Kannan Venkateshwar

Kannan Venkateshwar asked CFO Hugh Johnston about the financial drag of streaming investments and potential operating leverage, and CEO Bob Iger about the current organizational structure and its readiness for his successor.

Answer

CEO Bob Iger explained that the reorganization three years ago aimed to create accountability, particularly by connecting streaming's bottom line to the studio and TV organizations' spending, which has significantly improved profitability. He emphasized the importance of accountability for his successor. CFO Hugh Johnston detailed the streaming business's journey from a $1 billion quarterly loss to profitability, with a goal of 10% margin this year, and confirmed expectations for continued operating leverage while investing for growth.

Kannan Venkateshwar asked CFO Hugh Johnston about the financial drag from streaming investments (interface, international content) and the potential for operating leverage. He also asked CEO Bob Iger about the stability of the organizational structure and leadership for the upcoming transition.

Answer

CEO Bob Iger stated that the reorganization three years ago aimed to create more accountability on the streaming side, directly linking content investment to the bottom line, which has significantly improved the business from substantial losses to over $1 billion in profit. He believes the company is in a strong position for his successor, who must continue to evolve. CFO Hugh Johnston confirmed that the streaming business is driving significant operating leverage, with 12% revenue growth and over 50% earnings growth in the quarter, and aims for a 10% margin this year while continuing to invest and target double-digit revenue growth.

Kannan Venkateshwar inquired about Disney's interest in becoming a broader bundler of streaming services beyond its current Disney+, Hulu, and ESPN offerings, potentially including third-party content. He also asked for more details on the impact of ESPN bundling on Disney+ and Hulu, specifically regarding churn benefits or subscriber acquisition cost tailwinds.

Answer

CEO Bob Iger stated that bundled subscribers (Disney+ and Hulu, or the Trio bundle) exhibit lower churn rates, with approximately 80% of new ESPN service subscribers opting for the Trio bundle. He also noted that bundling with other companies, such as the Max bundle, has proven effective in lowering churn and attracting new subscribers for both parties, indicating a desire to pursue more such opportunities.

Kannan Venkateshwar asked about the go-to-market strategy for the ESPN sports offering, whether the current plan is the end state, and if there are opportunities to tier the product or bundle with other sports streaming services.

Answer

CEO Bob Iger confirmed they see opportunities to bundle other companies' sports offerings and have had discussions on the matter. He stated the goal is to serve consumers better by consolidating sports content into one destination to improve ease of use for fans, who often struggle to find where games are being broadcast.

Kannan Venkateshwar asked about the potential for theme park expansion in other new global locations beyond Abu Dhabi and questioned whether future streaming operating leverage would be driven by revenue growth or cost efficiencies.

Answer

CEO Robert Iger indicated that while not impossible, a new park in an eighth location is not a near-term priority, as the focus is on Abu Dhabi and the $30 billion expansion of existing U.S. parks. CFO Hugh Johnston explained that streaming leverage will come from both revenue growth and cost opportunities in areas like G&A and marketing, with some savings being reinvested and some flowing to the bottom line to accelerate margin growth.

Kannan Venkateshwar asked whether the primary objective of the ESPN flagship streaming service is to grow the sports business or to preserve its existing profitability. He also inquired if Disney would be interested in participating in industry-wide consolidation of smaller cable networks.

Answer

CEO Bob Iger clarified that the ESPN flagship service is designed to 'grow a business' by reaching a new generation of consumers on streaming platforms, calling it a 'sports fan's dream.' Regarding linear networks, he described them as a current asset, not a burden, and while not ruling out future changes, stated that the company feels good about its current portfolio and management strategy for both linear and streaming.

Kannan Venkateshwar of Barclays posed long-term questions about whether the market's pricing tiers are overly complex and if the 3.0x leverage target remains appropriate given potentially slower industry growth.

Answer

EVP Zainul Mawji responded that the tiered strategy must remain dynamic and is based on AMPU, not just ARPU. President and CEO Darren Entwistle countered the slow-growth premise by highlighting opportunities in AI, wireline, and health, and affirmed the 3.0x leverage target is a scientifically derived figure to minimize the company's weighted average cost of capital (WACC).

Kannan Venkateshwar questioned the long-term viability of the multi-tiered wireless pricing structure and asked if the 3x net debt/EBITDA leverage target is still appropriate in a slower growth environment.

