Good morning, and welcome to the Verizon Fourth Quarter 2024 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode and the floor will be opened for questions following the presentation. Today's conference is being recorded. If you have any objections, you may disconnect at this time. It is now my pleasure to turn the call over to your host, Mr. Brady Connor, Senior Vice President, Investor Relations.

Thanks, Brad. Good morning, and welcome to our fourth quarter 2024 earnings call and AI update. I'm Brady Connor, and on the call with me this morning are Hans Vestberg, our Chairman and Chief Executive Officer; and Tony Skiadas, our Chief Financial Officer. In addition, we have our Business Group CEO, Kyle Malady, who will be giving an update on our AI strategy, as well as our Consumer Group CEO, Sampath, who will also be joining us for Q&A. Before we begin, I'd like to draw your attention to our safe harbor statement, which can be found at the start of the investor presentation posted on our Investor Relations website. Information in this presentation contains statements about expected future events and financial results that are forward looking and subject to risks and uncertainties. Discussions of factors that may affect future results is contained in Verizon's filings with the SEC, which are available on our Investor Relations website. This presentation contains certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in the financial materials posted on our website. Earlier this morning, a detailed overview of our fourth quarter and full year results was posted to our Investor Relations website. We will also be posting supplemental materials relating to today's call on our website shortly. With that, I'll turn it over to Hans.

Thank you, Brady. Good morning, everyone. I will begin by addressing the wildfires and the devastation that the Los Angeles area has experienced in recent weeks. Our hearts go out to everyone who has been impacted. At Verizon, we always run through a crisis, and this time is no different. Our teams are working hard to protect and restore service to affected areas, support first responders and help neighbors safeguard themselves. The Verizon Frontline Crisis Response Team is closely coordinating with federal, state and local public safety agencies as they continue wildfire response and mitigation efforts. Verizon's network is holding up strong, maintaining critical connectivity for the community, businesses and first responders. Our engineers have been working around the clock, restoring nearly all of the macro cell sites that were impacted and we will continue to be here for employees, customers and communities in LA. Now, let me turn to earnings. We had a successful year with great financial and operational results. We delivered on our financial guidance, with 3.1% wireless service revenue growth and 2.1% adjusted EBITDA growth, both exceeding the midpoint of our guided ranges. We generated strong free cash flow while absorbing higher taxes. We added nearly 2.5 million postpaid mobility and broadband subscribers in the year while expanding our margins. We ended the year with an industry-leading quarter wireless service revenue of $20 billion. In mobility, postpaid phone net adds were nearly 900,000 for the year. Consumer postpaid phone net adds were positive, with and without the impact of our second number offering, and business postpaid phone net adds exceeded 0.5 million. Prepaid net adds, excluding SafeLink, were positive for the year and for the first time since the TracFone acquisition. This has been a great turnaround by the consumer team. On broadband, we added nearly 1.6 million subscribers and grew market share in 2024, led by continued success of fixed wireless access. We ended the year with over 12.3 million broadband subscribers, including nearly 4.6 million fixed wireless access subscribers and over $2.1 billion on fixed wireless access revenue. We're off to a great start to hit our next milestone of 8 million to 9 million fixed wireless access subscribers by 2028. We continue to scale private networks, winning work with Xerox, Cummins, Inc., FIFA and, more recently, the U.S. Air Force. We were the only U.S. carrier to be named a leader in the first-ever Gartner Magic Quadrant for private wireless services. Gartner recognized us for our vision, the work we have done to build the market and our industry-leading execution. We drove efficiencies and continued the business transformation. We ended the year with less than 100,000 employees, down close to 20,000 over the last three years. Continued business transformation gave us more flexibility to execute on our strategy and capital allocation priorities. We continue to invest in the business and made strategic moves for long-term growth. We launched customer-first offerings such as myHome and Verizon Access, refreshed our brand and signed strategic transactions, including Frontier, the tower deal, US Cellular spectrum and satellite partnerships. We raised the dividend for the 18th consecutive year and continued debt paydown, ending the year with a net unsecured debt to adjusted EBITDA ratio of 2.3 times. We have had a great year with both customer and financial growth as we continue the strategic transformation of the company. Looking forward to 2025, we will continue to focus on our three key financial metrics: wireless service revenue, adjusted EBITDA and free cash flow. While Tony will provide these details, I would highlight the underlying wireless service revenue growth is expected to be nearly double the guided range when excluding promo amortization. With that, I will turn it over to Tony to say a few words about the quarter and cover the guidance for 2025.

