going to do a ton of broadband growth every single quarter. We did 341,000. I think it was net adds. I don't even want to look at my team in case they're going to shake their heads to that strong number. But I think we did 341,000 net adds in broadband. Look, when I look at our net adds across postpaid, across broadband and across prepaid, we're going to have quite a number of net adds by the end of the year across all those things, and that's going to drive a lot of revenue growth for us.

So last year, we published -- I think it was probably before you took the CEO position, but we published some -- maybe back of the envelope math is the best way to describe it, but it would suggest that even by last year, FWA was roughly half of all the traffic on your network, but only about 4% of your revenues. Is that sustainable? And where is that mismatch a problem?

Well, first of all, your math is wrong. So it's hard to argue against the wrong math equation. So it's a minority of traffic, not 50%. So yes, we have a lot of room on the network for FWA to go forward.

And one of the questions that I find really interesting, both as opportunity and it relates to this capacity question for FWA is, what do you expect AI is going to do to network traffic loads? You can imagine as we start to see whether it's delivery vehicles or driverless cars and drones and various types of robotics and meta glasses and you name it, that you start to see much more significant loads on the wireless network than what the growth rate starts to reaccelerate to those old 35% compound annual growth rates that we used to see 4 or 5 years ago. There's obviously opportunities in that traffic, but there's also network capacity challenges in that traffic. Can you talk about that a little bit as to what you think is going to happen with AI workloads on the network?

Well, first of all, it reinforces kind of this AI infrastructure point that I feel we might be best positioned to capitalize on. Obviously, the hyperscalers, alternative cloud providers, large enterprises that are moving rapidly into the AI age are keen to leverage our assets in that. Second, from a consumer perspective, I think as more and more AI applications, as phones move from apps to kind of an agent-based interface, I think there's room for us to price to that value as well.

So if we're offering more value, more things, I think people hear me saying like Dan doesn't want to take price. That's not true. I'm not going to price for no value. But where there is value, it's irresponsible actually not to price to that because if you don't price to it, then in effect, you start a different type of price war on that. And so I need to think very carefully about where are we adding value and making sure that we price to that and where we're not, making sure that we're not trying to gouge customers either. So I think there's -- the bottom line on that, I think there's a lot of opportunity, both in supplying infrastructure to those who are driving the AI type of things and then making sure that customer is going to avail themselves...

But it sounds like you don't see any risk of crowding out FWA with AI workloads.

Not in the near to medium term.

I want to talk about fiber. You know that I've been concerned about fiber, which is you know I've been concerned...

You need more of it in your diet. I can see that in you.

That -- as density falls and as you move into...

Your bone density?

Yes, that's right. Bone density falls. That as density falls, the cost per home inevitably rise, right? It's just the nature of the math, more miles per home or fewer homes per mile. And that's before the cost pressures that are created on the supply chain by data center demand for fiber and for labor and all that sort of thing.

Do you share that concern as you look out over your sort of passings menu for the next 2, 3, 4 years? Those are inevitably going to be lower and lower density passings. How do you maintain the discipline of the ROI that you want to get out of those investments given that the cost necessarily has to rise and that we're starting to see pressure on broadband ARPU at the same time that says the ROI goes down as ARPU goes down.

What are you, a big cynic? Cassandra of the industry? No. Let me...

I've been called that...

No, I think as I mentioned, you're thoughtful around your analysis on this, like that's why we came up with 40 million to 50 million passings on this. Like past that, it doesn't pencil out for me because then you'd start to get to more rural and there, it doesn't pencil out. But in terms of the supply, we do most of it in-house. We just came to an agreement with our unions as well. So I know what that cost structure is going to look like, and that's how we came up with our number.

Is there a risk that with so many different people chasing the same price that AT&T is mostly building in its own footprint, you're mostly building in your own footprint, but you've got all these kind of free radicals, as John Malone would have called them, the Brightspeeds and the Ziplys and people that are building in all different markets. Is there a risk that somebody gets to a meaningful part of that 40 million to 50 million before you can?

I mean there's always risk. But my view of that is quite small. And on the LEO side because you mentioned that. Look, I think satellite is a really good complementary service to our product, but they cannot compete in urban and suburban against the terrestrial network. And that really comes down -- and by the way, that's where like 95% plus of the revenues are. And the reason for that are really simply comes down to densification and orbital physics when you have a low earth orbit satellite, it beamed, covers a much wider area than a cell tower. Once you get congestion in there, you actually -- when we get congestion in our network, we add another cell site and it increases capacity 2 to 4x. In urban and suburban areas, terrestrial networks are 100 to 1,000x more efficient than low earth orbit. But is there a market for that? Of course, there is. I think over the next 7, 10 years, I think that's like maybe like 5 million households or so. It's a real market, but it's not our market.

You said before that you really value your partnership with cable. Is there a scenario where you would enter into a similar partnership with a LEO satellite operator and give them an MVNO?

No.

Clear. We've only got time for a wrap up. So I want to go to your favorite topic and mine. And that is what you called to me a while back, your growth equation. We don't get to see pro forma financials. But I think about this as organic versus inorganic. Absent Frontier, you're probably right now at sort of roughly flat revenue growth overall or service revenue growth. But you've talked about a picture where that starts to meaningfully accelerate. So talk about the growth equation and how you think you can grow organically going forward, what are the pieces?

Yes. I think there are 4 areas where I want to assure we execute on to create sustainable and consistent revenue growth going forward. First is create volume growth on that. And I've seen that happen, and I expect that to continue. Second, pricing turns around. So you have 180 basis points of headwind that turns into tailwind. Promo amortization, you have 200 basis points of headwind turns into tailwind. You've got AI infrastructure as well. And so all of that along with driving convergence and those kinds of things, I think I see a really good revenue story, and I think you'll see that very, very clearly as you go into the back half of the year and go into 2027.

In the middle, we want to be the most efficient telco in the world. And we are taking out a lot of costs. And we are at the beginning of those stages of being efficient. We are moving rapidly to be an AI-native company. We are the only global operator in the world that got early access to Mythos because we do critical infrastructure for the United States. Like moving to become AI native is not a nice to do, it is a must-do in this world. But man, can you drive efficiency, productivity, customer sat rates, redefine your value proposition.

So -- and then as a result of that, like you're beginning to see increasing bottom line performance and free cash flow performance. And on top of that, obviously, we're driving quite a bit of capital return, whether that be through dividends and share buyback that will also help our adjusted EPS growth as well. So when I look at the overall growth equation over the next several years, I just see it continuing to compound.

Well, I think I told you the last time we were together, my history with what is now called Verizon goes back to the days of NYNEX, and there's no company that I want to see succeed more. So I wish you great success in this transition. I really thank you for joining us this morning.

A pleasure. Thank you, everybody.

Good morning, and welcome to Verizon's First Quarter 2026 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time.

I would now like to turn the call over to Colleen Ostrowski, Senior Vice President, Investor Relations.

Thanks, Brad. Good morning, and welcome to our first quarter 2026 earnings call. I'm Colleen Ostrowski and on the call with me this morning are our Chief Executive Officer, Dan Schulman; and Tony Skiadas, our CFO.

Before we begin, I'd like to point you to our safe harbor statement, which can be found in the earnings presentation and on our Investor Relations website. Our comments this morning may include forward-looking statements, which are subject to risks and uncertainties. Factors that may affect future results are discussed in our SEC filings. This presentation also contains non-GAAP financial measures, and you can find reconciliations of these measures in the materials on our website.

Finally, as a reminder, the results of Frontier Communications are included in our financial and operating results beginning on January 20, 2026, the date we closed the Frontier acquisition.

With that, I'll turn it over to Dan.

Thank you, Colleen, and good morning, everyone. When I joined Verizon, I have a simple but ambitious goal. I wanted Verizon to reclaim its market leadership. Obviously, there are a lot of things we need to do, right, to make that happen. We need to delight our customers and put them at the center of everything we do. We need to drive consistent and fiscally responsible subscriber and revenue growth. We need to keep more of our customers, as measured by our churn rate and convert that into stronger, more predictable cash generation for our shareholders.

With all of that in mind, we ended last year with our strongest quarter of mobility and broadband net adds in 6 years, and we entered 2026 with a clear set of priorities, a step function improvement in guidance and a realistic plan. Today, our first quarter results show that our turnaround is not only progressing, it is gaining momentum powered by a comprehensive transformation program that is reshaping how we operate and serve our customers. I'm also very pleased that our East unions recently ratified a new 4-year contract that we believe will enable us to better serve our customers.

Let me start by saying we delivered a strong quarter across our core operating metrics, and we translated that performance into solid operational and financial outcomes, some of which we haven't seen in over a decade. I'll briefly review the key highlights of the quarter, including the impact of the network outage we experienced earlier in January. Then I'll walk through 3 key themes: how we will continue to drive healthier growth second, how we will accomplish that with meaningfully better customer economics and finally, how that leads to improved cash generation.

I'll close with how these results and the transformation work underway, supporting increase in our 2026 guidance for both our adjusted EPS growth and our postpaid for net adds. In the first quarter, total revenues grew 2.9% to $34.4 billion, while our reported mobility and broadband service revenue grew below our annual guided range. Our reported growth includes a onetime pressure of 80 basis points on our wireless service revenues from customer credits and other impacts related to our network outage. We ended the quarter with momentum with March mobility and broadband service revenue growing in the middle of our guidance range, with Consumer wireless service revenue approximately flat year-over-year.

We anticipate Q1 mobility and broadband service revenues will be the low point of 2026. The and we are highly confident that our forecast for mobility and broadband service revenue growth is in line with our 2% to 3% guidance for the year. Importantly, the quality of our revenue is improving. We are purposely shifting our mix towards durable recurring service revenues and away from low-margin, highly promotional activity. We are prioritizing customer lifetime value over short-term revenue maximization. The benefits of that approach are obvious when looking at the combination of positive postpaid phone net adds better churn, lower acquisition and retention costs and higher free cash flow and adjusted EPS.

We added 55,000 postpaid phone net adds in the quarter. That represents an improvement of over 340,000 postpaid phone net adds versus the same period a year ago and it's the first time in 13 years that Verizon has set positive postpaid phone net adds in Q1. Both consumer and business had significant improvements in postpaid phone net adds Overall, we delivered almost 0.5 million net adds across our mobility and broadband platforms. This is a strong continuation of the momentum we established in Q4 of last year, and it is happening while we are also improving the overall quality and economics of our customer relationships. I'm particularly pleased to see the early results of our transformation efforts on our customer retention.

Consumer postpaid phone churn in the quarter was 90 basis points, a sequential improvement of 5 basis points from Q4. Importantly, churn improved throughout the quarter. And in March, consumer postpaid phone churn improved further to below 85 basis points. That is a significant improvement both sequentially from Q4 and within the quarter, and it reversed the upward pressure we had seen in churn over the past several years. As expected, when we stop imposing blunt price increases without corresponding value on our customers and begin to remove friction from the end-to-end customer experience, they reward us with their loyalty. At the same time, we are acquiring and retaining customers far more efficiently. Our cost of acquisition and retention in March was down approximately 35% relative to the end of Q4 and we expect to maintain a lower cost of acquisition and retention as we look forward.

I would point out that we accomplished these meaningful cost reductions while still delivering increasingly positive postpaid phone net adds versus a year ago. In other words, we are no longer predominantly reliant on expensive promotions to drive our growth. We are growing, and we are doing so in a much more disciplined, repeatable and fiscally responsible manner. We, of course, retain the flexibility and conviction to defend our base and have a large war chest, if necessary, to react to competitive moves in the market. These trends in churn and unit economics are listing, our consumer lifetime value and are already flowing through to the bottom line and to our free cash flow.

I'd also point out that a lower cost of acquisition will benefit our future revenue growth as the headwinds of promotion amortization finally begin to subside. Adjusted earnings per share for the quarter were $1.28, up 7.6% year-over-year, our highest adjusted EPS growth rate in over 4 years. Free cash flow was approximately $3.8 billion, up 4% year-over-year and represents a strong start to the year. Our performance is consistent with and in a few key areas ahead of the guidance we laid out for 2026 driven by a better customer experience and operating efficiency. It is also the foundation for the capital allocation priorities we have outlined, investing to maintain our network excellence and our overall value proposition, maintaining our ironclad commitment to our dividend, steadily reducing our leverage and returning capital to our shareholders.

Now let me come back to the 3 themes I mentioned earlier, healthier growth better economics and stronger cash generation. First, healthier growth. The story in mobility and broadband is that we are now consistently adding more of the right customers at the right economics. The dramatic year-over-year improvement in postpaid phone net adds over the past 2 quarters with continued momentum into Q2, all reinforce that our offers and our go-to-market strategies are working. We are leaning into converged value, mobility plus broadband, a simplified customer experience and features that matter to customers rather than chasing every promotion in the market. We are also beginning to see the benefits of our transformation efforts, which make it easier for customers to do business with us and reduce friction in their interactions with us.

In fact, I'm very pleased to say that our consumer customer service team delivered its best quarter on record for customer satisfaction, driven by improved resolution, fewer handoffs and faster response times. In broadband, we continue to aggressively expand our footprint, increase penetration and position those assets as a core part of our long-term growth story. We are solidly on track to have more than 32 million fiber passings by the end of this year. We are early in the journey of fully monetizing the combination of best-in-class mobility and a growing fiber and fixed wireless access footprint. But we already see in our net adds and in our improved churn that customers value having more of their connectivity needs met by a single trusted permitter. Our Frontier integration is on track and I'm extremely pleased with the level of teamwork and focus from go-to-market execution to network integration and all with a keen focus on driving convergence and delivering on our more than $1 billion of run rate operating cost synergies by 2028.

Now let me turn towards our second theme, which revolves around driving better economics. The improvements in churn, acquisition costs and retention costs are not one-off events. They are the result of specific choices we have made over the past 200 days and the early benefits of a broader transformation we have launched across the company. We have put in place an ambitious company-wide transformation built around 10 major work streams. These work streams span everything from becoming an AI-first company to reducing friction in every step of the customer journey to reexamining outdated internal policies and procedures that slow us down and add to bureaucracy. We aim to simplify our products and services, apply micro segmentation to better match offers to customer needs and drive towards our goal of being the most efficient telco in the world.

Each work stream has a dedicated cross-functional tiger team with clear monthly and annual targets in a disciplined governance process that reviews progress, unblocks issues and reallocate resources where needed. This program is changing how we run the company day to day. As I've mentioned before, we will not rely on empty across-the-board price increases that create short-term financial gains that erode the long-term trust of our customers. Instead, we aim to delight customers. A central pillar of our upcoming new value proposition is the end-to-end redesign of our customer experiences to ensure we delight each customer in every interaction. Our commitment to customer value and trust is becoming part of our corporate DNA embedded in how we design offers, how we communicate with our customers and how we measure success internally.

We are in the final stages of extensive market research that will inform a new generation of offers built around the principles of transparency, simplicity and genuine value delivery. We have begun to embed AI and automation into our operations and customer interactions, which is already significantly improving customer experiences and lowering costs. We will encourage more volume into digital sales and service channels, which lowers cost, increases engagement and leads to higher customer satisfaction and we have begun to see meaningful cost benefits from our transformation efforts as we take out legacy structural costs from the business.

Consequently, we are well on our way towards our OpEx savings target of $5 billion in 2026. Churn is the clearest measure of whether our efforts are resonating with our customers. When we achieve the kind of churn benefits we did during the first quarter, it has profoundly positive implications for our business model. Every cohort now contributes more revenue, more margin and more cash. That affects compounds over time. Lower churn also makes our marketing dollars work harder because we are not simply replacing customers who leave, we are adding to a more stable base. Our advertising is also evolving as exemplified by our Connor story brand advertisement which resonated powerfully across social media and focus on our service and our network, not promotions or handsets.

The same is true for acquisition and retention economics. We were able to meaningfully drive year-over-year improvement in our postpaid phone net adds while driving the cost of acquisition and retention lower by approximately 35%. Obviously, this fundamentally changes the return on investment we make to attract and keep our customers. And as I mentioned, the less we spend on promotions to lower our amortization headwinds, enabling a step function change in our future revenue growth. These improvements come from the work our teams are doing in our transformation streams, smarter channel mix, less friction, better tools and modeling the beginning of AI and naval processes and a tighter focus on fiscally responsible offers that drive profitable growth. We expect these more efficient levels to be sustainable under our current strategy, and we see additional opportunities to further improve our trends as our transformation matures.

Finally, our third theme revolves around stronger cash generation. The combination of healthier subscriber growth and better economics is evident in our first quarter free cash flow results and we are confident in our annual guidance of approximately 7% or more growth. We are seeing the benefits of a more disciplined capital program. where we continue to invest in capacity, coverage and reliability, but do so with sharper prioritization and better utilization of the assets we already have. We are also continuing to execute on our operating expense initiatives, which are delivering a substantial war chest to continue our investments in driving our end-to-end value proposition while driving continued shareholder returns.

We see room for further meaningful efficiencies in the years ahead while simultaneously advancing our primary goal of delighting our customers and by doing so, driving long-term sustainable revenue growth. We have also discussed in our previous earning calls that we aim to drive incremental margin by eliminating sunsetting or creating structures to dramatically reduce our exposure to noncore assets. We are well underway in this journey, and we look forward to sharing more details shortly. All of that brings me to our updated outlook.

On the back of our first quarter performance, the leading indicators we see in our business and the traction we are seeing in our transformation work streams. We are raising our guidance for adjusted EPS growth to 5% to 6% versus the prior range of 4% to 5%. We also now anticipate our postpaid phone net adds to be in the upper half of our $750,000 to $1 million range. We are reaffirming the balance of our guidance, mobility and broadband and service revenue growth of 2% to 3% with Q1 being the low point of 2026 and free cash flow growth of approximately 7% or more versus last year. We are making these changes early in the year because the data supports a higher level of confidence. We are ahead of pace on postpaid phone net adds and doing so with lower churn, better unit economics and record customer satisfaction scores.

We have clear line of sight to the remaining cost and capital efficiency actions that underpin our free cash flow target. And the transformation program gives us additional levers as the year progresses. At the same time, we are far from assuming a perfect environment. We operate in a dynamic and rapidly changing landscape. Our revised guidance continues to reflect a prudent view of competitive dynamics and the macro political and economic environment. Our capital allocation priorities remain unchanged. We will continue to invest in our network, our platforms and our people to deliver the reliability and experiences our customers expect.

We will, of course, maintain a strong and sustainable dividend, reflecting the cash-generating nature of our business. And as Tony will discuss, we are delivering on our commitment to return capital to shareholders. We will continue to use excess cash to strengthen our balance sheet over time, giving us flexibility as markets and opportunities evolve and we remain on track to return to our target leverage ratio in 2027.

To summarize, in the first quarter of 2026, Verizon grew underlying mobility and broadband service revenue in line with our annual guidance. delivered positive postpaid phone net adds in Q1 for the first time in 13 years, reduced churn meaningfully quarter-over-quarter, and exited the quarter with consumer postpaid phone churn below 85 basis points, all while significantly lowering both acquisition and retention costs, driving our best adjusted EPS growth in 4 years and delivering strong free cash flow. We did all of this by addressing a significant network event transparently and decisively. At the same time, we have launched and are executing against the [indiscernible] transformation program that is making Verizon an AI-first simpler, more efficient and more customer-centric company. On the strength of that performance, the transformation work already underway and the trends we see in the business.

We are raising our adjusted EPS growth outlook to 5% to 6%, and we anticipate our postpaid phone net adds will be in the upper half of our guided range, while we maintain our free cash flow and mobility and broadband service revenue guidance. We still have much to accomplish, and we are far from our longer-term aspirations, but the direction of travel is clear. we are growing. Our customers are staying longer. We are serving them more efficiently by executing on a disciplined transformation agenda and we are converting all of that into stronger, more durable cash generation for our shareholders.

With that, I'll turn it over to Tony to provide more detail on the quarterly results, and then we will take your questions.

Thanks, Dan, and good morning. Our first quarter results reflect a strong start to the year. We've built upon the operational momentum from the fourth quarter and continued executing on our transformation efforts to deliver on both volume and financial growth. Dan has discussed our plan to deliver long-term sustainable financial and operational growth, and our first quarter results show the early impacts of that plan. We're on track to deliver our 2026 guidance, including increased guidance for postpaid phone net adds and adjusted EPS growth. In mobility, we are pleased that for the first time since 2013, we generated a positive first quarter total postpaid phone net additions.

Our first quarter results of 55,000 included significantly better performance from both our consumer and business segments. Consumer postpaid phone net losses were $35,000, a $321,000 improvement year-over-year, driven by a higher mix of new to Verizon gross adds. In total, the year-over-year improvement of $344,000 reflects our consistent and disciplined go-to-market approach solid execution of our volume growth strategy and steady progress of churn. While there is more work to be done with customer experience, which is the largest component of our transformation plan, we're pleased to see early signs of progress towards our goals. Total postpaid phone churn was down 5 basis points sequentially to 0.97% for the first quarter. Consumer postpaid phone churn was 0.90%, down 5 basis points sequentially and improved throughout the quarter as we took actions to delight and retain our customers.

In prepaid, we grew our customer base for the seventh consecutive quarter. We delivered 115,000 net adds, driven by our visible and total wireless brands, demonstrating the continuing strength of our prepaid business and our segmentation approach. We look forward to optimizing the value of each of these brands as we continue our transformation.

Shifting to broadband. We continue to take share in the first quarter and delivered 341,000 broadband net adds. This includes 214,000 fixed wireless access net adds and 127,000 fiber net adds. We now have approximately 16.8 million broadband subscribers. We are confident in the long-term success of our broadband strategy. Frontier accelerates our opportunity to grow our broadband subscribers as well as our converged offerings, a key enabler to growing wireless share in underpenetrated frontier markets. In the first quarter, in addition to Frontier, we've also closed a Starry transaction, an investment that will enable us to drive further broadband growth opportunities in multi-dwelling units within urban areas. Overall, we're pleased with our operating results for the first quarter as we have seen significant improvement in our net adds. We look forward to continuing our commercial momentum throughout the year.

Now let's turn to our consolidated financial results. Our first quarter financial results show our disciplined execution is directly translating into operating leverage. We are driving financial growth and strong free cash flow even as we undergo a transitional year for revenue. Mobility and broadband service revenue was $22.9 billion for the first quarter, a 1.6% increase year-over-year. This result includes $20.6 billion of wireless service revenue, which was down 1% year-over-year. Customer credits associated with the network outage reduced first quarter wireless service revenue by approximately 80 basis points. As previously communicated, we continue to absorb elevated promotional amortization pressures and are lapping approximately 180 basis points of pricing impacts implemented in the prior year.

We expect to improve on our first quarter's wireless service revenue performance by maintaining low churn, being disciplined around cost of acquisition and cost of retention, and continuing to drive net adds. Additionally, we continue to see strong performance with perk adoption, continued growth in premium base mix and prepaid. Given these factors, we are confident we will achieve our full year revenue guidance and expect to have an even stronger and more sustainable revenue profile by the end of 2026. Our disciplined. Our disciplined financial approach and targeted actions led to strong profitability this quarter. Consolidated adjusted EBITDA was $13.4 billion, a 6.7% increase in the prior year. adjusted EBITDA margin of 38.9% expanded by 140 basis points. This represents our highest ever reported adjusted EBITDA performance, and we expect it to be an industry-leading result.