Answer

Zainul Mawji, EVP & President of Consumer Solutions, defended the dynamic, AMPU-focused brand strategy. President and CEO Darren Entwistle argued that the growth outlook is strong due to AI, wireline, and emerging businesses. He stressed the 3.0x leverage target is a scientifically derived figure to minimize the weighted average cost of capital (WACC), not an arbitrary number based on comps.

Kannan Venkateshwar of Barclays questioned T-Mobile's broadband scale ambitions, asking if its wireline goals are sufficient compared to peers and whether larger transactions might be necessary.

Answer

CEO Mike Sievert stated he is decreasingly interested in large legacy transactions like acquiring a cable company, preferring to focus on high-growth fiber and fixed wireless. He stressed the goal is superior shareholder returns, not scale for its own sake. He and COO Srini Gopalan reiterated that current plans create a homes-passed equivalent of nearly 45 million, and that T-Mobile's challenger culture aligns better with disruptive technologies than with being a legacy incumbent.

Kannan Venkateshwar of Barclays questioned T-Mobile's broadband scale ambitions, asking why its wireline goal is sufficient compared to peers with much larger footprints and whether this might necessitate larger M&A transactions.

Answer

President & CEO Mike Sievert responded that he is decreasingly interested in large-scale M&A like acquiring a cable company, preferring to focus on high-growth FWA and fiber where T-Mobile can generate superior returns. He emphasized the strategy is not to chase scale for its own sake but to leverage their mobile-first advantage. COO Srini Gopalan added that T-Mobile's culture is to be a challenger, an ethos that aligns better with FWA and greenfield fiber than with becoming a legacy incumbent.

Kannan Venkateshwar from Barclays asked for the strategic rationale behind the 12-15 million fiber passings target, questioning its long-term adequacy, and inquired about the directional P&L impact of the fiber JVs.

Answer

CEO Mike Sievert explained that T-Mobile's fiber strategy is not about convergence but about leveraging its brand, distribution, and customer base to achieve superior financial returns on fiber investments. President and COO Srini Gopalan added that US market dynamics differ from Europe, making a convergence play less certain. CFO Peter Osvaldik clarified that the JVs are structured to be cash-generating and fund accretive growth, not to be an initial drag on financials.

Kannan Venkateshwar asked if Q4 Core Adjusted EBITDA was affected by any one-time items like storm costs or insurance income. He also explored the potential to expand the SpaceX partnership to include bundling Starlink's home broadband service, particularly in rural areas.

Answer

CFO Peter Osvaldik acknowledged that Q4 results included both headwinds (ACP wind-down, storm costs) and tailwinds (a spectrum gain), but the underlying execution was strong and the 2025 guide is clean of major one-time items. CEO G. Sievert addressed the SpaceX partnership, stating that while they are open to it, SpaceX currently has more demand than capacity for its home broadband service, making a bundling partnership unlikely in the immediate future.

Kannan Venkateshwar from Barclays asked if the industry's successful price increases suggest a larger value gap, and whether T-Mobile should consider shifting its strategy more towards price increases rather than volume growth to enhance profitability.

Answer

President and CEO G. Sievert affirmed that T-Mobile's strategy of emphasizing value, network, and experience has been highly successful and that the company is cautious about putting that at risk. He acknowledged that while the 'Un-carrier' brand's meaning of superior value may leave room for future changes, any adjustments would be made with the North Star of remaining true to their brand promise.

Kannan Venkateshwar of Barclays PLC asked about the strategic fit between AT&T's scaling fiber and fixed wireless businesses. He questioned if they are mutually exclusive or if fixed wireless serves as a funneling mechanism to reduce customer acquisition costs for fiber.

Answer

CEO John Stankey described the two products as 'highly complementary.' He positioned fiber as the premium, long-term solution for the top end of the market. In contrast, fixed wireless is a viable alternative for price-sensitive or less usage-intensive segments, allowing AT&T to monetize fallow network capacity. Stankey also noted its strategic use as a tool to penetrate markets ahead of a planned fiber build-out, such as in the future Lumen footprint, and then migrate those customers to the superior fiber product.

Kannan Venkateshwar of Barclays asked about AT&T's growth framework for wireless market share and whether there are further opportunities to extract capital from copper decommissioning and real estate sales.

