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Verizon Communications Inc (NYSE:VZ)
Q3 2021 Earnings Call
Oct 20, 2021, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to the Verizon Third Quarter 2021 Earnings Conference Call. [Operator Instructions]

It is now my pleasure to turn the call over to your host, Mr. Brady Connor, Senior Vice President, Investor Relations.

Brady Connor -- Senior Vice President, Investor Relations

Thanks, Brad. Good morning, and welcome to our third quarter earnings conference call. This is Brady Connor, and I'm here with our Chairman and Chief Executive Officer, Hans Vestberg; and Matt Ellis, our Chief Financial Officer. As a reminder, our earnings release, financial and operating information and the presentation slides are available on our Investor Relations website. A replay and transcript of this call will also be made available on our website.

Before we get started, I'd like to draw your attention to our Safe Harbor statement on Slide 2. Information in this presentation contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. Discussion 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. As a reminder, we've entered the quiet period for the 3.45 gigahertz spectrum auction. So we will not be able to comment on our spectrum holdings or strategy.

Now let's take a look at the consolidated earnings for the third quarter. In the third quarter, we reported earnings of $1.55 per share on a GAAP basis. Reported results include a net pre-tax gain on the sale of Verizon Media of $706 million and a net pre-tax charge of approximately $247 million, which includes a net charge of $144 million related to a mark-to-market adjustment for our pension liabilities and $103 million related to a severance charge for voluntary separations under our existing plans. Excluding the effect of these special items, adjusted earnings per share was $1.41 in the third quarter compared to $1.25 a year ago. Please note, our results include two months of Verizon Media as the sale to Apollo funds closed on September 1.

With that, I'll now turn the call over to Hans to take us through a recap of the third quarter.

Hans Vestberg -- Chairman and Chief Executive Officer

Thank you, Brady, and thank you all for joining our third quarter earnings call. We had a solid performance in the third quarter, growing total wireless service revenue by 3.9% year-over-year with earnings growth. This was supported by a strong net additions in wireless and broadband, which are both translated to bottom line growth. This definitely confirms our strategy to grow our business with high quality offerings.

As I said throughout the year, we have all the assets we need to extend our number one position in the market. Our strategy remains unchanged, and we're delivering on everything we promised. And we're gaining momentum on all of five vectors of growth. We are more passive to grow than antibody else and we're confident with our growth targets for outer years based on our third quarter and continued momentum into the fourth quarter.

As an evidence, we're updating financial guidance for the full year. We now expect total wireless service revenue growth of around 4%, which is on the high-end of our prior guidance. And adjusted EPS or $5.35 to $5.40, up from $5.25 to $5.35. We remain on track to achieve our targeted capex levels in 2021, assuming no further disruption into the supply chain. Our team is working diligently and doing a fantastic work with vendors and suppliers to ensure we have adequate equipment to meet our C-Band build and that we have devices that our customer wants. Our operational excellence and our partnership strategy is the best in industry, which I've been so impressed by since I joined Verizon. And in times like these, it matters.

Let's talk about business. We continue to provide a best-in-class experience across the board. On the network front, third-parties continue to recognize us as the best network experience. This includes RootMetrics for the 16th consecutive time and JD Power for the 27th consecutive time. Our network team is doing a great job. On the commercial front, we've got great momentum in the 5G adoption with over 25% of our consumer phone base using a 5G capable device.

This is tracking well ahead of the 4G adoption, as I've said before. For context, 12 months of the 4G launched, 10% of the devices were on 4G. Less than 12 months after 5G DSS launch, more than the double were on 5G devices, and it's growing at the rapid pace. This combined with our millimeter wave strategy is an important combination, and that is paying off. In the third quarter, the total millimeter wave usage more than double sequentially. We're doing more gigabit of usage in a month now than we did in all the first quarter. In some or more established build outs, we're seeing more than 20% of usage of millimeter wave. And we are on track to have 5% to 10% of all traffic in the urban millimeter wave polygons by year end.

For Business segment, we continue to add wireless subscribers and take broadband share in our ILEC footprint with Fios. And finally, we delivered significant value creation and strategy refinement with the sale of the Verizon Media Group in September depending TracFone acquisition and also the issuance of our third green bonds, which is a vital step toward our net-zero goal in 2035. All this was accomplished in tandem with a strong quarter results.

When it comes to the finances, we are on track to meet and exceed all our 2021 guidance. We expect to have a strong finish of the year as we approach the launch of C-Band. We continued to deliver excellent revenue performance in wireless service and within Fios. We have a diversified path to revenue growth with all five vectors contributing.

EBITDA was up 3.3% year-over-year. And on an adjusted basis, EPS was up 12.8%. Our capital allocation stands firm. We invest in our business to create shareholder value. We continued to increase our dividend, which we did for the 15th consecutive year. And Matt and team are working diligently on our debt reduction. As we said last quarter, our guidance raise is broad-based and across all our five vectors of growth.

Consumer segment EBITDA increased by 2% driven by positive trends in customer acquisition, premium plan adoption, products and services and content as well as prepaid and reseller growth. The service revenue momentum in the third quarter was driven by continued execution of our migration strategy to higher valued price plans as well as high quality net adds, but our growth is more than that. Much of our long-term growth is in fixed wireless access and Mobile Edge Compute.

Our strategy is becoming a national broadband provider with the best access to detect for our customers includes Fios, fixed wireless access on 5G, 4G, millimeter wave and C-Band. When it comes to the Mobile Edge Compute, we are the Mobile Edge Compute leader, both in public and private. Thanks to great partnerships. And we just announced a private Mobile Edge Compute partnership with Amazon that we're pleased with. And this just scratches the surface on how we'll continue to utilize our assets. We're confident in our growth opportunities as we move into the investment cycle with C-Band.

Before I hand it over to Matt, I want to briefly touch on our broadband expansion. We are on track to meet our fixed wireless access household coverage targets with an expected 15 million homes passed by the end of the year between 4G and 5G. To date, 5G Home is in 57 markets and the 4G LTE Home in over 200 markets across all 50 states. In addition to fixed wireless access, we're pleased with the great performance of Fios and continue to grow the open for sales volumes within our footprint. We are on track on exceeding all the commitments for 2021 and on track for long-term growth expectations outlined in our Investor Day earlier this year. You can expect us to provide 2022 guidance during our Q4 '21 earnings call.

