Verizon Communications Inc. (NYSE:VZ) Goldman Sachs Communacopia + Technology Conference 2022 September 14, 2022 12:15 PM ET
Company Participants
Brett Feldman – Goldman Sachs
Conference Call Participants
Hans Vestberg – Chairman & CEO
Brett Feldman
All right. Well, welcome everyone to day three. This is a — we’ve a fumble there to being with. This is a big day for the telecom media space and I am very excited to be kicking off today with Hans Vestberg, the CEO of Verizon. Hans, thanks so much for coming out to the West Coast for our Communacopia + Technology Conference.
Hans Vestberg
Great to be here. Before we start the Safe Harbor statement, but I am probably going to say forward-looking statements here. So just be aware everyone about that.
Question-and-Answer Session
Q – Brett Feldman
All right. Let’s jump into it.
Hans Vestberg
Yes.
Brett Feldman
Really for over the last two decades, Verizon has been a leader in the wireless market on I think almost any metric you pick; subscriber share, network, operability, and you still are. The last few quarters, you’ve seen your postpaid net ads really below trend. And that’s happened even as the industry has been somewhat above trend and so the first question I have is what gives you confidence that this is a temporary dynamic and that Verizon will retain its leadership through the 5G era?
Hans Vestberg
First of all, I think you hit yourself. When it comes to brand market share profitability, we are clear to the number one in the market, and we are — we’re intending to keep that easily. Even though we guided down our EBITDA to flat this year, we going to be somewhere between $47 billion and $48 billion in EBITDA, which compared to others is way above.
So, we think that’s important, but clearly we’re not satisfied as we came into this second quarter on the consumer wireless and remember then that when we reported the first quarter, we talked about softness. We saw a softness there in the first coming in April EBITDA.
We took a lot of adjustments there and we did a lot of actions. We started by preparing a new plan, welcome plan because what we need to think about, we have such a broad portfolio right now, all the way from the value play with the TracFone all the way up to the premium.
We need to be surgical all the time when it comes to price changes, new plans. Sometimes we increase the price, sometimes we actually make a new plan and we came out with a welcome plan, which was, bring your our own device in a lower premium segment. More, we need to also increase the adjusted prices on needed plans and some fees where we saw it was appropriate. So all that sort play in for us and what we can say right now, two months into the quarter, clearly we have more gross ads. We’re growing that month-over-month.
We see much more traffic in our stores, probably up sequentially, double-digit. So clearly it’s happening and we see that working, but we need to be surgical all the time in order to be financially sound because we want to keep our good cash flow, which is clearly the best in the industry, because we think that’s important and we are the leader in the industry and we need to act like a leader. So that’s what we’ve been doing and it’s actually start resonating.
Then as a reminder, and we said it in the second quarter with the price increases, we going to get the churn [ph] bubble in the third quarter on the consumer side, because that’s how it works. But that’s all in all is the right decision, financially right and sound decision in order to continue to grow our cash flow.
On the other hand, you also make the people on the other side on wireless, on the business side, we have now four consecutive quarters with more than 150,000 phone methods, which we’ve never had before. So we started and clearly a very strong portfolio with a strong network.
Then we have been challenged in the competitor market on the consumer side. We have addressed that. We work basically daily to see that we’re doing the right things in the full portfolio and we have over 140 million wireless lines ranging from sort of the track phone through the premium, premium and we also need to be very surgical, very focused in everything we’re doing in order to get the right offerings to our consumers, but also seeing that we are keeping our profitability and see that we can grow that.
So I think that’s sort of the message I have to get the way that our brand and our network is still clearly the best, and there’s no doubt about it. And on our cast generation is number one in the industry, and we will continue to do that. Then we’re not satisfied with our sort of net debt in the second quarter and we addressed it and we’ll continue address with new things and we’ll probably talk about a couple of new things we’re doing.
