VlpHU09DSUQyMDE0UTM INVESTOR CONFERENCE CALL Fran Shammo – Chief Financial Officer Tony Melone – Executive Vice President - Network February 17, 2015 VlpHU09DSUQyMDE0UTM=
“Safe Harbor” Statement NOTE: In this presentation we have made forward-looking statements. These statements are based on our estimates and assumptions and are subject to risks and uncertainties. Forward-looking statements include the information concerning our possible or assumed future results of operations. Forward-looking statements also include those preceded or followed by the words “anticipates,” “believes,” “estimates,” “hopes” or similar expressions. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The following important factors, along with those discussed in our filings with the Securities and Exchange Commission (the “SEC”), could affect future results and could cause those results to differ materially from those expressed in the forward-looking statements: adverse conditions in the U.S. and international economies; the effects of competition in the markets in which we operate; material changes in technology or technology substitution; disruption of our key suppliers’ provisioning of products or services; changes in the regulatory environment in which we operate, including any increase in restrictions on our ability to operate our networks; breaches of network or information technology security, natural disasters, terrorist attacks or acts of war or significant litigation and any resulting financial impact not covered by insurance; our high level of indebtedness; an adverse change in the ratings afforded our debt securities by nationally accredited ratings organizations or adverse conditions in the credit markets affecting the cost, including interest rates, and/or availability of further financing; material adverse changes in labor matters, including labor negotiations, and any resulting financial and/or operational impact; significant increases in benefit plan costs or lower investment returns on plan assets; changes in tax laws or treaties, or in their interpretation; changes in accounting assumptions that regulatory agencies, including the SEC, may require or that result from changes in the accounting rules or their application, which could result in an impact on earnings; and the inability to implement our business strategies. 2 Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Strategic Overview • Deliver profitable growth and generate cash • Consistently invest in networks and platforms • Monetize non-core assets • Return value to shareholders • Strengthen balance sheet Investing in a financially disciplined manner 3 Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Funding Plan • $9.5B balance for Spectrum net of $900 million deposit – Cash on hand – Term loan • $10.6 billion cash on hand at end of 2014 • Cash on hand funded the $5 billion ASR • Tower proceeds of $5 billion will reduce term loan • Wireline proceeds in 2016 to pay down debt Limited need to access capital markets 4 Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Network Overview • Aggressive investment in technology • Securing necessary spectrum • Consistent approach to investment Industry-leading reliability and performance 5 Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Capacity Strategy Capacity Solutions Lab - IODT Spectrum X IODT = Capacity $2.71 $0.69 $0.57 $0.49 AWS 1 Auction Cox AWS (2011) SpectrumCo AWS AWS 3 Paired 2010 2014 (2006) (2011) Auction (2015) Capex/MB Opex/MB $/MHz/POP Shifting cost curves between spectrum and capital 6 Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Spectrum Strategy • One Nationwide low frequency band for LTE 700 C coverage • Currently, two frequency bands for additional LTE capacity AWS ‒ Mid/high bands good options on top of 700 C coverage layer PCS ‒ Close to ubiquitous ‒ Well-established bands ‒ Wider bandwidths • Right spectrum combination minimizes device complexity and cost Strong spectrum position going into Auction 97 7 Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Nationwide Spectrum Depth Pre-Auction Total Spectrum Depth Pre-Auction 105 MHz Total AWS 36 MHz PCS 22 MHz 700C 22 MHz VZW Pre ‐ auction Total Spectrum Depth 850 >= 107 MHz 88 MHz ‐ 106 MHz < 88 MHz VZW Nationwide Spectrum Inventory (MHz) Good mix of coverage and capacity spectrum 8 Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
AWS-3 Auction Objectives • Acquire spectrum in key AWS Spectrum Depth Pre-Auction markets to reach at least 40 MHz of AWS • Level nationwide mid- band (PCS+AWS) spectrum depth • Opportunistically acquire AWS 3 licenses VZW Pre ‐ auction AWS Spectrum Depth that build contiguity with >= 40 MHz < 40 MHz existing AWS 1 holdings Acquire and manage capacity spectrum depth 9 Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
AWS-3 Auction Results AWS ≥ 40 MHz POP Coverage AWS Spectrum Depth Post-Auction 95% 70% Pre-Auction Post-Auction Mid-Band ≥ 60 MHz POP Coverage VZW Post ‐ auction AWS Spectrum Depth 84% >= 40 MHz 55% < 40 MHz Pre-Auction Post-Auction Significant improvement in capacity spectrum depth 10 Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
AWS-3 Auction Summary Statistics Top 25 Markets Top 50 Markets Top 100 Markets # % of POPs # % of POPs # % of POPs 3 9% 3 7% 6 7% 10 MHz AWS 3 Spectrum 15 56% 28 56% 49 53% 20 MHz Acquired 1 3% 1 2% 3 3% 30 MHz ≥ 40 MHz 25 100% 46 97% 92 96% of AWS VZ Position Post Auction ≥ 60 MHz 24 93% 43 89% 84 88% of Mid-Band Licenses acquired balanced across top 100 markets 11 Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Nationwide Spectrum Depth Post-Auction Total Spectrum Depth Post-Auction 116 MHz Total AWS 48 MHz PCS 22 MHz 700C 22 MHz 850 VZW Post ‐ auction Total Spectrum Depth >= 107 MHz 88 MHz ‐ 106 MHz VZW Nationwide Spectrum < 88 MHz Inventory (MHz) Complementary increase in spectrum depth 12 Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
What’s Ahead AWS-3 LTE Unlicensed, 5 GHz, 3.5 GHz Increased Efficiency (LTE Advanced) Network Densification (Small Cells) 700 C AWS PCS 2015 2016 2017 2018 2019+ Open to additional primary and secondary spectrum opportunities 13 Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
Summary • Achieved auction results in a disciplined manner • No need for large spectrum acquisitions • Consistently investing for future growth • Strengthening balance sheet • Returning value to shareholders Focused on return on invested capital 14 Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
VlpHU09DSUQyMDE0UTM INVESTOR CONFERENCE CALL Fran Shammo – Chief Financial Officer Tony Melone – Executive Vice President - Network February 17, 2015 VlpHU09DSUQyMDE0UTM=
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