Verizon Communications Inc (VZ) — Q3 2023 Earnings Call Transcript

Good morning, everyone, and welcome to our third quarter earnings conference call. I'm Brady Connor, and I'm joined by our Chairman and Chief Executive Officer, Hans Vestberg, as well as our Chief Financial Officer, Tony Skiadas. Before we begin, I’d like to draw your attention to our Safe Harbor statement which can be found on Slide 2 of the presentation. 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 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, we posted to our Investor Relations website, a detailed review of our third quarter results. You will find additional details in the earnings materials on our Investor Relations website. With that, I'll turn the call over to Hans.

Thank you, Brady, and good morning, to everyone. I am pleased to share our strong third quarter results making out the quarter with solid growth and improving profitability. It is clear that our strategy is working. In both the consumer and the business groups, we are executing a segmented agile strategy that provides value to our customers and our bottom-line. We have delivered growth in each of the areas we focus on, wireless service revenue, EBITDA, and free cash flow. This is evidence that we have the right strategy and are achieving our results in a financially disciplined way. Now let me share our financials for the quarter. For the third quarter, wireless service revenue is up 3.9% year-over-year, driven by expanding and deepening our customer relationships. This revenue growth is a key driver for adjusted EBITDA of $12.2 billion for the quarter, which is higher than both Q3 last year and sequentially. Our year-to-date free cash flow of $14.6 billion is already exceeding our full year free cash flow for 2022. Thanks to our focus on high-quality revenue growth, disciplined promotion strategy, cost efficiency, and CapEx reduction of the recent years of heightened capital intensity driven by the C-band and fiber investments. I'm proud to share that my team and I have taken actions to further our financial strengths. Our strong cash generation enabled us to reduce net debt, strengthen our balance sheet, and deliver a higher dividend to our shareholders. We're working to bring our leverage ratio to the pre-Spectrum acquisition levels. During the third quarter, we paid down $2.6 billion in debt and increased our dividend for the 17th consecutive year, a current industry record that we take pride in. Our dividend coverage is very healthy. Year-to-date our free cash flow dividend payout ratio is approximately 56%, a significant improvement from a year ago. In summary, in spite of an uncertain economic environment, we are on pace to finish 2023 strong. We are confident that we will deliver on the financial guidance that we issued to you at the start of the year and this morning, we are announcing higher free cash flow guidance for 2023. Tony will provide you more details in a few moments. Now, let me share more on how our business units are driving our strategy forward. In the quarter, we delivered on our key growth areas, mobility, broadband, and private networks. Thanks to our networks, scale, and technology advantages.

Thanks, Hans, and good morning. Our results for the third quarter continue to demonstrate our progress towards our three priorities: growing wireless service revenue, and driving EBITDA and free cash flow. As Hans said, we are executing on our plan and remain on track to meet our financial guidance for 2023. We've talked about improving our operational performance while maintaining financial discipline with the third quarter results representing another proof point that demonstrates we can deliver improving key metrics and strong financials. Consumer postpaid phone net losses totaled $51,000 for the quarter, an improvement of $85,000 sequentially and $138,000 compared to the prior year. During the quarter, we executed well in a low switcher environment, enabling postpaid phone gross add growth of 2.3% year-over-year. Our postpaid phone churn of 0.85% represents a stable result even after implementing over $1 billion of annualized pricing actions in 2023. Our segmented approach to the market and the structure and discipline of our promotional strategy helped to deliver strong postpaid phone gross adds and lower postpaid upgrades. The third quarter’s consumer upgrade rate of 3.6% is down 150 basis points year-over-year. The quality of the business we are writing in consumer remains high as myPlan continues to drive an elevated premium mix. Consumer ARPA of $133.47 increased sequentially by 1.2% and year-over-year by 4.5%. We expect to deliver further ARPA growth as a result of the innovations of myPlan, as well as our most recent pricing actions.