And now, Matt, over to you.

Matthew D. Ellis -- Executive Vice President and Chief Financial Officer

Thank you, Hans, and good morning, everyone. I'm pleased to be with you today to share our Q3 results, another quarter in which we delivered strong financial and operating performance. As we have said previously, our focus is not solely on volume growth as a goal in itself, but on a high value volume growth that will yield sustainable increases in revenue and profitability going forward. By delivering the best-in-class network experiences to customers with additional services and products like Disney+ that others can't provide, our strategy is focused on increasing the value we receive from every connection.

As you can see from our results, our disciplined approach is driving profitability and strong earnings results. In the third quarter, consolidated total revenue was $32.9 billion, up 4.3% from prior year. Our results are inclusive of two months of Media revenue, which approximated $1.4 billion on a segment basis. Excluding Verizon Media, total revenue grew 5.5%. Our service and other revenue growth rate was 0.5% and 1.6% without Verizon Media. Equipment revenue growth was approximately 30% compared to the prior year, mainly due to the timing of iconic device launches and the continued pandemic recovery.

Fios revenue was $3.2 billion, up 4.7% year-over-year, driven by continued growth in customers as well as our efforts to increase the value of each customer by encouraging them to step-up in speed test. Total wireless service revenue, which is the sum of consumer and business, was $17.1 billion, an increase of 3.9% over the prior year. The results were driven by higher access revenue, volume growth and products.

We are creating more positive growth with connectivity and non-connectivity services. Adjusted EBITDA in the third quarter was $12.3 billion, up 3.3% from prior year. Top-line growth and a reduction in non-equipment-related expenses contributed to the year-over-year EBITDA growth. Our net EBITDA growth is helping us drive EPS growth. For the quarter, adjusted EPS was $1.41, up year-over-year by 12.8%.

Now, let's take a look at our consolidated metrics. Throughout the quarter, we remain focused on bringing in high quality net adds, a key component in helping us continue to deliver strong quarter-over-quarter revenue growth. We are seeing strong demand for connectivity across our consumer and business units. Our Mix and Match value propositions, network quality and unique partnerships are resonating with both new and existing customers.

For the quarter, we delivered 429,000 wireless retail postpaid phone net adds, up more than 50% from prior year and in line with 2019 levels. We're seeing growth in new accounts as well as high retention levels, allowing us to grow our base with high quality net adds. Phone churn for the quarter was 0.74%, well below pre-pandemic levels. Churn continues to benefit from a number of sustainable factors, including our best-in-class network with unmatched reliability and coverage and overall value propositions within our Consumer and Business unlimited plans. Additionally, consumer payment patterns continue to be better than pre-pandemic norms. Total broadband net adds, defined here as Fios, DSL and fixed wireless, were 129,000. Fios Internet net adds were 104,000 compared to 144,000 last year.

As a reminder, last year's 3Q Fios results included a benefit from a higher backlog entering the quarter, as we had largely paused installs in Q2 2020 due to COVID. Fios has continued momentum driven by our best-in-class value proposition built on network quality and our Mix and Match pricing structure. This combination is helping us to take share and deliver historically low churn rates.

For the first time, we are providing fixed wireless net adds, which include both Consumer and Business fixed wireless products. We are building momentum and our pre-C-Band success in Q3 demonstrates there is demand for the product from consumers and businesses. Both our 5G and LTE fixed wireless products are performing very well. We're pleased with what we're seeing around the install process as well as the quality and reliability of the product.

Now, let's turn to our Consumer Group results. Our Consumer Group had another strong quarter, continuing the momentum that we've been seeing in wireless and FIos. Total revenue was $23.3 billion, up 7.3% year-over-year. Service and other revenue was $18.8 billion, an improvement of 2.5% versus prior year. These results include strong wireless revenue as well as growth in Fios.

Fios revenue was $2.9 billion, up 4.3% year-over-year, mainly driven by growth in our Internet base of approximately 400,000 or 6.2% over the past year and migration to higher speeds. Our actions around Mix and Match, which include a broadband first approach, is helping us to grow Fios revenue and Consumer EBITDA. We're still seeing plenty of room for additional growth within Fios as we continue to increase our share Mix and Match penetration rates and our open for sale locations.

Wireless service revenue was $14 billion, up 4% from the prior year. We have been driving access gains both in growing accounts and phone net adds as well as by continuing to execute on our migration strategy. As a result of migrations and step-ups, over 30% of our account base is now on premium unlimited plans. Our growth in access is being complemented by product revenue, which includes items such as protection plans, content and others. Our wide range of product offerings helps us to not only grow revenue, but provides differentiated experiences and more value to our customers.

For the quarter, EBITDA was $10.5 billion, up 2% year-over-year or more than $200 million, driven by a high quality service and other revenue gains coming from multiple growth vectors. These results show the impact of our strategy to enhance the value of each connection, which we believe will drive continued growth into the future. The Mix and Match pricing structure for both wireless and Fios provides tremendous opportunity to migrate customers to higher value tiers and bringing customers in the higher value plans. We are very pleased with how this strategy is working to help us increase value from our base and from new customers. You can see the impact of this strategy throughout our results.

Postpaid phone net adds were 267,000, above our Q3 performance in 2019 and 2020. The performance was consistent during the period as we were able to grow accounts and deliver sustainably low churn throughout the quarter. Most importantly, we continue to be very pleased with the quality of customers we're adding with approximately 66% of new accounts taking a premium unlimited plan. And Q3 was another quarter in which we saw a strong acceleration in our 5G penetration, exiting the quarter with over 25% of our phone base now equipped with a 5G capable device, which is great progress in advance of our launch of 5G service on C-Band spectrum in the coming months. Fios Internet net adds were 98,000 for the quarter, up slightly from the prior quarter. We continue to be pleased with the results we're seeing, especially on retention.