Brett Feldman
Okay. And just to make sure, I get the data point you gave us accurately, you talked about month-over-month improvement in growth ads. That was consumer postpaid phone growth ads.
Hans Vestberg
Yeah. That’s consumer. So yeah, sometimes we end up talking only about consumer. That’s why I came back to the business side, but you are right; the gross ads we’re talking about, we’re talking about consumer, also the churn bubble is consumer because of the price increases we did in May, but they came in effect this quarter, basically.
Brett Feldman
And you alluded to it, one of the things that you introduced into the market in the last few weeks is the Welcome Unlimited plan is that allows you to sort of go after a demo. You historically haven’t really gone after, before with the price point as low as $30 a month. Are you finding that that’s a big part of what’s actually driving the improved store traffic and the improved gross ads and is that’s what’s selling or is it…
Hans Vestberg
That’s one of the drivers and of course when we get our consumers to come into the store, we have a great opportunity to talk to them, what is their right plan? And that doesn’t mean that everybody takes the welcome plan. They might be unlimited or unlimited premium instead and that’s of course what we’re seeing happening more. And on top of that, I think this is a bring your own device, which we think is also another way of working the market, where we bring value to a segment of the market.
And again, with the size we have right now in the scale, we have, you need to be surgical and financially disciplined in every segment of the market in order to see that you optimize for your customers and for yourselves.
Brett Feldman
Are you seeing any evidence that your existing customers actually want to switch to the Welcome Unlimited plan or it would be a little bit of a trade down?
Hans Vestberg
Nothing, nothing out of the ordinary. People are stepping up and stepping down. There are — but there’s nothing, especially because of the welcome. On the other hand, we see a continuation of this main scrap that we have on the consumer side, which is of course the step ups going from limited plan to unlimited, to unlimited premium. That is continuing and we have, when we reported the second quarter, more than two thirds of our customer right now on unlimited and 40% on unlimited premium. Our plan is to see that all customers that are on the Verizon brand is actually coming up to unlimited, unlimited premium, because that’s the best way for us to grow our data and grow our top line.
Brett Feldman
And that’s continued this quarter.
Hans Vestberg
Yeah. So far in the two first month of the quarter, we’re seen the continuation of those step.
Brett Feldman
And then just one last follow up on a point you made, you reminded us of the churn bubble that you’re expecting because of some of the price adjustments. You also have improving gross ads. Is that enough to get to positive consumer net ads this quarter?
Hans Vestberg
No, on the consumer side, we’re still going have a negative net ads on phones in the third quarter, but clearly we will have an improvement. And then the churn, of course, in the fourth quarter will come back to business as usual as we say.
Brett Feldman
Okay. So that’s the first quarter where you really have the opportunity to get back to growth.
Hans Vestberg
Yeah.
Brett Feldman
Okay.
Hans Vestberg
On the consumer side. Remember what I said on the business side, 150 net — 50,000 net ads four consecutive quarters, 45% market share in the business segment on wireless and we’re gaining share every day.
Brett Feldman
All right. We’re going to come back and talk a little bit more about business, but I wanted to stick…
Hans Vestberg
I don’t want you to miss that one.
Brett Feldman
As you basically just expressed, you have confidence that you’re going to see an improvement in the consumer business in the near term. It sounds like some of the steps you’ve taken in the market have helped, but I think the bigger point you’ve made is that as you more fully deploy your mid band spectrum assets, you’ll have an opportunity to bring network more prominently back into your marketing.
It will take you to kind of the end of next year to be kind of fully deployed just based on the clearing of some of those you’ve been doing it a bit faster. But that means there’s still a little bit of time here before you’re fully done. And you have started to use device promos a little bit more than we’ve seen in the past. Your competitors have used device promos a bit more than we’ve seen in the past.
And the question I have is, what gives you confidence that making this investment in your base, which does yields and benefits there’s retention, there’s up tiering is the right thing to do and also that you are going to remain positioned with the consumer as the best network. So as you continue to lead in your advantage of your peers, it can really drive more growth.
