The Transcripts, Transcripts
Verizon Communications Inc. (VZ) Presents at 51st Annual J.P. Morgan Global Technology, Media and Communications Conference Call Transcript
Verizon Communications Inc. (NYSE:VZ) 51st Annual J.P. Morgan Global Technology, Media and Communications Conference Call May 23, 2023 9:30 AM ET
Company Participants
Hans Vestberg – Chairman and Chief Executive Officer
Conference Call Participants
Phil Cusick – J.P. Morgan
Phil Cusick
Hi. Thanks for joining us. Welcome to the second day of the 51st Annual J.P. Morgan TMC Conference. I’m Phil Cusick. I follow the communications and media space here, and I’m happy to welcome Hans Vestberg.
Hans Vestberg
Thank you.
Phil Cusick
Chairman and CEO of Verizon.
Hans Vestberg
That’s correct.
Phil Cusick
Thank you for joining us.
Hans Vestberg
Thank you for having me.
Phil Cusick
I believe you have something you need to say.
Hans Vestberg
Yeah. Safe harbor. I can say some things that might be future looking. So safe harbor to all of you. Ready? We’re okay.
Phil Cusick
Happy safe harbor.
Hans Vestberg
Happy safe harbor.
Question-and-Answer Session
Q – Phil Cusick
So let’s just — you have — we had, we talked last night and we’ve talked about 5G and technology for a long time. Maybe let’s start with where we are there. And then we’ll dig into some other parts of the business. Just where are we in that sort of 5G process that you think about?
Hans Vestberg
So when I think about a wireless era, it’s somewhere between 10 to 12 years. They usually have three different phases. The first phase is basically when you deploy the technology, takes some three to five years. And the second part is where you start doing innovation and sort of new things, and you get advanced on that technology. And then you have the maturity of it.
You can say that 4G is in the maturity right now here in the U.S., and 5G is coming into the second phase where you actually start doing 5G advanced and actually start taking advantage of all the 5G out there. So that’s where we’re all — from a technology cycle. And that’s why you see — and I’m not sure how deep we should go into, but you see things like slicing coming up. You see new applications that can be used in five years, especially for enterprises. And for — some of you might remember from the beginning, the design of 5G was very much to see that — also enterprises could actually use wireless as their main source of communication, which historically has been other. So that’s why you have low latency in almost throughput. You can connect million devices per square kilometers, which was never the case with 4G. That is all happening right now with 5G advanced slicing, core networks that can handle 5G and all of that. So that’s where we are.
So I predict that the next five years is the second phase, where we’re going to see more innovation. We have already seen on the business side, I think consumer side, even though it’s not imminent, but the next five years we’re going to see more on the consumer side from 5G.
Phil Cusick
So I think 5G suffered somewhat from a high expectations early on that didn’t really play out …?
Hans Vestberg
Say in wireless technology.
Phil Cusick
Exactly. But there is a lot of value of 5G in the business today.
Hans Vestberg
Yeah.
Phil Cusick
So how should we think about what 5G is generating for you today, and then how that evolves in the next few years?
Hans Vestberg
So the whole idea for us when we built our network was that from the data center to the edge of the network, we holistically build that with unified transport with one fiber, fiber in between everything, multi routers in order to have one stable base in the middle. And then at the access point, we basically — we provide verified fiber, whatever it might be. And already today we see several use cases on the 5G spectrum we have. First of all, consumers, how many of our customers already today have 5G devices. We have plans that include the 5G Ultra Wideband. Then, of course, the killer application today is fixed wireless access. I mean, we use the same technology, same radio based station. It’s not a separate network, almost 400,000 in the first quarter. New subscribers on fixed wireless access. So that’s definitely the key application that’s not only for consumers, it’s also for businesses. Retailers, SMBs are using that as the primary tool for broadband.