In consumer mobility, we achieved sequential and year-over-year improvement in postpaid phone net adds by continuing to put the customer at the center of everything we do rather than engaging in aggressive promotional activity like others in the industry; we're offering our consumers optionality and flexibility to choose how they want to use our products and services. Our differentiated approach to segmentation and financial discipline is paying off with growth in postpaid phone growth adds and lower promotional cash costs. There is more work to be done, but our responsible approach positions us to grow subscribers profitably. Since its launch in May, myPlan continues to deliver a personalized experience, giving our customers the value, choice, and control that they want. During the third quarter, we enhanced myPlan by adding Ultimate Unlimited, a third tier with more value and services, further increasing our premium mix and ARPA growth. This is just one example of the flexibility and speed to market that myPlan provides. And I'm excited about what is to come. Our competitive position is now stronger. And we’ve delivered positive consumer postpaid phone net adds in the month of September. We anticipate that momentum will continue as we are on track to exceed our postpaid phone net adds from Q4 of last year. Postpaid phone shown levels are stable even with our targeted pricing actions throughout the year. We continue to see muted upgrade levels, which is something we are watching carefully and is a trend we expect will continue for the next few quarters. Turning to business mobility. Verizon Business Group delivered 151,000 phone net adds and reached our ninth consecutive quarter above 125,000. Businesses and governments continue to place an increased emphasis on best-in-class reliable connectivity that only Verizon provides. Across mobility, postpaid phone net adds were 100,000, compared to 8,000 last year. We have the largest customer base in the industry and are still finding new ways to add customers through innovation, service quality, and a variety of offerings and partnerships that competitors cannot match. As we discussed before, we’re seeking the optimal balance between price and quantity that allows us to grow our base profitability. In our value business, we have had negative volumes, but I'm encouraged by our quarter-over-quarter improvements. As I’ve said before, the value business is a key part of our growth strategy, and we will continue to invest in it and adjust to the needs of the markets. Moving to broadband, we delivered another strong quarter with more than 400,000 new subscribers for the fourth quarter in a row. We finished Q3 with 10.3 million broadband subscribers, up by more than 1.7 million subscribers from a year ago, a 21% increase. Critical to the strength of this key area is fixed wireless access, something we know we deeply believe in. Our fixed wireless access net adds of 384,000 continue to be strong even with a recent $10 increase for new bundled customers, further evidence of the demand for our product. Where fixed wireless access is available, our customers take it and love it as seen by the high net promoter score. I'm excited to share that on the Fios side we had 72,000 Internet net adds for the quarter, up almost 20% year-over-year and one of our best performances in seven years. Fios remains a coveted, high-quality service, and we continue to take share and deliver strong numbers even in a lower mover environment. When it comes to private networks, the demand for the product continues to grow, especially those solutions built with licensed spectrum, which provides a more secure and differentiated experience for the end-users. Businesses are increasingly looking to us for the private network solutions helping to grow our sales funnel and scale the number of installations each quarter. Let me end by talking about the backbone of our business, our network. During the third quarter, we obtained early access to our remaining C-band spectrum. In urban markets, where C-band is already deployed, we're firing on all cylinders and leveraging its full potential through software upgrades, delivering two to three times more spectrum depth. As a result, peak speeds go from 9 megabits per second to an amazing 2.4 gigabits per second enabling an even better experience for our customers. You’ve heard me say this before, but let me say it again. C-band is a game changer for our business, giving us better customer retention and a strong broadband opportunity with fixed wireless access. Every day we see the benefits of our generation investment in C-band spectrum and the impact it will have for our customers for years to come. Our network is winning. This quarter, we received J.D. Power awards in all six U.S. regions, receiving the most awards for wireless network quality for the 31st consecutive time. We have the best networks in the market, and we will extend our lead as we complete our C-band deployment, first augmenting urban areas, and next year in suburban and rural markets. This is our key differentiator and the center of everything we do. And we're doing all of this in a responsible way. We're optimizing our network while returning to business as usual levels of CapEx. We're finding cost efficiencies across our business both as a result of our new structure and by emphasizing profitability when evaluating new opportunities like within business wireline. Our cost efficiency program remains on track to meet our savings goal of $2 billion to $3 billion annually by 2025. Now let me turn the call over to Tony to discuss our financial and operational performance in more detail.