Hans Vestberg
Now, if we look at the network right now, and first of all, we know all the root metrics and JD Powers constantly, which is the most independent and best and that we haven’t lost and that’s where the network we have today and it’s just getting better. We have US 150 million pops with the C-band and just reminder to all, we started in the first quarter deploying the C-band. That’s the pace we have right now and we have said that we’re going to pass plus or more than 175 million pops by year end.
So this is going faster, but as you rightfully said, we’re using — we have 161 megahertz nationwide. We’re so far using 60 megahertz. We’re getting into 100 megahertz. We’ve talked a little bit about some market have 200 megahertz. So we have so much way to go here and improving the network. And what we see so far is of course, where we launch a C-band, we have a much higher step up ratio in those markets, which is a good indicator of that the C-band is really making difference.
And then of course, we open up more and more open for sale on the fixed wireless access, which also we see a direct correlation with the seamen deployment. So the team has all the resources and capital in order to deploy the spectrum. Some spectrum coming a little bit later because that’s how the auction worked out, but clearly, this is just making the best network, just even better.
Feel really good and confident about our network performance. I’m out testing myself all the time, talking to our reps in the stores, understand what our customers are saying and it’s a really good feedback and I would find, like by saying that it’s a reason why we have 45% market share in the business segment and we’re growing it because that’s where our customers really need the best quality, that’s where they really are buying for. I need a reliable network. I need the best network, and that’s where we really make a big difference.
Brett Feldman
All right. What are some of the other ways that Verizon is looking to maintain a differentiated premium service to its customers and the two things that you’ve sort of rolled out recently, I’d like to hear you expand a bit on, are the Verizon One unlimited plan, something you announced in conjunction with the launch of the iPhone 14. And then also I’d like to hear a bit more about +play and how that factors in.
Hans Vestberg
Yeah, I think on the consumer side, continuously of working surgical and discipline in different segmentations and the Apple One, which is exclusive for us, where we basically do an iPhone 14 together with all the Apple services in one bundle is of course addressing their high end premium. That’s really where we are getting our customers to both be loyal meaning retain them, but also acquire new customers. Very unique for us. We worked with this model where we not only use our scale of the network. We use our scale of our distribution as an asset where we partner with the best brands in the market from digital services.
As you remember with Disney Plus, Apple Music, now we do Apple One and you are alluding to the next step we’re taking as we had such a big inbound from digital services to work with them and see that our customers get new values.
We’re going to continue the launch. We have already made alpha launch. We’re going to do the digital launch of Plus Play, which is a sort of a digital streaming subscription platform with our customers can put all their different digital subscription on one platform and pick and choose. We can do marketing. We can do bundle that nobody else can do. And we basically have all large digital streaming companies there, gaming companies, we have companies at Peloton [ph], we have Netflix.
So that’s the next step for us to see that we are differentiating not only by having the best network and a very broad sort of segmentation model. We are adding this value on top of it. So we’re excited about that. We’ll roll out in the fourth quarter coming into the first quarter.
Brett Feldman
I thought it was interesting about the iPhone promotions that we saw when the 14 roll out, was that yours were a little more balanced than I think some of your competitors. And instead you rolled out Verizon One Unlimited. Why are you comfortable maintaining, I guess, like a premium promotion in the market right now?
Hans Vestberg
No, I think that we constantly evaluate what is the best balance of it. Sometimes we can be aggressive. We come in and out with promotions, but we really try to see that we’re doing it in the right times and see that we’re doing the right thing for our cash flow and our future EBITDA. So that’s the balance we’re doing all the time. Then it’s been a more competitive market this year and end of last year, I would say, where promotions has been much higher than normal.
I wouldn’t say it’s super strange. It’s a sort of the second year of 5G and everybody sees that, well, now you can capture 5G subscribers and think about that we are indicating that by year end, almost 60% of our customers will have a 5G phone and you would say that, okay, that’s okay.
