Verizon Communications Inc. (VZ) Presents at Citi 2019 Global TMT West Conference (Transcript)

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About: Verizon Communications Inc. (VZ)
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Verizon Communications Inc. (NYSE:VZ) Citi 2019 Global TMT West Conference January 8, 2019 11:00 AM ET

Company Participants

Ronan Dunne - EVP of Verizon and President of Verizon Wireless

Bracken Darrell - CEO of Logitech

Conference Call Participants

Stephen Graham - Deputy Director of US Equity Research at Citi

Jason Bazinet - Cable, Media and Satellite Research Group of Citi

Chris Danley - Semiconductor Group of Citi

Atif Malik - Semiconductor Equipment Group of Citi

Mike Rollins - Heads our Telecom Research of Citi

Adam Ilkowitz - Equity Research on Telecoms in the U.S. and in Canada of Citi

Tobias Levkovich - Equity Strategists of Citi

Jim Suva - IT Hardware and Network Equipments of Citi

Asiya Merchant - IT Hardware of Citi

Walter Pritchard - Software of Citi

David Phipps - High Yield TMT of Citi

Kevin Toomey - Sales Specialist in Equities of Citi

Cristina Rosenberg - IG and High Yield Specialist of Citi

Stephen Graham

It's TMT West Conference. I'm Stephen Graham. I'm Deputy Director for Research in the U.S., with oversight over various sectors including TMT. I want to thank you all for being here. Thank our clients who have come from quite far. Thank in particular the participating companies and the outside experts who will be sharing ideas with us. There are, I believe, over 65 companies and outside experts who are here.

Now Citi continues to invest in the TMT research business, in our equity desk, in our investment banking, it's an important focus for the firm. There are about a dozen of our senior research and equities people here with us in charge of various segments. I'm going to briefly run down the list. Some of them, Jason Bazinet, one of your hosts, he runs our Cable, Media and Satellite Research Group; Chris Danley runs the Semiconductor Group; Atif Malik runs the Semiconductor Equipment Group and works closely with Chris; Mike Rollins and Adam Ilkowitz are in charge of Equity Research on Telecoms in the U.S. and in Canada respectively; Tobias Levkovich is here, he is our Equity Strategists; Jim Suva, IT Hardware and Network Equipments; Asiya Merchant who works with Jim also in IT Hardware; Walter Pritchard on software; David Phipps High Yield TMT; Kevin Toomey, he was your host last night at the cocktail reception and the football game that ended up a bit lopsided; and Cristina Rosenberg, IG and High Yield Specialist. I'm sorry Kevin Toomey is I think that I'm not sure if I said that right. David Phipps, High Yield TMT; Kevin Toomey is our TMT Sales Specialist in Equities.

The broad sessions will be in this room and neighboring rooms. They're going to be more interactive than in past years. You'll see clickers on the table in front of you and the audience will be pulled periodically to get your opinion on whatever topics come up.

The corporate access teams at the front desk. Most of you have already been by that desk and they can help you with any issues, scheduling questions, problems, et cetera. They can also point you to where your one-on-one meetings are right across the hallway in the maze of cubicles in the other ballroom.

Our first two sessions will be with the Verizon and in this room and Logitech, and I believe it's a ballroom set in two rooms down. We have with us in this room, Ronan Dunne, Executive Vice President of Verizon and the President of Verizon Wireless. And for Logitech, we have the CEO of Logitech, Bracken Darrell, see Mike Rollins who Heads our Telecom Research team will host Mr. Dunne up here. And I'll turn it over to him now. Mike, there you are. Come on up. You had a great conference. And please do press our analysts with your questions, push back, help us keep pushing forward, our mutual understanding of the space that keeps on changing. Again have a great conference. Thank you.