We are growing responsibly with healthy economics in both the cost of acquisition and cost of retention. We are also making significant tangible progress with our cost efficiencies. During the quarter, we realized substantial savings in key areas, including advertising, network operating expenses and workforce-related costs. A significant portion of these savings dropped directly to the bottom line while we simultaneously reinvested a portion back into the customer experience. Our integration of Frontier operations is progressing well. We are on track to deliver over $1 billion in runway operating cost synergies by 2028. While there is more work ahead to drive further efficiencies, our first quarter performance puts us on track to deliver on our $5 billion of operating expense savings target for 2026.

Our focus on the customer and our cost discipline drove adjusted EPS of $1.28, up 7.6% year-over-year, even as we incurred the incremental depreciation and interest expense associated with the Frontier acquisition. Our performance reflects our responsible growth and our actions taken to streamline the business to make us more agile in serving our customers. This gives us the confidence to raise our guidance for adjusted EPS growth for the full year to 5% to 6%.

Now let's turn to our cash flow and balance sheet. Our financial foundation has never been stronger. Our cash flow generation remains a cornerstone of our financial strength and a testament to our high-quality earnings. Cash flow from operating activities was $8 billion for the first quarter. We achieved this strong result even after absorbing severance payments of approximately $1.1 billion related to our restructuring efforts, incurring costs associated with the Frontier integration and delivering higher gross add volumes. We're on track to achieve our CapEx guidance of $16 billion to $16.5 billion for the full year. Capital expenditures for the quarter were $4.2 billion. We continue to invest strategically for network excellence and future growth opportunities in a disciplined way by prioritizing our wireless and fiber builds.

As Dan mentioned, we expect to end the year with more than 32 million fiber passings. Free cash flow for the quarter was $3.8 billion, up 4% year-over-year. We expect our free cash flow performance to ramp as we further realize the full run rate of our operating expense savings and grow volumes responsibly. We are on track to deliver our full year free cash flow guidance of $21.5 billion or more. Our robust cash flow enables the seamless execution of our capital allocation framework, including investing in our business maintaining a strong dividend, strengthening our balance sheet and returning additional value to shareholders through stock buybacks.

Our net unsecured debt to consolidated adjusted EBITDA ratio increased due to the acquisition of Frontier to approximately 2.6x at the end of the quarter. We are making good progress and have paid down about half of the frontier debt since the acquisition closed, and we expect to repay substantially all of Frontier's debt by the end of the year. We remain firmly on track to achieve our target net unsecured leverage ratio of 2.0 to 2.25x during the 2027 time frame.

Lastly, we are delivering on our commitment to enhance shareholder returns. In January, we declared an annualized dividend increase of $0.07 per share, up 2.5% from our prior annual dividend rate. This marks the 20th consecutive year of dividend increases, a track record we're extremely proud of. In addition, our stock buyback program is off to a strong start. We successfully completed $2.5 billion in share repurchases during the first quarter. We are in a position of significant financial strength, generating the cash necessary to invest in our future, reward our shareholders and maintain a healthy balance sheet. In summary, our customer-centric approach has generated a step function change in our performance trajectory. We delivered positive first quarter total postpaid phone net adds for the first time since 2013 and raised our full year phone net add outlook. We achieved our best adjusted EBITDA in history, and we also delivered our best quarterly adjusted EPS growth rate since 2021 and raised our full year adjusted EPS guidance.

We returned a significant amount of capital to our shareholders, including commencing our first share buyback in over a decade. Our first quarter results demonstrate that our transformation is gaining momentum, and we're delivering on our plan. This is the new Verizon playing to win.

With that, I'll now hand the call over to Colleen to take your questions.

Thank you, Tony. Brad, we are now ready to take questions. [Operator Instructions]

[Operator Instructions] Your first question will come from Michael Rollins of Citi. Your line is open, sir.

Congratulations on the early progress. Curious if you could discuss the performance of accounts and ARPA with the dense in the quarter as well as what that means for the go-forward outlook for these measures including how the current promotional environment and your pricing strategy are influencing the performance.

I think I'll jump on that, Mike, and then we'll -- Tony can add color if he so desires. Look, I think if we take a step back, clearly, we're now orienting everything we do around a customer-centric approach. And just by definition, that means that we're thinking about accounts and not just lines and I would say previously, the company predominantly focused on lines, and that's just not our approach going forward. And as a result of that focus, our trajectory is moving in the right direction. Account net adds improved year-over-year in both consumer and total retail postpaid and that's in the same quarter we delivered our best postpaid net adds in 13 years, and that's not the coincidence.

A customer-centric approach is driving our progress on both fronts. The net adds we're adding are higher quality than those that are rolling off. Our new accounts are being added with more lines per account or percent of new to Verizon continues to climb, and that's a leading indicator of where our account number is headed next. But we're also very focused on driving higher revenue with every line. We are no longer giving away lines for freight. Our entire approach is to grow our accounts and lines and overall ARPA. And I think there are a lot of different ways that we can do that. We can do that through convergence.

Clearly, as we are more disciplined in our COR and our COA. We believe we're going to start to see the headwinds of promotion and amortization on our revenue growth rate start to flip and become tailwinds. And the majority of the ARPA declined in the first quarter came from our decision to do the right thing for customers on the network outage and to immediately give them credits because we absolutely always want to do the right thing for customers, and we value the long-term relationship with our customers. And so we feel really good about the way we reacted to our network outage. But obviously, that's a onetime event and doesn't come and follow us through the rest of the year. So I would say, in general, we expect to see account net adds continue to improve as well as ARPA as we go through 2026 and as we go to 2027.

Yes. I'd just add a couple of things to that, Mike. We exited the quarter with good momentum. The team is focused on writing good business and the new to Verizon is up 150 basis points, which is great to see. We see a lot of opportunity with convergence, and we saw that in the quarter with bringing Frontier to the fold. And then also, we've done a lot of work on bringing value to customers, things like perks. We've seen significant uptake in perks step-ups and of course, in FWA. So as Dan mentioned, we do expect improvements in ARPA as the year progresses. And as we continue to reduce our reliance on expensive promotions, that will obviously reduce the headwind per amortization that we move ahead. So that's how we're thinking about it.

The next question will come from Michael Ng of Goldman Sachs.

I wanted to ask about upgrade rates and the changing approach to device subsidies. What are you expecting around upgrade activity for the rest of the year? And how do you balance improved profits on some of these lower device subsidies versus opportunities to use devices to drive gross adds given that it should be a strong device for fresh year?

Yes. Well, I would say both on our cost of acquisition and our cost of retention. The improvements that we saw throughout the quarter. These are structural changes. They're not onetime or seasonal. We would expect that based on micro segmentation really understanding what our customers exactly want and what our customized offer to them will be will result in us being able to be much more disciplined in how we think about retention. Not every retention is going to be a free handset. In fact, quite the opposite. I mean, I think our industry has been too dependent on free handsets being the solution for everything.

And I think all of us, and I know for sure, Verizon can be much more profitable when we start the micro segment really listen to what a customer wants and not just give them a free handset for everything. So I'll give you an example of that. If a customer calls us and says that they're having a difficulty with service in their home, previously, what we would have done is send them a free handset so that they wouldn't churn. And what happened at that point is a customer who have a new handset and still have poor service at their home.

So we just spent like $1,000 and did not solve the customers' issues. If we have listened and sent a femto cell to be installed at the house, we could have done that at 1/3 the cost and made the customer happy. And so that's what's happening right now. We're listening what customers really want. We're customizing offers to exactly their needs and we are moving away from just, I think, one tool in our toolbox becoming much more sophisticated. And as we continue the micro segment, we're going to become much, much better at this. And so I think we will continue to be ferociously focused on retention an acquisition, but doing it in a smart fiscal micro segmented manner that should really improve our unit economics going forward.

Yes. And then, Michael, just a couple of other things to add to that. So obviously, the strong capital generation that we have in the business gives us a lot of optionality and scenario planning. In the quarter, we were able to absorb about 6% higher upgrade volumes year-over-year, being more surgical, as Dan mentioned, with retention offers and also having strong cash flow. And the one thing I can say is the rate of growth in upgrades has slowed the last couple of months and into the second quarter, and that's both reflective of the work we're doing, particularly on retention and being very segmented in our approach and very disciplined and also customer choice, customers choosing to hang on to their phones for longer periods of time. Obviously, we don't guide on this, but we'll see how it plays out, but we're being very disciplined in our approach.

Next question will come from John Hodulik of UBS.

Maybe 2, if I could. First, on the cost cutting, maybe for Tony, the -- any color on sort of how much of the $5 billion in OpEx savings we've seen thus far and how it ramps for the year? And then a lot of sort of bullish commentary on volume trends in the wireless business. How should we expect the fixed wireless and fiber broadband in terms to sort of play out through the year as you sort of digested fiber assets and get the converged offering sort of up to speed?

Sure. So on the cost transformation, let me just start big picture. So obviously, we're making significant progress on the transformation work and the cost work and it's showing up in the EBITDA and as we said in the prepared remarks, we expect EBITDA to grow at a faster rate than adjusted EPS when you factor in both the Frontier acquisition interest expense, which is about $1 billion and also the depreciation from the asset base, which is about $1.5 billion. And obviously, we had good acceleration and really good operating leverage. And to your question, we're off to a great start on the $5 billion of cost transformation. And we're seeing proof points in the quarter. Maybe I break down between the first quarter and also what's in progress and coming ahead.

So in terms of what we're seeing right now, first and foremost, on the network side and network operating costs. The team is doing a great job in continuing to decommission legacy elements in the network, and that includes copper and recycling that copper and also monetizing that copper as well as optimizing our third-party access costs with our larger footprint and there's a lot more we can do here when you think about Frontier coming into the fold. Second, from an advertising and marketing parking perspective, continued efficiencies in our spend, including use of digital. And then Dan mentioned our cost of acquisition called the retention, structural improvements there since year-end and particularly on cost of retention really being targeted with our retention spend. And then from a workforce perspective, we're exiting the first quarter.

We're running leaner with the 13,000 reduction behind us as well as reduced third-party contract to outsource spend. And then in terms of what's the opportunities ahead and things that are underway, we talked about in the prepared remarks around customer experience, and that is the largest part on the largest facet of our transformation program, and that's addressing customer pain points as Dan mentioned, reducing complexity and call volumes. If you think about both the IT and the real estate, continuing to rationalize IT platforms, including AI enablement along with reducing the real estate footprint, both on the work side and the admin side. And then from a frontier perspective, the integration work is well on track.

And we said we expect at least $1 billion of operating expense run rate synergies by 2028, and the synergies ramp as we execute on our integration plans. And as we continue through the cost transformation, the expectation is that we'll continue to reduce -- to further reduce costs beyond 2026. And then when you put that together, the EBITDA and the cost reductions allow us to do a number of things. First is run a lot more efficiently. Second is to absorb the transitional year that we have in service revenue. Third is to invest in the customer experience, and that includes defending our base if we need to do so. And lastly, returning a significant amount of capital to shareholders. And overall, we see a great path to both adjusted EBITDA and EPS growth for the year, and that gave us the confidence to raise the EPS guide for the year and then I'll hand to the broadband question over to Dan.

Thanks for the question, John. So convergence, obviously, it's one of our key vectors of growth. We intend to fully leverage our growing fiber footprint, as I mentioned in the last earnings call, we are still very focused on driving our fiber footprint $40 million to $50 million over the medium term. We made good progress this quarter towards that and expanding our fixed wireless access capacity. In Q1, we continue to take broadband share. We have absolutely no intention to slow down, in fact, quite the opposite. We have a huge cross-sell opportunity. Only 20% of our base has broadband. And so we see a large go-to-market opportunities for us there.

Look, fiber has inherent advantages over FWA, and we're going to prioritize it where we have coverage. And therefore, you should expect a mix shift from where we've previously been. We have very positive owner's economics on both our broadband and our wireless churn is almost 30% less on converged offers and has a higher both LTV and ARPA. However, be sure we're going to continue to drive FWA. And we entered the year with more available capacity in our network for fixed wireless access than when we began 2025, and we intend to take advantage of that. Q1 is seasonally our slowest quarter, but even so, we added 31,000 broadband subscribers. And by the way, that excluded the first 20 days of January for Frontier.

You can probably do the math on what our numbers could have been on broadband had we had a full quarter of Frontier in our numbers. So we're quite pleased with where we are in our broadband net additions, and we expect to see that accelerate as we go forward. We're going to continue to invest heavily in broadband. We're going to have at least 32 million passings. We're looking at more partnerships, potential acquisitions to speed the number of homes passed. There's no question. We think that fiber is a key differentiator against competitors who don't have it. And I'd also point out that our attachment rate of wireless when a customer has broadband, I think it's best in the industry at 55% right now. So expect that you'll see improvement in our broadband numbers as we go through the year, and we're looking for the optimal and most efficient way to deliver broadband to the home.

The next question will come from Sebastiano Petti of JPMorgan.

Just a quick follow-up to John's question there. Just in regards to your FWA commentary, I mean, should we still anticipate $8 million to $9 million FWA subs by 2028? Is that still a target for the management team? That's my first question. And then, Tony, the buyback is $25 billion great to see in the quarter. You're not surprised given the momentum. How should we think about the expectations for buyback in 2026? I think you previously talked about $3 billion, clearly seems conservative at this point. And I didn't see any commentary in the press release, but I mean how should we think about the, I guess, phasing or cadence of buybacks from here over the multiyear period?

Yes. I'll first jump on the FWA question. No, I don't think you should really adjust any of your thoughts around that. We're going to drive quite aggressively on the broadband front. Again, there may be more of a shift to fiber than FWA. We've had a lot of progress on FWA over the years, and we'll continue to drive it.

Yes. And then Sebastian on your question on capital allocation. I mean, look, as we said in the remarks earlier, that the pillars are the same. Our first priority is still investing in the business, and you see us doing that with our capital program of $16 million to $16.5 million in our acquisition of Frontier as well. The dividend is still iron clad for us, and we raised the dividend $0.07 back in January, and that's the 20th consecutive year. And the third is having a strong balance sheet and paying down debt.

And as we said, there's no change to our long-term leverage targets and we said we'd be there in the 2027 time frame. We've also paid down about half of Frontier's debt stack already. So we're well on our way there. And then fourth, as you mentioned, we have our share buyback curve underway. We did $2.5 billion of share repurchase in the first quarter. So we're off to a great start, and that reflects the strong cash generation and the conviction -- our conviction in the value of the stock at current levels, right?

In terms of your question, I can't talk about hypotheticals. Look, if we have additional excess cash flow beyond our plan and maintain our leverage commitments and invest in the business and things like that. We would have the ability to do more. But our plan of at least $3 billion is appropriate at this time. But the overall goal doesn't change. It's generating strong cash flows and being able to execute across all 4 pillars of our capital allocation strategy and doing that simultaneously. As you saw, we returned a significant amount of capital to shareholders. It was $5.4 billion in the first quarter. And we're doing all of this while we're executing on our transformation plan as well.

The next question comes from Sean Diffley of Morgan Stanley.

Dan, you spoke recently about AI transforming the economy and impacting jobs. I was hoping you could elaborate a bit on how you think about the ability to take out more costs across the business. Obviously, you referenced it a bit on the OpEx commentary. But any tangible examples of AI use cases that are being implemented at Verizon? How you think about total head count growth over time? And then one on CapEx. Can you elaborate on investing in wireless versus fiber? And anything to say on spectrum acquisition interest going forward?

Sean, it's like 12 questions. Let me jump on the AI piece of it. Obviously, I'm quite outspoken about the time we live in. It's one of ferocious technological change, not just AI, quantum coming in the next 3 years, humanoid robotics coming after that. I think it's important we openly talk about it and talk about the implications or potential implications of it. I also feel it is absolutely essential that Verizon uses the tools of this era to compete. I want us to be not an AI-first company. I want us to be an AI-native company. And I think there are 3 areas Were you going to see us utilize AI to its fullest.

One is around operational efficiency, taking out costs, improving productivity, delivering more value to customers. The second, really important, I'll give some examples of this is customer satisfaction improvements. How can we better serve our customers through the use of AI? And then finally, how do we fully ingest AI capabilities into our value proposition? How do we take that so that we micro segment down to every single customer? We have an initiative inside the company. We call it every customer has a name, and that is about full microsegmentation. And that is where we will fully ingest all of our data, structured, unstructured, external data into creating customized propositions for every individual customer.

Our AI tech stack has 4 different layers to it right now. We have a data and intelligence layer where we're taking, again, formatting all of our data, and we have a huge amount of data that's both structured and nonstructured bring it into the right format layering on top of that, both LOMs and SLM. We've got a second layer, which is our development factory layer, which is kind of our middleware. It's where we gen up agents where we have agent building capabilities. We have a third layer to our stack, which is what we're calling runtime engines, which is where we deploy agents, we deploy business features and impact how we serve customers. And then surrounding all of that, we have a control plane, which looks at security, identity, guardrails, safety, observability, traceability, those kinds of things.

We are going to be substantially complete with that entire AI tech stack by July, and we hope to be fully done by November. I would say we've recruited quite a number of AI savvy individuals into the company over the last 7 months or so. We've done more in the last 3 months than we've done in the last 3 to 4 years around this. We had a previous project on this that had a 4-year completion date. We, again, will be substantially complete on all of this by July. We are working very closely with Google and Anthropic and other best-of-breed AI players to bring this to life. This isn't our own stack. We are using best-of-breed to go and make it happen.

We're very close. Obviously, with Anthropic, we are part of glass wing. We are working with Mythos and have been for some time across all of our cybersecurity efforts, and it has given us great insight in terms of what we need to do to continue to have the world's most reliable, secure and safe network. We have been now for the past 3 months, you saw some of those results happen in this quarter. Looking at working with Sierra, ElevenLabs, Google, to start to put into place of voice agents into some of our customer service operations. Again, we are testing these models, and we are fine-tuning them. But what we are seeing already is a 1,280 basis point improvement in customer SAT scores year-over-year.

I mean these are quite astonishing step-ups in our ability to satisfy our customers. We're deploying quad code across our software development life cycle. This is not just around coding, but across the entire life cycle. We see opportunities to do an increase in our delivery by 40% plus, and we spend a ton of money on vendor support here, and we see our way to reducing those costs by over 70% as a result of what we're doing with AI. And in the network we have really deployed quite extensively inside our network. 85% of all of our issues right now are autonomously resolved. That means we are resolving issues for our customers even see them.

We used to have in our network by the bill of material, it was over like 1 million different combinations. Think about the cost and the complexity around that using AI, we've driven that down now to about 20 kits. And so our ability to deploy save costs because of this is radically improved. We already have over $200 million of energy savings as a result of deploying AI into the network and looking how we can optimize on energy, and we're doing things now at industrial scale. And so I'm quite pleased with the amount of progress we've made in a short period of time. And I would also point out on the commercial side, we are in quite deep discussions right now with hyperscalers with alternative cloud providers, large enterprises to integrate our fiber, both dark and lit and our 5G assets to support their AI infrastructure efforts.

And that can include data center connectivity, ability to help them with their training and inference. And that is the potential for multibillions in revenues, quite frankly. We'll have more specifics on that in the next 3 to 6 months. But the world is moving towards edge computing towards data connectivity, and we are in a real good place to play inside that AI infrastructure revolution that's going on.

Brad, I believe we have time to take one more question.

Your final question will come from Michael Funk of Bank of America.

So Dan, one for you. Theme of the call has clearly been customer lifetime value and micro segmenting as well. So just kind of curious about the save budget as part of that micro segmenting and churn reduction effort. And how much you've improved or increased the save budget how that might impact the repricing of the back book? And one follow-up. Do you still expect your postpaid phone net adds to be 10% to 15% of the net new?

Okay. A lot of different questions in there. One on our postpaid phone net adds. Yes. I mean I still think that's probably a good estimate of the 10% to 15% of new. We'll have to see where the industry comes out, what is new, what's real in those numbers. One thing I would say though on that, that we haven't really talked about is I think it's obvious now that at least as, if not more than half of our net adds are going to come from improvements in churn. And what that means is that the amount of dollars that we will spend on driving our net add number will be reduced because the bottom of our funnel is tightening. We're at 95 bps in Q4, 90 bps overall in Q1, 85 bps at the end of the quarter.

And so that obviously is an extraordinarily important element and a demonstration of how putting the customer at the center of everything you do when you stop raising prices with no corresponding value when you start improving the customer experience, which, by the way, is very difficult to do and is a differentiating thing hard for others to follow. You put out a price plan, people can follow that, you put out a promotion people can follow but the hard work of improving the customer experience that comes day by day. One initiative after another to make that happen. And that's why I really am pleased to see an all-time record of our customer satisfaction when people interact with our customer service teams on our consumer side. On cost of retention, the cost of retention and cost of acquisition have come down substantially through the quarter.

We believe that those lower levels will continue to play out through the year. And that really has to do with micro segmentation and really understanding what a customer needs. The era of just the free handset, that's gone right now. We are looking at what does the customer need. They have a handset that is last year's model that's been refurbished. Do they need a new handset, many of them because of the economy are keeping their handsets longer right now. And so I believe that you're going to continue to see COR and COA at reduced levels. But of course, as Tony mentioned, we have a substantial war chest, and we will defend our base whenever we see any competitive activity on that. But we think right now that the competitive intensity in the industry is moderating quite frankly.

And I think everybody is thinking about how do we look at acquisition, how do we look at retention in a much more segmented and much more fiscally responsible way than maybe we were several years ago. So I appreciate the question.

That's all the time we have for questions. Thank you all for your time today.

This concludes the conference call for today. Thank you for your participation and for using Verizon Conference Services. You may now disconnect.

Okay. Good morning, everyone. Thanks for joining us for our first session this morning. So I'm really pleased to introduce Tony Skiadas, who is the Executive Vice President and Chief Financial Officer of Verizon. Tony, welcome.

Thank you. Thank you for hosting us, Bryan.

And before we get started, I think you've got some safe harbor language you want to share?

Sure. Just wanted to mention that Verizon Safe Harbor statement and SEC filings are on our Investor Relations website and comments that we may make are forward-looking in nature and subject to risks and uncertainties. So with that, we can get coming. Thanks for [ hosting ].

Great. Our pleasure. Maybe to start off, can you give us just some perspective on the transformation that Dan Schulman commenced after taking on the CEO role in October? What are some of the goals the management team is trying to achieve with it? And how will that accrue to the company and shareholders in terms of benefits?

Sure. We have a lot going on, as you've heard. We're creating a new Verizon and with the goal of being the best and playing to win. And as Dan outlined on the earnings call back in January, he talked about the company being at a critical inflection point and making sure that we make significant changes to our culture and shift our culture towards the goals of delighting customers and delivering for shareholders.

And in doing that, leveraging our network excellence to drive mobility and broadband growth and doing that in a fiscally responsible way. And the last 100 or so days have been filled with a lot of change, but also a renewed sense of excitement and optimism inside the company.