And then the last piece that we are now seeing as well is private networks, where we actually use our license spectrum to build private networks in logistics centers or it could be big grocery stores, could be factories, it can be offices. So all three of them are now happening. We talked about them for many years ago. They’re all three happening, and they’re built on the same infrastructure. So basically I have three business cases on the same infrastructure. That was the whole idea of the strategy to see that we have the best return on investment on the capital. We invested in a network to see that we have as many use cases and as many connection as possible on one invested network.
Phil Cusick
Now we’ve talked about fixed wireless is clearly on its way, not there yet, but being a billion dollar business.
Hans Vestberg
Yeah.
Phil Cusick
What are the other pieces that we’re going to see sort of next? Are the other things you’ve talked about private networks and things like that? Are those in that five-year period, being billion dollar businesses?
Hans Vestberg
So — definitely. So the private networks is now — starting with private networks, but when you have private 5G network, you can in the next step put in mobile edge compute, meaning cloud services at the edge, which we’re partnering with all of them, all the three big ones. So that’s the next step. And then you start putting application at the private network. So it’s a journey. It’s a solution based journey to business to business that takes some time, but clearly we’re — clearly in the lead. We were early out with it. We built all the technology together with some of the largest cloud-based companies in the world. So I think that’s a journey, and we are long-term. That’s why we built a network. That’s why we bought our spectrum in order to see that we can monetize it in different ways. So private 5G network is just a slide in to get in, and then you start adding on that security mobile edge compute. It could be virtual C-Band [ph] and things like that on top of it.
Phil Cusick
And now where I’m trying to get to and I think what investor’s concerns are …
Hans Vestberg
Sorry. It’s okay. Never turn off the phone, you know?
Phil Cusick
Right, me too. I think what investor’s concerns are is that this is a mature business, that wireless is a mature business, and they look at consumer and postpaid and what’s going to happen in all the competition. But what I’m trying to think about is what is the sustainability of the wireless business in aggregate and being driven by all these other things.
Hans Vestberg
I think the sustainability in wireless business is one of the most important infrastructure you have in any country in our society today. I mean, I think being in wireless is probably the best thing it can be. I mean, mobility, broadband and cloud services or the 21st century infrastructure that’s going to be in every man’s latest hands over time in order to be part of our society. So no, I don’t think — it might be maturity because everybody has a mobile phone, but innovations only continue with wireless technologies. Everything for fixed wireless access, mobile edge compute. We are going to see slices on the wireless network in the future where you can think about other slices that is not intended for a device, meaning a mobile device could be something else that is receiving the wireless signal.
Phil Cusick
Yeah. I think what I’m trying to think about is given the — generally has been a lack of excitement about wireless by investors for the last couple of years. I’m trying to think about whether we’re in this sort of stable and we can maintain a, let’s call it, low single digit growth industry. Or is there a resurgence in growth coming that could really get people excited? What do you think?
Hans Vestberg
I think it’s a lot of excitement. And I think there’s a lot of opportunities in wireless. I mean, there’s no other industry I would like to be in. I mean, this is an industry that will continue to evolve, and actually bring new opportunities for everybody involved. So, no, I think definitely. And we saw the same — it was a little bit different between 4G, but it was a little bit same in the beginning. So what you going to do with it? Why do you need this? Especially on the consumer side, a lot of doubt. Then, of course, we still had on 4G an unpenetrated market. There were people that didn’t have a phone, but it was same questions and then we suddenly saw, wow, this what 4G can do. I think the same with 5G. And still you are asking what is the killer app? I mean, I said I’ve added 400,000 fixed wireless access broadband subscribers in the quarter. And when it comes to our C-Band that we bought two years ago, we only have gotten a fraction of it. We have gotten roughly in 70 markets, 60 megahertz, and we have 160 megahertz in average in more than 400 markets.
So we’ve just started it with this journey. I think you should be really excited what we can do with wireless and how we continue to build a very resilient, very strong network to handle all this traffic. And seeing that we actually have innovation at the edge.
Phil Cusick
And you’ve spent the last five years building a fiber network underneath a lot of this mobile. Where are you in that process?