Mike Rollins

Thanks Stephen. Good morning. Just by way of reference, we do have disclosures at the registration deck and for those joining us now via the webcast, I'm Mike Rollins, and I cover the telecom and communications infrastructure categories for Citi Research. For our first keynote of the conference, it's a pleasure to welcome Ronan Dunne, President of Verizon Wireless. Ronan, thank you so much for joining us today.

Ronan Dunne

Thank you, Mike, my pleasure to be here.

Question-and-Answer Session

Q - Mike Rollins

Well, maybe could get us started. New Year, what are your key strategic and operating priorities as you enter into 2019?

Ronan Dunne

So, it's a great question. Just again a reminder of the safe harbor statements in the events that I make a forward-looking statement that may contain risks, so just you're all on notice. I think really the focus for us in 2019 those around three things. At a corporate level, it's operational focus, discipline around the balance sheet. At the wireless level, it's continued the momentum that we've built in 2018 with a focus around the customer and really lay the ground for an amazing 5G opportunity. So finding that balance between driving the amazing experience that we're offering on 4G today, getting people more engaged with the category, and using that really as the template to engage customers in the prospect of 5G what we start to build our that capability.

Mike Rollins

So maybe also just in terms of some significant announcements Verizon's made. Last year, the Company talked about the realignment and product to customer vertical. Can you give us a little sense of what's going on with that and also how that changes, if at all the go-to-market strategy for Verizon?

Ronan Dunne

Yes, sure. It's a great question and it'd be inside for us was particularly I think in the context of the fundamental shift that 5G was going to create was that we wanted to build the future with the best of today. And in some respects, a product or technology orientation was kind of inconsistent with the way our industry is evolving. Our customers are looking for solutions in the business world. Our consumers are looking for experiences. They're very largely technology agnostic. They're largely barrier agnostic. So, this opportunity for us to take world-class assets in product, in wireline and in wireless and organize them in a way that our go-to-market was oriented around customer and was responding to customer demands. And the way I described in the wireless business is, show us how and where our customers would expect. And I think that opportunity is right for today will becoming increasingly critical in a 5G world where as you know already we've launched a 5G residential broadband service. So this idea of wireless and wireline is kind of VHS and Betamax.

Mike Rollins

And so taking a step back maybe just to the core 4G business right now. Can you talk about the competitive landscape in wireless and what you're seeing out there?

Ronan Dunne

Yes, sure. So I think we saw an evolution of the competitive model in 2018 and just to remind people you know we started a little over two years in the business and we started at the beginning of '17. We have challenged around the fact that we had a narrative around the best network, but we hadn't really critically explained to customers how they could access that. So, we launched Unlimited at the beginning of '17.

And the key thing there is that unlimited is not simply one size fits all. So what you saw us do throughout 2018 was build out the category in the context of an unlimited world. So increasingly giving our customers more choice whether that be mix and match, whether the opportunities to bring additional services. You know interestingly 20% of all of our new customers are taking the Apple music offering.

But within mix and match an increasing number of our customers are taking lines at different plan levels with more customers who join us are taking unlimited today than they did in the past and more of our existing customers are migrating. So what is that saying, what I'm saying is that we've moved from a one size fits all in the broadest sense to how do we use the size and the scale of a business like Verizon and yet deliver it, as a personalized exquisite experience to an individual customer. I think we've made great strides in that during 2018.

How has not affected the way we show up competitively? Well, more people both customers and prospects are realizing that if Verizon delivers plans to meet my needs. They're also seeing the value in our offerings, but also what we're seeing is that in a more kind of mature market and that most people who want a Smartphone, have a smartphone.

Now, they're actually saying, what is it that I want? How do I want to use this service? What are the elements that are important to me? And the truth is my children use the phones differently to the way I do. And so, what we're doing is? We're increasingly personalizing essentially. We're using a network that supports 130 million to deliver an individual one to one service to each of those rather than a one to 130 million servers. And that has resulted I think in a change in the way competition. So we're seeing re-pricing in certain segments we're seeing us focus on things like military over 55. You've seen us more recently with first responders.