Now let's move to Slide 11 to review the Business Group results. Our Business segment continues to see strong demand for wireless services across multiple verticals. We are continuing to focus on what we believe will be the highest growth portions of the Business segment; our small and medium business unit, private wireless and the MEC space or enterprise customers as well as building momentum for fixed wireless access to serve multiple customer groups.

Total revenues for the Business segment was $7.7 billion. We continue to see growth in wireless revenue, being offset by ongoing legacy wireline declines. Wireless service revenue was $3.1 billion, up 3.6% year-over-year. We saw quarter-over-quarter expansion driven by small and medium business, which was partially offset by distance learning process in public sector. Wireline revenues continue to be pressured by secular trends, while also facing elevated year-over-year comps due to 2020 COVID spending.

Consistent with our focus on driving high value business in the wholesale space, we continue to rationalize our international voice traffic, which is contributing to the revenue decline, as shown on the slide. Business segment EBITDA was $1.9 billion, down 2.4% from the same quarter last year, and Business segment EBITDA margin was 24.8% in the quarter. While secular trends within wireline will continue to put pressure on margins in the near-term, we're encouraged by the growth opportunities associated with our business transformation efforts as they start to gain traction.

Our market leadership in wireless across all customer groups and our continued investment in primary growth areas for Verizon Business Group will position us to take advantage of the growth opportunities in the future. We are encouraged by the results we delivered for the highest value portions of the segment in 3Q. Phone gross add volumes were above pre-pandemic levels, up 11.4% year-over-year and up 3% versus the same quarter in 2019. Total postpaid net adds for the quarter were 276,000.

To better highlight some of the trends, on this slide we've broken out the net adds by public sector and our higher growth commercial businesses, which includes small and medium business and enterprise. During 3Q 2020, the commercial space, primarily within small and medium business, was depressed, while public sector buoyed by distance learning programs saw elevated net adds.

In 3Q '21, we've seen a rebound in the commercial space, while distance learning disconnects have driven public sector volumes to lower levels. We expect these trends to continue into the fourth quarter. A portion of distance learning disconnects also impacted our phone churn and net add performance. Despite this, we delivered postpaid phone net adds of 162,000.

Now, let's move to our consolidated cash flow summary. The business continues to generate strong cash flow. Year-to-date cash flow from operating activities totaled $31.2 billion. The year-over-year change was primarily driven by lower cash taxes last year from a one-time benefit and higher working capital requirements this year due to greater volumes. Year-to-date capital spending totaled $13.9 billion as we continue to support traffic growth on our 4G LTE network, while expanding the reach and capacity of our 5G Ultra Wideband network.

C-Band capex was more than $1 billion through the third quarter. And we have placed orders for approximately $2 billion of related equipment year-to-date, giving us confidence that we will be within the previously guided incremental capex range of $2 billion to $3 billion for the year as we accelerate our C-Band deployment. The net result of cash flow from operations and capital spending is $17.3 billion of free cash flow for the nine month period.

Net unsecured debt at quarter end was $131.6 billion, a $5.2 billion decrease versus the prior quarter. In addition to our third green bond issuance, we extended over $4.6 billion of near-term debt into a new 2032 maturity as we continue to optimize borrowing costs and our debt profile. Our net unsecured debt to adjusted EBITDA ratio was approximately 2.7 times. Our cash balance at the end of the quarter was $9.9 billion, which included the proceeds associated with our sale of Verizon Media Group. We expect lower levels of cash on hand as we progress through the fourth quarter and approach to close of the TracFone acquisition, while continuing to execute on our business strategy within our capital allocation framework.

Let's move on to Slide 14 for an update on guidance for the remainder of the year. We continued our strong first half performance momentum in the third quarter. Hans and I are very pleased with the hard work our team is putting forth, and we are excited about the opportunities that lie ahead as we prepare for the C-Band launch. Our strong year-to-date results and momentum heading into the fourth quarter are allowing us to update guidance on both wireless service revenue growth and EPS.

Wireless service revenue growth is now expected to be around 4%, the high-end of the prior guidance. Adjusted EPS guidance is being increased to $5.35 to $5.40, up from the prior range of $5.25 to $5.35. Our guidance for the effective tax rate is unchanged. Capex guidance is also unchanged, though I'd note that our assumption for our BAU spend of $17.5 billion to $18.5 billion is dependent upon no material changes in the current state of our supply chain.

Our team continues to execute on our strategy and deliver strong operational and financial results. We are attracting high quality customers that see value in our products and services, evidenced by growth in accounts, migrations and step-ups. I look forward to continued momentum as we wrap up the year and position our base to take full advantage of all the things 5G built ride has to offer.

With that, I will hand it over to Hans to wrap up our prepared remarks.

Hans Vestberg -- Chairman and Chief Executive Officer

Thank you, Matt. As you heard, we delivered solid third quarter results and we are on track to meet or exceed all our 2021 commitments to the investment community. Our strategy is working. And I'm confident in the strategy will help to deliver both strong results and premium experiences going forward. As we look ahead, we'll continue to focus on expanding our 5G leadership, capitalizing on wireless momentum and work toward our C-Band launch, deploying differentiating experiences for our customers and execute our Network-as-a-Service strategy delivering all five vectors of growth. I will look forward to delivering on all fronts and sharing our results in the coming months.

With that I hand it back to Brady.

Brady Connor -- Senior Vice President, Investor Relations

Thank you, Hans. Brad, we're ready to take questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from Phil Cusick of J.P. Morgan. Your line is open, sir.

Philip Cusick -- J.P. Morgan -- Analyst

Hi. Thanks, guys. Hans, you discussed continued momentum into the fourth quarter, and I see you recently pulled back on the more aggressive retention plans. Can you talk about what competition looks like in Consumer right now and any shift in underlying demand? And then second for Matt. Given the strong performance in the recurring revenue businesses, does it make sense to be less aggressive on reducing leverage and maybe allocate some free cash flow to buybacks given the low multiple on the stock? Thank you.