Thanks, Hans and good morning. Our results for the third quarter continue to demonstrate our progress towards our three priorities: growing wireless service revenue and driving EBITDA and free cash flow. As Hans said, we are executing on our plan and remain on track to meet our financial guidance for 2023. We've talked about improving our operational performance while maintaining financial discipline with the third quarter results representing another proof point that demonstrates we can deliver improving key metrics and strong financials. Consumer postpaid phone net losses totaled $51,000 for the quarter, an improvement of $85,000 sequentially and $138,000 compared to the prior year. During the quarter, we executed well in a low switcher environment, enabling postpaid phone gross add growth of 2.3% year-over-year. Our postpaid phone churn of 0.85% represents a stable result even after implementing over $1 billion of annualized pricing actions in 2023. Our segmented approach to the market and the structure and discipline of our promotional strategy helped to deliver strong postpaid phone gross adds and lower postpaid upgrades. The third quarter’s consumer upgrade rate of 3.6% is down 150 basis points year-over-year. The quality of the business we are writing in consumer remains high as myPlan continues to drive an elevated premium mix. Consumer ARPA of $133.47 increased sequentially by 1.2% and year-over-year by 4.5%. We expect to deliver further ARPA growth as a result of the innovations of myPlan, as well as our most recent pricing actions.

So let me talk to you about how we expect to continue to perform in the upcoming quarters. We are committed to maintaining a lower cost structure while continuing to deliver on our operational and customer experience improvements across both business and consumer. We've implemented cost efficiency measures that we believe can save us between $2 billion to $3 billion annually by 2025. Our targeted actions in cost management have already shown results this quarter, and we will continue executing our strategy with the same level of discipline. Our focus remains on leveraging our vibrant network and strong service offerings in order to sustain growth and meet the needs of our growing customer base. Thank you for your attention. As we wrap up this call, I want to highlight that we're on a solid path to meet our financial targets and maintain strong operational performance. The initiatives we've put into place are promising, and we expect to continue seeing positive results. I also want to acknowledge the team's hard work and dedication, which is crucial to our success as we move forward. As we approach 2024, I believe we have the right strategy and approach in place to achieve our goals.

Thanks, Hans. Brad, we are ready to take questions this morning.

Hi guys. Thank you. Two if I can. Tony, how should we think about the pieces of free cash flow growing our stability next year? And after making the C-band relocation payments, what obligations other than the dividend will prevent you from delivering? And then Hans, as a follow-up, there's a lot of speculation about M&A in the fiber and wireless spaces lately. Can you talk about any interest you have in buying fiber or wireless assets in the market? And if so, what might be the criteria for that? Thank you.

I will start and then I will hand it over to Tony. I mean, first on the cash flow, I think you have seen us now the last couple of years focusing very much on our service revenue expansion, EBITDA, and cash flow expansion and all our incentives for management are driven from the Board, both short and long term. So this is a key thing for us to see that we are continuing to generate a lot of cash flow. Tony will talk through the puts and takes. Regarding fiber adds, first of all I love our strategy. Our strategy was clear from 2017. In the Fios footprint, of course, we build a lot of fiber while doing extremely well. You saw this quarter once again a record quarter of Fios subscribers. Outside we have built fiber over a couple of years. We're basically in all the major markets. We have one fiber to our own network. Right now, our strategy is clear that we want to take the broadband subscribers with fixed lines access because we get them right now. It’s a superior product and we don't see a need right now for adding any fiber to that footprint. Over time, of course, we will always look into it and anyone that would dispose of any telecommunication assets in any market will talk to us. But the total is high. We have a great network and we have built a really good strategy around our technology.