So, it's a different shape of market and I think that means that we're able to target our assets and our resources in a way that's better meeting customers' needs and allowing us to have a competitive edge.

Mike Rollins

I guess some thoughts about the fourth quarter that you want to share with us?

Ronan Dunne

Yes. No, so thank you for that. I think we built some nice momentum in the first couple of quarters and really have a model that says how we're growing our business. And we were really focused in Q4 on just making sure that our messages were clear and simple to customers. And I'm delighted to say congratulations to my team. You know we had an outstanding fourth quarter and clearly we're in a close period. Matt will tell the numbers at the end of January. But what I can do is share with you this morning's just something on the physicals.

So, from a market point of view in Q4, we added 1.2 million postpaid net adds, and within that some 650,000 phone net adds and all that a churn level just up 2 basis points seasonally at 0.82. So I think from a shape point of view, I think Mike can suggest that's probably slightly higher than maybe you have in your numbers and I don't know about others in the in the room, but I think that's a strong, strong performance. And also interesting in the context of we haven't seen any real change we said it before, not seeing much in our business of pre to post migration.

And in the context of the fact with fourth quarter was the first time you have the two MSOs stood up and competing for long, it's fair to say that we lost less than our fair share to the MSOs. We have a great relationship with them where the carrier partners of choice for them, but also in our brand new business we lost less than our fair share to the MSOs. So we have around from a trading performance very pleased with how the team did in the fourth quarter.

Mike Rollins

So, there is two questions that I think have and thanks for sharing those details. The first one is at a sector level, the second at Verizon level.

Ronan Dunne

So, what's that a bit, Mike, by the way from your numbers just to check, just curious.

Mike Rollins

Well, so our forecast for the fourth quarter was 400,000,

Ronan Dunne

400,000, okay, 650,000, so I think that's a bit.

Mike Rollins

So, let me ask you about the industry. First question on the industry, what is driving the strength in postpaid phone adds in 2008? And you've obviously just described what you did in the fourth quarter, but from an industry perspective, what is it that caused this acceleration and how sustainable is that?

Ronan Dunne

Yes, so that's a very top when I look at something like a 1.2 million postpaid. Engagement in the category is actually growing. And so what we're saying is, we're seeing more lines per account, we're seeing more people taking a connected devices, whether that be watches, whether that'd be more tablets and other things. So, the overall engagement with academy and I think the way we liberated more engagement in the category is a combination of better plan to allow people to mix and match, but also the fact that unlimited gives people that peace of mind to really not in the category. So I think that's important.

So I think there's an overall engagement in the category which is given growth to the industry. And I think we're taking at least if not more than our fair share. But I also think that when we're now at a point where I think we're seeing whether it would be in the older demographic of the younger demographic, we're saying also stretch in participation. And I think for the industry overall, there is a pretty supposed migration. And in other way I might be saying that is, most of my brand and business I'm a premium prepaid provider in my around the business. So if I'm saying pre to post migration, I'm taking customers from somebody else.

Mike Rollins

And Verizon's specifically talk about the customization or the mass customization of the promotions, but were there a couple things in particular that really shown through for Verizon to deliver the results that you just did?

Ronan Dunne

Yes, I think the increasing momentum of our unlimited plans and it's important to emphasis this plan, because we started with one plan. We said, okay, we introduced unlimited and that in itself was a big thing. There is big though we never do as you probably have a friend on this platform in the past and you probably said over his dead body. So, we made a change, we built the world's best network. I thought it was a really good idea to give people the access they deserve to the best network on the planet.

From that then we built out the category though, so we've introduced it in the prepaid, we introduced it in business and we introduced the concept of mix and match. So what we're doing is, we're building out the categories in a way that's allowing more customers to get exactly what they need. And ultimately, that's allowing us to win more than our fair share, our win share in the marketplace is very strong and it's stronger than it's been for some side, that's what building our momentum.