Hans Vestberg
Yeah. I think we’re a little bit underrated there, how much fiber we built. Since I came in, I think we were running for a while with 2000 route miles a quarter on fiber. We have built it in all meaningful places in the country where this local traffic, because my main concern from the beginning is that from the radio based station or for the — from the edge, you need a fiber because all the data, so — and that’s why we built our own fiber. So where want economics. We basically are now more in success based fiber, meaning we have gone over the hump, but that goes back to our capital allocation that we talked about. Our CapEx is coming down right now. One of the reason is that we actually built a lot of fibers since 2016, 2017. And right now it’s more success-based fiber where we see, hey, we can do a good return on investment here. So instead of building it ourself or — we build ourself instead of renting it, that that’s what we’re doing right now. So that’s coming down quite a lot for us, but more than 50% of all our radios have our own fiber.
And then you would ask yourself, why don’t you have the other 50? Some of them are very rural and fiber is not even needed there. So then you use mini links or you actually doing back wall with satellite. And that is a piece of — in between there where actually we have good rental fibers. It doesn’t really make the ROI or the return on investment calculation worth to actually build our own fibers. So we have come a really far away and we — I think we’re very underrated how much fiber we have built and how much fiber we have. And then adding, of course, our Fios footprint, where is in this area where we also are having a great success. I’m really happy with our Fios investment, but we are on year 20 or something on Fios. I’m not sure about 17, 18. That’s how long it takes, and now we are adding fourth quarter — first quarter — over the fourth quarter, probably 50, 60,000 new subs every quarter right now, which is a great pace for us.
Phil Cusick
Does wireless do better in fiber areas?
Hans Vestberg
Yeah. Fiber, yeah. I think that ultimately, in high traffic areas where you have good technology, you do better in general. I’ve said it a couple times. If I look where I’m rolling out the C-Band, number one, I get fixed wireless access. I get broadband subscribers. Secondly, the step ups from our customers, and even sort of the gross adds are better where we have the C-Band coming in. That’s why you — I’m not sure that when you’re following all the press releases we’re doing, but we’re doing a lot of press releases because every zip code basically that we come out with C-Band, we do a press release and it’s partly for you, but it’s partly for our organization because we work much more locally right now. We have decentralized our technology team. We’re decentralizing our consumer team so they can take action locally because we have so much demand of fixed wireless access. So our team needs to know, wow, now we have C-Band, now we can talk to local authorities. We can go out and market it. We have a back logo. People that have signed up for fixed wireless access now we can call them, so proactively can work with them. That’s why it’s so important with the change in structure we’re doing, at the same time how we’re now building the network.
Phil Cusick
That’s a good segue into consumer where you’ve changed your plans a little bit recently.
Hans Vestberg
Yes. Thursday.
Phil Cusick
Help us think about the philosophy behind that price change. Was it a price raise? Was it price reduction? What’s the sort of overarching view?
Hans Vestberg
So in general, we spent a lot of time thinking about what’s our next step. We worked with the mix and match for a long time, very successful. But we also understood that the consumer sentiment are changing, and we did a lot of research for quite a while. And I think that we found three things. I mean, control was important for our consumers. Also value was very important, and simplicity. All these three together was very important for our customers. And that’s why we launched the myPlan on Thursday last week. Whereas basically, you pick your network solution and then you can take perks and perks or discounted perks where you can add in what you want per line. You don’t need to have a Disney Plus. If you don’t want that in a family plan, you can decide. We have different, for different line.
So it’s a much more flexible way of doing it. But we always have our overarching goal, which you would know, it grow our service revenue and expand our cash flow and EBITDA. So we wouldn’t do anything that we see that opportunity, but we put more in the control in the hands of our consumers. Going in a lot of research in this. The team has done a tremendous work. And then just think about the back call as well. If you have fewer plans, they’re simpler for us. Also, back office is much easier. Our customer care is much easier for the customer care. So it’s both efficient for us, but also efficient for our consumers.