Hans Vestberg -- Chairman and Chief Executive Officer

Thank you, Phil. Let me start with the competitive landscape. Yeah, there is of course a little bit more compared to landscape right now, but let me remind you in a couple of things. First of all, as we have learned from the history, I mean, broadband and mobility is two of the most important infrastructure for any person in this country and in the world. So it's not strange there is a competition there. Secondly, we are in a moment where it's a -- 5G is scaling, the economy is strong. So of course, that's a moment where we see a lot of competition. But anyhow, if you look at our numbers, we are competing extremely effectively.

We are gaining the high quality customers regardless of the type of competition we have. And not only that, I mean, if you look at our growth of 3.9%, we feel really good about that as well when it comes to our service revenue. And we have been going back and forth on our promos. And the reason is that, Ronan and his team on the Consumer side, they look at long-term profitability, high quality customers when they come in and doing a promo. And right now, we feel very good about how we compete in the market. So we're always going to have promos when we think is the right timing of it.

So we feel really good about it. And as you also saw that Matt talked about our increased guidance as well. So all in all, we feel good how we compete in this environment. And if you look at track record, the last couple of quarters has been really strong in Consumer, and Ronan and whole team are doing a great job. So I feel good about that.

When it comes to the capital allocation, I'll let -- I can just say that we -- our capital allocation is clear. I mean, we focus, number one, on investing in business and we are investing in the business this year, both in capex, spectrum and all of that. So that's number one. But we also have as I said, our 15th consecutive year or dividend increase. And Matt and I, we constantly see that we have a position for the board so they can continue to do that, and we will continue to do that. And then we have our debt reduction, which Matt will talk about.

And finally, we have buybacks that we can do all the time. What I can tell you is that we constantly have conversation with the board, which is the best way of doing capital allocation, the priorities and we'll continue to do so to see that our shareholders get the best out of Verizon. Matt?

Matthew D. Ellis -- Executive Vice President and Chief Financial Officer

Yeah, Hans, I think you hit on the key points there. Look, we're always going to look at the pillars of our capital allocation policy. And right now, we continue to see a lot of opportunities to invest in our business. You see what we're doing there around the C-Band investment, for example, not just the spectrum, but also the capex associated with that. Obviously, we said long-term, we do believe deleveraging is the right priority. But we're also focused on returning capital to shareholders, and you saw that with the dividend. So you should expect us to continue to be thoughtful about capital allocation as we go forward.

Brady Connor -- Senior Vice President, Investor Relations

Great. Thanks, Phil.

Philip Cusick -- J.P. Morgan -- Analyst

Thanks, guys.

Brady Connor -- Senior Vice President, Investor Relations

Yeah. Brad, we're ready for the next question.

Operator

Thank you. The next question is from Simon Flannery of Morgan Stanley. Your line is open, sir.

Simon Flannery -- Morgan Stanley -- Analyst

Great. Good morning. Thanks so much for the disclosure on fixed wireless. That's great to see. Perhaps, you could just give us a little bit more color on the economics of the product. Is this a similar ARPU to a smartphone? Are we looking at mostly LTE or is this a mix of LTE and millimeter wave? And then perhaps, just coming back to the C-Band, I think you've said before 7,000 to 8,000 towers this year, getting to 100 million covered POPs by the first quarter. Perhaps, if you could just update us on that? And then how quickly do you really turn that into an expansion of your fixed wireless footprint if the marketing really start coincident with that or is that a steady ramp during the year? Thanks.

Hans Vestberg -- Chairman and Chief Executive Officer

Thank you, Simon. On the fixed wireless access, yeah, you're right, it's a similar ARPU on fixed wireless access as on our mobility. And also, when it comes to the numbers we have, as you said, it's a mix of 4G, it's a millimeter wave in the fixed wireless access right now. And as I said before, when we talk about our 5G fixed wires access, the usage of the network is very similar as on Fios. So they are even using more gigabytes on the fixed wireless access on 5G than they do on Fios. So -- and we have a very, very good performance and quality.

Remember, on the fixed wireless access, we are also doing, I would say, a different model with the self-install and all of that, making optionality for our customers. And ultimately, the vision is clear for Verizon. We're going to be a nationwide broadband provider. We're going to have different accesses in different places depending on what is right for the customers and how quickly we can deploy.

So -- and we are investing in the Fios, and you saw the numbers this month. I mean, we're adding 130,000 in this quarter when -- or 129,000, to be exact, net adds in broadband. So this is a great business for us and we're just ramping fixed wireless access. And then coming back to C-Band, as soon as we turn on C-Band, we're also going to augment the footprint that we can offer fixed wireless access. So -- and as we said in the opening remarks, we are on track for that to delivered after one year having 100 million POPs covered by the C-Band. As said, there are some challenges in supply chain, but I want to say the team is just doing an enormous work.

And just to be clear on it, the long-term planning we have with our vendors, the projection or forecasting we're done for all our equipment vendors over two years before we start deploying. Of course, it's paying off right now, but we work very differently with our vendors and how we plan. We have also pooled resources and inventory higher in the network so we can easily see that we have access to it. So we have done a lot of things the last two years, three years in supply chain so we can be in a situation to mitigate challenges we have right now. So all in all, that's where we are. Matt?

Matthew D. Ellis -- Executive Vice President and Chief Financial Officer

Yeah. No, Simon, I think, Hans has summed it up well that we've got good momentum in the fixed wireless business there. You saw the 55,000 net adds in the quarter. That means we're at approximately 150,000 total subscribers on fixed wireless access at the end of the quarter. Good momentum being built there. And as Hans said, as soon as we turn on C-Band, immediately be adding that to the technologies that we're selling on fixed wireless access. So good momentum build up and we've got that extra turbo boost to come here in the next few weeks.

Simon Flannery -- Morgan Stanley -- Analyst

Great. Many thanks.

Brady Connor -- Senior Vice President, Investor Relations

Yeah. Thanks, Simon. Brad, we're ready for the next question.

Operator

Thank you. The next question comes from Brett Feldman of Goldman Sachs. Your line is open.

Brett Feldman -- Goldman Sachs -- Analyst

Thanks. And just actually a follow-up here on your broadband business. You mentioned you're getting a mix of both LTE and 5G subscribers. I'm curious, who are these customers? Specifically, are you upselling into existing accounts or are these primarily new relationships for Verizon?