We moved quickly and took bold actions to drive $5 billion of cost out of the business. Some of that will be reinvested in the customer with the remainder falling to the bottom line. We also took actions to rightsize the organization to make us more agile in serving our customers.

And then from a capital perspective, we really sharpened our capital envelope to focus on mobility and broadband and driving about $4 billion in savings along the way.

And then lastly, we also gave guidance for 2026, which is a significant improvement over what you've seen from us in the past. We're very excited about the future and in process in executing our plans.

And what about your priorities this year in the context of that overarching plan for the company?

Sure. So if I start at the top of the house, the team is very aligned on growing both mobility and broadband. And as I said, doing it through sustainable volume-based growth. That's extremely important for us.

Second is around executing on our transformation. A lot of work ongoing with the customer experience and improving the customer experience and also doing that through loyalty and churn improvements as well. Part of that transformation includes executing on our Frontier integration. We closed on Frontier back on January 20. So we're in the middle of that integration work right now, and that's going extremely well.

And then thirdly is continuing our network excellence. And that includes deploying C-Band, and also continuing to build fiber.

And then if I dive down into my priorities, I have 3 of them. First is to support the leaders in the business. And narrow our focus to both operational performance and execution day in and day out. And I think you saw that in our performance in the fourth quarter.

Second is delivering on our guidance for the year. And if I can give you a little color on that. We gave guidance on volumes, net adds in terms of 750,000 to 1 million retail postpaid net adds in the year. Service revenue, mobility and broadband service revenue, 2% to 3%. And we said 2026 will be a transitional year for wireless service revenue as we build up sustainable volumes.

Adjusted EPS, 4% to 5% growth is our expectation. And that's a significant improvement over where we've been in the last few years. And then cash flow, we set at least 7% growth. We have industry-leading cash flows, so at least $21.5 billion.

And those cash flows bring us to my third priority, which is executing on our capital allocation framework. And having strong cash flows allows us to execute on all 4 pillars of our framework, including a share buyback program that we announced earlier.

So we're very excited about it and focusing on executing.

You've talked about the plans and some of the targets for the year. Can you talk about the progress that you've made so far against the plan? And how we should see those progress over the course of the year?

Sure. So when Dan came in, he had a vision for the company. And that vision and that plan is both bold and transformative. And it's very customer-centric, but it's also focused on delighting the customer. and delivering and returning capital to shareholders. It's both. And those can go very much hand-in-hand. And I think leveraging our network excellence is extremely important and foundational for us, to do that and growing volumes in a very fiscally responsible way.

And I think when you saw the fourth quarter results, we put up strong volumes. We put on over 1 million net adds in terms of mobility and broadband. We took meaningful share, and we delivered on our financial guidance. So those were the early glimpses of the work that's ongoing. We're very early in our transformation right now. A lot of the work that's forthcoming and what you alluded to is around the customer experience and improving the customer experience and investing in that as well to make sure that we can continue to reduce churn.

Deploying AI to improve our operations to make us more agile in serving our customers and also having a value prop that resonates with customers and is simple for customers to understand.

So when you put that all together, with the sustainable volume growth, we'll be able to exit the year in a stronger place than where we started.

And you've talked about $5 billion in cost savings this year. How are those savings being redeployed to support the strategy?

Sure. So we took actions pretty quickly back in the fourth quarter to drive $5 billion of cost out of the business. And that allows us -- and that gives us a lot of flexibility. It gives us flexibility to invest in the customer. It gives us flexibility to drop some to the bottom line as well.

In terms of -- let me just dive a little bit on where some of those costs are coming from. First, on the network side, if you think about legacy network decommissioning, a lot of work being done there, think about the copper networks that we have, continuing to get copper out of the network, including Frontier as well, and we have a lot of opportunities there and reducing access cost.

From a customer experience, I mentioned, continuing to take calls out of the system. That's a big driver of cost and continuing to improve customer experience. And then from an IT and real estate perspective, continuing to reduce the IT stacks, deploying AI to make us more agile in serving customers. And then reducing real estate, both on the network side, network facilities and also admin facilities as well.

On the marketing side, now that we have Frontier in the fold as well, being very efficient and smart with our marketing spend.

And then from a workforce standpoint, we talked about workforce reductions that we had in the fourth quarter, about 13,000. Most of those folks are off payroll now in Q1. And we also reduced significantly our contract and third-party spend as well.

And then lastly, from a Frontier perspective, we talked about on the earnings call, doubling the synergy targets. So we said at least $1 billion of operating expense run rate synergies by 2028, and those synergies will ramp over time. So when you put that together and you look at it from an EBITDA standpoint, the work that we're doing and the cost out work that we're doing enables us to do a number of things.

First, it allows us to run more leaner and more agile. It allows us to invest in the customer experience. And we think that's extremely important. It allows us to absorb the transitional year in service revenue, and it allows us to return capital to shareholders. So that EBITDA growth is really what's underpinning the adjusted EPS guide that we gave this year.

How much of the volume improvement strategy is intended to deliver -- sorry, how much of the volume improvement strategy intended to deliver the 750,000 to 1 million postpaid phone net add guidance do you expect to be driven by lower churn versus higher gross adds? And where really is the greater opportunity and focus there?

Sure. So we gave guidance for 750,000 to 1 million postpaid net adds. It's 2 to 3x what we did in 2025. And if you think about our performance in 2025, our share of net adds was in the low single digits, maybe 4%, depending on how you do the math. So this year, we expect to significantly improve upon that and do it in a very fiscally responsible way.

And we see a lot of opportunities with churn. To your question around churn versus gross adds. Our focus is really on retention. And churn improvements. And we think, for example, if we can reduce our churn by 5 basis points, that gets us more than halfway to our net add target for the year. And if we do that, we can be much more targeted and much more surgical with our promotional spend to drive the other half of the volume growth. So we're putting money behind this with the cost takeouts and the efficiency work that we're doing to improve our churn and do it in a smart way.

And we said we're going to deliver volumes in a fiscally responsible manner, and we think we can do it through churn improvements.

How achievable is that churn improvement opportunity, though? What's the time line look like for bringing that down? And what are some of the tactics that you can employ to do that?

Yes. Sure. We've been getting after it right out of the gate. A lot of work ongoing right now. In terms of the tactics and what's driving it, there's a few factors there. I would say, first is around some of the pricing moves that we did in the past. We did a number of pricing changes while they've been a good tailwind to revenue. They have put pressure on churn. And that forces us to try to put more promotional dollars in to get after growth. So that's not necessarily the most sustainable strategy. And while I can't talk about what we might do from a pricing perspective in the future, we'll always evaluate pricing with the corresponding value prop. That's something we're very mindful of.

When we think about customer experience and customers being frustrated, customers are calling in multiple times, for example, that's not a good experience that drives churn -- that drives significant churn. Customer doesn't understand their bill or their promotion. We've made it too complex for them to do business with us. So those are areas where we're getting after.

And then convergence. And we see a lot of opportunity with convergence and even particularly now with the Frontier and the mix as well. When we have a converged customer, we see significant improvements in churn. A 30% reduction in churn, when we have a converged customer. So there's a lot of ways to get after it. And because we continue to have cost takeouts, we have the flexibility to invest in some of these areas to make sure we drive it down.

Your guidance for 2% to 3% service revenue growth includes flat wireless services revenue growth, which implies some modest ARPU and ARPA pressure in 2026, which I think you alluded to already. What's driving that pressure? Can you give us more detail on that? And how should investors think about the longer-term ARPU trend? Do you expect ARPU to be -- to grow again in 2027 -- how are you thinking about that?

Sure. So our guidance for mobility and broadband service revenue is 2% to 3%, and that includes Frontier, and this really reflects our focus on both mobility and broadband being the drivers of our growth strategy. And what we said is 2026 would be a transitional year for wireless service revenue as we make that pivot towards driving sustainable volume-based growth.

And in terms of your question around some of the pressures we see this year. We have the ongoing promo amortization pressure that we've seen from the last couple of years. That's going to be there. Also, we're lapping pricing actions from last year, and that will put about 180 basis points of pressure on our revenue as well.

And then combating that, there's a number of ways to combat that. First, if you think about having perks in our portfolio, last year, we exceeded 15 million perks. Those perks give great value to customers. They're also great revenue, great margin for us. So continuing to penetrate the base with perks. Customers stepping up to premium plans is also another way our customer is taking adjacent services such as handset insurance.

Also, we've seen improvements in our prepaid business. And after several quarters now of volume growth, we're starting to see revenue growth as well. So on the mobility side, I think we have ways to stabilize that this year.

And then on the broadband side, we have over 16 million broadband subs in the base now when you include Frontier. And Frontier did a great job. They added about 500,000 fiber subs this past year. And we see a lot of opportunity with convergence and growing both fiber and fixed wireless access and both of them are keys to our growth strategy. And we're getting after it. As soon as we closed the deal, we had the convergence offers in market within 48 hours, and we're getting after it with sense of urgency.

And I wanted to ask you about the fourth quarter on the promotional environment. I think Verizon was fairly aggressive in the quarter with promotions. Some would say more aggressive than warranted by the economics of the customers. Do you agree with that view? And will we see Verizon continue to be that aggressive on the acquisition side?

Bryan, here's how we think about it. We had a strong fourth quarter. We delivered over 1 million net adds across both mobility and broadband. We took share in our broadband business. And we also delivered on our raised financial guidance. And a few reasons for that. We had offers that resonated in the market.

And to your question, we matched competitor offers. We had strong execution in the field, which is -- the sales team did a great job. So that was extremely important for us, and we had a consistent presence in the market, which is something different than where we had been earlier in the year. So those 3 factors contributed to a strong fourth quarter.

And as we look ahead, we said we're going to drive sustainable volume growth and be financially disciplined. And I think when you look back on the fourth quarter, we had strong volumes. We had full year EBITDA -- adjusted EBITDA of $50 billion, and we had industry-leading cash flow. So I think the outcome speaks for itself.

Yes. Okay. What have you been seeing in the market during the first quarter in terms of industry switching, retail store traffic, promotion levels? Talk about the competitive environment a little bit there.

Yes, sure. I mean it's still a competitive environment that hasn't changed. We don't give quarterly guidance. So I'm not going to share any quarterly environment guidance. But in terms of from what we're doing, we have a consistent presence in the market, and we saw that in the fourth quarter. We see that in the first quarter. We're continuing to focus on making sure that we execute well in the field day in and day out.

And look, the goal here is to grow year-over-year. The volumes will follow a normal seasonal pattern. And we're going to be very fiscally responsible as we do that as I outlined.

You just closed the Frontier acquisition in January. Can you walk us through your strategy in fiber-to-the-premises broadband? The current footprint, your build to pace and your longer-term targets there?

Sure. So we're very pleased that we finally got the Frontier deal closed on January 20. It was a long road, but we got there. And kudos to the Frontier team too, for keeping the business in great shape during that period of time. The Frontier team executed extremely well during that pendency period. So we're very happy with the asset. And now with the deal closed, we have over 30 million prems passed with fiber in our footprint, which is great to see.

And in terms of your question around build pace, we expect this year that we have around 2 million prems passed with fiber, and that's across the entirety of the footprint. We have a number of ways to get there, whether it's with our own organic build within the combined footprint or whether with partners like Tillman, who allow us to also build outside the footprint to our specifications and with really good economics.

And then what we said is, over the medium term, we expect to pass 40 million to 50 million homes with fiber and do that in a very efficient way. And we see the power of convergence. And the converged customer is a very sticky customer. And as I said, we're -- now that the deal is closed, we're getting after it with urgency, and we're also be deep in the integration as well.

What about penetration levels? What kind of penetration do you think the company can achieve across the fiber footprint? What's the opportunity for ARPU growth and convergence that you see in the broadband business?

Sure. And we have -- as you know, we have 20 years of experience building fiber with Fios. And our Fios product is a best-in-class product. We're extremely proud of it. And Fios is still growing 20 years later. So we know how to build fiber. We know what extent looks like. In our most mature Fios markets, we have penetration rates that are in the high 40% range.

So when we look at the Frontier footprint, we think there's upside to what we have there, and we think we can improve upon that. And that's really the goal there. And doing it in an efficient way. We're going to look at the fiber build, we're going to see where the best return is, and that could be in the Verizon footprint, it could be in the Frontier footprint. We'll look at build economics, we'll look at geography, cost per prem passed, et cetera. And we're going to get after it with urgency, and we're not stopping.

So -- but we're very pleased with what we have done with Fios, and we think we can bring the best of Fios into the Frontier footprint as well.

I forget if you've said, does the 2 million accelerate after this year or is...

We haven't given a target beyond that, Bryan. So -- but we're not stopping. I mean I think the message that we've given is we're being very focused on driving mobility and broadband. And we're not stopping with our fiber build. We're going to continue.

Okay. How should we think about the growth outlook for Verizon's fixed wireless access products? Do you expect any reacceleration in the pace of growth there?

Yes. And with fixed wireless access, what we've said is we're building a long-term sustainable business with plenty of runway. And that's what we're doing. In 2025, we added about 1.2 million fixed wireless net adds. And our base of business right now is over 5.7 million FWA customers. So customers are very happy with the product. It's a great revenue stream.

When I think about the network, our engineers do a fantastic job in engineering the network with capacity that's way out in front of the demand that's out there. And we're entering 2026 with more capacity on fixed wireless access than we entered 2025. So we feel really good about that. The shape of growth for fixed wireless access, to your question, will probably follow seasonal patterns with mobility. And it's generally sold with mobility. So you would expect it to follow that sort of trend.

And then when you think about some of the other work we're doing with multi-dwelling units, we just completed our acquisition of Starry. And that will help us expand our product there in the MDU space and give us more open-for-sale on fixed wireless access. So we're very happy with the product. And as I said, customers love it, and we can do FWA and fiber at scale, and that's what we're doing.

Okay. Maybe you could talk about just free cash flow growth a bit. So despite a number of areas where you're investing, which you talked about, you've guided to a decline in CapEx this year. And free cash flow growth of about $1.5 billion or more. How are you achieving the CapEx savings, especially now that you're bringing Frontier into the company and the asset base is growing?

Sure. So our first priority is to invest in the business, and that's what we're doing. Our CapEx envelope for this year, we said is $16 million to $16.5 billion is all in and sufficient to address all of our growth initiatives. And we really narrowed our focus to both mobility and broadband platforms.

And if I start with on the mobility side, if you think about C-Band, we talked about in January, we're about 90% done with our C-Band build. So 90% of our planned sites are now on C-Band. And the goal is to substantially complete that C-Band build this year. And as we do that, that build is going to be with -- more with small cells, which come at a lower unit cost. So and that was planned. We did a lot of this investment in C-Band earlier, we accelerated a lot of that investment in years past. So we're coming towards the end of that with small cells. So that's one side of it.

And then on fiber, we just touched on continuing to deploy fiber in the network. We said 2 million prems passed this year and focused on doing that in a very efficient way.

And then to your question about, why is it lower? We really took a hard look, and we put a lot of rigor both around OpEx and CapEx and narrowing that focus to both mobility and broadband in areas not aligned to growth, we actually rationalized and/or eliminated. So if you think about some of the legacy areas, if you think about business wireline, if you think about wholesale, copper areas, there's a lot of areas that we don't need to invest in or projects with too long of a paybacks.

So we really put a lot of rigor when we put our capital plan together this year. And we're focused on deploying capital in an efficient way, and we know how to do that. So that's the focus for the team this year.

Okay. Maybe just a follow-up on C-Band, if you don't mind on -- you talked about it being predominantly small cell. Is that because you've already deployed on the macro cells and now you're filling in...

Yes, we're filling in at this point. As I said, a lot of the investment -- we accelerated a lot of that investment, and we have over 300 million POPs now on C-Band. So we're getting towards the end of that build. And it's mostly around densifying now. So -- but we're very happy with the performance. We see great performance on C-Band and we also see lower churn as well where we have C-Band deployed.

And maybe you could just walk us through the bigger moving pieces this year for free cash flow bridge.

Sure. So if I start at the top, we really have strong cash flow generation in the business, and we like the cash generation of the business. We have industry-leading free cash flows. And coming into the year, underpinning that is a strong EBITDA profile. And our adjusted EBITDA last year was about $50 billion.

And then when you bring Frontier's base of business into the fold, they had a good EBITDA profile as well. So that's helpful. You take the cost work that we're doing, the $5 billion of cost work, we have about $4 billion in CapEx savings. And then you put back the investment in the customer. So those are the big moving pieces.

And then in terms of some of the puts and takes, we talked about our CapEx envelope being $16 billion to $16.5 billion. So we're going to be very focused there. From an interest expense perspective, we're absorbing about $1 billion of interest costs related to the debt that we took on with Frontier. So we have that in the mix.

From a working capital perspective, our goal is to continue to improve our working capital profile. We do see about $800 million of year-over-year pressure from the severance payments that we'll make in the first quarter related to the headcount actions that we took at the end of last year.

And then from a cash tax perspective, we said that we see cash taxes being up slightly year-over-year as we look at our plans and the attributes we have for Frontier. But when you put that all together, the strong work we're doing around cost discipline, around capital efficiency gives us a strong and growing cash flow profile. We said we grow our cash flows at least 7% or over $21.5 billion, which is a very strong outcome. And it allows us to execute across all 4 pillars of our capital allocation strategy.

You mentioned working capital and trying to improve that. Maybe you could talk about the underlying assumptions in that free cash flow guidance for the working capital investment for upgrades and customer acquisition, especially given that you're trying to bring churn down and I think, improved gross adds at the same time. So it seems like there's more volume flowing through.

Yes. So a couple of things here, Bryan. We don't -- we're not guiding on gross adds or upgrades. I think that's a tough thing. Upgrades are very tough to forecast. But what I would say is this, last year, we saw double-digit gross add growth. We also saw double-digit upgrade volumes as well, growth and upgrades. And we were able to still absorb all of that and have a very strong cash flow profile, and we delivered on our cash flow -- our raised cash flow guidance.

So this year, with the work we're doing to become more flexible from a cost and a capital efficiency standpoint, we plan for various scenarios. We'll have to see how those scenarios play out throughout the year, but we have the flexibility to do that.

And we said we're going to make sure that when we grow, we grow in a fiscally responsible manner.

Okay. All right. Well, it's probably a good place to wrap up. So I don't know. Sorry, a couple more questions. Other page. So business wireless service revenue and customer growth decelerated in 2025 and a lot of that, I think, came from government job cuts with DOGE as I understand anyway, can you walk us through the totality of factors that impacted '25? And maybe share your thoughts on '26? Are you expecting an improvement this year?

Yes. And Kyle and the team have done a great job in navigating this environment. I mean as you mentioned, we did see pressure from the public sector last year with some of the government efficiency efforts. And obviously, that put pressure on volume growth. In 2026, we see that returning to more normal levels. A lot of that pressure is now behind us, which is great to see.

And Kyle and the team are very focused on growing mobility and broadband but being very disciplined in the growth. We're writing good business, and we're making sure that we're being very disciplined at the deal desk, both on the wireless side and also on the wireline side as well. And deemphasizing low-margin deals.

The team has also done a great job in taking costs out. And we've taken a fair amount of cost out in the last year, that's still ongoing. And for the first time in a long time, we had an improved EBITDA margin year-over-year, which is really great to see.

And as we look ahead, Kyle and the team will continue to focus on growing both the mobility and broadband even fixed wireless access is doing great on the business side. And doing that in a very sustainable way.

The other thing that Kyle and the team are focused on is what we call AI Connect and having fiber, both dark fiber, lit fiber. We're seeing a lot of demand for that. We have some signed deals with hyperscalers and diversifying with other logos. So this is something we do well. It's a good margin business. And we're happy with the deals we see so far. There's a lot of deals in the funnel. We'll see where it goes, but that will hopefully help stem some of the legacy declines that we continue to fight for. But by being disciplined and by taking cost out we continue to see good opportunity to expand margins there.

And as I said, Kyle and the team have done a great job.

Yes. On the AI opportunity. I mean, I think about a year ago, you were talking about that, and I think it helped in the December '24 quarter.

It did.

Then we didn't seem to hear a lot about it since then. Is that something that maybe there was a law now you're starting to see some reacceleration or...

There's a lot of demand. And obviously, these building fiber out takes time, too, and getting it to specifications that the customer wants takes work. And -- but we're seeing -- there's a lot of demand for fiber routes to support the AI economy. So we like the business that we see. It's -- I like the margins that we're seeing from that business. So obviously, it's early days, but it can be an enabler to stem a lot of the legacy wireline MPLS declines that we've seen over the years. So Kyle and the team are right on top of that one.

And that -- is that mostly -- it sounds like it's mostly build-to-spec business as opposed to routes...

In some cases, yes. Yes. It could be specific routes, for example, yes.

Okay. All right. On the -- I wanted to ask you about the wholesale other and prepaid revenue. I think combined, it drove about 100 basis points of the total Consumer wireless service revenue in '25. Just wanted to ask, is it fair to assume that the contribution from those 2 areas will continue at about that rate going forward? How are you thinking about that?

Yes. So let me start with prepaid. We've had a significant turnaround in our prepaid business. So we now have -- after several years of declines, we've had 6 straight quarters of volume growth, which is great to see. And that volume growth has translated into revenue growth, which is what I wanted to see. And really -- and healthy and profitable revenue growth as well. And that's coming from a couple of places. It's coming from our visible brand and total wireless. Both of those brands performing extremely well, and we continue to open distribution doors. So I'm pleased with the progress that we have on our prepaid business.

And then to your question on wholesale and MVNOs, I'm a little bit limited in what I can say there. But as you heard, we recently signed a long-term agreement with the cable companies. We're very happy with the partnership. It's on really strong footing. That business is accretive and allows their customers to stay on the best network. And we're very happy with the partnership.

And as I said, I can't talk about the commercial deals, but we're very happy with the partnership with the cable companies.

Okay. All right. Great. It sounds like the trajectory is still intact, though...

Very much. Yes.

Maybe you could talk about -- and this is where we wrap up. Capital allocation. Talk about capital allocation strategy, plans over the next year or 2, dividend, share repurchases, other investments, whether it be potential fiber acquisitions, spectrum, et cetera.

Sure. So our capital allocation framework is both disciplined and deliberate. And we have 4 capital allocation priorities. Those priorities have not changed. But we've made a number of updates inside of those priorities, and let me just go through them.

First one, as I mentioned upfront, is investing in the business. And we talked about our capital envelope of $16 billion to $16.5 billion to both across mobility and broadband. So we're going to continue to invest in our networks and maintain our network excellence. That's extremely important.

Investing in the business also encompasses M&A, and we just closed on Frontier. And we're in the middle of executing on that integration. So first and foremost is investing in the business. Second priority is our commitment to the dividend. And I think you heard Dan on the earnings call talk about our commitment to the dividend being iron-clad. In January, we raised the dividend for the 20th consecutive year. That's a track record that we are extremely proud of. And our goal is to put the Board in a position to continue to raise the dividend per share in the future. So that's our focus there.