So I’m really excited about it. I’ve probably been to — I don’t know how many stores I’ve been to since Thursday, talking to a field force and our associates in the store and how excited they are of the plan, et cetera. So no, I think great work. It comes from a philosophy that I probably talked to you about 10 times, being segmented. This is a market where we have a great base. You see that you keep the base, but also that you can bring in new customers and this is basically how it works.
Phil Cusick
So I want to take a couple pieces there. One was, you talked about increasing service revenue.
Hans Vestberg
Yeah.
Phil Cusick
So the headline price goes from — for a single line 90 to 80, but it’s going to be higher revenue. Do you expect, I assume, people to take more than one perk?
Hans Vestberg
Yeah. We expect them to take perks. Absolutely. And that we’ve seen since before. I mean, all the inclusion plans we have done …
Phil Cusick
Just give some examples of what those might be, maybe.
Hans Vestberg
The perks?
Phil Cusick
Yeah.
Hans Vestberg
Yeah. The one perk is the Disney perk. Another is the Apple, one perk. Third one could be roaming, international roaming perk. Everyone — every perk is 10 bucks. And you just click whatever you want. We also have a Walmart perk. We have nine perks today. And thinking about this a start of a platform that can be iterated over time. I can have other perks. I can have other network plans and all of that. So again, we’re being in the forefront thinking about the customers being in control. And — but right now all perks are 10 bucks. And as my colleague and the new head of consumers said recently, in average, we should make some 30% margin on those perks in average. They’re a little bit different, of course, but — so we’re not just distributing perks, which are not value to us. They’re also creative to us, as well as they’re creating our service revenue. And with the base of how the company’s operating, that’s leverage. So it just falls down to bottom line.
Phil Cusick
Now you mentioned segmenting the base, so there’s a high end plan and a low end plan.
Hans Vestberg
Yeah.
Phil Cusick
And so as — at the start, now you’re going to make this more complicated. All right. So Verizon I’ve always thought of as a company that did phenomenally well at the high end and didn’t really need to address the low end too much. How has that evolved in the last couple of years?
Hans Vestberg
We still do phenomenal well in the high end. We did not do so well in the low end on the postpaid last year. I think in the second quarter was probably a quarter where we did not perform well, even though we actually had more promotions than ever. And, of course, very disappointed with that. Then we moved into the second part of 2022 and we did a lot of changes, both how we invest with our customers, but also being more segmenting, having different models for different segments in the market. We came out with a well compliant, for example, which is bring our own device, where we basically got the food traffic to the store and our store employees so that our consumers get the right offering.
So that’s how we devolved, but we didn’t perform well. You have seen in the fourth quarter, in the first quarter, our gross adds is now coming up in the consumer. I think first quarter was up 11% year-over-year. So clearly we are on the movement right now with really good traction. Even our store traffic increased quarter-over-quarter last year. So definitely we see it’s moving in the right direction. We want to be financial disciplined. And so we going to grind this out. I mean, we have a great team that is focused on doing that every day. And myPlan is a next step in that.
Phil Cusick
Is that 11% increase year-over-year? Is that mostly coming from addressing that, that lower end segment?
Hans Vestberg
Partly, but also we bring in others as well, but partly it came from that team — from that segmentation we did. And, of course, we get — and that’s why you see also that our promotions has come down, in the first quarter had less of phone promotions. So — because we had that plan. So it all plays into the overarching target. We have to continue to grow our service revenue and expanding our EBITDA and cash flow. Yeah. Definitely, got the good food traffic in the stores. We have a high conversion rate in the stores as we came out from the first quarter, and even as I reported. The team is doing great job in the store, and I’m excited to see what’s going to happen with myPlan because that’s comes on the back end of all of this momentum we built up in the second half or fourth quarter last year and into the first quarter.
Phil Cusick
Do you think that the competition in the industry sort of changed and it took you a while to catch up?
Hans Vestberg
I can only say that we didn’t perform well. I mean, there are many reasons we’re not performing. We did not perform well on the consumer postpaid. We performed in every other area. I mean, ultimately we created almost $48 billion [ph] in EBITDA last year. So it is relatively, but we didn’t perform in net adds in postpaid last year. Coming out from a very weak second quarter corrected, made some price changes, as you remember, in the third quarter, with some churn, which was expected. And then fourth quarter we got the momentum going, and then it continued to the first quarter. So yeah, it’s probably all. It was not performing ourself. And then it also the competition has changed and consumers has also changed.