Thanks, Hans, and good morning, everyone. As we reported earlier this morning, we closed the year with strong operational and financial performance. The steps we took in 2024 to improve our execution while maintaining financial discipline continued to bear fruit. We added nearly 1 million postpaid subscribers onto our mobile and broadband platforms in the fourth quarter, our highest quarterly result in over a decade, while also delivering on our financial guidance for the full year. We delivered solid growth in postpaid mobility, with 568,000 postpaid phone net adds in the fourth quarter. This includes 426,000 consumer postpaid phone net adds, giving us positive net adds for the full year with and without our second number offering. Business had another solid quarter with 142,000 phone net adds and saw strong growth across all three customer groups. The operational rigor we implemented in prepaid continued to pay off in the fourth quarter. Prepaid net adds were 65,000 excluding SafeLink, giving us positive net adds for the full year. In broadband, we continue to take market share, delivering 408,000 net adds in the quarter. Fixed wireless access accounted for 373,000 net adds and Fios added 51,000 subscribers in the quarter, a solid result given the challenges noted by some of our competitors. Importantly, we achieved these strong operational results while delivering on all of our 2024 financial guidance. In fact, both wireless service revenue and adjusted EBITDA were above the midpoint of our guided ranges, and our adjusted EBITDA margin expanded 50 basis points for the full year. In the fourth quarter, we delivered 3.1% wireless service revenue growth, along with 2.1% growth in adjusted EBITDA as we balanced investing in customer growth with maintaining financial discipline. Finally, our free cash flow of $5.4 billion in the quarter and $19.8 billion for the full year allowed us to take meaningful steps to further reduce our debt, consistent with our capital allocation priorities and to better position us for the closing of our pending acquisition of Frontier. Note that our fourth quarter free cash flow included approximately $2 billion in proceeds from the Vertical Bridge tower transaction. In addition, we made severance payments of approximately $600 million, which represents roughly half of the total payments we expect to make as part of our voluntary separation program. Turning to guidance. We entered 2025 with good operational and financial momentum, and that is reflected in our outlook. We expect total wireless service revenue to grow between 2% and 2.8%. The key drivers of this outlook are consistent with 2024, and include: improving postpaid consumer phone net additions and continued healthy business phone volumes, pricing actions taken in 2024 that carry over into 2025, continuing to scale fixed wireless access, growing adoption of myPlan and accompanying perks, and an improving prepaid revenue profile. As we shared in the fall, we expect promo amortization headwinds to peak in 2025. That said, the underlying customer economics are very healthy. Please note that beginning in the first quarter of 2025, we are reclassifying more than $2.9 billion of annual recurring device protection and insurance-related plan revenues from other revenue into wireless service revenue. As a result, our wireless service revenue guidance should be viewed in the context of growth off of a higher base of revenue. We expect consolidated adjusted EBITDA to grow 2% to 3.5% compared to 2024. This outlook reflects the expected higher wireless service revenue and benefits of ongoing cost transformation initiatives, partially offset by continued pressure in business wireline revenues. The midpoint of the adjusted EBITDA guidance range reflects an expected year-over-year increase of more than $1.3 billion, which is $300 million more of expected growth than we delivered in 2024. Full year adjusted earnings per share growth is expected to be in a range of flat to up 3%, reflecting the adjusted EBITDA growth, partially offset by higher depreciation and amortization. As we discussed in October, capital spending for the full year is expected to be between $17.5 billion and $18.5 billion. This guidance is an all-in number that includes all of our growth initiatives. This includes incremental investments to deploy C-band to 80% to 90% of plan sites, accelerating our Fios expansion to up to 650,000 open-for-sale locations, and launching our fixed wireless MDU solution. As always, we will continue to look for opportunities to efficiently deploy capital. Regarding cash flow, we expect free cash flow in the range of $17.5 billion to $18.5 billion in 2025. This outlook assumes mid-single-digit growth in upgrades and no change to current tax legislation. Please note that our guidance excludes any impact from the pending acquisition of Frontier. We are currently working with all regulatory bodies that must approve the transaction. The process is going as planned, and we continue to expect the transaction to close by early 2026. I will now turn the call back over to Hans to go over his 2025 priorities.

Thank you, Tony. Looking ahead, our 2025 priorities are clear. We will focus on growing wireless service revenue, expanding adjusted EBITDA, and generating strong free cash flow. Our goals include accelerating mobility momentum and broadband growth while scaling private networks as we expand our 5G Ultra Wideband and fiber reach. We will concentrate on operational excellence, financial discipline, and enhancing customer experiences to drive both customer satisfaction and financial growth. This involves executing our capital allocation strategy by investing in the business, supporting and growing our dividend, reducing debt, and eventually engaging in share repurchases. We will also leverage our fiber and edge computing assets to create new revenue opportunities within the AI ecosystem. Now, let me discuss Verizon's AI strategy. We have been incorporating AI for several years and currently have multiple generative AI products operating at scale within our company. We have established a three-part strategy for AI at Verizon. First, we aim to enhance experiences and improve efficiencies, focusing on both employee and customer experiences while reducing operational costs. A notable example is FastPath, which we have previously mentioned, utilized in our mobility call centers to match customers with the most suitable care representative. Second, our AI strategy emphasizes personalizing products and solutions, enhancing how we tailor our services for customers. A key product in this area is Segment of Me, an AI tool designed to personalize customer experiences with tailored offers and products. The third aspect of our AI strategy, which we haven't discussed extensively but will cover today, is connecting to the AI ecosystem. Currently, generative AI relies on large language models trained in extensive data centers, necessitating significant capacities. Over time, we expect this model to shift closer to the network edge, aiding in application delivery, reducing transport costs, and addressing latency issues. This shift presents an opportunity for us, as we have already seen an impact on revenue and EBITDA in the fourth quarter. We are exploring ways to utilize our assets and capabilities to serve this market as generative AI evolves. I am very proud and excited to introduce Verizon's AI Connect today, our solution to meet market demands and address customer needs in the next generation of AI—generative AI. Now, I will hand the call over to Kyle, who will discuss our opportunities and how we are addressing these markets.