Answer

CEO John Stankey explained that the primary focus is on growing the share of service revenues with healthy margins, rather than targeting a specific quarterly net add number. The long-term goal is to achieve market leadership through structural improvements. Regarding asset sales from copper decommissioning, he stated that reasonable estimates are already factored into the company's three-year guidance and he is not currently signaling a remarkable upside or downside to that plan.

Kannan Venkateshwar asked about the rationale for the 35-40 million long-term fiber goal and sought an update on Verizon's spectrum position and its view on upcoming auctions.

Answer

CEO Hans Vestberg explained that the 35-40 million fiber target was a long-term number provided at the Frontier acquisition announcement, with more details to come closer to the deal's closing. He affirmed that Verizon has a strong spectrum position with its C-Band and millimeter wave holdings, and while more spectrum will be needed for the U.S. long-term, it is not a short- or medium-term issue for the company.

Kannan Venkateshwar from Barclays asked if Verizon could turn consumer account growth positive by targeting new segments like Tier 1 markets and the Latino segment. He also sought to understand how management is thinking about the impact of immigration on overall industry volumes.

Answer

Consumer Group CEO Sowmyanarayan Sampath responded that while the postpaid market is expected to remain robust at 8-8.5 million line additions in 2025, Verizon is performing strongly in its value business despite lower immigration trends, thanks to refreshed brands and distribution. Regarding account growth, which was positive in Q4, Sampath emphasized that the primary focus is on building deep, profitable customer relationships by starting with connectivity and then adding services like perks and protection products. He stressed that the goal is to attract and grow with profitable customers who value network quality, which is reflected in the strong ARPA growth.

Kannan Venkateshwar asked if consumer account growth could turn positive given the focus on new segments, as line growth has outpaced it. He also inquired about the company's perspective on the impact of immigration on overall industry volumes.

Answer

Consumer Group CEO Sowmyanarayan Sampath stated that while the postpaid market remains robust, the company's focus is on building deep, profitable relationships with customers rather than solely on account growth, which did see an increase in Q4. He noted that Verizon continues to grow net adds due to its strong value brands, even with shifts in market dynamics like immigration.

Kannan Venkateshwar asked for David Zaslav's view on the media asset landscape and whether WBD is a buyer or seller, and followed up on whether easier studio comps and DTC profit growth imply consolidated EBITDA growth in 2025.

Answer

CEO David Zaslav positioned WBD as a global player fighting for a top spot, seeing consolidation happening via structural deals or commercial bundles where WBD is an attractive partner. CFO Gunnar Wiedenfels declined to give consolidated guidance but offered color: DTC EBITDA is targeted at $1.3B, Studios EBITDA will be 'very significantly better,' but the Networks business faces challenges from weaker ad sales and moderating affiliate rates.

Kannan Venkateshwar questioned if the guided high single-digit subscription streaming growth would be consistent throughout the year and asked if cost-cutting could be leveraged more to offset FX-driven margin pressure, seeking details on where cost savings are being reinvested.

Answer

CFO Bryan Castellani noted the recent 7% growth was an expected deceleration and that new DSP deals add conviction to the outlook. He confirmed FX is the primary reason for being unable to reaffirm the margin target. CEO Robert Kyncl added that reinvestments are focused on improving operational efficiency, such as enhancing the digital and physical supply chain and automating standard workflows.

Kannan Venkateshwar of Barclays asked for the rationale behind the weaker Q1 MAU guidance following a strong Q4, and also questioned the drivers for future growth in emerging markets.

Answer

CFO Christian Luiga explained the Q1 seasonality is amplified by a 'hangover' from Q4's outperformance, as the company won't prioritize retaining lower-engagement users. CEO Daniel Ek added that while developed markets will drive near-term profitability, he is pleased with emerging market development and expects them to become substantial businesses over the long term.

Kannan Venkateshwar questioned the sequential slowdown in net subscriber additions in Q3 despite it being an election quarter, and noted the Q4 guidance implies a lower degree of acceleration than might be typical.

Answer

Meredith Kopit Levien, President and CEO, expressed satisfaction with the 260,000 net adds, highlighting strong enterprise subscriber engagement and a new focus on using lifestyle products as funnels for the bundle. William Bardeen, EVP and CFO, reiterated that the Q4 guidance is built on adding value to the product, which supports monetization through bundle step-ups and price increases, leading to attractive revenue growth rates.