That’s why we did all the consumer research and came up with what does consumer really want? They want the control. They want value and they want simplicity. So that was very much based on that as well. So — and then, I think about a consumer investment all the way from media spending you’re doing, and then you have promotions, and then you have below the line as we call it, basically customer care, being able to offer discounts. And when we have possible churns that total investment is what I’m looking at constantly. So I can actually see media going down and below the line coming up. But overall, we’re managing that to be a smaller investment with the right offering and the best network.
Phil Cusick
Right. And yet protecting the back book and not letting a lot of value leakage from there.
Hans Vestberg
Yeah. Correct.
Phil Cusick
There’s been a lot of debate about what Verizon should do, given the relatively high prices of the customer base. But where is churn from that sort of really strong legacy customer base? Can you get that back down?
Hans Vestberg
Yeah. I think, we saw that already in the first quarter. We had — during the quarter the churn is coming down. I think with the myPlan is definitely that — I mean, all the research we have is basically if you have more than one service, meaning you have one wireless plan, then you have perks or you have fixed wireless access or Fios and wireless, the churn rate is going down. So it’s also playing into us with this new myPlan to see that if customer, they want to stay with us. They start picking all these perks and then they’re going to — they stay longer. So I think our churn management has been really good.
There were some decision we made last year of price increases because it was time for them, and it was also incentives to our custom to move to other plans. So we knew that churn would go up. So it was a very constant decision we did last year that flow in a little bit to this year, but we are very, very accurate in how we do that work.
Phil Cusick
And that came through as you expected?
Hans Vestberg
Yes. Yeah. Both the increase and also the little bit elevated churn.
Phil Cusick
For — we had a couple of your peers up here, and we talked about how for an industry where there’s a lot of hysteria around competition, price increases went through pretty well over the last few years from each of you effectively.
Hans Vestberg
The last few years, I think it was lost. I don’t think this industry has increased prices since it started, actually.
Phil Cusick
Yeah.
Hans Vestberg
I think actually when I got the question after the second quarter, I said that this is the first time wireless pricing has increased since we started wireless.
Phil Cusick
And outright pricing.
Hans Vestberg
Yeah. So — yeah, no, I think that’s worked pretty well. But I also — again, I think that this is such a necessity for society today for you and me, for businesses, for government. I mean, wireless is such a necessity. So that’s why you see a fairly good resilience on the price increases, which of course is related to both that we have price — cost increases. But the second is also that we want to get incentives for customers to actually bring to new plans and being more accurate what they are getting from us.
Phil Cusick
I want to — just one more on this topic, and it’s — you and I’ve had this conversation before, investors are tuned to pay for postpaid growth. And yet that’s — doesn’t necessarily — isn’t necessarily the best metric for driving value. How do you think about dialing the business to take your share or not in an industry that’s growing in phones, and yet creating value in other places?
Hans Vestberg
Yeah. And I have — you and I have had so many conversation about that. And for a while I basically told you that, hey, measure me on the service revenue, because that’s really what — then is a hundred of metrics is below that can support that lower churn, more net adds, whatever it might be, that is important in that and how I invest my money. So — but clearly you need to get new customers as well. But it’s shrinking how many people that doesn’t have a phone and how many are switching. So that’s increasing. So I would say the majority of the revenue growth will come from expansion on the existing customer base. That’s how we see it. But it’s also a piece of it that will come from new customers and that’s why we have this momentum right now and how we work in the consumer business.