And then, it's also notable that you are continuing to expand the Fios footprint. It looks like you're going to add over 400,000 locations open for sale this year, and it seems like you would expect to be at or above that pace going forward. You really hadn't edged out that footprint for a long time. Why have you decided to do that now? How big could the Fios footprint be? And is all of this happening in your region? Are you actually doing some of this outer region? Thank you.

Hans Vestberg -- Chairman and Chief Executive Officer

Okay. On the customers on fixed wireless access, I would say, there are probably, roughly, half and half. Half meaning coming from our existing base and half we're taking from other suppliers. That's basically how they come in right now, and let's see how they mix going forward. But here we have the optionality that we've talked about before. And we have the owners' economics to work with convergence, if that's what our customers want to have. We basically have all of those optionalities right now, and I feel really good about that.

And then the second question on the Fios footprint. We have constantly of course deployed Fios in this -- in our ILEC and to the owners [Phonetic] there. And what we see right now is very strong demand, and we are winning the business. We're deploying -- the team is deploying, as I said, we are heading toward 400,000 open for sale this year. And we will continue with that because we see a great demand and our win share is extremely strong in the Fios footprint.

Matthew D. Ellis -- Executive Vice President and Chief Financial Officer

Yes. So just couple of things I'd add there, Brett. On the mixture of the customers, as Hans mentioned, a good mix of 50-50 kind of split there between new and existing customers. But also, I'd comment that a good mix, a good split between not just being in rural areas and so on, but also seeing good traction in suburban and urban areas too for those products. And when you think about those customers in the first 46 C-Band markets that will come online, the customers taking the LTE product, they're getting a router that also has C-Band in so they could immediately step up to those speeds when as soon as we turn C-Band on there soon.

And the Fios expansion, it's -- there is a couple of pieces. We see great opportunity, as Hans mentioned. The other piece, it's a great cost opportunity as well as we continue to upgrade the network technology in that footprint as well. So we've been investing in there for a number of years, maybe haven't spoken about it quite as much, but it continues to be a very good growth driver for the business, and we see very strong line of sight for it to continue to do so. 4.7% growth in Fios revenues this quarter, certainly something we can continue to build on.

Brett Feldman -- Goldman Sachs -- Analyst

If you don't mind, just a quick follow-up there on the cost point. Those of us who live in regions that have Fios know that sometimes you can get Fios maybe down the street, you can't. Are you kind of completing the communities? In other words, are you going to be at the point where you could finally rip out all this legacy infrastructure? Is that what you meant by the cost savings?

Matthew D. Ellis -- Executive Vice President and Chief Financial Officer

Well, that's absolutely part of it. Now we're going to be all the way there. That's a long-term goal for us. But certainly as you replace in a certain location copper with fiber, there is a good benefit from a cost standpoint in addition to the revenue step-up opportunities you get with that customer base. So it's a win-win on both sides of the P&L there.

Brett Feldman -- Goldman Sachs -- Analyst

Thank you.

Brady Connor -- Senior Vice President, Investor Relations

Great. Thanks. Brett. Brad, we're ready for the next question.

Operator

Thank you. The next question comes from John Hodulik of UBS. Sir, your line is open.

John Hodulik -- UBS -- Analyst

Great. Thanks, guys. Just a couple of follow-ups on the -- again, on the C-Band deployment. First of all, are you seeing any supply chain or labor shortage issues with it that may affect the timing of that rollout? And then beyond that, thanks for the 15 million sort of homes passed with fixed wireless by year-end. Can you give us a sense of what the C-Band deployment, the sort of first phase of that, what that will do to that number? As that gets launched, you'd turn on a number of more homes? And then lastly, can you give us a sense of how your sort of go-to-market strategy will change? And do you expect the C-Band deployment to change the trajectory of your net adds, both on the fixed and mobile basis when we see that early next year? Thanks.

Hans Vestberg -- Chairman and Chief Executive Officer

On the C-Band, as I said before, there are of course challenges in supply chain, but our team has -- I think our team is the most outstanding operational excellence team in the world, and they are getting around all of it. On all the major equipments, radios, etc., that's already secured. This is in a warehouse, and that's how we work. I mean, we do long-term planning with our suppliers years back. So we feel really good about that.

There has been some challenges amid material. The team is working around them every day. Finding new solutions in order for us to deploy, and they will continue to do so. When it comes to resources, again, we secured our resources years ahead to be prepared for this type of deployment we have, and we are doing more deployment than were ever done before. You talk about C-Band, we do millimeter wave, 14,000 this year. We do fiber. We do augmentations on the 4G. We do Fios. The team -- so it's many things they are doing and we have never done more than this. And I can tell you, the team with supply chain and deployment are doing a great job.

When it comes to them 15 million households passed by year-end this year, that includes all the technologies we have. And of course, the second part that we guided for when we had our Investor Day was to get the 50 million households passed later on. So that includes all the technologies, including C-Band, of course, and also how we deal with different type of devices, having all the different technology in them.

So the team has been planning this, creating opportunities for us. And of course, without coming into 2022 yet, but with the opening of the C-Band, we see great new opportunities. And as I said also at the Investor Day, that means that we can accelerate and amplify our business case on 5G. That was the whole thing with the C-Band, and the team is geared up for that and very focused.

John Hodulik -- UBS -- Analyst

Okay, excellent.

Matthew D. Ellis -- Executive Vice President and Chief Financial Officer

So just following up on the bit about the open -- the households covered. As you saw in the prepared remarks, we're 11.6 million at the end of the third quarter. Obviously, we'll continue to add some millimeter wave and 4G for the rest of the year, but C-Band certainly will get us well over the 50 million as we turn that on.

John Hodulik -- UBS -- Analyst

Thanks, guys.

Brady Connor -- Senior Vice President, Investor Relations

Yeah. Thanks, John. Brad, we're ready for the next question.

Operator

Thank you. The next question comes from David Barden of Bank of America. Your line is open.