Thanks, Hans. It's a pleasure to be here this morning. Verizon AI Connect is the name of our strategy and suite of offerings that are intended to meet the growing demand for AI applications from both our ecosystem partners and end-user customers. It's a vision that allows us to utilize existing assets in new ways to service this technology revolution. Whether the AI workloads are across a multi-cloud environment deployed on our customers' premise or at the edge of the networks, we have a suite of offerings that businesses can utilize to fully leverage AI capabilities. Our vision is built around best-in-class connectivity and edge compute assets. It all starts with connectivity. Over the last 20 years, we have built unmatched fiber assets, not only in our ILEC footprint via Fios, but also outside through our 71 city One Fiber buildout. Together with our industry-leading long-haul network that stitches these metros together, we can provide lit and dark fiber services to our customers over a large geographic area. We have edge-to-cloud connectivity and expertise, and we are ahead of the curve in this area. The investments we have made in our Converged Intelligent Edge Network over the last several years will pay dividends in this new world as users need even more bandwidth and network visibility. Our network is intelligent and programmable. Customers want to control where and when AI workloads are running. And to that, we are building new capabilities to give users more insight and control via new tools. Essentially, we are allowing them to program their network resources to optimize their operations as they see fit. And finally, edge compute. As AI shifts from training to deep deployment, the need for distributed computing will become increasingly important for real-time decisions and predictions. We have thousands of distributed telco facilities, many of which already have power space and cooling available for this compute at the edge. As we take stock of our existing assets, Verizon's ability to be a foundational player in the AI ecosystem is clear. The technical infrastructure required to enable AI is evolving. AI demands massive amounts of data, powerful chipsets and high-speed, secure, flexible network connectivity. Market analysts estimate there will be over $1 trillion of investment in AI infrastructure over the next 10 years, and some suggest AI network traffic will grow at 35% plus CAGR over the next five years. Enormous investments have been announced, and we expect more to come. All of this AI infrastructure will need to be underpinned by secure network connectivity that will bridge the new distributed compute landscape. At Verizon, we see ourselves as not just participants in this AI-driven future, but as a key player enabling its success. Verizon's leadership in the enterprise connectivity market is poised to become even more crucial as AI applications become more widespread among end-users. We believe Verizon will serve as the essential link between these GenAI applications and the firms that utilize them. With a growing network of over 16,000 near-net enterprise locations, Verizon is positioned at the forefront of AI deployment, providing the connectivity solutions that will enable the seamless integration of AI applications across a wide range of industries and sectors. We also have extensive connectivity to third-party data centers currently ranking close to third in the market. Data centers will continue to be crucial in this new AI-powered world, and 40% of data centers are expected to face operational constraints by 2027, which is another factor for workloads moving to the edge. Verizon's extensive fiber and programmable networks are ready to meet these demands across key markets. And we're not alone in recognizing the opportunity. Industry analysts are seeing and predicting further significant growth in the AI market. Hyperscalers are expanding into new markets, and they need high-capacity connectivity. The industry is seeing a surge in cloud migration and colocation demand. Lastly, power space and cooling are the currencies that are in demand right now, and we have all three. As we look across our assets, take inventory and compare against players in the market, we believe that we are in a leadership position when it comes to usable power and space. We have facilities across the United States that either have spare power, space and cooling or can be retrofitted. As we sit here today, we have 2 to 10 plus megawatts of usable power across many of our sites. Also, as we move through our network transformation work, we will continue to free up more resources that could be made available for AI Connect. In addition, we have between 100 and 200 acres of undeveloped land, some currently zoned for data center build and much of it in prime data center-friendly areas. This is not a theoretical discussion. We are seeing increasing demand for our AI Connect offerings. We already have a funnel of over $1 billion simply leveraging our existing infrastructure. Major players such as Google and Meta have purchased capacity in our network with the intent of using it for their AI workloads. Some of these deals are reflected in our fourth-quarter results and are contributing to the margin improvements you saw in the quarter. We are working closely with industry players like NVIDIA to reimagine how telco functions can work along with AI workloads. We are starting this development at the far edge in a private network. The applicability will go beyond that and potentially into the macro network at some point. I'm also happy to report that we have a new strategic partnership with Vultr, a leading global GPU as a service provider and cloud computing provider. Initially, Vultr will deploy their GPU as a service infrastructure in one of our data centers and tap into our high-capacity fiber network for distribution. We anticipate helping to broaden their reach and enable our mutual customers with AI training and inference capabilities at the edge over time. The bottom line is we are ready to help power the AI ecosystem. We have the assets, the expertise and the vision to deliver AI solutions at scale. By unlocking the potential of our existing assets, we can further improve the financial profile of Verizon business. The team has worked hard over the last few years to help mitigate the impact of secular wireline revenue pressures. Together with continued strong results in mobility, FWA expansion and work on cost efficiencies, Verizon AI Connect positions us for success into the future.

