Verizon CEO Hans Vestberg Talks Frontier Communications Deal | Bloomberg Talks

[Music] Bloomberg audio Studios podcasts radio news Verizon agreeing to buy rival Telecom operator Frontier Communications for about $9.6 billion in cash giving an Enterprise value of $20 billion this as the New York phone giant looks to expand its high-speed internet business let's bring in Verizon CEO Hans verburg we welcome you sir and look it wasn't long ago that you actually owned some of these assets why go back into to w line why are we seeing this convergence again uh thank you for having me first of all I think this is very straight into our core strategy we are sort of in mobility and Broadband serve basically all types of customers in this market consumer SBS large Enterprise and governments uh this is just extending the offerings and optionality for the customers we have so this is a really good uh uh decision by us to to do it an economically right and on top of that as you mentioned yes we we own these assets before but they were in totally different type of assets uh there was a basically a CER based business nowadays Frontier is uh more than 50% of the revenue is fiber and more than way more than 50% of the EV is coming from fiber so a large transformation have been done uh and it fits in straight to our strategy over Ron Hans good morning it's Ed in San Francisco Frontiers trading at $35 a sharish below the $38.50 per share offer what does that tell you about the Market's reaction to the offer and what you think might happen next I don't tell me so much it's so early and is a two hours of trading I think first of all we feel really good about this deal uh from a from uh also from closing it and seeing that this is a possible transaction from many angles because given that we believe it's going to take 18 months and all all the GU regular bodies of course will be a thorough job but this is improvements for customers because we're going to get more choice and not only that we're going to bring our Mobility Broadband to these customers at the same time we also have the offerings that we have on our Broadband today which is everything from streaming services other services that we have on insurance Etc so we're going to bring a lot of new opportunities for the custom base of Frontier so I I'm I'm I'm really positive on this acquisition can you tell us a little bit about future as well the short term is a convergence trade is Wireless Wireline content but then there's AI then we're talking about the internet of things as we've been talking about for years Hans where does that come into play it come definitely into play in these assets and I said we expect this to take in take 18 months we already right now have a sort of a AI prepared network with a lot of comput and storage at the edge of the network we decided already uh some six years ago to fiber all our transport so we are really prepared of it the frontier asset is just coming in as an extension of that and we can meet even more customers to have processing storage at the edge of the network uh with with the fiberized transport so this is really also another Advantage we're getting with the even more Assets in the ground and of course serving consumers with home broadband together with our mobile and home offering is of course a strength in the overall acquisition where we're doing Hans we have a question from an audience member on Bloomberg technology who notes the 2015 sale of wline assets but I think the question that he and many others have is what's changed around the economics in this deal you said the economics work but give me specifics on what's different particularly for fiber in 2024 so the so if you look at the deal right now at closing we believe that's going to be a creative of growth uh Revenue growth and a beta on day one so that's a really good economics uh and then it's going to take some 12 months and EPs and cash flow will be a creative as well and the reason it takes 12 months there are some integration cost coming up in the beginning so uh definitely a very economical uh Sound business for us uh but I said um the assets we sold previously was of course in a totally different standard uh the the frontier team has put in billions and billions of dollar to fiberized the network uh to be the next generation and many any of the metrics that they have you know shurn penetration Etc are fairly similar to FiOS and FiOS is of course the best fiber Network in the in the state so uh there's a lot of similarities on that and that we can offer to our customers H some analysts were a little bit surprised by the timing and the fact that you're going all in on convergence now a bold step some call it because of your leverage and your commitment to reducing reducing your debt why do this now are you worried about leverage no I I think first of all we have a very strong balance sheet and as we said this morning at closing this will be maybe 0.2 0.3 not on our leverage which is very very low we still are committed to our Capital allocation number one invest in the business and that's what we're doing today number two commited to the dividend and you might have seen yesterday we came out with our uh dividend which was for the 18th consecutive year we increased our dividend and then is to pay down our debt uh we are have been paying down our debts since we bought the C band we still have some 18 months here that we're going to continue to pay down the debt so we're going to be in a really good position balance wise uh when when this deal is come to fruition Hans what opportunity is there for you in data center interconnect DCI in the context of AI look at what like Len's done with Microsoft for example I think that the difference here is that we have so many assets in the ground when it comes to fiber and Central offices many of these Central offices of course have compute storage power Etc and many of the AI Solutions when there is a real product they actually need to be way closer to the users uh the corporations uh Etc and that's means that because the transport cost and many other things it will be hosted at at the edge of the network that's how we built the Verizon intelligent Edge Network in 2018 when we started with the journey which we now is just adding Frontier to it so I I see a great opportunity for us on the B2B side with this footprint uh to serve customers uh that want to host AI at close to them secure lower transport cost Etc you're just announcing one deal and you know we always love to push forward Hans are you going to continue to be acquisitive when it comes to convergence I I think first of all we are really happy with assets we have and and now we're adding Frontier I don't think we need much more we're going to be biggest on Wireless we're going to be uh clearly the ones having the largest Broadband offering with fixed wireless access and fiber in the market uh we have the largest distribution and the customers so we're going to be in a really good position to see that we execute for our customers but also for our shareholders so I'm really happy with the assets we we're going to have and we have today when it comes to convergence I think what is important with convergence we will have the econ the scale of economy for both it we will have the ownerships for the wireless net Network and the fiber networks and fixed wirus access if customers want to make the convergence we will have the economics for doing it I don't believe it's going to be sort of you you discount one product for customer taking both that's not really it's two great products and we all know mobility in Broad band is essential for their society I mean everyone needs it if it's a corporation a private person or or a corporation you need these services that are even more important today than were 5 years ago and Verizon is number one in basic every segment of that and this is just fortifying it so yeah we're going to see convergence but it's not like we're going to discount products they're great two products that we're going to offer to our customers if they want to join we have improvements on shurn of course uh if customers both have mobility and Broadband with us and so we're going to see how this plays out in the market but clearly we're going to be best position in the market when it comes to commes Verizon CEO Hans vestberg thank you very much