People see more choice on the best network and that's it. And we're reinforcing that, one of the reasons why as we go later in the year with our Verizon 2.0 and the approach around the customers, that's allowing me to make sure that, I'm building experiences and service for the customers. That means the Verizon is famous for the experiences it delivers as the network it was delivered on. That's a real shift for us. And that's why you see in our surroundings it's moments of consequence people really engaging with those and say you know what, I see the value of being with Verizon.

Mike Rollins

So, the question that we've been getting is, what about sustainability into 2019? You've got AT&T building out FirstNet. You've got cable companies who talk about trying to take more share in your category. You've got proposed Sprint T-Mobile merger, so there is questions of what happens with that, if it does or doesn't go through. How do you react to the durability of what you're accomplishing?

Ronan Dunne

So, let me take that piece by piece. Look at what are the drivers and certainly just to remind people. The majority of my customers are not on unlimited plan. So I still have loads to go for there. With any of the plans, I'm seeing growth in activity within the plan. I'm also seeing growth in services above the plan, so more people talking family service or other things like that. So that's within our business like for like. Then within the context of the competitive I'd say, the B2B. B2B is the largest growing parts of our business and we said that up to Q3 we're not quoting any Q4 numbers and in segments, but it's largest fastest growing part of our business.

We have the wherewithal to compete with FirstNet that today. FirstNet doesn't even have the wherewithal to compete with FirstNet today. They haven't built out many of the things. We have 400,000 square miles of coverage, advantage over our nearest competitors. So, if you're a first responder and you're looking for coverage wherever I need it, I'm already delivering that. We have the capabilities within our network to give them the dedicated private network to give them the interoperability all of the tools the first responders need. So specifically to first responders, I feel very confident about our ability to not just meet but continue to meet the reputation that we with those.

In B2B more generally, we're also able to leverage the breadth and scale of our capability, the strength of our network. Just to remind everybody, it is the best performing network in the United States whether you ask the experts or whether you ask individual users. It wins hands down on both. There is an add running at the moment if you haven't seen it, just to remind you, our plan just in case anyone else tells you anything different.

So B2B, absolutely strong, so I think inside the competitive landscape you talked about the MSOs and the cable guys. I'll just go back to the point is, we are committed to being the best long term partner for the MSOs. It's a very important relationship to us. We're also committed to lose less than our fair share of our branded business to the MSOs and very happy for them to win business from others and for it to be served on the great Verizon. So I think when you put it in shape, we have the drivers internally and I think we're well positioned from a competitive response point of view.

By this we particularly targeted actions whether it be something like 55 of the things we demonstrated our willingness to show up and support the customers who are loyal to us in those categories.

Mike Rollins

If we migrate over to 5G which you're advertising on your lapel, so talk us about what's going on with your 5G strategy? Can you give us an update in terms of the commercial test markets and the experiences that you're seeing from customers?

Ronan Dunne

Yes, so just a reminder for everybody, the way we've been building out 4G for a few years now, it's effectively we've been building 4G and contemplation of 5G. The way we look at network strategies we look at spectrum, we look at densification and we look at features. What that’s allowed us to do is build ahead over the last few years in a way that allows us an easier and faster migration to 5G. The first part of that was we launched initial commercial launch of our 5G residential.

And again an important reminder to people, we're building a 5G mobility network that allows us an incremental opportunity of covering residential. We talked about an ambition of 30 million homes addressable market, but we're not building two networks. We're only building one a mobility network. What we're seeing in the initial commercial launch and again the initial commercial launches on 5G TF. And then we will migrate to a full commercial launch on 5G NR during 2019.

What we're seeing is three interesting things. The first thing is the performance of the product is higher than we anticipated. We advertised a 300 meg product and most of our customers are actually seeing closer to gig than to 300 meg. Now again to remind people, we're only using today 400 megahertz of the 1,000 megahertz of spectrum that we have in the millimeter wave. So we are only using 40% of the spectrum and we're seeing really, really strong performance.