Thank you, Kyle. I hope you now got more insights into how we see we can connect the AI ecosystem, both from a capability perspective and also from the assets we have, and that we already now have customers and solutions in the market. And this is just the beginning. I'm really excited about what we see right now as an opportunity for us in this area. Lastly, we had a great 2024, and I look forward to exciting opportunities and continued growth ahead. So, by that, I hand it over to Brady to handle the Q&A.

Yeah, thanks, Hans. Brad, we're ready for the first question.

The first question comes from John Hodulik of UBS. Your line is open, sir.

Thanks and good morning, everyone. To start with Kyle's comments on AI Connect, could you provide some insight into the overall opportunity in connectivity, considering we've been receiving announcements almost weekly? It would be helpful to understand the potential size of this opportunity in terms of connectivity as well as space and power. Additionally, regarding your operational performance, you demonstrated significant momentum toward the end of the year with over 5% growth in wireless gross adds and a strong performance in broadband. Could you discuss what has driven this momentum and whether it has continued into the beginning of 2025? Thank you.

Thanks, John. I'll begin with the second question and then return to the AI discussion with Kyle. Regarding momentum in both broadband and wireless, across the Business and Consumer Groups, we've made significant structural changes, including leadership and product updates, along with rebranding efforts. We're seeing our products resonate well in the market, and our new customer additions in the fourth quarter were the best we've seen in a decade, which is very exciting. On the broadband side, fixed wireless access is performing excellently, and combined with fiber, we've exceeded 400,000 in additions for the quarter while continuing to gain market share. On the wireless front, we're strengthening our position with several consecutive quarters of improvement. This success is a result of effective execution, proper product offerings, and solid branding, alongside an improvement in our network performance. Our network numbers reflect this; wherever we deploy C-band, we experience strong sell-through, enhanced fixed wireless access, and reduced churn. All of this is the outcome of our efforts over the past few years. Now, I would like to invite Sampath to provide further insights, and afterward, Kyle will discuss the AI opportunity, which we believe is substantial with our resources. But first, Sampath.

Thank you, Hans. In 2025, we anticipate a higher number of net additions compared to 2024. In the fourth quarter, our business showed strong momentum. We have experienced eight consecutive quarters of growth in phone gross additions, and we expect this trend to continue into 2025. One reason for this is that our value proposition is resonating strongly with customers. Over half of our customer base is already on myPlan, which offers unique savings that other providers cannot match. Additionally, the enhancements we made in sales execution and local marketing during 2023 and 2024 are beginning to yield positive results, and we expect this to persist into 2025. Furthermore, we have started to explore new opportunity segments, with Q4 marking the beginning of this initiative. We are seeing a shift in Tier 1 markets, where we have historically had less presence, and we are starting to gain market share in these areas. We have also focused on the Latino segment in recent quarters. As a financially disciplined operator, we recognized growth opportunities in Q4 and took action.

Hey, John, thanks for the question on AI Connect. I mean, our best guess at the moment is the TAM we can sell into with what we have is probably $40 billion plus, but you see that every single day, there's new announcements of hundreds of billions of dollars going into this ecosystem. And like I spoke about, we have a lot of assets that can play right into this. And frankly, we have well over $1 billion plus in funnel right now, and that's really only with our services that we have today. That's not even counting the power space and cooling stuff that I talked about. So, I feel this is going to grow. Where it ends up? I think it's anybody's guess. But the investment going into here is massive, and we're going to be able to play right into it.

Great. Thanks, guys.

Yeah, thanks, John. Brad, we're ready for the next question.

The next question comes from Michael Rollins of Citi. Your line is open.

Thanks, and good morning. Curious if you can provide a bit more context on the upgrade environment in terms of what you saw from customer behavior during the fourth quarter. And if you could share some additional context on the drivers behind your base case for upgrades that are embedded within the 2025 guidance? And then second, just in terms of financials, if you could just share some of the additional drivers that are contributing to the faster EBITDA growth guidance for '25, as well as if you could share some of the bridge items between EBITDA guidance and free cash flow guidance for '25, including things like tax and working capital?

Thank you, Mike. Regarding upgrades, after several quarters of decline, we've observed a slight growth recently. This isn't surprising after such a long period. Customers, particularly on the consumer side, are keeping their phones for over 40 months, which contributes to this situation. The trends in upgrade cycles are largely influenced by new technologies and hardware designs, though we haven't seen much advancement in that area recently. Additionally, our products are significantly better and more durable. I’ll have Sampath share further insights on this. As for EBITDA expansion, Tony will discuss that, but we have focused on reducing costs through various initiatives, including voluntary separation programs and outsourcing efforts. These changes, along with the growth we've started to see, are helping us gain leverage in our model, which is reflected in our cash flow and EBITDA. It’s important to note that we are evaluated based on three key metrics: wireless service revenue growth, EBITDA, and cash flow expansion. We demonstrated this in 2024 and our guidance for 2025 suggests we’ll continue on this path. The team is fully committed to these goals. Now, I’ll turn it over to Sampath for comments on the upgrade environment.