If you compare that to 4G, it’s so much ahead of 4G. If you would put 4G and 5G together and adoption of phones, 5G here, and 4G years here at the same time level, that’s how quickly goes. So of course, then it’s more competitive in the market. We are prepared for it. We think we compete really good in consumer segment in the competitive market, but we are not going throw away money. We want to have high quality customers that really think about our value and seeing that we are creating value for our customers and for ourselves.
Brett Feldman
So you’ve long dominated the premium end of the wireless market. You’re a relatively new entrant to the lower end of the market. You acquired TracFone, you’re now the largest prepaid provider in the US. You’re still going through the integration as you’ve gone through the integration, we’ve seen the subscriber base drift down a little bit. Where are you in the integration process and how do you see the path to getting the growth there?
Hans Vestberg
So we are really excited to be in the value segment and as I said, TracFone is one of the brand. It’s four or five different brands we have in the value segment. We are all tracking the integration of course you bring in the subscriber base. Some are of the subscriber were off-net using other providers networks. And of course they are sharing out some of them, some of we are regaining on to our network. And of course, much of the synergies are coming from that when it comes to the network synergies. So we’re excited about that.
Not only that. We’re also excited about being able to use the platform of our network, our platform or a product to launch into the value segment. And you’re probably going to see new products coming into the value segment and again, we use the scale of the product and solutions we have to bring that to the value segment, but in the right mind for them for that customer segment.
Then I would say, right now we can play in any segment of the US more consumer market in wireless, regardless of economic situation we can play there. So I’m really excited and what we’re seeing so far two first month of this quarter in the prepaid or the value segment is good traction. We’re getting good traction there, starting to do what we have said from the beginning. We knew that we would have a churn in the beginning because subscribers were on other carrier’s networks, but now we are sort of cleaning that out. We’re starting to get our traction that we were expecting.
So now we’re really exciting. We change our structure internally. So we basically address this from a back office. We have all the assets behind the brands in order to be even better serving our customers. So this is part of our strategy, one of the pillars of growth that we have. So yeah, no, I think me and my team, we are really confident that this was a good acquisition and is going to play out really well for us.
Brett Feldman
Do you think we’ll see the prepay base get to growth at any point this year? Is it going to require just a little more time?
Hans Vestberg
Now, we need to learn a little bit, but prepaid because a little bit different than the previous segment that usually in the fourth quarter is the weakest quarter in prepaid and the first quarter is the strongest. So I think we’re going to continue with that pattern, but I think we’re going see good numbers from our team, which are working hard. You’re going to see new services coming out, probably new products as well in the value segment that just going enhance our way of working with that customer base.
Brett Feldman
All right. Your fixed wireless services had a very strong year. I think you said on your call that your net ads have increased every month year-to-date and that you would expect that to continue for the balance of the year. So, the first question is, can you give us an update; has that trend indeed continued so far into this?
Hans Vestberg
Yeah. On the fixed was as far as we can see in this quarter, it continues the same trend and we just opening more and more markets, but you’re scaling it. We open the C-band in the first quarter. So of course that just adding opportunity for us. So we continue on that trajectory and team are really focused on the consumer side. This is the main broadband solution for our consumers on fixed wireless access.
On the business side is that I would say to the vast minority is the primary broadband as well. There are some backups, but very little and I think that’s also very important that we are grabbing a market here and competing very well, but think it also about it when it comes to our C-band deployment, that’s in urban and suburban area right now, because that’s what started because of coverage and pops. So that’s where we have our opportunity where C-band on fixed wireless access.
As we now continue, we are going to open up new opportunities outside the suburban, out of rural as well, where it’s even greater opportunities for us. So I think the team is doing great job. Our devices coming out of fixed wireless access will basically cover all the frequencies we have, all the way from millimetre wave C-band and 4G low band, which going to make this product enormously great and the key differentiator is enormous.