The second thing that we're seeing is, we're learning very, very quickly. There are no propagation maps for 5G and propagation tools because there isn’t out there. So, literally as we build it and deploy it, we are building the tools and the mapping to understand how would you build a 5G coverage map and propagation map and the tools to help us. So literally every week our ability to identify the signals, signal strength and location for the nodes is improving. And so that's reducing our false positives it's also reducing our deployment time.

And the third thing that's really interesting is about half of the customers are new to Verizon. So my business model basically says, I'll build a 5G mobility on both, by the way I have an additional opportunity to increase ARPA, just sell them an additional products in the family. What I'm also saying is this is an acquisition tool from our wireless business as well. And if I've been a betting man I wouldn't have expected it to be 50-50.

Now, it's early days, it's for initial markets but it's still I think that's quite interesting. So 2019 during you know in the not too distant future, you will hear very specific announcements about the arrival of the first 5G smartphone. We've already told you that the first 5G enabled smart device will be the Motorola Z3 with the ability to put moto mod on it, the first that we've announced already with Samsung. The first fully 5G handset that will come will be with Samsung and Verizon.

So, the market really kicks off then and then it's really a matter of its build and deploy. And the one thing I'm excited about is we have more insight from the fact that we have a real 5G network up and running than anybody else. And that will help us to be smarter in the deployment as we roll out across ’19 and ’20.

Mike Rollins

Are those half of customers that are new? Are they still paying $20 or more a month?

Ronan Dunne

So just to be crystal clear, we've launched and it's in a promo period was free. But yes, they’ve signed up for 70 bucks rather than 50 bucks. Some of those customers by the end of that three month period may well be wireless customers as well so that may well qualify might for the 50 buck deal.

Mike Rollins

Any other insights, I know it's for commercial test markets, but are there insights into where you see the penetration and getting to just based on the momentum that you've had in adding some subscribers?

Ronan Dunne

It began, I think it's a danger to extrapolate, but I would say we're seeing consistent with our experience in our early files. We're seeing the same sorts of qualifications coming through the pipe. So, all the indications are very similar to and consistent with what we saw in those early day files.

Mike Rollins

One of the questions with your 5G strategies of course the use of millimeter wave spectrum and ambitions to also put that in mobile and the perception that millimeter wave doesn't travel as far. Can you give us a sense of how you view the ability to leverage millimeter wave for mobile leverage or capacity?

Ronan Dunne

So, probably the best way to describe that is, a while back, we do a sell-side analyst presentation, we actually showed coverage maps and we went dense urban environments and we showed our actual maps of our coverage today. And what it shows is that we built out 4G LTE network with a combination of coverage and capacity sites in dense urban areas.

Nobody has a 1,000 megahertz of spectrum deployed anywhere. So the capacity list is enormous. That means that we need to have coverage, we don't need incremental capacity sides. So because we built the dense network already, essentially we can deploy our 5G on that and in many cases in the densest urban areas will end up with fewer nodes that we have today. And those nodes will then allow us we will identify a little bit more in the outer rings. So we see it as the 5G millimeter wave is core to a true 5G experience. It what enables the massive increasing capacity is what enables be ultra low latency elements.

And what it also does is, it lift traffic of the 4G LTE network in a way that actually liberates 4G LTE capacity and ultimately liberating more of that spectrum to be redeployed as 5G spectrum. So as much as the capabilities of millimeter wave itself, it's the interplay that actually makes it every other network accident that we have more valuable.

Mike Rollins

And if you think about as you have more services on 5G in future, how do you think about the importance of a bundle with mobile services? And you've got of course that Fios experience to leverage with awesome bundling as well, but what do you see the future in terms of what the customer wants to buy from who?