Yes, Hans. Look, 2024 was our lowest upgrade rate in a very long time. In Q4, we saw some modest increase, 10 basis points increase year-on-year. So, we think 2024 was the bottom of our low upgrade rate. And we're going to start seeing gradual improvements in 2025. I think mid-single-digits is what we have assumed in our plan and our guidance. And I think we're going to be quite comfortable with that. It's driven by two very important things. The first is the life of the device. It's exceeded 40 months right now. And at some point, customers will want new devices. The second is customers coming off their three-year DPP contract. We have a large cohort in 2025 coming off. So, a combination of those two gives us comfort that mid-single-digit increase in upgrades is what we expect in '25.

Good morning, Mike. To start with EBITDA, in 2024, we achieved about $1 billion growth. We also added 2.5 million subscribers across broadband and mobility, exceeding the midpoint of our range. For 2025, we anticipate a growth range of 2% to 3.5%, which translates to approximately $1.3 billion at the guidance midpoint. This indicates an acceleration in our growth rate and good operating leverage, stemming from robust service revenue growth and favorable customer economics. Hans discussed the customer economics without considering promo amortization. Moreover, Hans highlighted our focus on cost transformation and ongoing efforts to enhance business efficiency, including initiatives in customer care, AI applications, and managed services. Joe is working on eliminating legacy network components, and that effort is still in progress. We also implemented a voluntary separation program at the end of last year, which will provide full-year benefits this year. The guidance assumes a modest year-over-year increase in upgrades. We are confident in our ability to manage promo amortization impacts and achieve EBITDA growth acceleration. The investments we are making and the strength of our network, as Sampath noted, position us well for strong EBITDA performance. Moving to cash flow, as Hans mentioned, our cash generation remains robust. For 2024, we reported $19.8 billion in free cash flow, including about $2 billion from the tower deal. 2024 results demonstrate that we can navigate significant challenges, like cash taxes, while still maintaining a strong cash flow profile. Looking ahead, we provided a free cash flow guidance range of $17.5 billion to $18.5 billion and remain optimistic about cash generation, which is an all-in range we're managing to. The key drivers are similar to what we experienced in 2024, starting with EBITDA growth and the $1.3 billion at the midpoint. We set a CapEx range of $17.5 billion to $18.5 billion for 2025, and our network engineers will continue to use capital efficiently. Interest expenses are improving, with a significant $7 billion reduction in total debt during 2024. We'll persist in enhancing working capital efficiencies, extending beyond handsets. As for cash taxes, we expect continued pressure from bonus depreciation, pending any new legislation from Washington. Our free cash flow guidance assumes a mid-single-digit year-over-year increase in upgrades, excluding Frontier from the estimate. Overall, the guidance reflects our strong cash generation and allows us to focus on capital allocation priorities such as business investments, dividend commitments, and balance sheet deleveraging, which will be ongoing in 2025.

Thanks.

Yeah, thanks, Mike. Brad, we're ready for the next question.

The next question comes from Sebastiano Petti of JPMorgan. Your line is open, sir.

Hi. Thank you for the question. I have a housekeeping question for Tony regarding the $2.9 billion in device protection and insurance for 2024. What should we consider for the underlying growth rate in that revenue category that will be reclassified? I'm trying to understand the apples-to-apples service revenue guidance. How has that growth trended over the past several years, and what are the expectations for its contribution next year in relation to the overall service revenue guidance? Additionally, I have a question about fixed wireless. In the third quarter, we discussed the possibility of slowing growth in fixed wireless access, possibly due to increased contributions from suburban and rural areas as C-band is deployed there. The fourth-quarter numbers look strong. I'm also considering that you'll be launching an MDU solution in 2025, which should support growth in Tier 1 markets. Can you provide insights on how you anticipate the MDU solution will scale or its contribution in the 76 C-band markets? Lastly, Sampath, you mentioned expectations for consumer phone net adds to improve year-over-year, excluding second lines, which is great to hear. There's been a lot of focus on immigration growth. Can you touch on whether there might be a slowdown beyond the normalization we've seen across the ecosystem? Are there expectations for a significant downturn in immigration growth in 2025? Thank you.

Thank you, Sebastiano. Let me begin by addressing the insurance question, which Tony will handle. Regarding fixed wireless access, you are absolutely correct that our C-band deployment is our top priority for mobility. This means that our secondary business case for fixed wireless access will focus on Tier 2 and Tier 3 markets, which are less densely populated. The speed remains consistent. Some in the market may think we're slowing down, but that's not the case. You can see the numbers from the fourth quarter; our teams are performing excellently. However, there may be fewer opportunities as we head into the first half of 2025. Nonetheless, with the MDU solution coming in and the ramp-up of Fios, we expect to maintain our strength in broadband. We captured market share in broadband in 2024, and I'm confident we can do it again with our fixed wireless access and Fios offerings. This will be another great year for fixed wireless access, especially as we introduce new products and continually enhance our offerings. I'll ask Sampath to provide some insights on that and immigration, but before we delve into immigration, I want to highlight that we've managed our portfolio effectively across all customer groups, despite a slower or smaller switcher pool. Our offerings remain attractive to the market, allowing us to grow even in a competitive environment. I feel confident that, regardless of market changes, we can keep progressing. I'll turn it over to Sampath for his comments, and then Tony will address the insurance question.