Our third priority is a strong balance sheet. And we've done a lot of work in paying down debt. We've been operating inside of our long-term leverage target, our unsecured leverage target of 2.0 to 2.25x over the past 2 quarters. And we just took on the debt from Frontier, so that will add about 0.25 turn, on the unsecured metric. And what we said is we expect to return to our long-term leverage target in the 2027 time frame. So the focus will be to continue to generate cash and pay down debt.

And then lastly, our fourth priority is share repurchases. And the Board authorized up to $25 billion of share repurchases over the next 3 years with at least $3 billion of repurchases in 2026. So when you put that all together, we have a strong cash flow profile, and that allows us to execute across all 4 pillars of our capital allocation strategy, and we're getting after it with urgency.

Okay. All right. Great. Thanks, Tony. Thanks, everyone.

Thank you so much, Bryan. Appreciate it.

All right. Okay. Good afternoon. I'm Ben Swinburne, Morgan Stanley's telecom and media analyst. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales rep.

I'm really excited to welcome to the conference, he's been here before, but not as a member of and leader of Verizon, Dan Schulman, who has been Verizon's CEO since last October, has been on the Board since 2018, previously CEO of PayPal, other leadership positions at AT&T, Priceline, Virgin Mobile and American Express. Dan, thank you so much for coming. And I believe you have a safe harbor you at least want to reference.

Yes. Obviously, I'm going to be talking about things in the future, which always have some degree of risk in it. So I would reference the safe harbor statement for all of you.

Okay. With that out of the way. So you moved from the Board to the CEO role last fall. Can you talk about what excited and motivated you to make that change and how you have defined your sort of first few months leading the company?

Well, truthfully, I wasn't excited about it. I was very happily retired. I was on our ranch with my wife in Montana, trying to live up to a cowboy work ethic, which, by the way, puts all of our work ethic to shame. I mean I love my wife madly and the more time I spend with her, the better. So this was not a job that I aspired for or politic for despite what you read in the papers. But we had to do something. I was on the Board for 7 years. I was the Lead Director for a year or so before we made the change. And we were at a critical inflection point for Verizon.

We have been losing market share pretty consistently for 5 years in a row. Our stock was down over 30% in that 5-year time frame. We had gone from first to last in market cap in our industry. Our churn rate was up dramatically due to a lot of self-inflicted wounds. And our forward PE was reflected what everybody thought our growth would be. But what I saw is the opportunity to make a real difference, an iconic American company. I've been in the telecom industry for 2 decades plus.

I ran AT&T's consumer division. I ran Virgin Mobile in 5 or 6 years, who put on 6 million-plus customers. So I felt like I can make a difference in it. I convinced my wife of that. And I have to say, 5 months into it, I could not be more excited about being in this position. I feel like all those opportunities are turning into realities right now. And we're -- we have a long road ahead of us, but we're well on our way right now.

That's great. We're going to talk a lot about the opportunities ahead for Verizon. I'd love, Dan, if you could just talk a little bit first about the industry. This audience has a lot of investment options across TMT. How would you describe kind of the big picture trends in the U.S. telecom industry and why it's an attractive -- potentially attractive investment opportunity for folks?

Well, I think connectivity is one of the most demanded elements in our economy. I would say this is probably one of your most intimate devices. You take it to bed with you. When you go out to dinner, you put it on the table next to you. Too many of you take it into the bathroom with you. I mean it's just like -- this thing is intimate and is always with you. And there's more and more connections to it. There are more and more devices connecting into that connectivity. You have a huge demand for it. You have anywhere between 5 million and 6 million new people coming into the industry every single year.

You have convergence happening right now where you've got both broadband and wireless now coming together, and that's a huge opportunity for us. So I think on the demand side, and then you've got all the AI infrastructure that's happening right now, all the dark fiber that we have in the ground, like we don't talk enough about what that might do in the future, but it's a huge opportunity as well. And then I would just say, as you drop from the demand side down to the bottom line, I'll talk about Verizon, but I would submit this is an industry-wide thing.

We're massively inefficient. We can be -- there's so much more efficiencies to mine out of our operations. And that's not all just due to more efficiency and better customer satisfaction that you can get by the implementation of AI, and we will be an AI-first company. But just over the years, we've grown inefficient. We think that the only tool we have is a hammer and that nail is basically a free phone that we give away.

And I'll give you one example of like inefficiencies. Like if somebody calls us and we're worried they're going to churn because they call us and say, the service is great when they're traveling to their company and at their company, but in their home, they don't have the connectivity that they would like. We give them a free phone because that's all we know how to do.

That costs us about $1,000. And when we do that, it's a customer who's upset with a free phone. We could for 1/5 of the cost, give them a femtocell in their home and make them a happy customer. So like just take that one example and multiply it times hundreds and the amount of efficiency to be brought out of this industry and bottom line profitability improvement is actually quite immense. So I'm excited about it, both on the top line demand side as well as at the bottom line.

So I know you guys -- you've been busy and the team has been busy since you stepped into the CEO role. Talk a little bit about the kind of foundational changes you're trying to make in the organization to get Verizon where you want it to go.

Well, there are probably 4 or 5 things that I'm focused on. I mean the first was to be massively blunt and transparent inside the company. I mean first thing you have to do is admit you have a problem. And I wanted to be very upfront with the company that we could not be complacent that we were losing in the market, losing is unacceptable that I was there to win in the market, that Verizon was no longer willing to seed market share that we were going to grow through volumes, and we are going to have a sustainable top line that didn't come from short-term revenue price increases without corresponding value to it.

And so that was all about like going head on into the culture of Verizon. We were too bureaucratic, too hierarchical, too process focused, not outcomes focused. We didn't move fast enough. We're risk averse. And I will say the company really reacted to that. And I have no tolerance, honestly, for anything but that we have a saying inside Verizon now that every day matters. And I firmly believe that every day matters. If we aren't getting better every day, and I want to measure that, then we are falling behind because any time the pace of change external is greater than the pace of change internal, you're falling behind.

And so seizing the wheel, I'm just saying like we need to recognize where we are, we need to believe in what we are doing and what our future looks like is essential. The second thing was rallying around being a customer-obsessed organization, not a network engineering organization. Look, I believe in network excellence. I believe in having the best network, but that is not where it's at. This is about what are the pain points that our customers have.

What is the value proposition that we can put in front of them that delights them. What are the friction points we can take away. And that's how we reclaim our market leadership. Third thing was all around the cost side of it. I told people when I first came in that I was going to be aggressive on that. I think people maybe semi believe that I was going to be aggressive, but we took out $9 billion of costs, $5 billion in OpEx, $4 billion in CapEx.

And that has funded a war chest for us to invest back into our value proposition so that our value proposition is the best in the marketplace. I feel if we do that, that we will start to lower our churn. And I feel like lowering churn is a massive opportunity for us. It is the most profitable way to grow. Every basis point that we lower churn is the equivalent of 90,000 incremental net postpaid adds for us.

And so we've done that, and I will tell you that we are at the very beginning of that. And for those of you who doubt that, I would just say watch this space, like we have multiple billions of dollars to take out of this company year after year after year in terms of cost efficiency. I would say the next thing after that is I'm very focused on convergence. We have 30 million homes passed now with fiber. We're going to get up to 40 million to 50 million in the medium term.

A lot of that came from our Frontier acquisition. We have a huge opportunity to grow through that. We are very underpenetrated in the Frontier territory with wireless services. We're going to cross-sell into that. We're going to -- like we've got 1 gig to 7 gig of speed with fiber that we can offer to consumers right now. And so we're going to really step on the broadband gas pedal.

And any time we bundle customers together, there's a 40% reduction in churn versus stand-alone wireless. So to me, that is a huge opportunity. And finally, all of you saw this at our last earnings call, we are relooking at our capital structure. I have maximized our cash flow right now. For the last 5 years, our cash flow average growth rate has been negative 1%. We guided to at least 7% positive growth this year, $21.5 billion.

And so we'll invest in the business with that. We raised our dividend again for the 20th straight year, and I don't want to be the CEO that doesn't do that every single year going forward. That is an ironclad commitment for us. We are returning capital to shareholders now, $25 billion over the next 3 years, at least $3 billion this year. And we are going to delever. We are going to get to our 2.0 to 2.25 leverage ratio within the next 12 to 18 months after the acquisition of Frontier. So we have a really strong balance sheet. That balance sheet is going to get stronger. Our cash flows are going to get stronger. And so those are really the priorities that I'm focused on right now.

Great. That's a really helpful overview. You mentioned churn and growing subscribers and taking share and not losing share. So you guided to higher net adds, retail postpaid net adds in '26 versus '25 across consumer and business. We were chatting earlier about sort of what is the market looking for from Verizon. And I think one of the questions we get a lot is, well, if Verizon has the highest ARPUs and therefore, maybe the highest prices in the market, how do you grow market share in a competitive wireless sector? So maybe you could talk a little bit about what you think are the levers to grow sales, lower churn and do so in a way that's CLV attractive.

There's about 25 questions in there. But let me start off at kind of a high level. We guided to 750,000 to 1 million net postpaid phone adds. Honestly, it's 2 to 3x what we did last year. So in that way, it's impressive. But in the great scheme of things, I hardly consider it heroic. There's going to be 5 million to 6 million net new coming into the industry. That's maybe 10% to 15% of the net new in the industry.

What I am encouraged by is everyone has accepted that the fact that Verizon is going to grow now, and we are going to put on volumes. On top of that, obviously, we'll put on 1 million plus -- much more million-plus broadband and then we've got postpaid. So we're going to put on a good amount of net adds, and that will help grow our top line in a sustainable fashion going forward in addition to new value-added services we're going to do.

So I think it's a very doable, very responsible number to put out there. And I think the way that we're going to do it, and I'm putting a lot of money behind the customer experience, is we're going to take our churn down this year, I hope by at least 5 basis points. If you take our churn down by 5 basis points, we're halfway already to our target. And what that means is if we're halfway to our target with churn reduction, and I feel pretty good about that, then we're going to be very fiscally responsible because we don't really have to use a lot of promotional dollars to drive the other half of that.

And I think we can just be much more surgical and targeted in terms of how we acquire customers. And my view is I'm focused on net adds. I'm not focused on gross adds like gross adds are easy to get. They honestly are easy to get. We just spend a lot of promotional money to go do that. I have a war chest to go do, but that's not what I'm doing. Like I'm going to be very fiscally responsible. I'm going to be very conservative about what the top of my funnel looks like because I think I can take the bottom of my funnel and shrink it. And that is a smart way of getting at your growth.

Look, we're going to focus on churn in 3 different ways. The first thing, the #1 reason why our customers churn by far and away is price increases without corresponding value. And this is one of the reasons why I felt like we had to make a change in leadership here at Verizon is because for the past 3 years, we've done something like 30 price increases without corresponding value.

What does that do? That does something in the short term, it raises your revenues and maybe your EPS, even though our EPS has actually grown at negative 1% for the last 5 years. But it does nothing in the medium to long term. In fact, it's actually counterproductive to it because -- then you lap those price increases, you have higher churn that's going on and it is counterproductive to having a sustainable long-term strategy of growth. So as I said on our last earnings call, the first rule of getting out of a hole is stop digging.

And so we're not going to do price increases without corresponding value. I'm not against price increases, by the way, just to be clear, but there has to be value associated with it. And I believe by not doing that and I have some proof points that you'll start to see churn come down as a result of that. Second is friction in our process.

Like if you come into our store and 2 hours later, you have not been able to activate your phone and you walk out of the store without your phone and we promised to get it to you, like we're starting off the relationship on a bad initial footing. If you get a bill, your first bill, and it doesn't reflect what you think the promotion offered you or whatever it may be, that's a terrible experience.

If you call in to us sometime over your lifetime and we transfer you from one place to another, again, a terrible experience. And we have taken out of that $5 billion, quite a chunk of money to go after with Tiger teams established 12-month, 24-, 36-month targets for each of those to go after every single one of those pain points. And I am ruthless about it right now, just ruthless. And every day, I want to see how we're improving on those things, and I'm pushing the teams hard on it. And finally, convergence is a great opportunity for us. The more people we put on converged offers, 40% less churn that happens with that, the better off we'll be. And so I see a real -- there's a real path to it. We have to keep executing, but I really like what I'm seeing so far.

That's great. Obviously, a lot of stuff that you're focused on internally. In the backdrop, it's been a competitive environment. I think the investor view is it's gotten more competitive over the last year. I don't know if you would agree with that, but any thoughts on how you would describe the competitive backdrop here that you're operating in, inside of the first quarter?

In the first quarter, are you asking about?

Yes.

No, not really. I feel like actually, we're doing pretty well in the first quarter and doing it responsibly. So -- but in general, I think the industry is acting quite rationally right now. I know we are, and we're a big part of it. I know everybody thought it was crazy coming in because it was like this does not work for Verizon the way it's going right now.

But I think what I'm seeing right now is industry where all of us can grow, all of us can be more profitable. That's what we are focused on. And so I think we'll -- I think we -- and we're a big part of the industry, we're going to be much more rational about how we think about where value should be added and how much value we give away to other players in the ecosystem versus keeping ourselves. And so I want to be very thoughtful about it, very rational about it. But I feel like the goals that we set out for 2026, although they are step function improvements from where we've been, they're just the starting point for where I think we can be over the next couple of years.

I want to shift over to the broadband side of the business for in a minute, but I want to ask you about direct-to-sell connectivity in the context of adding value to your customers. SpaceX presented earlier today. There's a lot of focus in this area. What's your message to investors on satellite connectivity, direct-to-device sort of value to the consumer or new competitor? How do you look at it?

Well, right now, we cover about 99% of the areas where people work, live and play. So we've got pretty good coverage. I do think that the opportunity to work with some of the satellite companies, and I've spoken to all of them to be able to give an offer to our customers where we say you are never without service. I think that's real value added.

I mean you talk about like how could you add value, where could you raise prices with incremental value. To me, that's a super offer, but there's a lot that needs to be get done. Like the handset folks need to work with us. We need to really figure out how easily that switches back and forth. We need to make sure that the quality of that service is where we want it. And right now, terrestrial, like just like that is the best connectivity and speed and everything by far and away. And I think as I look at industry structure personally, I think we understand it really well. I think we're very thoughtful about it. And we know the ecosystem that we think is best for Verizon, and we'll be very disciplined around it.

Got it. Okay. You recently closed on the Frontier acquisition. Congratulations on that. What does this business and these assets bring to Verizon when you sort of fold it into your long-term growth plans?

Yes. Honestly, I couldn't be more excited about the acquisition closing. That was not an easy thing to close, and we did it. It's taken our fiber footprint to over 30 million homes passed right now. We want to build that out over the medium term to at least 40 million or 50 million. We're going to do at least 2 million homes passed incremental this year.

And to me, one of the big growth opportunities for Verizon is in convergence. And that convergence can be either with fixed wireless access or fiber. I mean fiber gives speeds up to 7 gig. Nobody here needs speeds up to 7 gig, but it provides it. And fixed wireless access where we don't have fiber is a really good alternative, and we're doing quite well on that. In fact, we have more open for sale coming into this year on fixed wireless access than we did going into last year. So I'm really pleased with the capacity that we've put on into the network around that.

I do think any time you can bundle together, you have higher lifetime values. I mean, much higher LTVs. You have both the broadband part of it, you have -- and the ability to upscale that and price that up. And then you've got the wireless side where you have a lot less churn, 40% less churn. So convergence offers us the opportunity to grow and the opportunity to retain. And so it's a big deal for us.

You guys are going to be building a lot of fiber over the next couple of years. Can you talk a little bit about ramping up that organization? And I guess you're bringing on a new organization and maybe just compare the Fios, legacy Fios opportunity relative to what you just bought with Frontier as we think about the next couple of years in fiber builds?

Well, we know how to build fiber, I mean, yes, and we know the whole regulatory process to do that. I was talking to members of the administration who are really quite excited to help us to lay more and more fiber. I mean it's just -- it's better for critical infrastructure for the United States. It's better for customers. It is massively helpful as we go into the age of AI as well, whether that be with our commercial customers, the hyperscalers or our consumers. There's huge opportunity in doing that. And so we'll do that organically.

We have partnerships that we're quite happy with that will help on some of that build-out. We've done some acquisitions like a smaller one called Starry that helps us get into MDUs, multiple dwelling units. more effectively. And so there are all sorts of ways that will accelerate our move into fiber, and we'll continue to add capacity and make sure we have room for more and more fixed wireless as well.

I was going to ask you that next. So when you think about the long term, Dan, you've got more and more fiber coming on, how does fixed wireless fit in? How do you think about customer segmentation and sort of bringing the right product to the right customer?

Where there is fiber, that will be our initial choice for broadband connectivity for our customers just because the speeds are so much better. And Fios plays right into what we're doing with Frontier. And I couldn't be happier to get the Frontier workforce into us. They're -- I got to give them a ton of credit. Like they went through bankruptcy. They came out of it. They executed in a time of uncertainty in a way that was extraordinary.

So they are scrappy. They are hard charging. I really -- I love their network folks, and we're learning a lot from them. They're learning a lot from us. We're going to come together. We've got a ton of opportunity to learn and get better at installing fiber. We also obviously have a ton of opportunity in terms of synergies. We said we're going to do instead of $0.5 billion, $1 billion of synergies off of that.

And that doesn't even include like the fact that our cost of debt is way less than theirs. We're retiring their debt. But there's all sorts of things we can do together from go-to-market to learning from each other to common systems to leverage back on access costs that make that acquisition and our whole convergence and broadband strategy one that gives me a lot of confidence about the future.

Yes. One area that all this fiber certainly helps is on the commercial or the enterprise side. You touched on it a couple of times, hyperscalers, AI, big theme at this conference. How would you -- how do you advise us to think about Verizon's opportunity to participate in all the investment that's happening around connectivity and AI?

Well, I don't talk enough about it, honestly, and that's my fault. That is not like Kyle Malady, who runs our business group is doing an unbelievable job right now. He is killing it. First of all, like he's got a lot of the wireline stuff in there where we lose $1 billion to $1.5 billion of margin. And over the next 1 to 3 years, we will either sunset all of that, exit it, look at different structures where we can free up all of that $1 billion to $1.5 billion of incremental margin on top of the efficiencies that I talked about.

But also the opportunities now in the business segment, in the commercial segment as more and more companies are looking at how do we use AI and like we're going to do that inside for us and every company is going to do it. I have strong thoughts about it. I've been very public about those. But the opportunity to use our embedded assets, we have a ton of dark fiber. More and more of the hyperscalers are looking at not just building out data centers, but how do you cluster those data centers? How do you tie them together.

And really there, you need amazing connectivity to go and do that, and we can offer that, and we are working and have in place with several of the hyperscalers that connectivity, and that's only going to grow, but it's also going to grow on the commercial side. So I see a ton of top line opportunity for us on the commercial side, and I look forward to talking about that more.

That's great. Let's shift over just to the -- a little bit more on the efficiency front. You mentioned that a couple of times. You guys have taken a lot of cost out. You haven't guided specifically to EBITDA, but you've mentioned you want to grow ahead of the 4% to 5% target you set for adjusted EPS. What are the levers -- you mentioned $9 billion earlier. That's a big number for any company of any size. How do you find those kind of efficiencies? What are the levers you're pulling that you think will not slow the company down?

I think quite the opposite. I think it's actually going to speed the company up. Look, over time, you build up a bureaucracy, you build up -- I'm very strict on like performance. Like to me, I have no time to admire problems. Like I want to know what is the time frame that we're going to fix something and what the results are going to be. Like process, I think -- I'm not coming down on process or anything. I want to be thoughtful. I want to be rational.

I want to be analytical, but I like results. And for me, this is about do we have the right people in the right places focused on the right things. And we took out 13,000, 14,000 people. We took out a whole heck of a lot out of our contracted workforce as well. That was step one. And that was relatively easy to go and do. Step 2 is we strip out complexity that frees up a ton of resources, and step 3 is we automate what's left.

And so I feel like we want to be the most efficient telecom company in the world, but there's so much opportunity out there. And right now, it's just we are at the beginning of that journey. And I know it looked like it was a lot. But like on CapEx, people are like, are you sure $16.5 billion is enough? I'm like $16.5 billion is a hell of a lot of money. It puts us outside of people who are investing in data centers, puts us as like one of the top 10 investors of capital and infrastructure in the country.

And honestly, I agree to it because it was [indiscernible] like we've got to be way better than that. And by the way, I will not sacrifice for a moment anything around network excellence in our broadband and our wireless networks. I will not do that. But we can be ever more efficient there, and we can be way more efficient in our operating expenses. I mentioned something like you don't have to give away a phone for everything. Like that is thousands of dollars, like our cost of retention and our cost of acquisition can come down substantially, and you will see that as we go through the year. You will see it.

Great. All right. Well, maybe in the couple of minutes we have left, I want to make sure we hit on capital allocation. It's an important part of the Verizon story. You announced plans to buy back at least $3 billion in stock this year as part of a 3-year, I think, $25 billion buyback plan. Talk about your approach to capital allocation as you weigh buybacks and dividend growth against investing in the business and reducing leverage?

Yes. Well, as I said, our #1 priority is invest back in the business. Like the way that I think about our business model is I want to have top line sustainable growth, and that's going to come from volumes, not from empty price increases. It's going to come from volumes. It's going to come from convergence and it's going to come from added services that we add on top of that. But that can keep our top line growing substantially over time in a responsible, sustainable way. Then I want to be the most efficient.

I want to take out costs continually, and I want -- and that, to me, is pretty straightforward to go and do. And then I want to buy back my shares. And that -- like if you think about that, what I think we can do is like grow our bottom line. I know you want adjusted EBITDA, but I like adjusted EPS.

I like adjusted EPS.

Okay. Good because that's what we're going to be guiding on. But I think we can take that and just start to grow that and grow on top of growth year after year after year for the foreseeable future. And so you take that with free cash flow that I intend to increase as well through these efficiencies and top line growth. And then our dividend, which is a good paying dividend, and we're committed to that.

But on the dividend, what's really important is this is the highest in terms of the money we'll spend on our dividend. It will peak here and go down from here, even though we're going to increase because we're buying back shares now. And so -- and I think that's really healthy for our balance sheet as well. And so I think our capital allocation makes sense to me. We have plenty of flexibility, by the way, in our balance sheet to do acquisitions if we wish to do that, to go after spectrum if that makes sense for us versus network densification. And so I feel really good about our capital allocation plan right now, but within the context of our overall business model.

Great. Well, Dan, we're out of time. Anything you want to wrap up with for this audience before we close it out?

No, Ben, thank you. I appreciate it. Thank you, everybody.

Thanks, everybody.

Good morning and welcome, everyone. For those of you who don't know me yet, I am Kannan Venkateshwar, and I lead the North American cable, telecom and media research effort here at Barclays.

I'm happy to have with me Tony Skiadas, CFO of Verizon. And sorry for the last-minute switch to a virtual event. But Tony, great to have you here, and thanks for joining us this morning.

But before we get started, yes, Tony, you have a safe harbor statement I think that you want to read out as well.

Yes, sure. Thanks, Kannan. Great to be here.

So I just need to draw your attention to Verizon's safe harbor statement and our SEC filings, which can be found on our Investor Relations website. And my comments may include forward-looking statements, which are subject to risks and uncertainties.

So with that out of the way, Kannan, we're ready to go.