David Barden -- Bank of America Merrill Lynch -- Analyst

Hey, guys. Thanks for taking the questions. I just wanted to return, Hans, to the competitive landscape. I guess, year-over-year, I think most observers would say that the promotions kind of looked very similar as they did a year ago. And if anything, the wireless landscape is probably less competitive now than it's ever been in terms of postpaid phone net add availability. As we look ahead, I think the things that people wonder about what's going to change are as the EBP and the PPP and the renovated programs all go away, the super normal kind of support for the postpaid market might ebb. And second, you've got the cable companies coming in with new pricing plans. And then third, we've got the Dish launch coming up. Could you kind of give us your perspective on how comfortable people should be about how the landscape is going to evolve as these things change? Thanks.

Hans Vestberg -- Chairman and Chief Executive Officer

Yeah. No, there's a lot of moving parts there, as you have talked about. Again, I mean, I think that what we have -- and now we start with consumer, because remember also, our strong position wireless on the business side, basically we are leading in every segment. So sometimes we forget to talk about our strong order. But let me start with consumer, because I think your question is a little bit more geared to consumer.

Remember, how we have built are possibility. First of all, we have the best network. We have kept the best network. We augmented. And we are of course adding more spectrum to it right now with C-Band. So that's very important. The second thought is that the value we are doing besides having the best network of course with all the offerings we have created over time with Discovery, Disney+, which all of them are giving us profitability and retention, and you see the share numbers in this quarter.

I think we have found a model with Mix and Match and things that we are offering our customers on the wireless side has really paid off with both the loyalty, but also the step-ups. And remember, when Matt talked about that we are now one-third of all the unlimited, be on unlimited premium, but we still have, let's say, one-third on metered plan as well. So we have so many steps to continue to move our customers upwards, and that has been a strategy from beginning. And it's clearly different than anybody else in the market how we can do that and both offer the best network and the experiences that we have as well as the mix and match that we have in the network.

So I feel good about the -- regardless of what type of competition is there and how it changes. We have owners' economics of everything we're doing. That was very clear from the beginning. We build our own fiber. We have the full network, and that's why we can have every nose on the network, which we also are benefiting from. So the whole idea with the strategy we laid out is just playing straight into what's happening in the market where mobility and broadband is the essential infrastructure for every individual in the world at the moment. And hey, everybody wants to be in, we have the best assets. That's basically how it looks.

Matthew D. Ellis -- Executive Vice President and Chief Financial Officer

Yeah. Couple of other points, Dave, if I can. So you mentioned the EBB impact on the marketplace, and certainly, we're supportive of all efforts to make digital connectivity available and accessible to everyone in the country and we're participating in those programs. I would though say that in terms of our gross adds, new customers coming in, it's a very small portion of that. The majority of our EBB participation is with existing customers rather than new customers. So it's not a driver of gross add for us.

And you also kind of mentioned, obviously, in the marketplace there's been new plans that have come to the market in the past six to nine months. And what I would say is look at the volumes we've had especially in the last two quarters with those new plans in place. You see the high quality volumes that we've put on in that environment. So you have to look across both the service revenue and the handset components of the offering to customers. You add in the other values and products and services that we bring to customers too. This is the strategy we've been working on for two to three years now. Obviously, it was a bit of a dip when we hit the pandemic, but the strategy was driving revenue growth before the pandemic, and you see it driving revenue growth now as we continue to focus on high quality customers and increasing the value of our base, and it shows in the results.

David Barden -- Bank of America Merrill Lynch -- Analyst

And if I could, just quick follow-up, Matt. As we look at the implied performance in business wireline, is a portion of that related to Verizon's willingness to be more aggressive on price and throw more elbows to hang on to customers knowing that those enterprise relationships are the groundwork for potential new wireless relationships as we think about enterprise 5G?

Matthew D. Ellis -- Executive Vice President and Chief Financial Officer

Yeah. No, I think there's a couple of items when you look at the wireline part of business revenue results for the quarter that are not related to what you mentioned. One, last year during COVID, we saw a little bit of a step-up in some of the chord voice data revenue that we hadn't seen in quite a while. We are now lapping that, and those volumes are returning to their pre-pandemic trends. The other thing is we've stepped out of some of the wholesale international voice business that had revenue, but not significant margins associated with it. So we wanted to focus on value-driving activities.

We continue to compete effectively in the enterprise space in wireline. But on the quality and reliability of the service we provide, obviously we are aimed to be competitive there. But I'm not -- I've not seen us do anything out of the ordinary of what we were doing previously. And as you mentioned, those relationships are very important to us as we go into the 5G era. And we're already seeing those relationships pay off with the work being done working through those opportunities in MEC with a broad array of enterprise customers.

David Barden -- Bank of America Merrill Lynch -- Analyst

Great. Thank you, guys.

Brady Connor -- Senior Vice President, Investor Relations

Yeah. Thanks, Dave. Brad, we're ready for the next question.

Operator

The next question comes from Michael Rollins of Citi. Your line is open.

Michael Rollins -- Citigroup -- Analyst

Thanks, and good morning. Two questions, if I could. First, I'm curious if you're seeing any impacts of inflation on your cost structure? And related to that, what are the opportunities and the specific products where Verizon could try to pass through any increase in input costs and get better pricing? Second question. Just taking the reaffirmation today that Verizon wants to be a national broadband provider for homes, businesses and on-the-go, how are you evaluating that build versus buy decision of using your spectrum in 5G technology to introduced fixed wireless broadband services versus the possibility of acquiring cable and fiber assets in the future?

Hans Vestberg -- Chairman and Chief Executive Officer

I can start with the second question, Matt will answer on the inflation. When it comes to our rollout of nationwide broadband and playing with that, of course, remember, we are doing a lot of fiber already right now. I mean, we're doing -- remember, we have been reporting on our One Fiber project, which is still ongoing. In the most metropolitan area we're building new fiber. And of course, that is setting us up to have owners' economics on the broadband. And then at the access point, we will do different type of 4G accesses, that's what new.

The reason we do that because that's so much faster when it comes to coming out to the customer. We want to be innovative as well and having a self-install and all of that combined with it. That will always on our fiber when it comes from outside or ILEC. We have looked into buy versus build all the time. We have come to the conclusion, we want to build. We built our One Fiber network because we wanted the owners' economics on fiber. So that work is already done. So we feel really good about it.