Thank you, Hans. Our value proposition in fixed wireless access and broadband is really resonating with customers. myHome is performing well and meeting customer expectations. On one side, we have fixed wireless access, which attracts premium clients who appreciate its ease and convenience. On the other side, fiber offers high reliability and performance. This segmentation has contributed to our ongoing success, as we capture over 50% of the industry's net additions. We expect to maintain this momentum in 2025, just as we have in 2024. We anticipate broadband net additions between 350,000 and 400,000 per quarter, with some fluctuations as we scale three major initiatives in this space. The first is rolling out C-band in Tier 2 and Tier 3 markets, which have different densities and sales speeds. The second is our multi-dwelling unit product for fixed wireless access, which we are starting to scale through 2025. The third is expanding Fios to 650,000 households. All three initiatives will develop throughout the year, and we are comfortable with the 350,000 to 400,000 range despite some fluctuations. Additionally, we are beginning to see a positive increase in average revenue per user, as customers are opting for our premium and gig plans on Fios and fixed wireless access. This reflects the resilience and convenience of our services. Speaking on behalf of customers, they have faced limited choices in broadband providers for decades, often encountering similar pain points like unclear pricing and poor reliability, which results in low satisfaction. We understand that customers want high performance, reliability, straightforward pricing without hidden fees or temporary promotions, and genuine transparency. That is exactly what we are providing, and it's well-received. With this foundation, we are confident in achieving 350,000 to 400,000 broadband net additions each quarter.

Good morning, Sebastiano. Just on the handset insurance, so just a couple of things here. So, it's recurring handset protection revenue, and it's value that our customers receive. That's very complementary to connectivity. We are going to recast the historical revenue, so we'll provide them so you have a comparable view. The impact is about $2.9 billion in 2024. So, the baseline of service revenue exiting 2024 is about $82 billion. The impact to growth rates is not significant, maybe 5, 10 basis points. And there's obviously no change to the service another category.

Thank you.

Okay. Brad, we're ready for the next question.

The next question comes from Jim Schneider of Goldman Sachs. You may go ahead, sir.

Good morning. Thanks for taking my question. One on wireless and one on AI, if I may. On the wireless service revenue, I think, Tony, you've talked about the $2 billion step-up roughly for this year, but the growth rate is essentially underlying roughly doubling when accounting for the accounting change you're introducing. So, does this sort of imply as we exit '25 and go into '26, that we're going to be able to kind of maintain that same level of pace in terms of absolute revenue dollar growth on service revenue? And then secondly, on the AI Connect, Kyle, thanks for the good detail. But can you maybe give us a sense of the $1 billion pipeline of sales? When do you think we're going to see material revenue being actually recognized in the P&L? And what's the split roughly between the connectivity business and data centers long term?

Okay. Regarding the promo amortization, I want to restate what I mentioned earlier. We are currently guiding for a growth range of 2% to 2.8%, while our underlying growth is nearly twice that. By year-end, this growth will begin to taper off and have a lesser impact moving forward. At this point, we are not providing guidance for 2026, but we feel confident in our position. The challenges we faced from substantial investments in 2022 and 2023, which were not our strongest years, are still affecting us. However, due to the financial discipline and efforts from Sampath and Kyle over the past 12 to 18 months, we expect a positive shift that will relieve some of that pressure by year-end. So, it's important to clarify that we are anticipating nearly double the growth compared to our guidance in real terms, though we need to adhere to accounting practices. Now, I'll pass it over to Kyle for insights on AI.

Thank you for the question, Jim. Currently, our focus is primarily on connectivity for web scalers, specifically lit services, wave, and dark fiber. We are pleased to announce that we will also be adding power, space, and cooling to our portfolio. Over time, we expect to sell not just wave and dark fiber but also bundles that include power, space, and cooling alongside networking services on a project-by-project basis. We will ensure to maintain our strong profit margins. In terms of revenue recognition, we booked revenue related to this in the fourth quarter, which contributed positively to our EBITDA trajectory. Our goal is to drive more of this to the bottom line as we move through 2025, and we are looking forward to expanding our business in this area.

Great.

Yeah, thanks, Jim. Brad, we're ready for the next question.

The next question comes from Ben Swinburne of Morgan Stanley. Please go ahead with your question.

Thanks. Good morning. I wanted to ask about ARPA growth and the competitive landscape, and then I will return to Kyle regarding the AI topic. You experienced over 4% consumer ARPA growth in Q4 and mentioned anticipating strong growth in '25. Could you discuss the competitive environment a bit and what gives you confidence in your ability to selectively raise prices and the factors driving ARPA growth for the consumer business? Kyle, you mentioned dark fiber. We have noticed some competitors making significant investments in capacity. Could you elaborate on how much of the AI opportunity relies on existing assets? Additionally, if you are investing within your CapEx guidance for this business, where are those investments focused? Thank you.