You get the device and one to two minutes later, you have broadband at home. It’s a new wave of it and we compete extremely well. So I’m excited for it, but don’t forget we have our FiOS business, we are really happy with as well. We saw — remember in the second quarter, a little bit less movement. So we have positive net ads, but a little bit lower, but we have seen good traction on that as well in the thought of this quarters. So all-in-all the strategy of national broadband, where we have different type of access, the strategy is going well.
And it goes back to what we said in Investor Day, where multiple vectors of growth. We talked about the value. We talked about national broadband. We talk about mobility, step pops, welcome Apple One. So all of them are humming, then it’s a competitor market, but, I feel good about and confident in what we’re doing, and we will do it in a very disciplined financial way, the way that Verizon always do.
Brett Feldman
It’s interesting that you said most of your fixed wireless distribution right now is in the suburban markets. Those tend to be cable markets. So does that mean you’re winning cable switchers?
Hans Vestberg
That’s good conclusion. Brilliant guy.
Brett Feldman
Thinking about the bundling that you’ve taken, you’ve kind of refreshed your mobile and broadband bundles and you’ve essentially said if you’re getting 300 megs or 500 megs or gig, it doesn’t matter what technology you’re on. It’s the same price and if you’re getting it in a bundle, you get the same discount. So it’s been a very simplified, go-to-market strategy. And I’m curious, how has it worked so far? Are you actually finding more traction with the bundles and how do you just feel about the positioning of your bundles versus what the cable guys are offering because they’re kind of flipping the switch on that?
Hans Vestberg
No, we feel good about it and again, we want to give optionality for our customers. They can take broadband, they can take mobile, they can take them together. And we have all these economics on all of it because we have one network, we own all our equipment, we have almost 60% of all our sites with our own fiber. As owner’s economics, we just have signed all the power companies. So we have owners economics on all these different use cases, which others doesn’t have.
So I think that we will play into the market. If that is a market where we’re going see sort of a combination of home and broadband, we’re going to be strong. If it’s not going to be, we can play on either side. So again, the whole idea for us is to be meeting the consumers in their place and the value they want to have and that’s why you can buy today, fixed wise access, naked broadband, or you can actually add on streaming services, like YouTube TV, etcetera.
That’s how we work and that’s giving optionality for our customers and I think that’s the trend where it’s going in the world and then if a customer want to combine the wireless and their mobile and the home, yeah, we’re going to be there. If it’s FiOS together or fixed wireless access, doesn’t really matter. We have a good opportunity here to capture market share in that area if the market goes to that culmination all the time.
Brett Feldman
I noted that, your bundles in some ways are I’m not going to say response, but the cable companies are doing something similar. You’re the partner to the cable companies and so as you look at the competitive dynamic, but also the partnership dynamic you have with the cable companies, on net, how do you feel about this relationship? You find that it’s accretive in delivering what you would’ve expected?
Hans Vestberg
Yeah. Well, we need to understand this also when the cable guys are adding wireless customers, that’s on our network as well. So that comes in. So when we talk about net ads sometimes, we need to remember that many of those net ads in the market, that’s in the switch pool, they come to the Verizon network, but they are not branded Verizon. So we feel good about that relationship. It’s an important enterprise relationship with the cable guys. We have always treated them as a really important enterprise customer and we’ll continue to do so.
They are an important part of our strategy to have one network and serve as many connections as possible in order to get the best return on capital in the industry, which we have. So it’s just playing into our strategy. Every day we come to work, we’re going to see how many connection we’re going to have and don’t forget that how many IoT connections we’re putting on content on the network as well.
That’s what we’re designing this Verizon network to that we basically designed in 2017 in order to meet these demand, which we can do easily with all the spectrum we have and the technology changes we’ve done, the virtualization we’re doing in the network. So I would say, you should probably asking the cable guys, but I feel that we’re good relationship with them should always ask the customer, not the supplier.
