Is the new T-Mobile a threat to Verizon’s bottom line? You bet your bottom dollar it is, but for Verizon EVP Ronan Dunne, he’s still, (of course) going to put his dollar on Verizon.
Dunne, who is Group CEO of the Verizon Consumer business, responded after an online poll during a Citi investor conference asked the audience to identify the biggest threat to revenue and cash flow for Verizon over the next three to five years. The audience was presented with a list.
Some 70% said it’s the New T-Mobile, while just 15% said it’s AT&T and the competitive environment broadly. For 8%, the biggest threat is the Dish insurgency and 5% said it’s cable. Just 3% said it’s the prospect of other new entrants coming in, such as Apple, Google or Amazon.
Dunne said the views of the survey participants didn’t particularly surprise him because they essentially reflect the narrative in the market. “I think what’s key really for me is how well am I positioned to grow? And then, that growth determines where am I exposed to competition. Ultimately, the first thing that we’re all interested in, is there growth out there?”
It’s been a question for the wireless industry for a while now, and it’s a big one when it comes to 5G and how operators are going to get their return on investment. Of course, Verizon is confident with multiple growth trajectories over the medium to long term, according to Dunne.
Another question is who’s best positioned to capitalize on the growth that’s out there. In some respects, the growth rate of some competitors has been about net adds switching between Operator A, B or C, according to Dunne, who didn’t name names. T-Mobile executives have said their business thrives when there’s a lot of switching going on.
While churn will always be an element, for a business like Verizon, the growth of ARPU per subscriber, the increase in the addressable market and the introduction of new products and services represent very significant components of the growth rate, Dunne said.
He suggested the survey reflects one vector of growth, which is who will win in the net adds game, and it’s not that Verizon won’t necessarily win in that regard. But Verizon’s got some other things going for it, including the quality of its customers. It’s also well positioned now to participate more broadly in the prepaid space, subject to regulatory clearance of its acquisition of Tracfone. It also has a strong position with 5G, its Home offering and new products and services.
“I get the analysis. Still, if I had a dollar to invest, I know where I’d invest it,” he quipped.
Network leadership question looms large
Conference participants also were asked another question that’s been on a lot of minds: Will Verizon maintain network leadership over the next three to five years? Some 36% of survey respondents said Verizon will retain its lead, while 35% said T-Mobile will gain an edge. Some 27% said quality would be comparable and 2% expect AT&T to gain an edge.
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Dunne was unable to talk about C-band spectrum since the auction is underway; it’s where many expect Verizon to get mid-band spectrum to compete against T-Mobile’s lead in 5G mid-band with the 2.5 GHz it got from the Sprint acquisition.
Dunne said the definition of network superiority evolves from generation to generation in the wireless business. The basic access and reliability components are table stakes, but he once again turned the conversation to Verizon’s “rock solid” 4G LTE network, which “provides us with an incredible foundational layer” as it moves into the 5G world. “That’s not something that simply goes away when you move from 4G to 5G,” he said, adding that its strong position in 4G LTE leads to a strong position in 5G.
Verizon’s 5G is structured around 5G Nationwide, which uses dynamic spectrum sharing (DSS) in lower spectrum bands to compete with the nationwide 5G offerings of its rivals. However, Dunne said it’s important to recognize that the currencies around 5G are not just speed; latency and the ability to support more connected devices are available on a nationwide basis even if speeds in those areas are probably on par with LTE, plus 10 or 20% better.
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About 60% of Verizon’s existing spectrum holdings are deployed for LTE at this stage and it has the ability to deliver more with its existing spectrum, he said. It also picked up some mid-band spectrum in the CBRS auction and the crème de la crème is the Ultra Wideband layer where it’s deployed millimeter wave (mmWave), using 28 or 39 GHz, in more than 60 markets across the country. That layer allows it to bring premium experiences to places like stadiums and airports, where, presumably, people will re-assemble once the threat of Covid-19 subsides.
Regarding the switching pool, or number of customers leaving one carrier to join another, he said the overall market in the fourth quarter resulted in a smaller switching pool. Some of that is related to the pandemic, but there’s also the impact of some competitors’ strategies around retention.
Verizon closed about 85% of stores by the end of March and by September, it was largely back to a full store portfolio, he said. Since then, as a second wave came across different parts of the U.S., it saw particularly in November and December, somewhere between 150 or 250 of corporate stores and agent stores closed due to Covid. The telesales business was significantly bigger in the fourth quarter than the same time last year.
Generally, “I believe we have better CRM and analytics tools than our peers that allow us to be very forensic and targeted around the opportunities that are in the market,” he said. “We have the lowest churn in the market,” and it’s also bringing value with its relationships with Disney and Discovery, which create greater loyalty. Most would probably agree that a reasonably quick 5G handset adoption cycle is a good thing for the entire industry, he added.
Verizon’s 5G Home fixed wireless access (FWA) service is still in the early phases of the new CPE and it’s seeing improvements in signal strength and quality with new indoor and repeater technology, including from Pivotal and Corning. The tools in the tool kit are significantly better today than they were even a few months ago, he said.
Dunne said the 5G Home product can be competitive with cable services, but he reiterated that Verizon only offers it where there’s a mobility case. It’s not building a standalone 5G FWA network. It’s offering the 5G Home service in areas where it has built a 5G mobility network, and the FWA is a second use case.