Hi Phil. Good morning. So on the cash generation, we are very pleased thus far. I'll start with where we are in the third quarter. So we're pleased with the cash generation of the business. The performance of the business and as you saw the continued discipline that we had with promotions and retention gave us the confidence to raise the free cash flow guidance by $1 billion to more than $18 billion. And that's with CapEx at the upper end of the range and with higher interest expense. We feel very good about the balance of the year and are positioning heading into next year. Obviously, we're not going to guide on 2024 at this time, but I can share some qualitative aspects as we look ahead to free cash flow for 2024. On the plus side, we continue to focus the team on an improving EBITDA profile and that's a big focus of the team.

Yeah, great. Thanks. Thanks Phil, Brad. We're ready for the next question.

Great. Thank you very much. Good morning. Hans, you talked a lot about fixed wireless. You've got the rest of the C-band. Can you help update the fixed wireless footprint? The open for sale and where you are today? And how you get to the 50 million households or any updated target that you have there? And then, Tony, you talked a little bit about some of the pricing actions you've taken so far. Can you just tease out for us what you've recognized in Q3? And what I think you've talked about a tailwind when going into Q4. So, how we think about some of the sequential benefits that are still to come? Thank you.

Simon, I can start with fixed wireless access. As you can see, we continue on that rhythm with the 354,000 every quarter. The additional C-band we got used a couple of weeks ago will initially go straight to augmenting our urban areas. We’ve already had the sites and then in the early part of next year, we will also start deploying that in suburban and rural areas. And of course, that's an even greater opportunity for us because there are more underserved markets and our fixed wireless actually comes extremely quickly into those markets. So that will just fortify our situation and how we want to roll this out. We have a target of 4 million to 5 million subscribers by 2025. We will keep that, of course, we have mentioned on the network for way more and the team, of course, has the internal targets that were set by me. But right now, there's nothing else that we want to deliver this target as well to the market. We always want to deliver what we tell the market, and we're going to do that. And then we can have a conversation about that when we've passed it.

And Simon, on your question on pricing. So a few things here. We executed a number of pricing actions as you saw. The legacy mix and match that we did earlier in September will yield about $100 million of incremental benefit in the fourth quarter, and we also see improving volumes on mobility and year-over-year improvements there. We also see an increasing contribution from fixed wireless access. You saw the growth we had in the quarter with 384,000 net adds. We have 2.7, almost 2.7 million subs in our base. So we feel very good about the momentum there. So, very good progress on service revenue and setting us up well for next year.

Brad, we are ready for the next question.

Great. Thanks. Good morning, guys. Just two questions. First on the upgrades. Obviously, that number continued to come down or solidly into this sort of 3% range. I mean, Hans, in your prepared remarks you sort of suggested that you expect to see the same for the next few quarters. I guess, two questions there. First of all, what in your view is really driving it? And do you think that this is a temporary issue or that it'll go back to some sort of normalized rate? And then, any comments on what that low rate is really doing to your business? And then, secondly, in the past, you guys have given some numbers, and some metrics on what C-band is doing for your business as it gets rolled out. Any update there? Are you still seeing improvement in things like gross adds, ARPU, and churn as you roll C-band out? Thanks.

Thanks, John. On the upgrade, as we're seeing now for a couple of quarters, when we started our segmented approach on the consumer side, where we actually tried to meet our customers in different segments with the right offerings. That, of course, has driven a lower upgrade rate. But as we are not doing a peanut butter spread sort of that everybody gets everything. So we’re really trying to make sure we have the right offer for our customer and what is giving me confidence is that our gross adds just continued to grow for us. So we have the right offering in the market together with myPlan. Of course, fourth quarter is always a little bit higher on upgrades because that's normally a seasonal period. But in general, I see that our model is working, and this is both helping our customers with the right offerings. This is helping us with the bottom line, and the cash flow generation that we're very focused on here at Verizon. And then on the C-band, we see the same things as we have discussed before. We see lower churn where we deploy C-band. We see improved step ups in those regions. And then on top of it, we increased fixed wireless access. So there's no difference on that. So I think we're the same, and that's why we're so excited about C-band as we continue to roll out, and I have gotten hold of the old C-band here just a couple of weeks ago.

Brad, we are ready for the next question.