I will begin by discussing the competitive environment. There isn't anything particularly new; however, we are performing significantly better. Our competitive strategy revolves around our network, product and service offerings, and brand strength. Looking back at last year, our network continues to improve, and we are now increasing our C-band coverage to 90%, indicating further potential growth. On the product side, initiatives like myHome and myPlan are gaining traction, and the ongoing brand refresh, although only six months in, is also yielding positive results. Overall, we are competing more effectively in the market than we have in the past. Now, I will hand it over to Sampath to provide more detail on our ARPA growth, and I’ll let Kyle address dark fiber specifics. Generally, everything is accounted for in our guidance, and we mainly rely on our existing assets. Mr. Sampath?

Thank you, Hans. To elaborate, our focus is ultimately on the value proposition. We have developed a robust value proposition backed by our top network, which instills confidence in our average revenue per account (ARPA). I'd like to take this chance to discuss our overall service revenue opportunities. We aim for a medium-term balance of 80% from pricing and 20% from volume, which is essential for a sustainable subscription business model. We're making progress towards this goal. The year 2024 marked a positive beginning, with volume contributions improving across all our sectors: mobility, fixed wireless access (FWA), and value, which has been a weaker area for us in the past. We anticipate continued growth in postpaid volume and sustained momentum in broadband, addressing the volume aspect of our strategy. When it comes to pricing, we have two primary pricing strategies. The first involves increasing prices for the additional value provided to our customers. In 2024, we implemented four significant price increases, and we've initiated two more in 2025 as we enhance value for our customers, who are responding positively to our pricing structure. While we cannot comment on future price changes, we will consider factors like churn rates and higher input costs, along with the value we deliver. For 2025, our strategic price increases are already projected to contribute over $1 billion to our service revenue growth. We also expect positive developments from volume growth. Customers are upgrading as they opt for more premium plans, especially with the rollout of C-band technology, providing us a beneficial trend. Additionally, we are actively exploring new monetization avenues for our network, including network slicing, which we launched in Q4 2024, and enhanced satellite connectivity through partnerships with Apple and Skylo. As these initiatives develop, we expect increased monetization opportunities. Altogether, these elements give us strong confidence in achieving substantial ARPA growth in 2025. The market is competitive, but we are pleased with our strategy and believe it is effectively driving our performance, similar to our success in 2024.

Regarding AI, I appreciate your question, Ben. Some of our competitors are making investments now, but our strategy is to utilize the investments we’ve made over time. As MPLS continues to decline, we can rethink how to use our existing assets. Most of the tools we will use to enter these markets are things we’ve already developed. We’ll be making slight modifications to the assets we already possess. We also have capital expenditure set aside because for some of these projects, we will need to invest a bit more to enhance our fiber and connect with the right data centers or business locations, as well as retrofit technical spaces. We have financing for that and are prepared to proceed, all of which is accounted for in our budget. We’re truly capitalizing on the work we’ve accomplished over the past decade with One Fiber, Fios, and IEN, and we’re going to build on that to capture market opportunities.

Thanks a lot, guys.

Yeah, thanks, Ben. Brad, we're ready for the next question.

The next question comes from David Barden of Bank of America. Please go ahead with your question.

Hey, guys. Thanks so much for taking the question. I guess, first, more of a housekeeping item for you, Tony. Now that we've pulled fees out of other in 2023, now we're pulling insurance out of other in 2025, what is 'other'? And is it now more of a pure-play representation of the monetization of your cable relationship perhaps? And then, the second question is, obviously, in the new administration, I know you guys are well aware that everybody is now thinking about big deals. And one of the bigger deals people are talking about is could Comcast and Charter come together. And I guess the question is, what would that mean? As we think about that possibility, how should we think about what it would mean for Verizon in terms of are there change of controls? Would this larger entity have more bargaining power with you the next time we have a conversation about pricing? How would it all work? Thanks.

Good morning, Dave. So, what's left is really USF and other fees along with the MVNO relationships, but all the other recurring revenues are up in service revenue.

Yeah. So, first of all, I cannot speculate on whatever combination you're seeing in front of you. But again, our MVNO relationships are very important to us. They're treated like large enterprises. I think we both are very satisfied with the relationship we have and what we have built together. And remember, our strategy is to build the network once and have as many profitable connections on top of the network. And this is accretive to us, as we said before. So no, I cannot comment on any combinations that can happen. I think we're in a good position. We have the best network in the market. And I think that resonates with customers, and I think that's the most important.

Thanks, Hans. And if I could just do one more follow-up, Tony? Is there a specific increment in cash taxes that you've baked in that you can share with us for the cash flow number?

So, we provided a guide for this year and outlined the factors influencing it. We will adhere to that guidance. We met our expectations for 2024, and I anticipate that we will continue to meet our guidance for 2025.

But it is a higher...

It is higher, yeah, but we're not going to give this to.

Yeah, great. Thanks, Rob. Brad, we're ready for next question.

The next question comes from Sam McHugh of BNP Paribas. Your line is open.