We're going to have owners economics nationwide on broadband over time here. And we can work with a wireless offering, our broadband offering. We created the two go-to-market Verizon Consumer and Business Group thinking about our customers, how they do product, how they do platforms, user experience, this all comes into play right now. And I couldn't be more excited right now because the momentum for mobility and broadband is happening. We have prepared and worked now for three years to get to where we are. And yeah, we -- I feel really good about what we have, and the strategy is really work.

If I look at the last couple of quarters here when we talk about our net additions, talking about the revenue growth. And as I also said, when we spoke to earlier, I mean if you look at the second quarter when everybody has reported, we also take the largest share of industry service and other revenue growth in the market. I mean, that's really what we're focusing on. We're focusing on getting the revenue growth, and that's a little bit of the answer to your question on inflation as well that Matt is going to soon take over is, of course, we still have a lot on the wireless side where we can migrate customers up to higher plans. And that's of course the best way to see that we are getting incremental revenues from our customers, but also give them more value and experiences.

Matthew D. Ellis -- Executive Vice President and Chief Financial Officer

Yeah. Thanks, Hans. So Mike, certainly, we are seeing inflation in our business here. How long that last, obviously, we're going to have to wait and see and we're all monitoring that closely. But we're seeing that come across in certainly in labor rates, we're seeing in commodities driving utilities and whatnot. So -- but that's why the things we've done on the cost side over the past few years and continue to do are so important, because it gives us the opportunity to be able to handle those -- any of those pressures coming in and continue to produce good margins. So we will continue to be focused there.

And then as Hans said, our opportunity on the pricing side is really to step customers up. If you've got direct costs out there that we can pass-through that we certainly we'll always look for the opportunities to do that. That's why you see kind of the changes in our content model from the legacy linear model where there wasn't clear transparency to the consumer between the increase in the cost from the producer there to what they were paying. What you see and what we're doing in the wireless space with content, gives a lot more transparency. So as costs go up, it's much easier for those to flow through to the end user.

Michael Rollins -- Citigroup -- Analyst

Thanks.

Brady Connor -- Senior Vice President, Investor Relations

Yeah. Thanks, Mike. Brad, we're ready for the next question.

Operator

The next question is from Colby Synesael of Cowen. Your line is open.

Colby Synesael -- Cowen and Company -- Analyst

Great. Thank you. Two if I may. First, you're starting to talk more about or let's just say disclose more on fixed wireless, which we appreciate. But you've also talked about the other 5G growth opportunity being Mobile Edge Compute or MEC. When will we start to see that show up in the numbers and actually start positively contributing to growth? And where -- what line items would you point to where we'll be able to see that?

And then secondly, Hans, you mentioned that next quarter we should expect to see 2022 guidance. Just curious, if your views on the metrics that you're focusing on might change. You're going to be seeing incremental headwinds, particularly to EPS, purchase and accounting, I believe on the spectrum. Just curious if you believe guiding to EBITDA and/or free cash flow is something that might become more important when we see that guidance for next year? Thank you.

Hans Vestberg -- Chairman and Chief Executive Officer

Great question, Colby. First, on the Mobile Edge Compute. We are -- first of all, we're doing a great progress in Mobile Edge Compute. And you have seen that we have made announcements in the quarter with the biggest cloud providers in the market both on the private 5G Mobile Edge Compute. And as you remember, there are basically three use cases. One is the public Mobile Edge Compute and then it's a private Mobile Edge Compute and then it's private 5G networks. All of them sort of are in execution right now and we're working with customers. We have announced a couple of commercial contracts already, like Corning, British Ports, etc. So that's already happening. And of course, it takes some time because we are actually creating a totally new market and we are actually alone in this market. Nobody else in the world has launched Mobile Edge Compute at this moment.

So of course, we feel really good about that. And the team is working through the funnel all the way from proof of context to new applications, and that's how it works when you create new markets, etc. So we will come back as soon as we feel it's time to start reporting it as we're done with 5G fixed wireless access. But I'm even more sort of excited about the Mobile Edge Compute what I've seen in the last year here with the technology solutions we have and also the customer interaction we have together with the main partners. I mean, we have the biggest partners you can everything about in this that are equally much invested as us because that was part of the strategy to bring different partners we have there.

So we will continue with that. And we will come back and report. And we will give you new deals and how is this progressing with partners over time. And ultimately of course it's going to be financials, and that's going to show up initially, of course, it's going to be on Verizon Business Group, that's going to have that as revenue. There is a B2B2C opportunity longer term, which can end up in Consumer. But predominantly, in the beginning, it's a Verizon Business Group opportunity.

Matt, on guidance? Can we talk through what you're going to do next year? He hasn't told me yet.

Matthew D. Ellis -- Executive Vice President and Chief Financial Officer

So Colby, great question. So obviously, we'll get into guidance at the next call. But as you mentioned, we always look at what year-over-year pressures may be in there, especially things that are accounting-related rather than cash flow-related. We'll make sure we have the appropriate level of transparency around that. The important thing for us to be able to demonstrate in that guidance is how our strategy is working, and it's going to show up in revenue growth and cash flow growth. And you see that this year. And we'll find a way to make sure that we could communicate clearly that we're continuing to grow the top-line of the business and that's flowing through into the cash generation of the business as well, which is ultimately what it's all about.

Hans Vestberg -- Chairman and Chief Executive Officer

Great.

Colby Synesael -- Cowen and Company -- Analyst

Great. Thank you.

Brady Connor -- Senior Vice President, Investor Relations

Yeah. Thanks, Colby. Brad, we're ready for the next question.

Operator

Thank you. The next question comes from Craig Moffett of MoffettNathanson. Your line is open.

Craig Moffett -- MoffettNathanson -- Analyst

Yeah, hi. Two questions if I could, both sort of at the strategic level, Hans. First, maybe you could just update us on your expectations for what exactly do you do differently when you get the TracFone asset? How do you think about the go-to-market strategy in the prepaid market in particular? And then second, you've started to see some of the -- whether it's open signal or other reports suggesting that T Mobile's network for 5G is faster and broader coverage. How do you think about maintaining the sort of best network advantage that you've had? And what gives you confidence that you can convey that in the business and consumer markets?