Thank you. So Tony, maybe we could start with all the changes Dan has made in the first 100 days, he's had a lot of impact. So could you just talk at a very high level about what are the operational changes that have been made thus far? And what is yet in the pipeline and what is yet to be done?

Yes, sure. And we have a lot going on, and from a macro view, as you've heard Dan talk about, we're creating a new Verizon and aimed at being the best, and also playing to win in the marketplace. As Dan said on the earnings call, the company is at a critical inflection point and we have to radically change our culture towards the goal of delighting our customers and also delivering for our shareholders. And we talked about having network excellence and leveraging that network excellence to grow both mobility and broadband, and doing that in a very responsible way.

And to your question, Kannan, the last 100 days, we've had a lot of change and, I would say, a renewed sense of excitement inside the company as well. We took bold actions, as we talked, about to drive $5 billion of cost savings out of -- for 2026, some of which gets reinvested in the customer and the remainder falling to the bottom line.

And we moved quickly in the fourth quarter to rightsize the organization. We also sharpened our capital envelope, as you saw, improving efficiency and really narrowing our focus on mobility and broadband programs. And doing that, we drove about $4 billion in savings, and I'm sure we'll get into that.

In terms of your question about what's in progress and what still has to be done, we still have a lot of work in front of us. First and foremost, improving the customer experience. Second, leveraging and deploying AI to optimize the operation of the business. So we also talked about launching a new value prop for customers. And then we also gave guidance for 2026, which has, as you saw, significantly improved over prior years. So we're excited about what's in front of us.

And with all the changes happening in the company and across the industry, from your seat, what are the main priorities that you're focused on for the organization?

Sure. So maybe I'll start at the top. And overall, as I said, our team is very focused on growing mobility and broadband through sustainable volume growth, and doing that in a disciplined way. And second on that list is executing on our transformation. As I said, we're taking bold actions, improving customer experience, focusing on loyalty and improving churn, and having a value proposition and offers that delight customers.

The other thing we have in front of us is the integration of Frontier as well, since we closed the deal back at the -- on January 20. And then third is continuing our network excellence as we complete our C-Band build and as we continue to deploy fiber in the network.

And then from my standpoint, in terms of my priorities, I have 3. One of them is -- the first one is supporting the leaders in the business and making sure we maintain our focus on operational performance and execution. And I think you saw the results of that in the fourth quarter. Second priority for me is delivering on our guidance for 2026. We gave guidance, as I said, that's a step-function improvement, and I'll come back to that. And then third is making sure we generate strong cash flows and execute on our capital allocation framework.

And if I can expand maybe on the guidance and the capital allocation, I think it would be helpful just for some context. So for guidance, in terms of volumes, we said we expect to grow our postpaid phone net adds 750,000 to 1 million, which is an increase from what we saw in prior years and an increase in our share of industry net adds, and doing that in a responsible way.

From a revenue standpoint, we said mobility and broadband service revenue, we expect to grow 2% to 3%. And we see '26 as a transitional year for wireless service revenue as we continue to drive volumes.

With all the cost work that we're doing, we expect our adjusted EPS to grow between 4% and 5%, and that's a significant improvement over where we had been over the last 4, 5 years. And then free cash flow, we have industry-leading free cash flows, and we've said we expect to grow our free cash flows at least 7% or at least $21.5 billion.

And then in terms of the capital allocation framework, we have 4 capital allocation priorities. The priorities themselves haven't changed, but we made significant updates inside of those priorities, as we outlined them on the January earnings call. And the first one, and first and foremost, is to invest in the business. And you see us doing that with our CapEx program, we said $16 billion to $16.5 billion. That's all-in and very sufficient to support our growth initiatives both across mobility and broadband.

Second priority is the dividend. And we are proud to have said that we raised the dividend for the 20th straight year. It's a track record we're extremely proud of. And the goal is to put the Board in a position to continue to raise the dividend in the future.

Third priority is having a strong balance sheet. And as we said, goal is to pay down debt. And we've been operating inside of our long-term leverage target for the past 2 quarters up to the Frontier deal. And now that we've ingested Frontier, we said we'd get back to our long-term leverage target in the 2027 time frame.

And then fourth priority is share buybacks. And we're pleased to announce that the Board authorized up to $25 billion in share repurchases for over 3 years, with at least $3 billion in 2026. So overall, the goal is to generate strong cash flows and execute across all 4 pillars. So as I said, this is really a step-function increase over where we've been in prior years. And the exit rate from '25 sets us up for a good platform for 2026.

Yes. That's great. I mean there's a lot to unpack there, obviously. I mean maybe we could just start with the subscriber side. I mean you mentioned 750,000 to 1 million, which is your guidance. Could you talk about maybe the context of industry growth that you've used essentially to come to that kind of a number? And U.S. population growth last year was the slowest in 5 years, and it seems like this year it's going even lower. So what industry growth framework did you assume when you set your subscriber goals for the year?

Yes, sure. I think as we've seen, the wireless industry is both robust and resilient. And now that everyone's reported results, I think that's pretty clear. And by the way, the broadband market is also very healthy as well. And we now have Frontier in the portfolio, which also helps us extend our reach. And when you put it together, the demand and the priority for connectivity still remains extremely high. You see that day in and day out, and even from a payment trends perspective, very, very healthy.

The fourth quarter showed that we can compete and execute well. We have offers that resonated in the market. We had a consistent approach and we have strong execution in the field. And we delivered those volumes within the parameters of our guidance for the full year.

And then as I look ahead, to your question, we gave guidance of 750,000 to 1 million postpaid phone net adds, which is roughly 2 to 3x the volume growth that we had in 2025. We see enough growth in the industry, and as we've said and we said on the earnings call, we expect to grow volumes in a fiscally responsible manner.

And you mentioned you're working on offers to delight customers and there's a new approach to go to market and so on. So what should we expect -- when should we expect to see further changes in the go-to-market strategy? And what vectors are you trying to optimize for? And organizationally, there's obviously been some changes. So who's leading the activity? If you could just walk us through the planning process for this.

Yes, sure. And I think if you heard Dan on the earnings call, we talked about being thoughtful and financially disciplined. So that's kind of the framework that we start with. And we're in the early stages of our transformation. A lot of the go-to-market activities reflect the drive to be more customer-centric and delighting customers.

And we can do that by eliminating pain points, making it easier to do business with us, investing in the customer experience and deploying AI proactively to help solve customer issues, take calls out of the system. And ultimately, this is going to lead to reduced churn and hopefully a lower cost to serve. And ultimately, you get to a higher margin profile. And as we look ahead, we're focused on a new value proposition, and we said we're targeting to launch that in the first half of this year.

And in terms of who's running this right now, so right now, Alfonso Villanueva is serving as our Interim CEO for the Consumer team. And having Alfonso in the role I think gives us a critical bridge between the transformation work that he's doing and our daily operational execution, particularly when you think about the customer journey and the work that we still have in front of us.

So as I said before, the objective here is to grow volumes across both mobility and broadband and do it in a very fiscally responsible manner.

And something I forgot to mention in my introduction, in case the audience has questions, there's a chat box that you should see in front of you. And so feel free to type in your questions and I'll read it out with Tony.

So I guess looking beyond volumes, Tony, when we look at pricing for this year in both broadband as well as wireless, it feels like, given the unit growth framework that we are looking at, as long as industry growth holds up, maybe there's a bit of rationality. But if that changes, then pricing could be under a bit more pressure. But based on your and AT&T's comments, it also feels like ARPU this year could be under pressure irrespective. So how do you see the trajectory beyond this year? I mean is this the new normal in terms of pricing? And how should we expect this to evolve next year and beyond?

Sure. So maybe I can start at the top of the house with the revenue guidance. So we said we plan to grow both mobility and broadband service revenue 2% to 3% in 2026, and that includes Frontier. And that also reflects the importance of both mobility and broadband and both of those pillars being key to our growth strategy.

We also said that 2026, and we've been very transparent with this, is going to be a transitional year for service revenue. When you break it down underneath with mobility, we said we expect wireless service growth be around flattish as we look to drive sustainable volume-based growth, and that will ramp up over time here.

And in terms of your question around pricing, obviously, I can't talk about what we might do in the future, so I'm not permitted to talk about that. But what I can talk about is what we've done in the past is we're lapping pricing initiatives that we took last year. We still have the ongoing promo amortization headwind that we still got to fight through as well.

But in terms of driving ARPA organically, there's a lot of ways to get there. We've had a lot of success with perks and getting customers to take perks. So the penetration of perks has increased, and that drives revenue. We've had step-ups to premium plans. As customers continue to step up, that helps. Adjacent services, and even prepaid. Prepaid continues to grow; we've had 6 straight quarters of growth there. So with the volume growth to follow, the exit rate for 2026 should be much better and setting us up for a better revenue profile as we head into 2027.

And then on the broadband side, we now have, with Frontier, 16 million -- a little over 16 million subs in the base right now, broadband subs. So there's a lot of room to run with fiber, with Frontier in the base, and also with our FWA products. So when you see a converged offer, there's a lot that can happen there in terms of customer lifetime value and churn benefits as well. So there's a lot of opportunities to grow on the revenue side, and we're going after it with urgency now that we've closed Frontier.

Got it. And so maybe sticking with the broadband part of the business for a bit. What is the fiber goal? I mean you obviously have a very ambitious passings goal now post Frontier, the 35 million to 40 million became 50 million, and AT&T's 60 million seems to be creeping to 70 million. So when you look at the 50 million, I mean, why is that the right number? Just given the scale of the opportunity? And what could drive you to push this higher or lower in one way or the other?

Yes. And I think you see that -- again, I can't speak for others, but I think you see that it's a clear indication that there's a lot of opportunity with fiber and convergence, and we all see it. And it goes back to our capital allocation framework. First priority is to invest in the business, and there's no change there. So we're going to continue to invest in fiber and we're going to continue to grow that business where we see the best returns.

And we've expanded the fiber footprint. We have over 30 million prems passed now that we have Frontier in the mix. And we said that we'd have at least 2 million prems passed in 2026, towards a goal of 40 million to 50 million over the medium term. And we have a sufficient path to get there and we can get there in a reasonable amount of time.

But we're going to look at where we see the best return economics, whether it's penetration rates, convergence opportunities, things like that, build costs. We have 20 years of -- as you know, 20 years of experience building fiber with Fios, so we know what that looks like. Fios is the gold standard, and it's still growing. So we're confident that we can get to our 40 million to 50 million passings in a reasonable time frame.

Got it. And in terms of the way fiber and fixed wireless fit together, how are you thinking about the path going forward? I mean is fixed wireless maybe an upper funnel product which helps you upgrade people and, therefore, get more price over time? Or is this essentially a market expansion opportunity beyond the regions that you have fiber in? How are you framing that discussion internally?

Yes, Kannan, I would say we do both. So both fiber and FWA are important pillars in our broadband strategy. And with FWA, we've said for a long time, we're building a long-term sustainable business, and we're building a long-term sustainable business. We have over 5.7 million subs in our base, and we put on about 1 million -- 1.2 million subs in FWA in 2025, and we see a lot of room to grow there. So we can do both and we have the capacity and the network to do it at this point. And we will continue to deploy fiber where it makes sense to do so, up to the 40 million to 50 million passings over in the medium term. So we feel like there's a lot of optionality there for customers with both FWA and with fiber.

Got it. So moving on to the cost side a little bit. You mentioned the OpEx savings of $5 billion, some of it to be reinvested. Could you help us understand -- I mean it's a pretty big number in terms of the savings goal. So could you help us understand where these savings are coming from?

Sure. So as we said upfront, we're driving $5 billion of OpEx savings in 2026. And it gives us a lot of flexibility, to be more agile, be leaner and also invest for growth. And there's a lot of work that's already underway. When you think about the work that we're doing in the network and the continued decommissioning of the legacy elements in the network, whether that's copper, whether that's even inside the Frontier footprint or access costs, continuing to drive that down.

I talked about customer experience and addressing customer pain points and reducing call volumes. That's also underway. On the IT and real estate front, continuing to rationalize IT platforms, deploying more and more AI as well. And then looking at the real estate portfolio, both on the network side and the admin side. On the advertising and marketing, just continuing to be much more efficient with our spend.

And then from a workforce perspective, as you saw in the fourth quarter, we reduced our workforce by 13,000, 80% of which were off payroll in the fourth quarter and then the remaining 20% coming off payroll here in Q1. And we also addressed, as part of that exercise, third-party contractors and vendors as well.

And then lastly, on the Frontier integration, as you saw in the earnings call, we said we saw double the operating expense run rate synergies, so at least $1 billion of synergies by 2028. Those synergies are going to ramp up over time as we execute on the integration work.

And then when you put that together and you look at it from an EBITDA standpoint, cost reductions give us the optionality to do a lot -- a number of things. Number one is run more efficiently. Second thing is to absorb the transitional year in service revenues we've talked about earlier. And then the third is to invest in the customer. And last is return a significant amount of capital to shareholders. So we see a good path to both EBITDA and EPS growth for 2026, and that's by taking bold actions.

Got it. And so I guess EBITDA, if -- I may have missed this in your early comment or maybe I heard this wrong, but I think you mentioned about 4% to 5% EBITDA growth.

EPS. EPS growth.

Yes, that's why I wanted to clarify that. Okay. And then in terms of CapEx, I mean, that again is a pretty ambitious target given that it's $4 billion lower versus I think what you and Frontier on a combined basis spend. And this includes some of the incremental fiber CapEx. On the wireless side, it probably looks even deeper in terms of the savings. So could you help understand how -- where these savings are coming from on the CapEx side as well?

Yes, sure. And as I said before, the first priority is to invest in the business. So we're going to continue to do that. And the CapEx profile that we have for this year of $16 billion to $16.5 billion is sufficient to address all of the growth initiatives. And we talked about having network excellence and that being foundational for us. We're not compromising on that.

We'll continue to invest in the wireless RAN. From a C-Band perspective, 90% of our planned sites are on C-Band. We said we'd be substantially complete here in 2026. And a lot of that build is on small cells, which obviously have a lower cost point.

And then from a fiber perspective, we're not slowing down. We'll continue our fiber build pace. We said at least at the combined rate of Verizon and Frontier which is about 2 million prems passed in 2026. So we're going to continue to do that, and then get to the 40 million to 50 million as we've talked about.

And in terms of what we're not doing, we really took a sharp look both at OpEx and CapEx and put a lot of rigor in around narrowing the focus on the CapEx program to mobility and broadband. And things, areas that were not aligned to growth were either reduced or eliminated. And that includes things like in business wireline, wholesale, looking at projects, legacy copper projects, things that have a longer -- projects that have a long payback. So we really took a sharp look at this and went back to aligning it around growing mobility and broadband and doing that in a very efficient way.

Maybe one ancillary question related to that is you have an opportunity, you have this cable MVNO deal and you always get questions more on the wireless side in terms of what it means. But I guess there's also an opportunity here to somehow use the cable network, cable infrastructure to offload your traffic or save some CapEx, or OpEx for that matter. Is there an opportunity to do something slightly different with these partnerships? And are we just looking at it from a very narrow lens right now?

I mean look, I can't say too much about the -- the partnership's on good footing from a wholesale standpoint, so I'll leave it at that. But we're very happy with the agreements we have with the cable companies, and we just signed a long-term agreement. So it puts the partnership on a really good footing.

Got it. And maybe just looking at that partnership more broadly, obviously, this is an important source of revenues, high-margin revenues for you. But given that cable is now adding close to half of industry net adds, longer term, how do you frame this discussion? I mean if industry volumes at some point were to slow, I mean, doesn't this become a bigger problem for the industry as a whole?

Yes, I have to be careful in my answer here on the MVNOs. But what I'll say is, as I said, the partnership is strong. We have a long-term comprehensive agreement that we just signed. It allows them to -- their customers to remain on the best network, and it's an accretive deal for us. And it sets us on a solid foundation. I got to kind of leave it at that.

But then if you shift from wholesale over to retail, I think you saw in the fourth quarter, our fourth quarter results speak for themselves. So we did very well. So that's the way I would frame it.

Okay. And more in terms of the cash flow side of the business, obviously, we've talked through the OpEx and CapEx savings, but there's also upcoming spectrum auctions that you may have to invest in. And given fixed wireless and its importance, I mean, obviously, there are other ways to deal with it, like densification, for instance, which again goes back to the CapEx question. So when you think about fixed wireless in the broader scheme of things or your spectrum needs going forward, is there a way for us to contextualize that in terms of how you've considered that within your cash flow and capital return goals?

Yes. Look, in terms of spectrum, and you mentioned auctions, I mean, we're in a quiet period for the AWS-3, the Auction 113, so I can't comment on anything related to that auction given the FCC's rules. But if I stepped back more broadly, I mean, we're happy with the assets we have. We have the assets we need to execute on our strategy.

We're going to look at everything, and we always do. And generally speaking, in terms of spectrum, we always look at it from -- as a build-versus-buy analysis, and we'll look at it that way. And we have sufficient balance sheet capacity to the extent that it makes sense for our business. And same thing with fiber as well, and we're very thoughtful about what we're doing there and we're pressing ahead. So I feel good about our positioning right now. We have a strong balance sheet to support our growth initiatives.

We also have a couple of questions from the audience, but I wanted to maybe broaden that a little bit. So the question specifically is about interest in further acquisitions in fiber and what other frameworks you could look at in terms of expanding footprint. And so it's more about inorganic use of your cash.

But are there also other alternatives in terms of fiber structuring? I mean we've seen some of this in the industry, for instance, all the JVs that have proliferated or the Lumen acquisition structure that AT&T used where it's partly off balance sheet. So if you could just talk more broadly about fiber investments and potentially organic or inorganic structures that would help you use your capital more efficiently.

Yes. Obviously, we have a great build engine and we've been at this for a long time, so we know how to do this organically. We also have a partnership with Tillman that's expanding as well, and they're building fiber outside of our footprint, to our specifications, with good economics. So we like those structures. And to the extent we can continue to grow that, that would be another option.

And as I said before, we always look at everything. I mean obviously, we just ingested Frontier so we have the integration work in front of us right now. But we'll always look to do that. And we have many paths to get to the 40 million to 50 million prems passed in the medium term. So we have a lot of optionality there, with the work we're doing organically, with partnerships, et cetera. So I feel good about that.

And looking at cash flow more broadly beyond this year, next year obviously, you have a lot easier cash cost comparisons, I mean, so that should help you, and some of the restructuring costs fall off, and synergies, the cost savings start kicking in. So when you think about the growth path from here, it would seem like cash flow should see a step function change as you go into next year and beyond. So could you frame the puts and takes for us as you think beyond this year for cash flow?

Sure. And I'm glad you think it's easy, Kannan. So look, I'm not going to guide on 2027, but as I said earlier, we expect to grow free cash flow at least 7%, which is an acceleration from prior years. And we have industry-leading cash flows and the cash flow generation of the business continues to be strong.

And it starts with a strong EBITDA profile. Last year, we had $50 billion of EBITDA. And you layer in the work we're doing around our cost structure, our CapEx, having Frontier in the mix, investing in the customer, we have a good cash flow profile. I mean I talked about our CapEx program and being very sharp there.

We're also absorbing about $1 billion of interest expense this year from Frontier. We continue to do work and improve our working capital profile now that we've absorbed Frontier. We have some incremental year-over-year severance pressure from the head count actions we took in the fourth quarter. Some of that comes in Q1 here. And then cash taxes, we expect to be up slightly year-over-year just given the plans we have for the year.

But the strong cash flows allow us to execute across all 4 pillars of our capital allocation framework, including investing in the business, paying the dividend, reducing debt and having a share repurchase program, and being able to do all 4 of those this year. So obviously, more to do, but the goal is to continue to increase our cash flows and be very disciplined in our approach.

And here, just maybe a minute left, so in that minute, I guess the mandatory question in all these conversations now is AI, so I got to ask you about this, in terms of how this fits into the organization. Obviously, you mentioned briefly about some of the cost opportunities you may have. But could you talk more expansively about maybe both the cost and the revenue side of it, I mean, how we see this playing out in the coming years?

Sure. Yes. We do look at it from both of those dimensions, Kannan. First, on the efficiency side, obviously, tied to making sure we have customer experience improvements and efficiency. And ideally, we want to be able to do both of those, whether it's customer care and reducing the handle time for the customer, or just reducing call volumes in general. Of course, that's extremely important. If you think about what we're doing in our network and optimizing the performance of the network day in and day out, or just taking out manual work and improving our processes. So the goal here is to operate a lot leaner, be more agile. And that's what our transformation is going to require. So that's the cost side of that.

On the revenue side, a number of opportunities that Kyle and the team see on what we call AI Connect. We have a number -- we have a lot of demand for both dark and lit fiber, and we have a number of signed deals with hyperscalers and diversifying to other logos. There's a lot of demand there right now. And we do see further opportunity here as we go through the year with success-based capital. So we're excited to see that space evolve, and more to come.

Got it. Tony, we're at time. So thank you so much for joining us. I know you have a busy day ahead. So with that, all the best for the rest of the day.

Thank you, Kannan. It's good to see you.

Same here.

Good morning, and welcome to Verizon's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time.

I would now like to turn the call over to Mr. Brady Connor, Senior Vice President, Investor Relations.

Thanks, Brad. Good morning, and welcome to our fourth quarter 2025 earnings call. I'm Brady Connor, and on the call with me this morning is our Chief Executive Officer, Dan Schulman; and Tony Skiadas, our CFO. Additionally, I'd like to introduce our new Head of Investor Relations, [indiscernible]. She will be assuming the role on a go-forward basis.

Before we begin, I'd like to point you to our safe harbor statement, which can be found in the earnings presentation and on our Investor Relations website. Our comments this morning may include forward-looking statements, which are subject to risks and uncertainties. Factors that may affect future results are discussed in our SEC filings. This presentation also contains non-GAAP financial measures, and you can find reconciliations of these measures in the materials on our website. With that, I'll turn it over to Dan.

Thanks, Brady, and thanks for all of your service to Verizon over the years and to me personally over these past 100 days. I'll miss working with you.

And Colleen, welcome to the Verizon team. We are so lucky to have you. And thanks to everyone on the call for joining us this morning.

We have a tremendous amount of information to share with you from our fourth quarter results, our Frontier acquisition, our renewed MVNO relationship with Comcast and Charter, and of course, our 2026 guidance, including an update on our capital allocation plans. And we are you're going to dive into each of those topics, but first, I want to acknowledge the network outage that impacted our customers earlier this month. We did not meet the standard of excellence our customers expect and that we expect of ourselves. We let our customers down. The Verizon brand was built on superior network quality and reliability, and I'm committed to relentlessly working to deliver the service that our customers expect and deserve each and every day.

We saw that resilience in action this past week under difficult circumstances. In response to the winter storm, I want to thank our technicians, fiber crews and retail teams who have battled the ice and snow to serve our customers and keep them connected. We maintained seamless connectivity across the most heavily impacted regions. Last quarter, I said that we would transform our company in a fiscally responsible manner with a clear focus on driving shareholder value.