Thanks, guys. Two questions. On the wireless service revenue, you obviously have a few puts and takes with the promo amort and the price-ups. How should we think about the phasing of these headwinds and tailwinds through the course of 2025? Number one. And then secondly, on the business EBITDA, you mentioned some of the AI-related sales. Maybe you could elaborate on how material they are? Are we at a place now where we should be confident on this inflection point in business EBITDA and can that be enough to support this? Thanks very much.

Good morning, Sam. Regarding service revenue, we are optimistic about its trajectory. It's based on $82 billion, and the midpoint of our guidance suggests approximately $2 billion in additional growth. We have implemented several pricing initiatives that will carry into 2025. We also noted an improving volume situation in consumer, which Sampath highlighted, along with stable business volumes. We continue to experience strong volumes on the B2B side. Additionally, fixed wireless access is growing, with a $2 billion revenue base in that area, which continues to expand, as evidenced in the fourth quarter. Another factor to consider is prepaid; the positive volumes and the turnaround that Sampath mentioned are expected to enhance the revenue profile in the latter half of 2025, turning that headwind into a tailwind for prepaid. However, there's still the factor of promo amortization, which we anticipate will peak in 2025. Nevertheless, as Hans pointed out, the customer economics remain strong, and we expect headwinds to lessen towards the end of this year and into 2026. As Sampath noted, we are aiming for a better balance of pricing and quality, which we believe is evident in both mobility and broadband, and we expect this trend to continue into 2025. The strategies Sampath detailed in terms of execution are setting us up for sustainable revenue growth.

On the Verizon Business Group, I'm going to ask Kyle to comment on it. The AI Connect is one contributor, but the entire Verizon Business Group team has done a great job with many aspects. The wireless growth over the last couple of years has been impressive, consistently adding between 125,000 and 150,000 new net additions every quarter. Fixed wireless access has exceeded our expectations in the Business Group. Additionally, the cost reductions are paying off, as reflected in the fourth quarter's positive year-over-year improvement. I believe we are onto something, despite the challenges we face in the market. I want to acknowledge that, although Kyle doesn't need to say it, the team has performed excellently. I'm cautiously optimistic that we can maintain this momentum.

Thank you, Hans. I appreciate your question, Sam. I won't dwell on that. The revenue we recognized from AI Connect in our first quarter was small and had a slight impact on EBITDA. The main drivers of our performance are the cost management strategies and efficiencies that Hans mentioned, along with new revenue opportunities that our team has effectively pursued. We've seen consistent growth in EBITDA over the last three quarters, and for the first time in a long while, we experienced year-over-year growth in the fourth quarter. I believe these positive trends will carry on into 2025 based on the strong foundation we've established. Regarding fixed wireless access, it has become a significant success for us as more business customers feel confident using it as their primary connectivity solution. We've noticed strong demand and growth, especially among larger clients like big banks and retailers. Our recent announcement with Brightspeed highlights a new market opportunity where we can leverage our fixed wireless access network to modernize outdated copper lines. This approach opens up promising sales prospects. Along with our initiatives in private wireless and AI Connect, I am optimistic about our path forward into 2025.

Great. Awesome, Kyle. Thank you.

Yeah, thanks, Sam. Brad, we have time for one more question.

Your final question will come from Kannan Venkateshwar of Barclays. Your line is open.

Thank you. Sampath, you mentioned a few factors driving growth on the consumer side, like the Tier 1 markets and the Latino segment. While your postpaid lines have increased, account growth remains negative. Is there a chance to achieve positive account growth by focusing on these new segments? Will we start to see this trend over the coming year? Additionally, regarding immigration, I might have missed your response earlier, but how are you considering its impact on overall industry volumes this year and beyond? Thank you.

Thank you, Kannan. I will ask Sampath to answer those questions, but I think we're in a really good position with our offerings to continue regardless of anything that happens. So, but, Sampath?

Thank you. Hey, Kannan, good morning to you. On the overall market growth, we think postpaid is expected to grow between 8 million and 8.5 million lines in 2025 all in for Business and Consumer. It's a robust market. It's a very resilient market. And similar to 2024, pre to post migration makes up almost half of that. It's not a segment we play in on the retail side, but we leverage our wholesale channel to go after that segment aggressively. Despite there have been lower immigration in the last few quarters, yet we are seeing really strong performance in our value business. I think our refreshed value brands, our value proposition, our relationship with Walmart, as well as expanded total wireless distribution is working very well. So, we can continue to grow for net adds in this environment, and we feel very comfortable with that. Now, to answer your first question on account growth, we saw account growth in Q4. You see that. But I think at the end of the day, what we are focused on is building deep relationships with our customers. If you look at the way our offering framework works is we start with connectivity. We want to offer the best connectivity products, both at home and on the go in mobility and, of course, on the value side. And then, on that foundation of that relationship, we start selling more to those customers, whether it's some of our entertainment products with Perks, it gives you savings that others can't give, our TMTR protection products, our cloud products. So, we want to deepen our relationship with customers. And I think that's the way we see long-term growth in our business. You saw very strong ARPA growth of over 4%, and underlying growth is, of course, much higher than that when you take care of promo amortization. So, account growth is important to us, but what is important to us is profitable customers who value the quality of the network and our offering framework, we want to grow in those.

Thank you.

Yeah. Thanks, Kannan. 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.