Ronan Dunne

So, good question. So I think the first thing that's probably embedded in that is, you know, due course I'm not responsible for the Fios business today. But from April 1st, so we'll be responsible for all of our consumer operations. I don't anticipate building a new business that looks like the whole business. I'm not going to build another linear concepts model, so just to be clear on that. I think what we will see is the evolution of 5G will mean that ideally bigger this connectivity and bringing together what were two separate products to a kind of a single product, but with separate CPUs, billing, so that you have two elements within an overall conductivity package. So there's a wireline wireless convergence element within the bundle.

And then I think what will be interesting is with the evolution of DTC, OTT and SVoD, virtual MVPD, the whole evolution of map environment plus the developments of the new genres of the snacking content, the short format content, which is so natural to the mobility spaces. I think the whole content area will evolve. So rather than I'm going to lift and carry an existing model, I think there will be a new model that will evolve through a combination of what's happening in the content space itself and the way people are accessing connectivity. Lots of people won't have a traditional wireline relationship, in which case they don't need to buy 600 channels that they don't watch.

Mike Rollins

And when you think about the 30 million household goals that you mentioned, how should investors think about the timing of how long it takes to get to 30 million homes pass for a 5G fixed wired service?

Ronan Dunne

Bet you, Comcast and Charter would love to know that quarter-by-quarter, city-by-city. So look I'm not going to go into details surprisingly enough. But what I would say is this will be an outcome from the way we deploy our 5G mobility network. We have incredible ambition for 5G to get out there build the best, biggest and with time build it the fastest. We also have the opportunity within that is the way we will access homes as we do that. It's not just building the network, but its elements allowed at the speed experience that we want to offer a product we want to offer.

And I mentioned earlier, we're actually seeing speed performance as much higher with only 400 miles than maybe we anticipate and we still have another 600 miles to deploy. We talk about the fact that the early already chipsets are really mobility chipsets masquerading as TV chipset. So as we get the proper CPE and the chipsets for that then the coverage capability of those will also improve.

So we have a number of ways that while we accelerate the pace of our mobility rollout. We have a number of variables indoor outdoor deployments of antennas other things like that, which start to play into the opportunity of the size of 30 million and how quickly we get there. And everything we're seeing so far makes me very excited

Mike Rollins

Another development for Verizon in the fourth quarter was announced results for the voluntary separation program. So can you talk about the implications of that program? And at this point you now ahead of the pacing for the four year cumulative $10 billion cost cut goal that the Company has?

Ronan Dunne

So again let me just remind people, we said that cumulative $10 billion over four years. You can imagine when Lowell said that originally, he had some ideas and some plans about how we might do it. What we're not going to do is tick off every one and say that was the end that was out. You can assume this is about executing to that plan. But also I think you should take VSP and just think about it in the context of here's a business that is in a transformation phase, where 5G will be an accelerant to our industry and to the opportunity for customers. This is part of allowing us to show off how and where our customers would expect. It's allowing us to reposition our business, so that our business operating model best meets the customer needs.

And we have a lot of great colleagues who've taken the opportunity and decided this was the time to leave and do other things. Many of them have been with us for a long time, but it also creates tremendous opportunity for our colleagues who are staying. The development opportunities for them the opportunity to build new skills to support digitization, AI, machine learning other things like that, so you should see this not as a cost driven. You should see this as a critical enabler to an ambitious company who wants to accelerate its plans on behalf of its customers.

Mike Rollins

And to do that, do you think Verizon Wireless needs more access, whether it's spectrum, fiber or services vertical applications. What are the things that Verizon might need to further accelerate the strategy?

Ronan Dunne

So I'll give you a two part answer. The first part is above my pay grade. So if it harms them matter here is inside a very, very structured and disciplined approach to balance sheet. We will always evaluate the build versus buy. That's just good business sense. So that means we never say never. But if you ask me the other half of the question is, as the President of wireless, do you have the assets you need to execute the ambitious plans and strategy you have? Absolutely, I do.

Mike Rollins

And I want to come back to one thing that you mentioned about Apple. You said its 20 -- Apple music is 20% of the sales.