Brett Feldman
All right. Well, this is a great transition to talk about your business segment and you alluded to before the momentum in post-paid phones in business mobility has been very strong. What’s driving the momentum and are you seeing any economic headwinds to that?
Hans Vestberg
Of course the business segment has several different pieces to it. First of all, they have different segments all the way from small and medium, the government to large enterprises. They’re little bit different dynamics. There are different products. But what we can say is that if you look at the small and medium businesses, that has been a great growth and wireless, they want to digitalize coming out from COVID. All of them are digitized. We have somewhere between seven million small and medium customers.
So of course, that has been a growth engine. When they come back, they need to have a digital platform, both fixed wise access and mobility is playing in here. They need broadband in the store or whatever they have in order to make the digital connection to the customer. So that’s really have been an important piece in the market.
On the large enterprise, that’s always sort of the same. You have a group of large enterprise doing enormous transformation. Digitalization needs a lot of bandwidth technology. You have a couple that have a challenges situation, don’t spend so much, and then you have the one that use BAU. That’s the same.
One trend we see, I would say is historically in large enterprise and we saw a lot to bring your own device. They let their employees bring their own device. We see that in some cases right now with security concerns that actually the large enterprises start catering for phones again because they want to control the environment and the security on this device that sometimes is doing 80% of the workload.
So that’s a good opportunity for us. We see a lot of opportunities in your sector. For example, I think it’s pretty important. Then we need to remember, we have a sector decline in the Y line piece of it, because that’s where sort of the transformation is ongoing. We saw in the second quarter decline. Our work is to both take out cost at the same time to see that our customer going to the new areas like mobility, fiber, 5G Mobile Edge Compute, new solutions that we’re doing and accepting that and that was the whole strap for us both to grow, but also improve our profitability over time.
Brett Feldman
I’m going to come back to some of the broader business segment questions in just a minute, but I do want to follow up just on the mobility side. When we listen to your competitors in the wireless space, they all say we are under indexed to the business segment, and we think we have an opportunity to take share. So they definitionally, they mean from you. What gives you confidence that you can protect and grow your business mobility business, even as they focus more?
Hans Vestberg
The network, we have clear the best network, and if it’s a governmental service, public safety, if it’s small and medium, they need the reliable and the best network. Our network is already the best, and we’re just adding C-band. So I think that really giving confidence.
Then the second part, when it comes to business, the business, you need the distribution channel that you don’t build up in two weeks, and that we have built over years and have relationship with large enterprises, government, small and medium in every local community that is really key differentiator here. So we are confident that we have a great portfolio. We’re products and we have a great customer relation. We are pushing hard every day to continue to earn that business and yeah…
Brett Feldman
So on the business wireline piece of the business segment, there’s obviously been secular pressures as their customers move off legacy services? You’re getting away from low margin businesses. I think exacerbates the top line pressure. What’s the right way of thinking about the outlook for that part of the segment? And then how does that ultimately translate into the outlook you have for overall business segment EBITDA on the path to better margins and growth there?
Hans Vestberg
Yeah. I think we’re going to see this secular decline continuing, and that’s what we are expecting. We’re offsetting that with [ph] band solutions where we are the leader, but also offsetting with fiber solutions that we have offsetting with mobile edge compute solution and mobility to fix wireless access. So we’re trying to offset all of that decline. At the same time we continue to take out cost constantly and sometimes we don’t talk enough about it, but our biggest transformation projects are enormous. It’s billions of dollars that need to get out every year and we just continue to ramp that’s up in order to be even more efficient as an organization.
So ultimately our goal is in the business segment to be over 25% EBITDA. We have new management right now. Sam [ph] came in as a new CEO. Tammy had done a great job to put that in place. We all need to remember this was four distinct areas of businesses that never have worked together, own systems and all of it, we are bringing that together. And we do that because we believe that this is such an important segment and we believe that we definitely can grow the profitability of the time here. And it goes back to the main strategy, one network as much a connectivity on top of it in order to have the best return on investment on that invested capital.