And don’t forget my wireless business to business, which is really performing well. I mean, we have been close to 150,000, 200,000 for six consecutive quarters on net adds. So that is really doing that. The consumer has been a little bit different. So I think that — we have said that maybe 80% of the service revenue growth is coming from sort of existing base and 20% from new customers. That’s sort of the high level idea. So we’re finding out each other on the way here because historically I said that net adds is just one metrics. I need to manage many metrics. The only one that really makes a difference for us is a service and revenue growth that falls down. So my EBITDA and cash flow is expanding because that’s ultimately how I measure my team. That’s how they’re incentivized. Then they need to manage a lot of KPIs.
Phil Cusick
You read my mind on the business side.
Hans Vestberg
Yes.
Phil Cusick
It’s been remarkably consistent.
Hans Vestberg
Thank you.
Phil Cusick
And we had a sort of a boom of growth from business over the last couple of years during COVID and now it seems to be slowing down a little bit. How do you think about the sustainability of that market, both in terms of the market growth there, but also your position in it?
Hans Vestberg
Yeah. We saw a little bit of the COVID growth, of course, especially from governments, et cetera on the wireless side because the remote schooling and all of that, those disconnects came during 2022, I would say the first half and the second half of 2022. So there’s no pre or post-COVID benefits right now. We’re now on a normal trajectory. We’re very strong in every area of …
Phil Cusick
So you’re through the sort of post-COVID churn period.
Hans Vestberg
Yes. Yeah. That’s over. And it’s no much — now much. And then we had the CDMA shut down as well that had some implication. But if you take that away, on the business side, we continue to be the number one clearly in large enterprises. The same with SMB and government. We take more than fair share. We have done that for quite a while. The team is doing great work. Here, the customers are evaluating the best network, the resilience, high quality, the security of the wireless network is enormously important for our customers. And then, we have a solution based system behind account management. We have technical support behind that. I worked for years and understand these and our customers. And now with Kyle taking over with his background, working with customers and technology, really excited how they can continue that journey. So no, good.
Phil Cusick
If you look at aggregate business, wireless and wireline.
Hans Vestberg
Yeah.
Phil Cusick
Is that a growing market?
Hans Vestberg
Yeah. It is. But of course, the wireline decline that we have seen, the secular decline on sort of legacy equipment like MPS and all of that, that will continue. What we need to do is to see that we are actually taking out cost at the same level. So ultimate, it’s going to level out and actually it’s going to be additive for us. Right now, you have seen some of the last quarters, we actually have some growth in the business area in Verizon business group because the wireless business and the fixed wireless access and fiber is coming up and actually offsetting the decline in wireline. So that’s the trajectory we have and that’s also fuel our ambitions for our better EBITDA all the time.
Phil Cusick
So let me make sure I understand what you said. So wireless plus wireline and fiber and everything else, that business is growing in revenue now.
Hans Vestberg
Yeah. I think we were just about the zero [ph] here in two quarters, so yeah.
Phil Cusick
And you’re cutting costs against that.
Hans Vestberg
Yes.
Phil Cusick
And can aggregate margins in that segment expand as well?
Hans Vestberg
Yeah. Of course. If we can — you see that the — and the guy are doing a very hard work with transformation of the network, taking out cost all the time in order to be able to meet that decline in revenue. And if they just start moving that we going to have money coming flowing to our bottom line from wireline, and then you grow your wireless, fiber and all these fixed wireless access, your new products that should be additive to your bottom line. And we have a long-term goal of 25% EBITDA. We still believe that’s achievable. Kyle and team are working every day to get there.
Phil Cusick
Okay. Let’s talk about capital spending and the network you’ve been building. We talked about fiber, we talked about 5G. You forecast that capital spending will start coming down next year and then be stable. Is that right from here?
Hans Vestberg
Yeah. So this year our guidance is 18.250 to 19.250, coming down from almost $24 billion in 2022. And then we believe we — after this, we will come to some BAU around 17, around 17. That could be up and down. But that’s what we have in our plans. And it’s just that we have invested so much in order to make this network with fiber I said. And as I told you before, fiber is now more success based. We have built out our millimeter wave phenomenally in all urban places. We’re taking the traffic on millimeter wave that’s also coming down because we’re down so much. We have more than 40,000 millimeter radio — wave radios in the market today. And then 4G is coming down. And then we allocated $10 billion for our C-Band the first three years. And that is exhausted right now. That’s why we’re coming down.