Thanks for taking the question. Coming back to service revenue growth as we're looking ahead into next year and maybe digging a little bit into ARPU drivers, I know you don't report postpaid phone ARPU, but it's clearly an important component of what drives your ARPA. And I was hoping you could give us some insight into how you're thinking about those drivers next year? So for example, do you still see opportunity to make further pricing adjustments in the base? Could you maybe give us some insight into what the mix is looking like? And are you continuing to see the highest tiered plans being among the most popular? And then, are there any headwinds that might be emerging in the ARPU dynamic we need to be taking account for? Thank you.

So, let me start on the high level. I mean, first of all, we need to think about our total offering on wireless and we haven't spoken so far much about the business side, but the business side again for the ninth quarter in a row had more than 125,000 phone net adds, actually over 150. So they are doing well in a market where our customers on that side are really looking at the performance of the network and the high-quality distribution we have. So I'm very pleased with that. On the consumer side, I think we have found a model with myPlan and how we go to market. All the changes that the consumer group and Samper have done since earlier this year with the plans, decentralization, and sales incentives have helped us to be in the right proposition. Then we always look for new value adds that we can give to our customers to broaden the scope for us and for our customers like we did with the third tier on the network side on myPlan or that we took away the discount on the convergence within mobility and fixed wireless access this quarter. We will continue to look at it, but it's not the most important right now because I think we have an offering that is really compelling to our customers.

And then, Brett, on your service revenue question, just some qualitative thoughts for you. On the plus side, I would say look at the pricing actions we took this year, obviously have a tailwind in the fourth quarter and carry over into next year. So we continue to see momentum there. Also, as I mentioned earlier, we do expect an improving volume profile in the consumer business. So that's something that the team is very focused on. Fixed wireless access continues to scale. So, as I mentioned earlier, another 384,000 net adds; even as Hans said, taking away the discount as well. So the momentum is strong there. And continued increase in premium mix with myPlan. So myPlan is seeing roughly 70% premium mix, and we're very pleased with the progress there. We’re also seeing some of the headwinds from the promo amortization starting to ease a little bit—that's starting to flatten out—which is good news. And that is also a function of all the discipline that we've had this year. Lastly, offsetting that, as we've mentioned in the prepared remarks, prepaid continues to be a headwind in the near term as we continue to work to improve the business, and that's ongoing. So those are the puts and takes in terms of service revenue.

Brad, we are ready for the next question.

Thanks and good morning. I'm curious if you can unpack the ways in which Verizon will look to achieve its cost-cutting targets through 2025, as well as how much of those benefits could come through in 2024 versus 2025? And then just separately on prepaid, just an update would be great on the integration of TracFone? And how Verizon is thinking about the opportunities and timing of potentially taking some of those prepaid customers and migrating them over to your postpaid base? Thanks.

Thank you, Mike. On the cost target, we are definitely on track for delivering on the $2 billion to $3 billion that we talked about when we launched a new structure. The new structure started this year. We see a lot of traction on it and probably, as you've followed us closely, you've seen that we've worked on the managed services side together with HL. We have done a big transaction on the customer care side. We are doing a lot of transactions on the IT side. We're bringing more AI into the network and to customer care. There are a lot of things ongoing, and I have high confidence that we are finding all the savings we need, and the traction is very high in the company on efficiency given that we have one organization right now, Russian Global Services, supporting all others to see that we find the best measurements across the company.

Sure. Thanks. And Mike, just a couple of other additional points that Hans mentioned. So, we're on track to deliver $2 billion to $3 billion as Hans said. $200 million to $300 million of that will come this year in 2023 in EBITDA, and that was already contemplated in the guide. Hans mentioned a lot of the initiatives. The other item I would mention is we are being very disciplined in business wireline by deemphasizing low-margin deals. So that's something that the team is very focused on as well. We're not going to give cost targets for 2024 at this time, but we feel good that we have a good foundation that is driving EBITDA improvements, and you saw it in the quarter with both sequential and year-over-year improvements in EBITDA that's going to set the foundation for improving that profile in 2024.

