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Verizon agreeing to buy rival telecom operator Frontier Communications FRO about nine point six billion dollars in cash, giving an enterprise value of twenty billion dollars. This is the New York Phone Johant looks to expand its high speed internet business. Let's bring in Verizon CEO hands Verspeg. We welcome you, sir, and look, it wasn't long ago that you actually owned some of these assets. Why go back into wyline? Why are we seeing this convergence again?
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 the market CONSUMERSMBS, large entervice and governments. This is just extending the offerings and optionality for the customers well have. So this is a really good decision
by us to do with an economical right. And on top of that, as you mentioned, yes we own these assets before, but they weren't totally different type of assets. There was basically a copper based business. Nowadays Frontier is more than fifty percent of the revenue is fiber and way more than fifty percent of the DTA is coming from fiber, so a large transformation have been done and it fits in straight to our strategy.
Over Isison Hans, good morning. It's ed in San Francisco. Frontiers trading at thirty five dollars a sherish below the thirty eight dollars fifty cents 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 is so early in it's it two hours of trading. I think first of all, we feel really good about this deal from 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 eighteen months and all the regulator bodies, of course will be a thorough job. But this is improvements for customers. Were going to get more choice, and not only that, we can only 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 on new opportunities for the custom base or frontier. So I'm really positive on this acquisition.
Can you tell us a little bit about the future as well. The short term is the 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. Hands where does that come into play.
It come definitely to play in these assets, and as said, we expect this to take in a take eighteen months. We're already right now have a sort of AI prepared network with a lot of compute and storage at the edge of the network. We decided already some six years ago to fiber all our transport show. We are really prepared of it. The frontier acid is just coming in. There's an extension of that and we can meet even more customers to have a processing storage at the edge
of the network with the fiberized transport show. This is really also another advantage we're getting with 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 twenty fifteen sale of wireline 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 and what's different, particularly for fiber in twenty twenty four.
So if you look at a deal right now at closing, we believe that's going to be a creative of growth, revenue growth anibita on day one, so that's really good economics. And then it's going to take some twelve months and EPs and cash flow will be a creative as well. And the reason it takes twelve months is there are some integration costs coming up in the beginning. So definitely a very economic sound business for us. But I said the assets we sold previously was, of course in a
totally different standard. The Frontier team has put in billions and billions of dollars to fiberrize the network to be the next generation, and many of the metrics that they have, you know, Sharen, penetration, et cetera, are fairly similar to FiOS, and FIUs is of course the best fiber network in the States. So there's a lot of similarities on that and that we can offer to our customers.
And some anas 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 think for we have a very strong balance sheet and as we said this morning, at closing, this will be maybe zero point two zero point three notch on our leverage, which is very very low. We still are committed to our capital location. Number one invest in the business and that's what we're doing today. Number two committed to the dividend, and you might have seen yesterday we came out with our dividend which was for the eighteenth consecutive year we increased our dividend. And then is to
pay down our debt. We are have been paying down our debts since we bought a C band. We still have some eighteen 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 when the deals Comeing to fruition.
Hans, what opportunity is there for you in data center interconnects DCI in the context of AI. Look at what like Lumen'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 office. Many of these central offices of course have compute, storage power, et cetera. And many of the AI solutions when there is a real product, they actually need to be way closer to the users, the corporations, et cetera. And that means that because the transport costs and many other things, it will be hosted at the
edge of the network. That's how we build the Verizon Intelligence Edge Network in twenty eighteen when we started with the Journey, which we now is just adding frontier to it. So I see a great opportunity for us on the B to B side with this footprint to serve customers that want to host AI at close to them, a secure, lower transport costs, and et cetera.
You're just announcing one deal, and you know we always love to push forward. Hands are you going to continue to be acquisitive when it comes to convergence.
I think, first of all, we are really happy with assets we have and now we're adding Frontier. I don't think we need much more. We're going to be the biggest and wireless we're going to be clearly the ones having the largest broadband offering with fixed fires access and fiber in the market, 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
assets we're going to have and we have today. When it comes to convergence, I think what is important in convergence we will have the scale of economy for both. We will have the ownerships for the wireless network and the fiber networks and fixed fires 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 there's two great products. And we all know mobility in broadband is a centure for day society. I mean everyone needs it. Division corporation, a private person or a corporation. You need these services that are even more important today than we're five years ago and Veriecon is number one and basically 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.
There are great two products that we're going to offer our customers if they want to join. We have improvements on Scheren of course, if customers both have mobility and broadband with us, and so we're going to see how that places out in the market, but clearly we're going to be the best position in the market when it comes to convergence.
Verizon CEO Hans Vesperg, thank you very much.