Ronan Dunne

So 20% of the new customers who’re coming to us are signing up for the Apple Music offer.

Mike Rollins

So Verizon held back on bundling in some kind of content. You had competitors doing Netflix, Hulu, HBO, variety of different channel packages. What are you seeing from your early days of bundling? Is this something that we're going to see a lot more of in the future or is this a special circumstance in terms of the focus on Apple Music.

Ronan Dunne

So look I think if you use Apple Music as the proxy, the whole range of things that we're doing. We're building our tools for the family. We're building out tools for different categories. What we're really trying to focus on is saying one size doesn't fit all. So what you will see us do is measuring on the best-in-class network supported by incredible customer service and experience. You will see us continue to evolve what we think there's ways of adding incremental value to the customer.

But again what I would say is that what we're trying to do is to simply replicate either a competitor model or a traditional video and content model. About 90% of the traffic on my network ultimately is driven by video. So video consumption is an important consideration, but the fact that it's 90% means much of the video people already have access to. One of the areas I'm really interested in is working with our partners and Verizon Media Group where they have these four super you've got entertainment, you've got sports, you've got news you've got finance.

And Yahoo's finance portal is as big as Bloomberg give or take. You know it's a massive interest segment. If you watch in the playoffs football college football in the game last night, you know what you’re probably a register and logged in Yahoo subscriber. So one of the things we want to do is as we look at how content evolves, spoke in the context of our mobility business but also in 5G residential is how do we take the assets in the business that is you know Verizon media group and the real interest groups in there. And how do we give even more value to Verizon customers from those. So I think that's a really interesting area for us to focus on.

Mike Rollins

Have time for survey questions.

Ronan Dunne

Sure.

Mike Rollins

All right. So if we’re going to queue up, our first survey question of the day -- everyone has remotes in front of them hopefully and look forward for your participation. If you like you can get your remote too if you want to weigh in on this.

Ronan Dunne

Somebody throw me a remote.

Mike Rollins

Great. Okay, so the first question. Does Verizon need more spectrums for its existing mobile business? And this is one that we have asked before. Thank you. Choose number one, if its yes. Choose number two, if they have enough spectrum. Or three, know they can build more macros and small cells. So let's go to the audience and see what they think.

Okay, and for those via the webcast, I'll read off the percentages as they come through. So 55% says, yes. They have -- sorry 55% says yes, they need more spectrum for its existing mobile business. 21%, no, they have enough. 24%, no, they can build more macro in small cells. Forget maybe to one or two your question, but just over time over a longer period of time. Have you view the need for more mobile spectrum in Verizon Wireless?

Ronan Dunne

So, the context is and we have about 53% -- 54% of our existing spectrum holding that used for 4G LTE. So virtually half of it, not yet deployed. We have the ability to reform significantly at a 1,500 and 1,900 as we take out CDMA and other things. We have an explosion of capacity in the areas where the demand is created by the largest contiguous holding millimeter spectrum on the planet.

In that context, I'm very confident, but also 2 and 3 also exist, I have the opportunity to build out more macros to densify, do all of those things. It's not an either all and I'm very, very comfortable with where we are. And I think people really underestimate the fact that the millimeter wave not only gives you something, it also increments the value of all of the other holdings to that.

Mike Rollins

And that unlimited the moves that increase in data traffic in?

Ronan Dunne

I'm actually more spectral efficiency that over the last two years. Because of the way the unlimited is actually moving the profile of my usage. So actually, that's been helpful to my network management. So what's happened is the shoulders of the day, the busy our business, I'm not building capacity for two hours for it to be dormant for 22 hours. I'm not building in a way that actually I get monetization opportunity for 8, 12, 14, 16 hours of the 24 hour a day. When I think about residential roadmap, I think about it as it significantly different usage times them I think about mobility network. So actually what I'm doing is I'm actually yield managing more effectively within the capacity on building. And I don't think that people are recognizing that in some of the map they do out there.