So that doesn’t mean we’re not investing in a network. We’re investing a lot in capacity. We’re doing new sites in a network, but that’s sort of the factor that we committed. When we started the — when we announced Verizon Intelligent Edge Network in 2017 when I was a CTO, that was that, hey, we need to invest here to get the resilient end to end from the data center to the edge that can actually handle all this traffic. And then we only need to invest in our capacity enhancing units in the future. And that’s where we’re all right now. So this is not only a promise to our organization, it’s a promise to my shareholders as well that this is how we can do it.
Phil Cusick
It seems like you’ve built a lot of network, both fiber, millimeter wave, C-band …
Hans Vestberg
A lot of capacity.
Phil Cusick
…at the end of this year will be underutilized.
Hans Vestberg
Yeah. I’m going to have a lot of capacity, but usage are increasing. We always have been ahead of the curve. I mean, that’s Verizon. I mean, we have the best network. We always are ahead of the curve, so we don’t end up in any quality issues, and we are going to continue to have that. So — and then, of course, I get more spectrum at the year-end, so I can even do more. So we will continue to do that.
Phil Cusick
Okay. And so with that free cash flow, you’ve talked about delevering the business.
Hans Vestberg
Yeah. So the capital allocation is clear. Number one, we allocate to the business and we talked about the CapEx, which is the main driver for our business investments. Number two, we want to continue to put the Board in a position to increase our dividend, which we have done for 16 consecutive years, which is a fairly good record actually. So me and Tony will continue to see that the Board can do that.
And then we’re paying down debt, as they fold you because our debt portfolio has a really good cash interest expense today, given how great the team was doing it. So we will pay it down as they come and as soon as we see that, we’ll come down to the thresholds we talked about, but we going to have free cash flow to do buybacks or whatever we want to do.
Phil Cusick
Okay. If we can sort of — we got a couple minutes left. Just sort of sum up. We had a conversation a couple years ago. You and I’ve seen each other a known number of times.
Hans Vestberg
Yes.
Phil Cusick
You’re in a better mood today than you were.
Hans Vestberg
I’m always in a good mood. I’m always in a good mood, but I can be upset over things that is not working. And I think that what you’re referring to last year, I wasn’t really happy. We didn’t perform well, so I was upset. I think I’m energized with a new team that is coming in. I’m energized with the momentum we’re creating in basically all business we have decided to be in. We have divested everything we want to divest. We have bought everything we want to buy all the way from track on C-Band, we have done a lot. Now is the fruits to come. I mean, now the team needs to execute. That doesn’t mean we’re done. We feel we’re great or something — we can do so much more. And ultimately, it is growing the service revenue and it’s doing the expansion on the cash flow. I mean, that’s ultimately the target we have for ourselves, and for our shareholders.
Phil Cusick
So clearly you’re confident, but I think there’s a feeling in this room and in this town that wireless is a bad business and this reconsolidation…
Hans Vestberg
…is the best place can be.
Phil Cusick
This competition is going to make a problem. And just add one more piece. What else can you give us to give that level of confidence to this room?
Hans Vestberg
No. Coming back to the wireless business, I think wireless business is something so important and it’s so sticky. So I think that over time we have great opportunity to upsell, include more — if the consumer side just expanding on what we have now launched. On the business side, we have seen the importance of using wireless as the primary broadband, as the primary service for large enterprise and SMB. So I would say that gives me a lot of comfort going forward. And then I think the position of Verizon is great. I mean, we have the best network, greatest distribution. We’re number one in everything we’re doing. There’s no way we’re even thinking about leaving that position. The team is super geared, super excited over it, and we are incentivized to continue to be the number one in this market and in the world.
End of Q&A
Phil Cusick
It’s a good place to stop. Yes, Hans.
Hans Vestberg
Thank you.
Phil Cusick
Thanks everybody.
Hans Vestberg
Thank you.