Brett Feldman
You mentioned cost transformation as part of that equation. You’ve been focused on this for a while. Obviously the inflationary environment makes taking costs out of the business a bit harder. What are you seeing right now from inflation standpoint? Is it changed at all from when you updated your outlook a few weeks ago?
Hans Vestberg
We mapped, updated the market over second quarter and said that we of course have pressure from inflation and this year, maybe 500 million. I don’t think it’s much different from what we talked about before. There are pressures in the market. Our job is to offset that constantly. We’re doing it by taking out more costs, but not only that, we also did sort in some areas increase prices, but we do it surgical.
Again in the consumer segment, we don’t do it in one blanket. We don’t increase prices, reduce prices, do new offerings. We do it for the different segments. When you have over 140 million wireless lines and you go from the lowest plans to their absolutely highest plan, you need to be very surgical and that’s where I feel so much confidence that we have all of that, that we have an organization that can address that and we do it together.
Basically every day, we’re shifting their thinking about it, and I’m personally much more involved every day right now, given the size of it and how we want to put the brands in, the product in, pricing, see what’s happening in different regions of the country. So this is important to us, but this is also the main driver of growth for us.
When we talked about our growth, the next five years in Investor Day, we talked mainly the biggest portion, absolute is of course, mobility step ups, upgrades. That’s really where we see the absolute number and that we need to continue to work with.
Brett Feldman
Another piece of that is mobile edge compute and if we think about 5G versus all prior generations of wireless, one of the things that makes 5G so exciting is that it lets you serve end markets that you couldn’t have served with a 3G or a 4G network and mobile edge compute is just one of many potential use cases in the enterprise. And so where are you in your discussions with large enterprises about them, much more broadly adopting 5G technologies other than just upgrading their employees, phones to 5G.
Hans Vestberg
So think about it in three different buckets. You have building private 5G networks where basically use license spectrum from us in order to have a secure environment for your phones and having competing directly with Wi-Fi. The next one is private 5G networks with mobile edge compute, where you add the cloud component on it in order to, I would say, take directly business related decision in real time in the local zone.
And then the public mobile edge compute where basically you are walking around here and using the cloud much closer at the edge of the phone. That’s also the fruition. Today where we see the most traction is on private 5G networks, where company’s enterprises are doing it for the factories, for their offices. They’re actually building private 5G networks in order to see a much secure, faster, reliable experience for their employees or for their devices.
Secondly, then we start bringing in different type of cloud solutions and that we do together with Amazon, Microsoft and Google, basically that we work with all of them in because our customers for some reason are using different. So we need to offer that and that we start using use cases in manufacturing, retail, logistics. The funnel is as a normal enterprise funnel. It takes some time. You do a proof of concept, then you put it in and then you replicate it in different logistics centers, etcetera. So that takes a little bit longer time.
And the public is taking the longer time, because then you need to have sort of much more coverage and cloud mobile edge compute across the country, but with the C-band and the partnership would have with Amazon, we are going quickly there as well and suddenly you’re going to see gaming opportunities on the phone where you can actually have that cloud computing very close at the end.
So all three of them are important working conflict, but again, it’s one network. Again, it’s the same spectrum we’re using the same network. Again, we try to get as much connectivity and the best return investment on one big investment, which is our network.
Brett Feldman
So earlier in our discussion, you alluded to the fact that you had adjusted your outlook for the year. You’re looking for fairly stable EBITDA profile and maybe a little bit of pressure on earning, some of which is as a county related. The question that we have, and we get a lot is ultimately what does Verizon have to get, right in order to be back on a sustained path of not only EBITDA growth, but also earning’s growth. From your standpoint, what are those top things?
