‘No magic wand, no secret sauce. No shortcut’

Verizon has raised its full-year guidance for the third consecutive quarter after a sharp rebound in postpaid phone additions, while pitching AI infrastructure and gigabit fixed wireless as new sources of growth. You can see Verizon’s latest quarterly scores here, but just quickly: 8% higher adjusted EBITDA ($13.8bn); 1.5% higher operating revenue ($34.3bn); 5.2% higher net income ($5.3bn); 406,000 net-new postpaid 5G additions (up 820%, its strongest Q3 in five years), across 137,000 net-new postpaid accounts (“best” in over 10); 314,000 new fiber/FWA broadband connections; 41% lower acquisition costs; 30% lower retention costs. So yeah, you get the picture; a good show. But the most interesting parts came with discussion of its AI contracts and 5G skirmishes, in particular.

Verizon has signed $4bn in AI Connect deals in six months, spanning dark and lit fiber and edge-compute locations. Revenue will register shortly (2027), albeit modestly to start – over contract lifetimes, not necessarily ARR. It has signed a $2bn-plus deal with AWS to host ‘real-time’ edge AI workloads. Demand from hyperscalers, neoclouds, and big enterprises is “exceptionally strong”. Verizon’s fiber and edge locations will be more valuable as AI exits central data centers. “We will price it as such,” said chief executive Dan Schulman of the capacity AI agents will command. All interesting, and to be covered in more detail tomorrow; but the best response was deep in injury time on the earnings call, where Schulman, in response to a prompt from Citi, took SpaceX to task.

Actually, there was not much here that has not been said – either by AT&T chief John Stankey last week, or by either Stankey, Schulman, others over the last quarter. But the force of his invective felt new, and so it is reproduced below, slightly abridged but unshorn of its combative edge.

“My operating philosophy, in general, is to be very thoughtful, be analytical, and to never take anything for granted. I have my eyes wide open. Clearly, the landscape is rapidly evolving, and we need to evolve with it. That’s why I’ve been so demanding from everyone at Verizon. I don’t want us to get incrementally better; I want us to leapfrog. I [don’t want to think about] improving by 10%… [but] by 10X?… I want to be… in a position to play to win. I also operate under the assumption that everything SpaceX says [it] will do, and… execute flawlessly. That’s my operating assumption. To assume anything else makes no sense… Everything we’ve seen so far – its announcements, everything we hear in the market – is [what] we’ve predicted it would do. We always knew it needed a terrestrial network to… [provide] a competitive service… We should take it seriously…

“There are no secrets in the market. We know exactly what it is going to do. We know [about its] RFIs, who it’s talking to on towers, who it’s talking to put equipment in place… It it builds a terrestrial network, it will basically look and feel like every other network, right? There’s no magic wand. There’s no secret sauce. There’s no shortcut. There’s no radically lower structural cost advantage. If it builds one, it is going to look at 65-80,000 macro sites, [and] backhaul, some combination of fiber, maybe some satellite. It is going to need RAN. It is going to need a tremendous amount of spectrum. Assuming… it tries to do that, it’s going to take a minimum of four-to-six years… [and] it’s going to cost hundreds and hundreds of billions of dollars; somewhere between $300-$500bn over the next seven or eight years.

“It needs to build retail, customer service, back-office systems etc. All of that gets them basically the same network and same capabilities and same cost structure as we have today. [So] sometime over the next four-to-six years, it has the possibility to become the sixth – not the fourth, the sixth – competitor in the market. Frankly, at that point, I [will] welcome the opportunity to compete against it. It’s very hard to throw a punch against something that doesn’t exist. But once it comes into the market, we will be ferociously competitive. We already have America’s best network [for] coverage, performance, and reliability. We already compete against three [operators]. Two of [them] offer free wireless service, and we are not only competing extremely well, but holding share, and beginning to gain share.

“We are not going to stand still. Four-to-five years from now, we will be two-to-three generations better than we are today. We will have high-speed broadband gigabit-plus coverage across the country with our millimeter wave – which [is now a] tremendous advantage for us, with 1,700 MHz of millimeter wave, two-times that of any of our competitors… We are ahead of most people and already experimenting with 6G applications. We are going to have a host of AI-enabled new value propositions using our data, our information, our AI tech stack to create new products, new services – to be able to play into edge computing and all of the applications around that, whether robotics or agents.”