On the value segment, in prepaid and TracFone, as we said in the prepared remarks, we are at the low point for the first half of '23, and from here on, we should start to improve sequentially. Secondly, this is really important for our strategy. We want to build the network once and have as many connections as possible and address the entire market on wireless. Of course, being strong and being the number one in the value segment is important. Then from a market point of view, we all know that there has been some sort of blend between the low end on postpaid and prepaid, which means that the volumes in preparation are a little bit lower, and we have not been part of that transformation or taking customers for prepaid. So what we're doing right now in our own operation is a lot, but one, we're building up Total by Verizon, which is a great speed we have on opening new doors. That's going to help us to move up to postpaid for the customers that want to do that, and also have a high-end value proposition. Secondly, we work with the national retailers that we have to see that we are fortifying our offerings in our store. And finally, we're seeing that feasible continues with the pace it has. That we're working with a lot of other things. So it's a lot ongoing here that gives us confidence that we will continue to improve sequentially.

Brad, we are ready for the next question.

Hi, good morning. I have a question on fixed wireless. There continues to be a lot of debate regarding the sustainability of fixed wireless served by macro as all sites given the trajectory of broadband usage and, of course, unit economics of radio access networks versus fiber. So really I guess two questions. One, since you started the fixed wireless deployment, have your assumptions changed at all regarding usage or the number of fixed wireless customers you can ultimately load onto the network with over time? And secondly, what developments have occurred in millimeter waves delivered fixed wireless this year? And how at this point are you thinking about millimeter wave evolving over the next couple of years as a scalable access technology? Thanks.

Hi, Bryan. On the first question, yes, our assumption has changed on fixed wireless access because our technology has improved more than we thought from the beginning. That means that we can take on even more capacity. And we're only on the first inning of the software improvements and our optimization of the network. I think Joe and his team are doing a fantastic job with it. Customers are using it on the consumer side equally as much as on the Fios. So there’s no difference on usage. So I think we have a great path forward with technology and we are not seeing everything we can do still with fixed wireless access when it comes to software development and radio improvements, etc. So I'm— I have no hesitation in the assumption with that; we actually have better assumptions today. When it comes to millimeter wave, that is playing a vital role for us for many reasons. First of all, it takes in high-density areas, and they take the majority of the capacity. And that’s very important for several reasons. I unleash the mid-band spectrum in order to have better performance on the street but also in fixed wireless access. So millimeter wave will continue to play a very vital role. As we have said several times, we built very few—very quickly in all major places. And now we're sort of augmenting where we see a lot of traffic. On top of that, of course, we see opportunities for using our millimeter wave also for MDUs over time to see that we address that market with fixed wireless access. So, all in all, we still have a lot of technology evolution to see that we can serve even more customers with even better performance and more capacity. So, I'm very happy, and as you've seen on fixed wireless access, our NPS scores are all out of the shot. I mean, the customers love it. It is easy. It's quick to deploy. It's simple to install. So I think we hit it clearly with this product and we want to push it with our team and see the customer gets the right products.

Brad, we are ready for the next question.

Great. Thank you very much. Quick question. I apologize if this was addressed. Can you quantify how much of the interest expense is going from capitalization to the income statement from C-band? And then secondly, where are you as far as being able to utilize the fixed wireless to help reduce costs or type two circuits and that sort of thing? Thank you.

I can start with the fixed wireless access, and Tony will discuss the interest expense. Yeah, good question. Sometimes we focus on fixed wireless access being sort of a consumer solution for broadband. Today, we sell a lot of fixed wireless access for the business segment as well, both for large enterprises and for small and medium customers, which has a different usage pattern, which is great. And also, we see—and Kyle has discussed that several times—we see also this as a way of optimizing our access cost by having fixed access as a barrier or transport in many cases. So, clearly again, this is how we build our network from the beginning to be able from the data center to the edge of the network to have a total harmonized network that can fastly move all the data, and then at the edge of the network, we'll have different types of access technologies in order to serve our customers, and fixed wireless access can serve many different use cases. We tend to talk a lot about the consumer fixed wireless access use case. But I have or Kyle has a lot of use cases in the business segment, and if you look at the numbers this quarter, he's continuing to add a lot of fixed wireless access customers as well.