Hans Vestberg
Yeah. So you just, first of all, need to look backwards. Our EBITDA has grown every year the last five to seven years and again, this year we are guiding to a flat to slightly down. It’s going to be $48 billion in EBITDA. So we still are producing a fair amount of cash share.
Our job is now to continue with the mobility side on consumer and business to continue with your step up, because that is really giving a lot, when our customers go from unlimited to unlimited premium, or they go up from the value segment up to the premium segment, that’s really where the main money are. You need to think about this as a subscription service where you upgrade constantly and that’s really a lot. So that will be important.
The other thing is of course, a national broadband that is adding straight to bottom line with new broadband services across the country, not only in the FiOS ILEC and the majority outside of FiOS ILEC, it’s new territory for us. It’s just new revenue and then the whole value segment that we acquired track pointing, which uses a net addition that, as I said, in the beginning, we got a little bit, of course, off net churn and now that should be thought to be additive for us over time.
So all those are important together, what we’re doing business, and then we continue to take out cost. That’s what I do. Historically, Verizon has been really good at growing EBITDA. The EBITDA, as I said, there are some accounting noises in between, which is little bit order to explain. I will probably bring in Matt to do it, but if I think about the EBITDA, that’s really where our focus to continue to growth and this year flat to slightly down in a year, that has been very competitive for us, but I see a good traction on the consumer side right now.
So I think that’s really where we are focused. We have a very clear strategy. We have the best assets in the market. We have more growth vectors than anybody else in the telecom industry at this moment. And we have a great cash generation and a very solid capital allocation model. So that’s what I’m seeing going forward.
Brett Feldman
Great. Well, my last question is essentially about capital allocation. You made a big investment in mid advance spectrum. So you put some upward pressure on leverage your net debt to unsecured EBITDA or unsecured net debt to EBITDA is about 2.7 times, but the target is 1.75 times to 2 times, and you’ve got a three to four year trajectory to get there.
And when you talk to the board about how you think about your capital allocation, as you work towards that leverage target, why you continue to be confident in the dividend model, you recently increased your dividend again and, your stock has not had a dividend yield like this for years. I think normally you’d want to be buying back. I think normally you’d want to be buying back your stock although you’re not quite where you want to be from a balance sheet standpoint.
So how do you think about maybe a path to getting the buybacks and do you think it might make sense to even do them sooner if the stock were to continue to trade where it is?
Hans Vestberg
So, think about the capital allocation model and I think a couple of really important things here. First of all, we invest in our business. This year, we will continue with this incremental 10 billion of the C-band deployment on top on our business as usual. So we are going to be somewhere between $22 billion to $23 billion in CapEx this year.
Next year, we come down to BAU between $16.5 to $17.5 and whatever is left from the C-band. We don’t know that, then we’re going to guide that in the beginning of there, but it’s going to be a smaller portion. So only there you see how much cash we’re going to iterate because, this was the whole idea with the Verizon Intelligence Edge network, combine the whole network and at different access points and when you have that, when you have done that transformation, our BAU CapEx will come down. So that’s an important piece of our capital allocation.
Secondly, our second priority is to continue to put our board in a position to continue to increase our dividend. 16 years of consecutive increase in dividend and we did it again. I think it was last week that should give shareholders a confidence that we believe in our cash generation.
Thirdly, as you’re right as we said, we want to do sort of a post Vodafone. We want to go do a post C-band. We want to come down on our leverage down to up two or something like that. But we will start considering buybacks at $2.25. This is a fluid conversation with the board, of course, and things can change, but clearly we know what we need to do. We have a good step into ’23 when it comes to cash generation because of the CapEx coming down, which we already talked about that at Investor Day and as many of you know, when Verizon say something, they do it and we will do it.
So I think that the capitalization model we have is extremely strong and the fundamental important for shareholders and to all what we’re doing and we will execute on that.
End of Q&A
Brett Feldman
Hans, thanks so much for being here.
Hans Vestberg
Thank you so much.
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