Net volume growth and profitability growth can and will go hand in hand and that they can happen simultaneously. And as I talk to you today, I am more convinced of that than ever. Our transformation will be driven by bold and meaningful actions to affect what is essentially a turnaround story. We are already a leaner, more efficient and intense organization. We are bringing in talent with new skill sets to complement our workforce. Every single year, we will become more efficient, more agile, more outcomes-oriented and our speed of decision-making and product deployment will meaningfully increase.

We are creating a new Verizon, one that does not settle for anything less than being the best. So far, I am very impressed with the reaction of our workforce as they begin to truly embrace, feel and drive the level of commitment that is needed to transform our culture. That attitude is fully required from every single member of the Verizon team.

There's no question that Verizon is at a critical inflection point, and there is no doubt that we must radically shift our culture towards the goal of delighting our customers and building a brand that stands for trust so that we can deliver for our shareholders. The prevailing attitude inside Verizon is that we are now going to play to win, and we will never again be content to be the hunting ground where our competitors take our share and our customers.

These last 100 days have been full of change and a renewed sense of excitement about our future. And I expect that intensity to continue and grow. We moved quickly to rightsize our organization by aggressively removing pockets of underperformance, eliminating redundant organizational structures, reducing layers of hierarchy and cutting resources not focused on our priorities with both our full-time employees and contractors. We are building an in-year war chest of $5 billion in OpEx savings, with a substantial portion realized by headcount reductions, alongside marketing efficiencies, real estate rationalization, contract renegotiations and more. This will allow us to be more agile and reinvest in our business for growth and loyalty, and this is just the beginning of the efficiencies we are uncovering in both our OpEx and CapEx.

We aim to be the most efficient telecom company in our industry. As we continue to reduce complexity, eliminate structural inefficiencies, divest noncore assets and deploy automation at scale, we will enable a growing stream of cost savings, providing us with ever more operational flexibility to invest for growth and provide meaningful and increasing returns for our shareholders.

Make no mistake, our #1 priority is to invest in our business to drive our future growth. No company ever cost cut its way to greatness. We are examining every dollar of OpEx and CapEx to ensure it is being spent on initiatives that will drive customer loyalty and brand trust. However, when we invest, the bar will be high. We will only do so when we know it drives growth, delights our customers and delivers for shareholders. There is nothing more important than that.

Our financial success will rely on subscriber growth, driven by convergence, a value-based pricing strategy, superior value-added services and a fully revamped end-to-end customer experience. We will not rely on empty price increases to drive short-term revenue and earnings. That is not a sustainable financial model nor an engine of long-term growth. I strongly believe that Verizon, and possibly our industry, is only scratching the surface of meaningful increases in bottom line performance.

We began to see initial glimmers of our actions to play out in our fourth quarter results. We were disciplined and we performed well in the market, achieving more than one million mobility and broadband net adds, our highest reported quarterly net adds since 2019, while simultaneously writing better business than we did in the fourth quarter of last year. Importantly, we added 616,000 postpaid phone net adds with 551,000 from consumer, our highest postpaid phone net adds in the last 5 years, all while delivering on our 2025 financial guidance.

I think by now it's clear, we are not satisfied with [indiscernible] market share to our competitors. Our fourth quarter results show that we can compete effectively and win when we move with speed and consistency. While we are still in the very early stages of our transformation, and we are still predominantly competing with many of our existing and blunt tools, our execution in the fourth quarter was critical to establishing a strong baseline and momentum as we enter 2026.

Before Tony reviews our fourth quarter results and our 2026 guidance, there are a few topics I want to briefly cover. First, and obviously crucial to our converged future is the closing of our Frontier acquisition. We now have over 30 million fiber passings with a huge cross-sell opportunity as we are significantly underpenetrated with our wireless services in Frontier markets. I want to thank the entire Frontier team for their focus and execution over the past 18 months. We intend to continue our fiber build-out, adding at least 2 million fiber passings this year, with our goal to reach 40 million to 50 million fiber passings over the medium term. At the same time, we are aggressively driving efficiency through our integration. We now expect to realize over $1 billion of run rate operating cost synergies by 2028, double our initial estimate. These savings will be derived from network integration, third-party contract efficiencies and go-to-market savings across marketing and advertising. The combination of our assets creates a powerful force in the market, and we intend to aggressively seize incremental net adds and share of both mobility and broadband services within Frontier markets.

I'm also very pleased to announce that we have completed a comprehensive long-term agreement with Comcast and Charter to continue our partnership. We obviously can't reveal any of the details, but each of us agrees the partnership is on very solid footing financially, operationally and strategically. It is an accretive deal that ensures their customers remain on the best network.

Finally, we are targeting the launch of our new value proposition in the first half of this year. We are in deep market research with a very sophisticated conjoint analysis that is providing us with detailed customer feedback, projected market dynamics and associated financial and operational metrics. I'm encouraged to say that the feedback is quite positive.

Obviously, all of you and our competitors want the details. The good news is we have them, and we are now in the fine-tuning stage of our value proposition work. We are not going to show our hand until the day we launch, but our guidance incorporates our view of how the new value proposition will impact our volumes and financials based on significant market input and data analytics. We are driving a customer-obsessed culture deep into the organization. We are reducing complexity, eliminating the things customers hate and removing pain points to make it easier to do business with us. To do this successfully and efficiently, we are determined to be an AI-first company, deploying AI at scale. We will use AI to optimize our operations and fundamentally reshape the customer experience. We are leveraging it to simplify offers, personalized interactions and reduce churn through smart, consistent marketing.

By using predictive models, we can anticipate customer pain points before they happen, allowing us to solve problems proactively. We will use our data and AI capabilities to not just massively improve our efficiency and customer satisfaction, but to redefine our value propositions and deliver hyper-personalized experiences. Eventually, every individual customer will have a tailored proposition.

Beyond these internal efforts, we are unlocking new revenue streams by reimagining our existing assets, leveraging our deep fiber footprint and distributed network facilities to enable AI at scale for our enterprise customers, including hyperscalers.

I'm proud of what we have accomplished in the last 100 days. We have a financial and operational plan that is truly transformative and appropriately conservative. Our 2026 guidance is significantly more robust than our recent performance, and it reflects the beginning of our turnaround.

With that, let me turn it over to Tony, who will cover our fourth quarter and full year 2025 results and outline our 2026 financial guidance.

Thanks, Dan, and good morning. We finished 2025 with strong operational momentum while also achieving our full year financial guidance. This includes our previously raised guidance for adjusted EBITDA, adjusted EPS and free cash flow. In the fourth quarter, we added over 1 million net adds across mobility and broadband, our highest reported quarterly volumes in 6 years. We ended the year funding growth delivering high-quality net adds across mobility and broadband with healthy customer lifetime values. We accomplished this while taking decisive steps to transform our cost structure, ensuring that we have the necessary flexibility to invest in our customers and business going forward.

Fourth quarter postpaid phone net adds were 616,000. This was our best net add quarter in 6 years as our offers resonated in the market. Our consumer team executed exceptionally well across the holiday season, especially with new to Verizon sales. Consumer postpaid phone net adds of 551,000 were driven by strong demand as we leveraged our financial strength and flexibility to fund growth opportunities.

In our business segment, we continue to see growth in the small and medium business and enterprise sectors. Public sector results were impacted by residual disconnects from government efficiency efforts as well as the federal government shutdown. However, public sector performance improved from the prior quarter. With the vast majority of these related disconnects behind us, we expect to see further improvements in public sector wireless volumes across the first half of 2026.

Postpaid phone churn remained elevated in the quarter, largely from prior pricing actions as well as competition. Churn remains a pivotal opportunity in 2026, and we expect our investment in the customer as well as increased convergence opportunities to benefit retention over the next few quarters.

In core prepaid, we continue to take share. Fourth quarter net adds were 109,000, our sixth consecutive quarter of positive customer growth. Our visible and total wireless brands continued their strong performance. We finished the year with over 2,000 total wireless stores across the country, and we have good momentum with our key brands going into 2026.

Moving to broadband, we also continued to take meaningful share. Fourth quarter net adds were 372,000, our highest of the year, reflecting strong customer demand across both fixed wireless access and fiber. Fixed wireless access net adds were 319,000. The quarter-over-quarter improvement was driven by our Consumer segment and reflects the innovation and expansion around the product offering.

Fios Internet delivered 67,000 net adds, our highest fourth quarter net additions since 2020. Fios continues to be the gold standard for broadband connectivity. We are excited to grow our fiber footprint through the Frontier acquisition and the Tillman partnership. Frontier delivered an exceptional performance in the fourth quarter, generating 125,000 fiber net additions, representing a 29% increase over the prior year. This momentum was supported by strong operational pace.

Frontier deployed approximately 1.3 million new fiber passings in 2025, bringing their footprint to more than 9 million fiber passings. We are incredibly pleased to have Frontier in our portfolio, and we're excited about the long-term growth potential these assets provide.

When we combine Frontier, FWA and fiber, net adds were almost 1.9 million for 2025, resulting in over 16.3 million connections. While we are in the initial stages of our strategic transformation, our execution is already yielding significant progress across both mobility and broadband platforms.

Turning to our financial results. We delivered on all of our 2025 financial guidance even as we undertook a change in strategy in the fourth quarter. This reflects the strength and resiliency of our business and provides a good jumping off point for 2026. Wireless service revenue for the full year grew 2%. The fourth quarter performance reflects an increased emphasis on disciplined volume-based growth.

As the revenue benefits as a volume-based growth model scale across 2026, we will continue to rely on growth from areas such as FWA, perks, premium mix and prepaid to help offset continued promo amortization pressures as well as lapping last year's price increases. I'm proud of our team's efforts to meaningfully reduce our cost structure. Our goal is to create flexibility to invest in the customer while also delivering strong financial results.

Consolidated adjusted EBITDA was $11.9 billion for the quarter. Full year adjusted EBITDA, which we expect to be industry-leading, was $50 billion. This was an increase of $1.2 billion or 2.5% from the prior year and within our guided range.

Adjusted EPS for the fourth quarter was $1.09, bringing the full year number to $4.71. 2025 growth of 2.6% from the prior year was driven primarily by the strength in adjusted EBITDA.

Our cash generation remains a key strength for Verizon. Cash flow from operating activities was $37.1 billion for the full year, up year-over-year even with stronger volume growth. CapEx for the full year totaled $17 billion. We delivered on all of our growth initiatives across C-Band and Fios builds. The team has done a great job finding efficiencies across mobility and broadband with more to come in 2026.

As of today, our C-Band build-out is about 90% complete and covers approximately 300 million POPs. Additionally, we exceeded our Fios build targets for the year.

For the full year 2025, we generated $20.1 billion in free cash flow, which we anticipate will once again be industry-leading.

Net unsecured debt at the end of 2025 was $110.1 billion, a $3.6 billion improvement year-over-year. We continue to make meaningful reductions to our debt throughout the year, resulting in our net unsecured debt to consolidated adjusted EBITDA ratio ending at 2.2x as of the end of 2025. This represents our second quarter in a row that we were inside of our leverage target prior to the Frontier closing.

Additionally, we had $1.3 billion in discretionary pension contributions during 2025, which resulted in the pension being fully funded as of the end of the fourth quarter.

Funding for the Frontier transaction was completed in the fourth quarter. Both the amount we needed to raise for Frontier and the rates we achieved came in favorable to our original expectations. By the end of January, we will have paid down approximately $5.7 billion of Frontier's debt since closing on the 20th, moving quickly to realize benefits from the strength of our balance sheet.

As we indicated before, we expect our unsecured leverage ratio to increase by approximately 0.25x once Frontier's EBITDA contributions are factored in.

Looking ahead, 2026 represents an exciting opportunity for Verizon. Our guidance reflects the impact of the bold actions we have taken recently. We expect to deliver performance that is a step function improvement from our recent historical trends across our key metrics. We're taking actions to ensure we have the financial flexibility to invest in the customer, drive improvements in postpaid phone net adds and expand our broadband base. Our guidance reflects the beginning of our transformation.

For the first time, we're guiding to our consolidated postpaid phone net adds. We expect to deliver approximately 2 to 3x of 2025 total, targeting a range of 750,000 to 1 million postpaid phone net adds in 2026.

Our 2026 financial guidance includes Frontier from January 20, the closing date of the acquisition. As we work towards driving sustainable and disciplined volume-based revenue growth, we anticipate that 2026 will be a transitional year for revenue as we lap prior year price increases, absorb promotional amortization and await the benefits from churn reduction and increased volumes.

We are guiding to 2% to 3% mobility and broadband service revenue growth, which equates to approximately $93 billion. We expect wireless service revenue growth to be approximately flat in 2026.

Having broadband in our service revenue guidance reflects the importance of both mobility and broadband as key growth drivers in the future. We have streamlined our organizational structure and are conducting a rigorous bottoms-up review of our entire cost base. Over the last 100 days, we have implemented several actions that would deliver multibillion-dollar benefits in 2026, including a reduction in workforce as well as asset and business rationalization efforts. The work on our cost structure will continue in 2026 as we simplify operations, deliver Frontier synergies and exit low-margin businesses.

As Dan mentioned, we have line of sight to delivering $5 billion of operating expense savings in 2026. We are reinvesting a portion of these savings to drive a higher quality revenue profile, which in turn creates a more profitable and stable foundation for sustainable long-term growth.

Based on our anticipated revenue performance, combined with the strength of our cost efficiencies, we expect adjusted EPS to be in the range of $4.90 to $4.95 for the full year, or year-over-year growth of 4% to 5%.

This represents a significant acceleration compared to our recent historical performance. While we were not guiding on adjusted EBITDA, we do expect adjusted EBITDA to grow at a faster rate than adjusted EPS.

Our 2026 CapEx spending is expected to be in the range of $16 billion to $16.5 billion, a combined improvement of $4 billion from Verizon and Frontier's capital expenditures from 2025. We are bringing the same rigor to our capital expenditures as we are to our P&L, while not sacrificing any of our network excellence for mobility and broadband.

The efficiency work that helped us come in below our 2025 CapEx range has only just begun. In addition, our C-Band will be substantially complete in 2026 and any initiatives outside of mobility and broadband are being aggressively rationalized.

We expect free cash flow to be $21.5 billion or more, growing approximately 7% or more, which will mark our highest free cash flow generated since 2020.

As we communicated at the announcement of the Frontier acquisition, we anticipated the inclusion of Frontier's results to be cash flow dilutive in 2026 and given the investments being made to expand the fiber footprint. However, because of the work being done to streamline our cost structure, grow adjusted EPS and drive CapEx efficiencies, we are now in a position to grow our free cash flow in 2026 even with the inclusion of Frontier and our investments in the customer.

Our strong free cash flow generation enables us to execute on our capital allocation priorities, including strategic investments and paying down debt. We expect to return to our target leverage range of 2.0 to 2.25x in the 2027 time frame.

To summarize, we delivered strong volumes in the fourth quarter, delivered on our 2025 financial guidance, and we have a plan for 2026 that accelerates our trajectory.

I will now hand the call over to Dan to discuss more on our 2026 capital allocation priorities.

Thanks, Tony. Our 2026 guidance reflects our conviction that this year is not just the time of transition, but a measurable and improved performance that will only accelerate as we go into 2027 and 2028. Our guidance for our adjusted EPS growth, our free cash flow growth and our postpaid phone net add targets are all significantly above historic trends for Verizon. For instance, our guidance for adjusted EPS growth of 4% to 5% represents a meaningful acceleration, increasing our growth rate by more than 70% at the midpoint of our guide compared to 2025.

It is also significantly better than our 5-year historical average adjusted EPS growth rate of approximately negative 1%.

Also, our guidance for free cash flow of $21.5 billion or more is expected to be our highest performance since 2020. The guided growth rate of approximately 7% or more eclipses our average free cash flow growth rate of approximately negative 1% over the last 5 years.

We are targeting a range of 750,000 to 1 million postpaid phone net adds, approximately 2 to 3x our 2025 total and the highest since 2021.

With Frontier, we expect our mobility and broadband service revenues to grow 2% to 3%, even as we lap billions of dollars of price increases from last year that we will not repeat.

I want to close by discussing our capital allocation strategy. Our framework remains unchanged. However, we are also making meaningful improvements in our capital allocation to shareholders, while maintaining significant flexibility. We will be much more deliberate in how we allocate our capital spend across 4 key priorities. Our first priority is to invest in our business. We simply won't be satisfied without delighting our customers, investing in our employees and delivering for our shareholders. We will continue to invest to maintain and improve the network excellence our customers expect. Importantly, we are applying the same rigor towards CapEx as we are on OpEx efficiencies. As Tony mentioned earlier, we expect CapEx to be in the range of $16 billion to $16.5 billion for 2026.

Our investment is focused squarely on our growth areas. In mobility, we are focused on the completion of our C-Band build-out, and increasing our investments to assure our track record of unparalleled reliability. In broadband, we are focused on achieving our goal to reach 40 million to 50 million fiber passings over the medium term. Second is our commitment to our dividend. That commitment is ironclad. We are pleased to announce that we are pulling forward our annual dividend increase to the first dividend declaration of the year. Today, the Board declared a dividend payable in May, which represents an annualized increase of $0.07, a 2.5% per share increase from our prior annual dividend rate. This marks our 20th consecutive year of dividend increases, and our goal is to put the Board in a position to continue to increase our dividend per our track record.

Third is maintaining a strong balance sheet. We remain committed to paying down debt and achieving our long-term net unsecured leverage target of 2.0 to 2.25x within the 2027 time frame. We have a strong balance sheet with significant financial capacity and flexibility for strategic investments. Fourth is returning cash to shareholders. I am pleased to announce that our Board has authorized up to $25 billion of share repurchases, which we expect to complete over the next 3 years with at least $3 billion of repurchases in 2026.

This plan underscores our confidence in the strength of our business our cash flow generation and our dedication to driving meaningful shareholder returns. Consistent with our growth profile and cash flow generation, we expect to significantly increase our total return of capital to shareholders over the next 3 years.

This is a defining time for Verizon. We have lots of hard work ahead of us. We know we are only at the beginning of our transformation, and it will take time, and it will always be a straight line. But we have a clear and doable plan for 2026, a value proposition that we believe will resonate with customers, momentum from the fourth quarter with volumes that we haven't seen in 5-plus years and a financial plan that is significantly more robust than any in recent history, with room for us to continue to improve as we go through the year and into 2027.

Our targets reflect a step function change in our performance trajectory. The Board has been clear that my mandate is to not only deliver for our customers, but also for our shareholders. We are heads down focused and ready to show the world that a fiscally responsible Verizon is playing to win. We look forward to your questions.

Yes, Brad, we are ready for questions.

[Operator Instructions] First question will come from Michael Ng of Goldman Sachs.

I just have 2, if I could. First, it was really encouraging to see this strong outlook for postpaid phones in 2026. Would you talk a little bit about the investments needed to drive that subscriber growth? Will we see the improvements more on the churn rates? Or will it be more marketing and promotions to drive gross adds? And then I have a quick follow-up.

I think maybe I'll start and then Tony can come in if he's got any additional color to add. If I just take a step back, we delivered 616,000 postpaid phone net adds in Q4. And we did that in what I thought was a very fiscally responsible manner just no actions on our core base pricing. We went into the ring, we offered a set of promotions. We are consistent in that and the market reaction was excellent to that. We met every single day. We looked at what was happening in the market. We made changes where we needed to. And I felt really good about how the team executed against that.

As I look to next year, we're targeting 750,000 to 1 million postpaid phone net adds. That is 2 to 3x what we did last year, but that's only about 10% to 15% of the net new to the industry. So I think it's a very doable target for us in year 1 of our transition. We don't need to overutilize promotions or pricing to achieve those targets. There's absolutely no need, in my mind, for that to happen.

If we reduce churn by 5 bps, we are already halfway to our target. And think about some of the things that we're doing, like our churn is driven by price increases without corresponding value. And we've already said in our remarks that we're not going to do that.

By the way, that is exactly the right thing for us to go and do. Although that puts about 180 basis points of pressure on our revenues for this year, what happens is when we raise rates without corresponding value, our churn rate goes up. And right now, our churn over the last 3 years has gone up by 25 basis points, every single basis point is 90,000 net adds. 25 basis points times 90,000 is about 2.25 million net adds that we've lost Obviously, not all of it because of price increases, but that would generate $3 billion-plus revenues a year for us. And so we're not going to go do that going forward, and that should help churn.

Second, we're going to be investing in our overall customer experience. We have a large amount of flexibility with the $5 billion of OpEx savings that we have. We're going to be able to be to compete in the market, invest in improving our end-to-end customer experience. And the third thing they have is we're going to leverage strongly all the convergence opportunities we have. We did 1.2 million of fixed wireless net adds last year, and we entered 2026 with more capacity in our network to do fixed wireless access than we did when we start at 2025.

Obviously, Frontier is a huge opportunity for us in net adds as well. We're significantly underpenetrated in Frontier markets on wireless. And when we bundle together, we see a 40% reduction in churn versus stand-alone mobility. And so our goal over time is to win our share of new to market net adds, win responsibly in a manner that sustainably grows our top line and allows us to drive shareholder value.

And so I think you're going to see a combination of us spending a lot to improve our overall value proposition, leveraging convergence, seeing churn go down and then being appropriately aggressive where we need to in the market. But this is not going to be anything on price where a lot of promotional expenses is about investing in our customers.

Great. Dan, that was all very clear and comprehensive. I appreciate that. And then just on the follow-up, I think you guys raised the fiber passings outlook to 40 million to 50 million over the medium term. I think the old target was 35 million to 40 million. So could you just talk a little bit about whether you saw more opportunities in footprint, opportunities to go out of footprint? Any thoughts there would be great.

Yes. Well, first of all, we're really pleased with the closing of the Frontier acquisition. Our partnership with Tillman, we acquired [indiscernible], which is going to help us with MDUs as we pass those passing as well. And the more I look at convergence, the more optimistic I am that that's going to be a major part of our future. So we want to double down on that. We want to get to at least 40 million or 50 million fiber passings. We said in our CapEx guidance that we'll do at least 2 million organically. Obviously, we'll look at a possibility of both inorganic and partnerships. That is something we're always looking at. We have plenty of capacity and flexibility on our balance sheet to do any one of those acquisitions and other things that we might consider. And so the combination of what we're seeing at Frontier and what we can do internally here at Verizon, we need to be comfortable with that 40 million to 50 million.

The next question will come from Ben Swinburn of Morgan Stanley.

Again, you talked through some of the strategies around go-to-market. But I guess I'm just wondering how -- if you could talk about how you're thinking about customer lifetime values as you move forward relative to the past. There's probably some concern out there that CLVs will be lower for Verizon, if not the industry in '26 and '27 versus the last several years. So what does Verizon doing to make sure it's bringing on high-value customers and it takes us more aggressive posture?

And I just wanted to ask, maybe for Tony on CapEx. You mentioned CapEx efficiencies. Looks like you're taking a couple of billion roughly out of kind of the previous run rate. You said no impact to revenue. Just could you talk a little bit about where you found all this CapEx opportunity that's not going to impact the business, if anything, might help the business grow faster?