Then, Frank, on the capitalized interest question, in the quarter, we saw about $0.03 of pressure from capitalized interest from the time we got the licenses. And then, for the fourth quarter, we estimate $0.03 to $0.04 of pressure from capitalized interest. So I hope that helps.

Brad, we are ready for the next question.

Hey guys. Thanks for taking the question. Two if I could. Just the first one, Hans, at the very beginning of the call, you said that you were being really successful at three things: mobility, broadband, and private networks. And we haven't really heard a lot about what you're doing in private networks. What your goals are, what your successes have been. So if you could elaborate a little bit on what that is and why it's one of the big three things that we should care about Verizon being good at, it will be super helpful. And then the second is maybe this is for Tony. Just, I think we just touched on a little bit, but the success that you guys have been having in the postpaid phone subscriber net adds in business, could you elaborate a little bit on where that's coming from? Given that the consumer isn't growing, how is it that the business continues to be so successful quarter after quarter? And should we assume that that just can continue? Thank you so much.

Thank you, David. On the private networks, yeah, good question. What is happening in the private network right now is that we are doing proof-of-concept to go to commercial. We have ramped up a fantastic funnel. We're starting to get more and more deals every quarter. They start pretty small. They start as a Wi-Fi substitution. And then, when it works, let’s say you have one big logistics company, they take the one logistics center, then they do it and all. We are in that phase of ramping that up to do in one to many at the moment. What we have done is two things very important. We've cut the lead times of proof-of-concept to actually get to commercial deals. And it's very clear for our customers that the capacity, the security, and the low latency are game changers for them when they see it. And secondly, we also now have an ecosystem of products, infrastructure, modem, chipsets, phones, and radios that can serve different use cases. So that’s why we're excited about it. We are not going to see any significant revenues that have an impact on Verizon overall in '24. We are going to see that in '25, but why it’s important is that this is an area we never had been into. This is a total new time we can address by running private networks for different industries for different large enterprises across the country with our distribution and technology. I see this as a great opportunity to how we use our spectrum. So that’s why we pay a lot of attention to it, and with a lot of opportunities coming through it. And before Tony talks about the business segment and the wireless, I would say one main reason why we continue to do this is our wireless—our network is the best. I mean, if you ask any of our enterprise customers or SMB customers, the reliability and the performance of our network is just the best. And that's a very important buying criteria in that segment.

Sure. So, Dave, a couple of things. We're pleased again with the strong results from Kyle and the team. We saw great phone net adds in the quarter, 151,000 and over 430,000 year-to-date. We saw healthy demand across the board. That would be enterprise, public sector, and small medium biz. And that performance is in a very uncertain environment, and as Hans said, these strong results validate that the businesses continue to trust the Verizon network even during uncertain economic times. We do see certain pressures in certain sectors and we're certainly not immune to it. But we're not seeing anything significant, and from a competitive standpoint, I would tell you that we're being very disciplined, and we're not going to chase the bad deals that are better unprofitable. The other thing I would mention is FWA volumes also continue at a strong pace in business. We had 132,000 net adds in the third quarter and over 400,000 year-to-date. So we have great momentum heading into the fourth quarter here and as we set up for next year.

Yeah, thanks, Tim. Brad, before we end the call, I want to turn it back over to Hans for a few closing statements here.

Before we close, I want to take a moment to address the humanitarian crisis in Israel and Palestine that has continued to escalate over the past few weeks. At Verizon, we stand against terrorism in all its forms and condemn the violence that has claimed the lives of so many innocent civilians. The Verizon Foundation has committed a $2 million donation to organizations supporting relief efforts. And we continue to waive international long-distance charges for calls and texts from the U.S. to the region. My hope is that we will move to a peaceful resolution as soon as possible. In the meantime, we need to come together as a society and lean into what connects us, not what divides us.