Mike Rollins

So the second question, so on 5G, do you believe 5G will be an effective competitor to fix broadband services? One, yes. Two, no. Three maybe undecided, this also is a question that we've asked before.

So, yes 48%; no, 32%; maybe undecided 20%. So when you think about 5G being fix competitive to broadband or fix or competitive this broadband? It is just an urban dense urban opportunity or do you see over time from the initial test that this is actually evolving suburbia rural areas. As you look out, how far can this go?

Ronan Dunne

This is a good question. So I think our focus is absolutely initially going to be in the urban environments. The think also campus and for campus read it's educational establishment, it's a retail establishment, or think of it as a cluster of homes on the side of small rural environment. In the cities all of those lend themselves to 5G deployment.

And the other thing I would say is, if I just I'm looking to give people a slightly cheaper alternative to cable, I'm completely on ambitious as the opportunity to transform the residential environments. Consumer IoT can take off in this world. It can be a fundamental transformation for the opportunity is for connectivity, in my home. Just some tightening the cable guys like just do this one.

Mike Rollins

And so our final questions so, does Verizon have the right investment priorities to drive future growth revenue and earnings? So one is yes, continuing to focus on wireless network leadership and drive cost efficiencies. Two, no even greater investment in the networking spectrum. Three, no to pursue vertical integration opportunities. Four, no change the asset mix or fives no for other reasons. Few choices for people to.

Ronan Dunne

There is one yes and four nos, that's not living witnesses.

Mike Rollins

You have people voting second, so

Ronan Dunne

Good answer.

Mike Rollins

Yes. 49% greater investment in network and spectrum 25, pursue vertical, 15% change app that makes 9, other reasons 1%.

Ronan Dunne

Or another way of putting that is like there is many people believe that we have the right strategy than any other alternative.

Mike Rollins

And for those that may think you need greater investment industry and think about vertical integration opportunities. As you study and led the right wireless business and been at Verizon. What's your take on the future opportunities for Verizon?

Ronan Dunne

Look it's interesting. And whether it's one or one or two whatever is, the one thing I would say is within the context of a clear balance sheet financial discipline. In many respects, I think the opportunities to take the last question and this question. If we can demonstrate by our engineering prowess and our ruthless focus on customer and experience that the opportunity is even bigger and better than some of you out there think.

Actually, there will be the people in this room who be coming to us and asking us to accelerate our investment. And the great news is we have the financial strength to respond positively to that. So my ambition is to create the conditions in which you were knocking on my door saying could you not go faster because you not go harder. We're excited about the opportunity. And if that's the case the great news is we have the balance sheet discipline to be able to do.

Mike Rollins

We have just a couple minutes for questions in the audience. If there is a question want to raise your hand and microphones roaming in room. One question that also comes up is there is this proposed merger between Sprint and T-Mobile. What are happens or doesn't happen, is there is a scenario that you are thinking better for Verizon.

Ronan Dunne

So that is the reality of M&A is always the case, is if it happens people get distracted. And if it doesn't happen, people get distracted. The one thing about horizons nobody is distracted. Their strategy executed consistently. We want to be in a different sense of this.

Mike Rollins

Great. And then just a last question. Are there, as you look out into this future for the wireless business. What point of time do you think that we're no longer going to distinguish between wireline cable wireless? And this is just how many years will it take for just whether it's investors regulators look at the industry as a single broadband market.

Ronan Dunne

So look, I'd say if those of you have the opportunity comes out homes to out later today's 5G is not great. 5G is fundamental transformational capability. We are on the cusp of industrial revolution. We will look back in 10 years and realize everything has changed and changed utterly. How it plays out over that first 10 years. It is anyone's bet. I guarantee you in 10 years time. Everyone will say we underestimated it how big this was.

Mike Rollins

Thank you for joining us today.

Ronan Dunne

Pleasure. Thank you for having me.