Yes. I guess, I'll start and then turn it over to you to Tony. I can add on the CapEx side, too. So I have some thoughts on that. So on LTV, I was really pleased not only with the number of net adds that we added in Q4, but the quality of the business. We had a lot of new to Verizon. As you know, new to Verizon is our highest LTV value. And LTV is driven by a number of things. One of the biggest things is churn. And to me, we have a large opportunity to address churn. I think it's one of the biggest opportunity sets we have.

As I mentioned on the pricing side, there are 4 reasons why people leave us. It's price increases without corresponding value. That just irritates our customers, and we've seen the churn arise as a result of that, and we've stopped doing that, and we're going to start adding value to it. Second is friction in the process, whether it's onboarding, the billing, when they call our customer service, that needs to be flawless. And we need to reduce complexity, and we need to address that. And we already have initiatives underway to address each and every one of those things. And then there's price perception and competitive intensity. And we want to be very rational and very fiscally responsible when it comes to promotional activity.

Again, I think we are targeting a very reasonable number given our momentum and given the percentage of the net new to the market. And so I think we're going to be able to move after our targets in a fiscally response the way without stepping up on the promotional side. I think we're going to be able to lower churn. I think we have a lot of opportunity there. And then as I look at convergence, that combination of having an ARPU associated with your broadband service and an ARPU with your mobility at much lower churn rate is a higher LTV for us as well. And when we sell broadband, the majority of our customers have our mobility solution with that, too. We're really pleased with the attach rate on that as well.

And so I'm hopeful that LTVs go up this year as we act responsibly, and we reduce churn. Churn will be a key lever for that.

And Ben, on your question on CapEx, as we said in the prepared remarks, our first priority is to invest in the business, that hasn't changed. And the guidance that we gave at $16 billion to $16.5 billion is all in and sufficient to address all of the growth initiatives that we have in the business. And we're going to continue to invest in the, the wireless RAM. We talked about 90% of our plant sites have C-Band, and we expect to be substantially complete with our C-Band build here in 2026. And the remaining C-Band additions, just for some color, are mostly on small cells where lower CapEx is required. And then from a fiber perspective, we're not slowing down. Dan touched on this. We'll continue the fiber build pace at at least 2 million times passed, which is at least the combined pace of both Horizon and Frontier from last year and 40 million to 50 million passings over time. We have the Tillman partnership as well that can -- we can scale and build to our standards at very good economics.

And then in terms of our CapEx spend relative to history here, we really have narrowed our focus to mobility and broadband. And as we said earlier, we're applying the same rigor to CapEx as we are to OpEx. And noncore areas that are not aligned to growth, including legacy areas are being significantly reduced and/or eliminated and that includes areas such as business wireline, nondirectional products, technology as well, wholesale, legacy copper and voice platforms and even projects with too long of a payback. So the team has done a great job in finding unit cost efficiency as we build both in wireless and in fiber, cost for Prem Pass, et cetera. So there's a lot of good work being there, and that helps us get to a lower CapEx envelope, but we're very focused on being very efficient with our capital deployment this year.

Yes. Maybe just a little bit. I thought it was a pretty comprehensive answer. Look, network excellence across mobility and broadband is foundational for us, and we will not compromise on that 1 iota. Look, $16 billion to $16.5 billion, yes, I may be old fashioned, but that's a lot of money. When I think of $1 billion, I think it's a lot of money. When i think of $16 billion to $16.5 billion, it's a tremendous amount of money. Honestly, I don't know if we need all $16 billion to $16.5 billion for our CapEx projects, but I think it's a responsible number to have there. As Tony said, there are a lot of things that we spent pretty heavily on in the last couple of years. They're predominantly complete. We're almost done with all of our nationwide 5G advanced stand-alone features as well. And so I feel really good about this CapEx envelope. We'l be able to do all the things we need to go do. And as Tony said, we're not going to invest in places where we're losing money right now. As I mentioned, I think last quarter, we have a number of places where you add it all up, and we're losing $1 billion to $1.5 billion a year in margin. Like we are either going to sunset those, retire those or divest those things, and there's no need for us to continually invest in places where we're just going to lose money forever on that.

And so I think the team did a great job here, frankly. This is one of the easier places where we were able to look aggressively at our CapEx, and I think we'll feel really comfortable at these levels.

The next question will come from John Hudlick of UBS.

Great. Maybe 2 questions, if I could. Maybe first for Tony. Any [indiscernible] parts or components you could give us on the flat service revenue growth in mobility or the organic EBITDA growth on a consolidated basis? On the service revenue side, there's a lot of moving parts, you got better subscriber growth, probably a nice wholesale growth, but there's probably a higher promo than we saw last year. But so any color there on that or the organic EBITDA growth would be great.

And then for Dan, you gave us the volumes on the postpaid phone side. What about the broadband side? Any color you can give us on sort of what you expect in volumes this year, certainly as it relates to both fiber and fixed wireless would be great?

Okay. John, so I'll start on the revenue and EBITDA. So we -- on the revenue side, we guided to 2% to 3% mobility and broadband service revenue growth. And right after we closed Frontier, we were in market with competitive offers there to attract the Frontier customers to the Verizon network and experience. As Dan mentioned, we see strong convergence opportunities, particularly where we under-index in those Frontier markets, and we do see convergence improving our churn profile.

As we said, in terms of revenue composition, we expect to have flat wireless service revenue in 2026 as we lap prior year price increases, as Dan mentioned, about 180 basis points or so of headwind, absorb the ongoing promo amortization, so that's continuing, and work towards driving sustainable volume-based revenues and doing that in a very disciplined way. To give additional context, maybe some assumptions in the revenue guide. In terms of tailwinds, obviously, on the mobility side, we said we expect volume growth of 750,000 to 1 million postpaid phone net adds, and we're writing good business, and that's the focus there. We also have areas like perks and step-ups. We continue to see growth in customers taking perks as well as step-ups to premium plans. And then on broadband, continued volume growth in both FWA and fiber, including Frontier.

Frontier put on almost 500,000 net adds this past year. So we have now combined 16 million, over 16 million broadband subs in the base, and that includes a little over 10.5 million fiber customers. And then also prepaid, our prepaid business continues to perform well. Six straight quarters of volume growth has translated also into revenue growth.

In terms of headwinds, I mentioned promo amortization, and that pressure will continue and be a headwind in 2026. And we're still lapping, as Dan mentioned, pricing actions from 2025, and we'll work our way through it. But as we said, 2026 is going to be a transitional year for revenue as we push on volume-based growth across both mobility and broadband and setting up for a stronger revenue profile exiting 2026 and doing it in a very fiscally responsible way. So that's on the revenue.

On the EBITDA, while we didn't guide on the EBITDA, I can certainly share some additional context for you. Obviously, it starts with the revenue growth that I just described. Frontier brings a substantial EBITDA contribution with it as well. And in the prepared remarks, we said we expect EBITDA to grow at a faster rate than adjusted EPS. When you factor in the Frontier acquisition-related interest expense, that's about $1 billion, and the depreciation and amortization from the asset base that we acquired, which is about $1.5 billion. So when you look at the EBITDA, it's an acceleration in the EBITDA growth rate and great operating leverage.

And then when you look underneath that, from a cost transformation perspective, we mentioned that we're carefully examining all areas of our cost structure to run leaner and be more agile. And we have $5 billion of cost transformation in our plans for 2026, and that work is already well underway, whether it's the continued decommission of legacy elements in the network, including copper, and you think about the legacy areas as well in Frontier, whether it's customer experience and addressing customer pain points and reducing call volumes, or on the IT side in terms of rationalizing platforms and including AI enablement. On the workforce side, we reduced our workforce by 13,000 in the fourth quarter, 80% of which were off payroll in Q4, with the remainder coming off payroll in the first quarter. And then we mentioned the Frontier integration, and we said we expect 2x the operating expense run rate synergies, so at least $1 billion of synergies by 2028, and those synergies will ramp as we execute on our integration work.

And when you think about the EBITDA and the cost reduction actions that we have in place, it allows us to do a number of things. First, run more efficiently. The second thing it allows us to absorb the transitional year for revenue. It also allows us to invest in the customer experience and return a significant amount of capital to shareholders. So we see a great path for both EBITDA and EPS growth. And I'll hand it to Dan.

Yes, it's hard to expand on that. A comprehensive answer. I'll just say this. I think all of this kind of hangs together and integrated all in my view. But one of the reasons why we have such high churn rate, one of the reasons why we've been losing share over the last several years is because we keep raising our pricing without corresponding value. And that is the primary reason why our customers churn. And the #1 rule of getting out of a whole is stop digging. And we're just not going to do that again. And if we did just do what we were doing in previous years, we would have guided to 4% to 5% revenue instead of 2 to 3. But then at the end of the year, we would have had another couple of billion of things we have to lap and higher churn rate and would be deeper in the hole.

And so our view is, as we go into 2027, that 180 basis points of headwind goes away for us. We start now to have volumes based revenues coming in. We do 750,000 to 1 million net postpaid as well as continue to aggressively move in our broadband and convergence place. You only have several billion dollars of revenues coming in there. And so that's how you create sustainable long-term revenue growth. And then when you combine that on top of us being ever more efficient every year, and we're looking at $5 billion this year and we see billions more as we look forward into 2027 and 2028. We're just at the beginning of our efficiency journey. And then we're buying back shares, and you can really see that you have both top line and adjusted EPS growth that it sets us up for having a delighted customer base because we're doing the right thing. And hopefully, a delighted shareholder base because we're creating a model that can create sustainable long-term growth, both on the top line and the bottom line.

Your last question will come from Michael Rollins of Citi Group.

I also want to express my thanks to Brady, and welcome Colleen. Dan, you've been very clear about the problems that come from empty price increases. And I'm curious if you could discuss the opportunity for the alternative. Just given the maturation of industry penetration rates, do you see opportunities for Verizon and/or the industry to inject more value into these services to capture better ARPUs over time? And is there a sense if that is an opportunity when Verizon can go after that?

And then just secondly, on the cost side, Tony, I think you were just talking about the different layers of getting savings. Can you discuss what Verizon has identified for savings after 2026, specifically for '27 and '28 as you're looking to continue to fund the top line strategy as well as the new capital allocation targets that were set today?

Well, because I love cost as much as I do revenues, I'm going to jump on that. Look, I see kind of 3 waves of efficiency. The first wave is basically what we talked about today on the call, take out pockets of underperformance, structural inefficiencies, unnecessary layering of management structures, take people off of the places where we are no longer focused going forward. That was the first, but the second wave is taking complexity out of our business. And that's about looking at the customer promise that we have, the value proposition that we have. And complexity adds a ton of cost internally to us. And so we're going to go heavy at this end-to-end customer experience at our value proposition and it's going to be around simplicity and reducing complexity because that's really important.

And then the third thing is when you take out your complexity, then you automate your processes that are left. And so there there are 3 waves that we have identified that we understand quite well and that we're very comfortable with.

On the values basis this kind of pricing, and can you add more value into it? I think the answer to that is yes. I think that is the answer, but it comes with brand trust. And so everything we are trying to do this year -- we have a 3-year plan. We've got very concrete metrics for the 12 months. And I know what we want to do and then I actually have a vision for where we want to be in 3 years from now as well. But the first thing is stop doing things customers hate. No rocket science on that. Fix the end-to-end experience, again, not rocket science, but hard to do on that. And then you start to regain trust. And when you start to regain trust and you can start to put either promises or incremental value in it, then like I'm not saying that we don't do price increases, I'm saying we will not do price increases without value. But I do think that there are lots of places where we can add value.

Honestly, I think some of the broadband stuff that we're doing, where you're putting 1 gig plus out there, that's real value to customers. And so I think there are areas where there is value that we should be able to capture through the appropriate pricing, but we're not going to capture temporary value short term at the risk of upsetting our customers and increasing our churn. Again, that defeats the purpose of long-term sustainable growth. And that is what this transformation is all about.

Perfect. Great way to end. Brad, that's all the time we have today, and thanks, everybody, for being on the call.

This concludes the conference call for today. Thank you for your participation and for using Verizon Conferencing Services. You may now disconnect.

Good morning, and welcome to Verizon's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time.

I would now like to turn the call over to Mr. Brady Connor, Senior Vice President, Investor Relations.

Thanks, Brad. Good morning, and welcome to our third quarter 2025 earnings call. I'm Brady Connor, and on the call with me this morning is our new Chief Executive Officer, Dan Schulman; and Tony Skiadas, our CFO.

Before we begin, I'd like to point you to our safe harbor statement, which can be found in the earnings presentation on our Investor Relations website. Our comments this morning may include forward-looking statements, which are subject to risks and uncertainties. Factors that may affect future results are discussed in our SEC filings. This presentation also contains non-GAAP financial measures, and you can find reconciliations of these measures in the materials on our website.

With that, I'll turn the call over to Dan.

Thanks, Brady, and good morning, everyone.

On behalf of the Board and everyone at the company, I want to start off by thanking Hans for his leadership and passion and his many contributions to Verizon over the past 8 years.

Hans executed a series of technology-related investments that have positioned Verizon for success. By building an enviable network and a strong foundation we can leverage going forward. Hans has been a friend for many years, and I appreciate your support as we enter this new chapter. Personally, I could not be more excited about the future of Verizon, and I am honored to be its next CEO.

As most of you know, I come to this role with extensive experience in the technology, telecommunications and wireless industries. In fact, I began my career as an assistant account executive at New Jersey Bell and then spent 18 years at AT&T eventually becoming the President of its consumer division. So I have deep roots in the telecom sector and in many ways, this is like coming home for me. In the years since I've had the privilege to help lead and grow some of the most iconic consumer brands in the world, including AT&T, priceline.com, Virgin Mobile, American Express, PayPal and now Verizon. Those experiences have provided me with a strong perspective on customer-centric growth. And of course, I've served on the Board of Verizon for the past 7 years. So while I am only a few weeks into my tenure as the company's CEO, I've had a front row seat into the company's evolution since 2018, and therefore, come into this role with a rich perspective of where Verizon is coming from and what the opportunities are.

For many years, Verizon has led the industry with our reliable and scalable network, and we will continue to advance our network leadership. As you know, we're significantly investing in cyber and in the power of convergence with our acquisition of Frontier, which we expect to close early next year. Verizon has deep strength and incredible potential, but the blunt truth is we haven't captured the customer growth opportunities this strong foundation enables. Verizon is at a critical inflection point. For years, our priority was clear: build the best and most reliable network.

With that foundation firmly in place, our next chapter is about serving and delighting customers by building the industry's best overall value proposition and the best customer experience on top of it. We must shift to a customer-first focus and redefine our trajectory. This is not a course correction. It is a fundamental change in our strategic approach to customers. The only way we can drive sustainable value for our shareholders is by significantly raising our game and winning responsibly in the market. This is about financially disciplined growth, winning with the right customers at the right economics. Volume growth and profitability growth can go and will go hand-in-hand. We are fully committed to achieving both simultaneously.

Before I elaborate on my vision for a revitalized Verizon, I'm going to hand it over to Tony to cover our third quarter performance.

Great. Thanks, Dan, and good morning.

Before I begin, I just want to take a moment to congratulate Dan on his appointment as CEO of Verizon. The leadership team and I are excited to work with him in creating this new chapter for our company. First and foremost, we remain on track to deliver our full year financial guidance, which includes our previously raised expectations for adjusted EBITDA growth adjusted EPS growth and free cash flow.

In Consumer Mobility, we delivered strong postpaid phone gross adds up 8.4% from the prior year. However, gross add growth was offset by churn of 0.91%, which resulted in postpaid phone net losses of 7,000 in the quarter. We continue to see healthy retention benefits from our converged customers. At the end of the quarter, more than 18% of our consumer postpaid phone base took a converged offering more than 200 basis points above last year. We see significant opportunities to increase convergence in the Frontier footprint after we close the transaction. Importantly, converged customers on fiber have a mobility churn rate that's nearly 40% lower than our overall mobility base. We also saw a 16% year-over-year increase in consumer upgrades in the third quarter tied to our best value guarantee, which is resonating with customers.

Moving to core prepaid, we delivered 47,000 net adds, our fifth consecutive quarter of positive subscriber growth. The strength of our key brands as well as the continued expansion of total wireless distribution positions us to continue to grow our prepaid business. Verizon business delivered 51,000 phone net adds. As expected, we continue to see disconnect pressure in the public sector, in part from ongoing government efficiency efforts. This was more than offset by strong demand from small and medium businesses and large enterprise customers as we continue to be the provider of choice for businesses.

Shifting to broadband. We once again delivered solid results with 306,000 net adds. Our broadband base is up 1.3 million subscribers from a year ago and is now over 13.2 million subscribers. Fios internet delivered 61,000 net adds, our best quarterly result in 2 years. Given the demand for Fios, we're working to bring it to more and more premises within our footprint.

In addition, we recently announced an initiative with Tillman that will enable us to bring our best-in-class Fios broadband offerings to even more households and businesses. The agreement combines Tillman's network design, build and operations capabilities with Verizon scale, distribution strength and brand power. We will focus on markets outside of the Verizon and Frontier footprint, expanding our Fios business to new places across the country and driving more convergence in these markets.

Fixed Wireless Access net adds were 261,000 for the quarter. With approximately 5.4 million FWA subscribers, our annualized revenue has surpassed $3 billion and continues to grow. We believe FWA can be a long-term sustainable business. In addition, we recently announced an agreement to acquire Starry, which will enhance our MDU capabilities, combining our scale and resources with Starry's technical and go-to-market expertise.

Moving to financials. Our third quarter performance keeps us on track to deliver on our financial guidance for the year. Third quarter consolidated revenue was $33.8 billion, up 1.5% from the prior year period. We delivered over $400 million of year-over-year wireless service revenue growth in the quarter. Wireless equipment revenue was 5.2% higher than the prior year, driven by higher gross adds and upgrade rates. Wireless service revenue was up 2.1% from the prior year, driven by continued ARPU growth from targeted pricing actions and further adoption of fixed wireless access and add-on services. Perks continued to provide a high-margin revenue stream, and we look forward to offering additional benefits for our customers. Additionally, prepaid revenue grew year-over-year for the first time since the TracFone acquisition. As expected, we faced the promo amortization headwind in the quarter, and we expect this headwind to continue. However, our underlying customer economics remain healthy.

On the expense side, we have work to do to further reduce our cost of services and SG&A. As Dan will outline, we will be looking at cost with the new lens and will be focused on driving significant cost savings across all aspects of our business. Consolidated adjusted EBITDA was $12.8 billion, up 2.3% year-over-year. Year-to-date, we have generated almost $1.3 billion more in adjusted EBITDA compared to 2024, driven by a combination of pricing actions and cost reduction. Our adjusted EBITDA growth of 3.5% through the end of the third quarter is at the top end of our guided range. Adjusted EPS was $1.21 in the quarter, up 1.7% year-over-year, driven by growth in adjusted EBITDA.

The cash generation of the business continues to be strong. Cash flow from operating activities was $28 billion for the first 9 months of the year, up over $1.5 billion or 5.8% compared to the same period a year ago. CapEx through the end of the third quarter totaled $12.3 billion compared to $12 billion in the prior year period. We're on track to meet all of our investment goals for the year and deliver within our guided range or better. The combination of our continued CapEx efficiency and our ability to drive profits to the bottom line resulted in third quarter free cash flow of $7 billion. This represents a nearly 17% improvement year-over-year and the highest reported in our industry by nearly $2 billion for the period. For the first 3 quarters of the year, we have generated $15.8 billion in free cash flow, an increase of 9% compared to the same period a year ago. In September, we raised the dividend for the 19th consecutive year reflecting our continued commitment to shareholder returns.

Net unsecured debt at the end of the quarter was $112 billion, a $9.4 billion improvement year-over-year. We continue to make meaningful reductions to our debt throughout the year, resulting in our net unsecured debt to consolidated adjusted EBITDA ratio dropping to 2.2x as of the end of the third quarter. This puts us inside of our target leverage ahead of schedule and before the Frontier closing. We're focused on generating strong cash flow and committed to paying down our debt. We also remain committed to our long-term net unsecured leverage target range of 2.0 to 2.25x. This is not going to change.

Looking ahead, we remain on track to close the Frontier deal in the first quarter of 2026. We have received approvals from 11 of 13 states and are making good progress in the remaining jurisdictions. Integration planning is on track. And through the third quarter, based on their public disclosures, Frontier is performing extremely well across both their fiber build and customer growth. While we continue to execute within the parameters of our financial guidance, we recognize there is significant opportunity ahead.

And with that, I will turn the call over to Dan.

Thank you, Tony.

When I look at our performance objectively, Verizon is clearly falling short of our potential. And as a result, we are not delivering the shareholder returns our investors expect. Despite investing significantly in network leadership, we have not been able to translate that into winning in the market. And consequently, we are not generating the financial profile necessary for share price appreciation. Our stock performance reflects this reality. My mandate from the Board is clear: unlock the growth potential of our platform while delivering strong financial results.

Today, I intend to discuss my priorities and areas of focus. Our plan will not be about incremental change. We intend to aggressively transform the culture and financial profile of our company operating under the principles of being bold, customer-centric and executing with financial discipline with a focus on shareholder value. For the past few years, our financial growth has relied too heavily on price increases, a strategic approach that relies too much on price without subscriber growth is not a sustainable strategy. Every year, it gets harder to grow as we lap past price increases and experience higher churn. This cannot continue, and there is no question that meaningful change is needed. As we shift to a customer-first culture, we will simultaneously drive a much more efficient cost structure, that fully supports our incremental investments in delighting our customers. I reject the premise that delighting customers and winning in the market means that margins will decrease. I think this industry and clearly, Verizon are only scratching the surface of increased bottom line performance.

My top strategic imperative for Verizon is to grow our customer base profitably across our mobility and broadband subscription businesses. I strongly believe that growing volumes is essential to drive sustainable long-term revenue and adjusted EPS growth. We are going to compete and grow responsibly across all market segments. And over time, meaningfully increase our share of net adds, particularly in postpaid. We aim to win fairly by having the best overall value proposition and delighting our customers across all elements of the marketing mix. This is not going to be about promotional activities that can be quickly imitated. It is about true innovation, not easily replicated by our competitors.

We will leverage our network excellence to drive growth, but we cannot rely on it exclusively. Network quality is now foundational. Winning in the marketplace demands a revamped and superior customer value proposition and requires full attention to the entire customer experience. We will significantly elevate our game across multiple dimensions. We will work relentlessly to serve our customers, ensuring that every customer is fully satisfied with their Verizon experience. We must make it much easier to do business with us. You should expect bold execution powered by sophisticated and smart marketing, actions that strengthen loyalty and the elimination of practices and processes that detract from the customer experience. Raising rates without corresponding value rarely, if ever, delights customers.

Our primary objective is to build loyalty and drive significant improvements in retention to optimize the lifetime value of our customer base. Verizon will no longer be the hunting ground for competitors looking to gain share. We are reinventing how we operate to make Verizon more agile and efficient. You should expect disciplined execution across marketing, operations and service. We will invest significantly across all elements of our marketing mix and customer experience to drive mobility and broadband growth, and we will fund these investments by aggressively reducing our entire cost base. We will be a simpler, leaner and scrappier business. This work is overdue and will be multi-year and an ongoing way of life for us.