Hans Vestberg -- Chairman and Chief Executive Officer

Yeah. I can start with the second one. I mean, first of all, we rely on the RootMetrics because that's the most sophisticate and scientific way of measuring the network, and we are undoubtedly the leader there. And without going into my competition, because I never talk about them, but clearly one is always lost. So if we then talk about the TracFone, which is of course an exciting opportunity for us, we are still to be closed. We're not -- we're going to have the go-to-market and the brands that TracFone have. They are so good on prepaid and they have shown that. What we will of course support with this all the back-end support all the way from supply chain, IT support, UX, customer care and all of that. But clearly, we want to keep the point of sales, we want to keep the offerings and we want to serve the value market. So that's where we are. I cannot go further into that because we still have the pending sort of approval of it. But we will give you even more color, Craig, as soon as we have closed this one.

Craig Moffett -- MoffettNathanson -- Analyst

All right. Thank you.

Brady Connor -- Senior Vice President, Investor Relations

Great. Thanks, Craig. Brad, we're ready for the next question.

Operator

Thank you. The next question comes from Kannan Venkateshwar of Barclays. Your line is open.

Kannan Venkateshwar -- Barclays -- Analyst

Thank you. So maybe a little bit of a longer term question, Hans. When we look at your growth algorithm on the consumer side, you have essentially an ARPA growth trend line as well as revenue trend line, which is trailing [Technical Issue] probably continue as you deploy C-Band. And then as your replacement activity increases, your G&A should also pick up as we head into next year, and then there is the competitive backdrop which put [Technical Issue] When you think about this growth algorithm, how you keep margins intact when your revenue growth is essentially trimming?

Hans Vestberg -- Chairman and Chief Executive Officer

Yeah. Kannan, you broke up there. But I think what you're trying to ask is, how do we think about margin profile as ARPA trails the service revenue growth. Matt, your thoughts.

Matthew D. Ellis -- Executive Vice President and Chief Financial Officer

Yeah. So look, Kannan, I think we have tremendous opportunities, and you see it come through in the results we've delivered now for a few quarters. So the ability to bring high quality customers in and then step them up. So the step-ups give us the increase in ARPA. And then the service revenue is obviously a combination of the increase in revenue within the base and then also the impact of the new customers coming in.

So as you do that, we're very, very confident that you continue to add scale to our business, which is already the best-in-class from a scale standpoint, and that will show up in the margin profile of the business going forward. So I expect us to continue to have a very strong margin profile going forward. It's built on executing the strategy. You see that in the results this year. You compare the Consumer margin in 3Q this year to two years ago. You see that strategy is working and delivering results at both at the top-line and the margin line.

Brady Connor -- Senior Vice President, Investor Relations

Perfect.

Kannan Venkateshwar -- Barclays -- Analyst

You have [Technical Issue]

Brady Connor -- Senior Vice President, Investor Relations

Kannan, we're having technical difficulties with you. We'll have to catch up later. Thanks.

Kannan Venkateshwar -- Barclays -- Analyst

No problem.

Brady Connor -- Senior Vice President, Investor Relations

Yeah. Brad, we have time for one more question.

Operator

Thank you. Your last question comes from Frank Louthan of Raymond James. Your line is open.

Frank Louthan -- Raymond James -- Analyst

Great. Thank you. Can you give us a little more color, you mentioned there was a split in the fixed wireless between the Consumer and Business. How is that shaking out? And then on the Business side, you're still a little bit weaker there. Is that just continued pricing pressure in the market or is it a share issue or walk us through how you're looking at the enterprise space going forward?

Hans Vestberg -- Chairman and Chief Executive Officer

Yeah. I talked about the fixed wireless access on the Business side, it's called Business Internet on that signed offering we have. And of course, we started off with our fixed wireless access on the Consumer side, and we later on added in our Business side to actually have access to it as well, because that's how we want to restart. I would say, we have really good traction on the Business side on fixed wireless access small and medium businesses. Clearly, where we have our stronghold and being the clear leader. So we see this as a great opportunity for our Verizon Business Group as well. And again, we are now adding products and solution for Verizon Business Group. That over time should offset the wireless decline that we have that Matt talked about.

When we talk about the Verizon Business Group, we haven't talked enough about them, but the momentum on wireless there is really good. I mean, look at it -- small and medium businesses are coming back. They are doing a great job on the enterprise side wireless business well as well. The only area, it's a public sector, is coming a little bit back, but that's a very natural thing because sort of the increased demand of home education and etc., during the COVID, of course, had a spike in wireless connections, which is just naturally coming down a little bit right now. But the momentum on the wireless side, on the Verizon Business Group and then you add the new opportunity, everything from application on top of the net to the Mobile Edge Compute, the fixed wireless access and over time also opportunities outside ILEC on Fios or at least on fiber.

So that's a great opportunity for us and that's what we outlined already in 2019 when we decided to transform that business to see that we are really well prepared for capturing those opportunities and those transformations that all the enterprise, small and medium companies will do to digitalize over time. So I think we're in a good place. Simon and team are doing a great job.

Frank Louthan -- Raymond James -- Analyst

Great. Thank you.

Brady Connor -- Senior Vice President, Investor Relations

Yeah. Thanks, Frank. That's all the time we have today for questions. Thanks for joining the call. And everybody, be safe.

Operator

[Operator Closing Remarks]

Duration: 63 minutes

Call participants:

Brady Connor -- Senior Vice President, Investor Relations

Hans Vestberg -- Chairman and Chief Executive Officer

Matthew D. Ellis -- Executive Vice President and Chief Financial Officer

Philip Cusick -- J.P. Morgan -- Analyst

Simon Flannery -- Morgan Stanley -- Analyst

Brett Feldman -- Goldman Sachs -- Analyst

John Hodulik -- UBS -- Analyst

David Barden -- Bank of America Merrill Lynch -- Analyst

Michael Rollins -- Citigroup -- Analyst

Colby Synesael -- Cowen and Company -- Analyst

Craig Moffett -- MoffettNathanson -- Analyst

Kannan Venkateshwar -- Barclays -- Analyst

Frank Louthan -- Raymond James -- Analyst

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