In addition, as some of you know, I am a strong believer in the growing power and resulting opportunities created by AI. We have barely scratched the surface of how AI-powered innovation can transform our customer experience. I intend to use AI as a key tool to simplify offers, improve the customer experience and reduce churn through smart, consistent and more personalized marketing and offers. And we will leverage AI throughout the company to make it easier for our employees to delight our customers and to dramatically improve service of reducing cost and complexity across the vast majority of our business processes. While we narrow our focus to invest in key growth areas, we will also aggressively sunset or exit legacy businesses where we don't see a clear path, profitable market leadership. We have a large opportunity to unleash meaningful margin improvement by doing so. And we will talk about this in more detail in January.

Convergence is one of our most significant near-term growth opportunities. The pending acquisition of Frontier will enable us to serve approximately 29 million fiber passings, creating a massive cross-sell opportunity. Our wireless share significantly under-indexes in Frontier's territory, and we intend to address this on day 1. This will create a significant runway to capture mobility volume from our broadband customers and cross-sell broadband to our existing mobility base, driving meaningful revenue synergies. I recently met with the Frontier senior leadership team. Their focus and performance is impressive. The results are trending above the expectations when we signed the deal, and I am looking forward to having them join the Verizon team. We will continue to expand our fiber footprint through our own build and with strategic partnerships.

I expect the actions we are taking will enable us to generate higher free cash flow in 2026 and 2025, even when we include Frontier. Our business is generating strong cash flow today, but I believe it can be even stronger. I am committed to prioritizing the customer experience, while maximizing returns for our shareholders and doing both in a fiscally responsible manner. I am closely examining not just our operating expenses, but also our capital spend, and our capital allocation framework. I believe that elements within our framework can change to optimize our capital structure and shareholder returns.

This includes an ironclad commitment to our dividend, continued debt repayment and value-creating capital return. In short, we will be much more deliberate in how we allocate our spend to execute our strategy. Of course, we'll continue to invest in the business and we will do so with a critical eye towards growth areas. You can expect our capital envelope to support the completion of our C-band build-out and our long-term objectives for fiber expansion, while preserving our financial capacity and flexibility for strategic investments as the landscape evolves.

To summarize, we understand changes needed, and we are aggressively making those changes. Our goals and our priorities are clear. First, delighting our customers to meaningfully increase our share of industry net adds. Second, cost transformation, fundamentally restructuring our expense base. Third, capital efficiency, optimizing how and where we invest and fourth, accelerating shareholder returns by increasing our bottom line growth, and a steadfast commitment to our dividend. You can expect to see a tangible difference in the way Verizon competes. Going forward, we will aggressively compete and fundamentally redefine what it means to be a Verizon customer. I'm confident in our strategy, our assets and the team's ability to execute. We have the network, the scale, the brand and now the strategic clarity and commitment to drive sustainable growth.

We are planning to win, and this will be a different Verizon than the market is used to. This will not happen overnight, and there's no one silver bullet. It will require hard work, strategic focus and thoughtful execution. Importantly, much of the critical planning and evaluation is already well underway. We will provide 2026 guidance during our January earnings call and we will report progress against these objectives quarterly. Our shareholders and our customers have been patient. It is now time for us to deliver.

Thank you, and Tony and I look forward to your questions and comments.

Brad, we're ready for questions.

We will now begin the question-and-answer session. [Operator Instructions] Your first question will come from John Hodulik of UBS.

Great. And good to talk to you again, Dan. Dan, can you expand on your vision of the company and what you expect to accomplish, say, over the first 100 days? And specifically, if possible, can you touch on or provide more details in terms of how you expect to turn consumer volumes?

Nice to hear from you, John, and good to work with you again. Look, let me take just a quick step back. I'm extremely excited about Verizon's potential. We are building off tremendous assets. We've got an excellent network. We have got an iconic brand. You've got tens and tens of millions of loyal customers. We have a really talented team, but it's clear we need to enter a new chapter. The existing status quo is not acceptable for us. And I wouldn't be here if I wasn't fully confident in our ability to pivot.

The vision has 3 pillars basically to it. The first pillar is about shifting from being a technology centric to being a customer-centric company. This is about delighting our customers. This is about growing through retention basically. My aspiration is I want us to have the lowest churn rate in the industry. And when you talk about growing through retention, it is about creating the best value propositions segmented by the various segments in the market looking at all elements of our marketing mix quite thoughtfully and looking at creating the best customer experience possible. This is the full reboot of what Verizon means in the marketplace.

And this is not about onetime noneconomic promotional activities. That's not how you're going to win over the medium and long term in this marketplace. It's about being thoughtful across all elements of the value proposition and marketing mix and winning responsibly. And that's kind of what we intend to do, and we are well underway throughout the organization in making that shift. But I don't want to underestimate or underplay how big a shift that is for us, but it is the way that we win over the long term. Second pillar that happens simultaneously with delighting customers because we want to drive shareholder return simultaneously. I want to deliver sustainable revenue growth, accelerated bottom line adjusted EPS growth.

And as I mentioned in my script, the dividend is sacrosanct to us. We are going to examine every element of our OpEx and our CapEx, and we are going to fully fund all of our initiatives with OpEx savings and drop them to the bottom line so that we can accelerate EPS growth as well. And finally, the third pillar kind of supports all of this is a full review of our CapEx spend and our capital allocation. You can expect us to continue to invest heavily in growth areas with the path to profitability, whether that be completing our network, expanding our network, fiber aspirations, other opportunities as they become available to us in the ecosystem. We have a tremendous amount of financial flexibility on the balance sheet. We're going to do a hard look at portfolio rationalization and divest and exit legacy businesses where we don't see a clear path to profitability.

As Tony mentioned, we'll continue to pay down debt. We'll continue to be steadfastly committed to our dividend. And we will review, frankly, other opportunities to return capital to shareholders. And so I think just to summarize, we want to win responsibly in the market. We're going to do that through, let's call it, kind of growth through retention, looking at all elements of how we delight customers and at the same time drive shareholder returns. We think we can do both, and we're committed to that.

The next question comes from Ben Swinburne of Morgan Stanley.

Dan, thanks for all the helpful commentary in your prepared remarks. I had 2 questions sort of tied back to your comments. You made the point, Dan, that you think the reliance on price increases has been misguided or were not productive and not sustainable, I think it was your phrase. I think there's a view in the market that Verizon's back book is overpriced relative to sort of where the consumer is. And I'm curious if you agree with that probably oversimplified generalization? And more specifically, how do you drive share for Verizon higher in -- particularly in consumer without going through sort of a painful kind of back book repricing exercise, which I'm hearing from your financial commentary about accelerating earnings growth and free cash flow that you're not expecting.

And then I just was curious, you guys were very clear on your balance sheet and leverage targets. But would you be open to flexing the leverage higher if the right opportunities presented themselves. There's a lot of spectrum in the market, more coming from the FCC down the road, you have this Tillman agreement. So just curious if you could talk a little bit about the potential to take leverage higher, at least temporarily if the opportunities were there.

Ben, thank you for all of your questions. I hope I remember a couple of them at least. Look, I think my view on our approach into the market is to be quite thoughtful and financially disciplined. I think that we need to look at the reasons why customers are leaving us. And there are basically 4 that customers there are more, but these are the top 4 are price increases that we've done that customers run into some friction in the experience with us and we need to fix that. There's a value perception. I think I call it a value perception, not pricing. Because the value is all about price to value. And I feel we offer good value and -- but there's a value perception. And then there's obviously competitive intensity. There are a lot of offers in the industry.

Our game plan is going to address all of those pain points for our customers. We want to have the best-in-class experience. I want to leverage things like convergence. I want to create segmented and targeted value props and offers. I want to think carefully across all of the marketing mix. The are marketing 4 Ps. I always throw a fifth one in there, which is [ prayer ]. But I think like pricing is the last refuge of the marketing desperate. It is what you pull when you have nothing else in your quiver. And frankly, we have a ton of things to pull in terms of creating incremental value for our Verizon customers. And so although I won't go into specifics on how we're thinking about this because it's still early days and I'm actually never going to go into specifics because I don't want to tip off our competitors on what we're trying to do in the marketplace. But I think that we can begin to take our fair share of the new to the industry, postpaid adds, we're going to start off by increasing it because today, we take somewhere between 0% and some very low percent of the new-to-industry postpaids. We're clearly losing share, and that's not a sustainable path for Verizon. So we'll win eventually, our fair share of industry net adds going to reduce our churn to being the industry best. I want to responsibly win in a fiscally prudent manner. So hopefully, I hit a couple of your questions, at least there, Ben, anything else that you want me to hit on? Tony?

No, that was really helpful, Dan. I appreciate it. Just I was curious on the balance sheet, any openness to flexing up if you had the opportunities?

Sure. Hi, Ben, it's Tony, good morning. So a couple of things there, very comfortable with the long-term leverage target. And as you know, we've had a long and demonstrated track record of execution with the balance sheet. The target is very appropriate for the company of our size, and the way we expect it to perform in the future. And I think you heard Dan talk about that. We have strong cash flows, as you've seen, we reiterated our guidance for the year at $19.5 billion to $20.5 billion for 2025. And as you heard Dan in his prepared remarks, we expect to have higher cash flows in '26 versus 2025. And that leverage target gives us the ability to invest for growth. And it also gives us a lot of flexibility and balance sheet capacity to be opportunistic should the need arise from a strategic standpoint. As we talked about, the deleveraging is on track. We're now inside of our long-term leverage target at 2.2x. We have Frontier coming in, as we said previously, that will add about 0.25 turn to the metric and that will be for a short period of time. So we are going to operate outside of it for a period of time. But the overall goal is not going to change. The focus is generating strong cash flows and execute across the entire capital allocation framework, and that includes continuing to pay down debt.

The next question will come from Michael Ng of Goldman Sachs.

Good to be reconnected with you, Dan. I just have 2. First, are there any parallels between Verizon and PayPal that informs your view of the opportunity for improvement? Where in the Verizon business, do you see the biggest need for a change agent. And then second, Verizon's Perks and MIPlan seems like a strategy where it puts it closer to a super app strategy relative to peers. Is this something that is important to your strategic blueprint? Any opportunities or key benefits that you would call out?

Nice to hear your voice again, Mike. I look forward to seeing you again as well. I think when I think about kind of when I first started at PayPal and now first starting here with Verizon, there are definitely some similarities. One of the big things that we did at PayPal when I first came on was declare that we were going to be a customer champion. And declaring you're going to be a customer champion kind of easy words. But if you're really going to be a customer champion, it takes hard work and it takes challenging your business model as well. It means doing what customers expect and addressing all of their pain points and then figuring out how to delight and surprise them going forward.

At PayPal, that was giving customers full choice on how they could pay, not by forcing them to pay with what was the highest margin funding instrument that they had in their wallet for us. And that unleashed a huge amount of growth for the company. And I think the same thing can happen here. We're going to invest heavily in our value proposition. We're going to fund all of that cuts in our cost structure. We have a tremendous amount of opportunity to be more efficient to be scrappier. In many ways, this is a turnaround for us and making sure that, culturally, we're ready to make that move from being technology-centric to being customer-centric. It takes some time, but there is no question that what I saw on PayPal, I see here in Verizon too.

The team here wants to reclaim their market leadership. And they will do anything that they can. Big companies are extraordinarily good at responding to a crisis. They're not necessarily good at day-to-day, but responding to a crisis, they're amazing. And this is really a clarion call to the company to refocus, regain our leadership by focusing on customers, delivering what they want, not doing things that don't delight customers. And so there are a lot of similarities, obviously, very different industries, different ways of thinking about it. And when you talk about the value prop and things like super app versus how we might think about that. Just give us a little bit of time to develop our thoughts more from where we are at a full effort underway right now, and you'll hear more about that as we go into January and beyond.

The next question comes from Mike Rollins of Citigroup.

Dan, welcome back, and congratulations on taking over as CEO. You mentioned a few times the importance of convergence. I'm curious to get your perspective on where you would like convergence to go over time in terms of the physical fiber footprint, how many passings you want to see that get to and the path potentially to get there as well as how you're looking at fixed wireless and whether it's time to incrementally invest in fixed wireless as also a way to drive more broadband business for the company. And then just secondly, following on your comments about accentuating the growth side of the business and deemphasizing or exiting legacy businesses. Curious if you could put more context around that as -- when you look at the Verizon portfolio in totality, how much of Verizon do you view today as strategic and growing versus legacy. And what are the ways you're trying to better frame that internally as well as externally for shareholders?

Yes. Mike, it's great to hear from you again. You've been around this industry for a long time, and I appreciate your thoughts and your questions. I'm a very big believer in conversions. I think it is extremely powerful. I think it offers not just meaningful revenue synergies, but as Tony mentioned and as we see, when you combine mobility with fiber, you see churn rates that are almost 40% less than what we see with our traditional mobility. And I think thinking innovatively about how we bundle together broadband writ large, and that includes both fixed wireless and fiber with our mobility to drive both incremental broadband revenues as well as incremental mobility revenues will definitely be on the plate. So expect us to continue to invest in our broadband footprint and our fiber footprint as well as our fixed wireless as well, but also expect us to think about that innovatively as I mentioned, because I think there's a ton of opportunity in that.

And as I mentioned in my opening remarks, we'll continue to invest appropriately and aggressively in that expansion. In terms of kind of portfolio optimization, I think that's what you were talking about, kind of legacy versus broadband and mobility. Clearly, we're focusing on broadband and mobility. There are other areas, by the way, that I think we can focus that are maybe potentially large opportunity areas. Clearly, AI infrastructure is booming, and we can be a part of that and should be a part of that. But we have parts of our business that are costing us billions of dollars of margin. And I think we can think much more clearly about how do we invest in growth areas and divest or exit those that are not that for us and are actually hemorrhaging margins for us. We'll spend more time on that in January and lay that out for you in more detail, but you can probably imagine what we're thinking about and talking about on that. But I'll be more specific about that, and Tony and I will both be more specific about that as we get into early next year.

The next question comes from Sebastiano Petti of JPMorgan.

Dan, congratulations on the role. I look forward to working together. Just maybe following up on the 2026 free cash flow. I mean, we're -- I understand the cost efforts will help -- basically help fund a lot of the growth initiatives that you're discussing here today and the pivot and your vision for the company. But relatedly and basically to Mike's question, and it's about the longer-term fiber footprint. How do we square 2026 free cash flow growth? I mean it sounds like CapEx is coming down this year, implication would be free cash flow probably trends towards the higher end of the range. And as you -- and Frontier is burning $1 billion of cash today. And so just trying to help understand that, the question we've been getting incoming from investors this morning.

And then secondarily, I guess, just maybe thinking about the accounts growth in the -- accounts decline in the quarter on the consumer as well as on the total wireless segment. Anything to help square there? It was the highest losses we've seen since the first quarter of 2020, rather, the pandemic quarter. So just helping us understand the trajectory there, and how we should be thinking about that trend over time as you kind of focus in on convergent.

Sebastiano, just on your question on free cash flow. So look, in the prepared remarks, we said we expect free cash flow growth to 2026 year-over-year. And that's all in, including Frontier. So some points on that, but that gives us confidence in that statement. So first, we have a very good starting point. The cash flow generation of the business continues to be very strong, and we have the strongest free cash flow in the industry. So we start there. And then in terms of actions, and I think Dan covered this multiple times, you should expect to see significant cost transformation. Dan talked about running leaner. Those plans are already underway.

In terms of the portfolio, we're looking at everything and everything is on the table for us. So -- and it also entails being very efficient with our capital spend. And what we said in the prepared remarks that we expect 2025 to get all our initiatives completed and will be likely at the lower end of the range or better, and that's the goal. And then as we look ahead, we said prioritizing investments focused on both mobility and broadband and being very efficient with our capital spend. We know how to do this, and that includes maintaining network excellence and also making sure we deliver on the promise for customers. And as Dan said, areas not aligned to growth will be deemphasized. And those actions are underway, and we're acting with a sense of urgency. So we'll be back in January with the full view of that, Dan?

Yes. Look, on account growth, I mean it just plays basically into what I was talking about before. The status quo doesn't work for us. We're going to be much more aggressive in delighting customers, and that has to happen. Look, it's a competitive industry, and all attractive and great industries are competitive. That's why people come into them because they're super important industries and most industries follow the rule of 3, and wireless is no different in that. I think about competition, a little bit how I think about gravity. When I get out of bed in the morning, I don't think, oh my gosh, gravity is pulling me down, it wasn't around, I could jump 20 feet high in the air, same way about competition. If it wasn't around, I'd have 100% share, but it is.

And both AT&T and T-Mobile are excellent companies. And with strong leaders with John and Srini, I have a ton of respect for both of them and their companies. But I feel like there's still plenty of room for growth in this industry. And on how you count it, somewhere between 5 million and 8 million new postpaid subs that enter into the industry every year. There's obviously switcher pools that are available. There's new and growing services, whether that be convergence or AI-powered infrastructure that can come in. So there's a lot of opportunity in the industry.

The key here for us is to win smart and responsibly, focus on what our customers want, not on our competitors. I feel like we can win this fight the right way. We earn it every single day. There's no need to ratchet up high promotional spend. We want to be competitive. Obviously, we want to be consistent, but there's no reason for us to be rationally aggressive to win our fair share out there. So we'll focus heavily and you'll see that on creating the best value propositions, they'll be very different than what you see today, make sure that we have the very best customer experience, and we are going to do everything in our power to make sure we delight customers. And again, thoughtful around all elements of the marketing mix. Look, we want to be so good that prospects want to come to Verizon, and our Verizon customers never want to leave us in. So a lot of work to do underway with that, but we feel good that we've got a head start on that, and we know what we want to go do.

The next question comes from Michael Funk of Bank of America.

Dan, welcome back and congratulations to you. So Dan, I heard you loud and clear on growing through retention. So curious to hear from you, what strategies or tools you think best for reducing churn? And then how we should think about these as being proactive versus reactive when you think a subscriber might be on the verge of churning. And a couple more, if I could. So curious to hear if you think about utilizing AI to address the efficiency offers you laid out for us in retention as well. And then you threw in your comments about AI infrastructure is booming and love to know what that means for Verizon as an opportunity?

Bunch of good questions on the -- as I mentioned, we have a pretty good idea of what's driving churn. And so we have a pretty good idea on how to address all of those. In many ways, this is a multipart complicated business. And otherwise, it's pretty straightforward, honestly. And so we just need to hit these things one by one to reduce churn, continue to grow by retention, but also we'll have the right offers in the marketplace. We'll be competitive. And I think -- you'll start to see evidence of that even beginning this quarter. But as I mentioned, this will take some time as well. When you want to turn around your entire offering to the marketplace, when you want to redefine the culture, financial profile of a large company like Verizon, we need to do it in a very thoughtful, prudent manner, but with a nod to urgency and moving as fast as we can. We're going to be a much scrappier company than we've been before. We have a lot to do, and we're going to go out and do that.

On AI, I have spent a lot of time before I got here within the AI community help advise some of the CEOs in the AI community. So I haven't really keen understanding of where it's going. I think AI is the only technology I've seen in my lifetime where it does a step function improvement every 2 to 3 months the models that we have today are by far and away the worst models we're ever going to have. You can see anywhere between 300% and 600% improvement in those models over the next year. And obviously, they are becoming more and more powerful, and they are able to do more and more things.

The other thing that AI is doing is clearly shifting the way the internet operates on its head. The internet is much more of a wide cast broadcasting and AI is much more narrow cast, much more individualized to you. I think that, as I mentioned, we are just scratching the surface of how we use AI inside Verizon. AI can obviously be used to be more efficient to do things and satisfy customers in ways that we can't do today and do so at a much lower cost, and that goes for across multiple functions inside any organization, including Verizon. But really importantly, AI can be used to dramatically improve the value proposition that we put in front of customers.

To your point, we can anticipate when customers want to upgrade when they have an issue, what that might be proactively address it before it happens, tailor and customize offers at micro segment levels that can radically change kind of where Verizon is today and frankly, where our industry is as well. And so I think that AI is today, a very large opportunity. And as the years go on, will be an increasingly large opportunity for not just Verizon, but American industry.

Great. Thanks, Mike. Brad, we have time for one more question.

Your last question will come from Peter Supino of Wolfe Research.

Dan, nice to meet you in this way. I wanted to ask you 2 questions. One about costs and the other about fiber. On costs, I wonder if you could discuss the nature of the cost opportunities you see if there are some common threads or themes through them. Verizon looks productive on a headline sort of benchmark to peers level? And then on fiber, Verizon is on course this year to pass about 650,000 homes incrementally with fiber organically. And at the same time, it's laying out $10 billion to buy Frontier. And the 2 seem somewhat inconsistent in the sense that it's a rather slow organic fiber expansion in a rather aggressive external fiber expansion. I wonder if you could sort of reconcile those and let us know what you think an ideal organic expansion rate for Verizon's ILEC footprint for the organic fiber extension might be over time?

Yes. So Peter, on fiber, I'll start there, and I'll hand it to Dan on the cost. So on few things here. So number one, I mean, fiber is not new for us. I mean we've been at it for 20 years, and there's plenty of room out there in our combined -- outside of the fiber footprint that we have today and with Frontier to be first on fiber. And as you saw recently, we signed a deal with Tillman to further expand our broadband build and maybe just some aspects of that deal. It's a capital-light partnership and it gives us the opportunity to go outside -- in markets outside of the pro forma footprint that we have and Frontier has and to increase the convergence opportunity.

And look, in this case, the fiber is going to be built to our standards, leveraging the Verizon brand and bringing Fios to more and more locations. It's a long-term deal, and it gives us a lot of optionality in the footprint to go in the future and really to go outside the footprint with good economics, and we did not have that ability before. And to your point, we're on track with our 650 (sic) [ 650,000 ] in terms of premise passed and Frontier, as you saw the results last night. We're also pacing to their fiber build. So we're not stopping. So -- and I think you see that in the results in the quarter and where we're heading and with the deal with Tillman, we have a lot of runway ahead with fiber.

And then I'll hand it to Dan on the cost.

Yes, thanks for the question. First of all, our goal is to reclaim our market leadership. It's as simple as that. And we need to invest to be the best in the marketplace. And that's going to take significant investment to go and do that, and we're fully committed to that, and we're fully committed to covering all of those investments through cost reductions, and redeployment of those cost reductions into our value proposition.

Cost reductions will be a way of life for us here. Honestly, I'm not that interested in comparing our productivity ratios to others and looking at how productive can we be as a company? What is the right place for us to invest, where are the right places for us to be leaner than we have, how do we use technology to do so. This is all about satisfying our customers, but there's tremendous opportunity for us to be a more nimble and agile organization.

Thank you, everybody inside the company knows that we need to invest in our value proposition, that we need to be customer champions, and that there's a lot of area for us to find efficiencies. We'll talk more details about that as we're working through our plans, but we see plenty of opportunity to be the most efficient company in the industry. Again, we're looking at every element of our OpEx and our CapEx spend to make sure that we invest wisely that we capture the growth areas in front of us and that we drive bottom line performance for our shareholders.

Yes. Great. Thanks, Peter. Brad, that's all the time we have today.

This concludes the conference call for today. Thank you for your participation and for using Verizon Conference Services. You may now disconnect.