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WHEN: Today, Thursday, September 14th, 2017
Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Verizon Chairman & CEO Lowell McAdam on CNBC's "Squawk on the Street" (M-F, 9-11am ET) today, Thursday, September 14th, 2017. Following is a link to the interview on CNBC.com: https://www.cnbc.com/video/2017/09/14/verizons-lowell-mcadam-5g-will-usher-in-the-fourth-industrial-revolution.html.
All references must be sourced to CNBC.
CARL QUINTANILLA: LET'S GET OVER TO DAVID FABER AT THE GOLDMAN SACHS COMMUNACOPIA CONFERENCE, SITTING DOWN WITH A VERY A VERY SPECIAL GUEST. HEY, DAVID.
DAVID FABER: HEY CARL. THANKS. THAT'S RIGHT. WALKED OVER HERE. LOWELL MCADAM, CEO/CHAIRMAN OF VERIZON IS OUR GUEST THIS MORNING. NICE TO HAVE YOU AGAIN, FROM A VENUE YOU AND I HAVE SPOKEN AT A NUMBER OF TIMES THROUGH THE YEARS.
LOWELL MCADAM: IT'S GOOD TO SEE YOU.
FABER: AND ALWAYS LOTS OF CHANGE IN YOUR BUSINESS. LET'S START OFF FOLLOWING UP ON SOME OF THE COMMENTS YOU MADE IN YOUR PRESENTATION EARLIER HERE AT THE COMMUNACOPIA. SPECIFIC TO SOMETHING WE'VE DISCUSSED BEFORE, BUT LET'S GET IT OUT OF THE WAY. YOU SAID YOU'RE NOT INTERESTED IN CABLE ANY LONGER.
FABER: YOU TALKED ABOUT INFRASTRUCTURE BUT WHY? WHY ARE YOU NO LONGER -- WHEN WE SAY CABLE, WERE TALKING ABOUT CHARTER, BUT WHY?
MCADAM: WELL, DAVID, I THINK YOU WERE ONE OF THE EARLY ONES TO SEE THERE WAS A HUGE AMOUNT OF HYSTERIA AROUND MERGERS. AND I THINK A WEEK DIDN'T GO BY THAT WE WEREN'T MENTIONED AS WE WERE GOING TO BUY DISNEY OR CBS OR CHARTER OR COMCAST OR WHOEVER. AND LOOK, COOLER HEADS ARE RUNNING THESE BUSINESSES. SO I THINK CHARTER HAS A GREAT COMPANY, GREAT BUSINESS MODEL. WE ARE VERY FOCUSED ON DEPLOYING FIBER AND 5G. THAT'S WHERE WE NEED TO PUT OUR CAPITAL DOLLARS. AND BUYING A CABLE COMPANY AND HAVING TO RECONFIGURE THEIR NETWORK DIDN'T MAKE ANY SENSE FOR US SO --
FABER: LAST TIME YOU AND I SPOKE WAS WENDELL WEEKS FROM CORNING AND YOU WERE FOCUSED ON 5G, SORT OF INTRODUCING IT TO OUR AUDIENCE FOR THE FIRST TIME. BUT WHEN IT COMES TO THAT, THERE HAD BEEN A THOUGHT THAT OWNING A CABLE PLANT WOULD BE BENEFICIAL. IF YOU GO THE ROUTE OF NOT DOING A DEAL, DOESN'T THE DENSIFICATION THAT YOU NEED OF THE NETWORK, MAKE OR OVERBUILD A REALITY AND COST YOU A LOT MORE MONEY?
MCADAM: NO, ACTUALLY, BECAUSE IF YOU HAVE TO BUY THAT ASSET AND THEN CHANGE IT OUT, YOU'RE PAYING FOR IT TWICE IN THE MEANTIME, CHAIRMAN PAI OF THE FCC AND LOCAL MAYORS, MARTY WALSH IN BOSTON IS A GREAT EXAMPLE, THEY'RE SAYING THIS FIBER DEPLOYED IN OUR CITIES WILL MAKE A HUGE DIFFERENCE TO HOW PEOPLE LIVE THEIR LIVES AND THEY'RE CLEARING THE DECKS FOR US. THEY'RE GIVING US ACCESS TO STREET FURNITURE, CONDUIT, ALL OF THOSE THINGS TO ACCELERATE THE BUILD.
FABER: WHERE ARE WE ON THE BUILD? I MEAN, YOU HAVE – YOU'RE SEEMINGLY AHEAD OF
EVERYBODY ELSE IN THE INDUSTRY, AT LEAST IN TERMS OF WHAT YOU SAY AND YOUR EXPECTATIONS FOR WHEN 5G IS GOING TO BE A REALITY.
MCADAM: YEAH, ABSOLUTELY. LOOK, AS YOU KNOW, WE BOUGHT XO WHICH GAVE US FIBER AND SPECTRUM. WE'VE NOW GOT A DEAL PENDING FOR APPROVAL WITH STRAIGHT PATH THAT GIVES US MORE SPECTRUM. RIGHT NOW DAVID WE HAVE MORE 5G CELLS DEPLOYED THAN ANYBODY IN THE WORLD. WE LITERALLY HAVE HUNDREDS OF THEM THIS NETWORK WILL USHER IN WHAT I THINK IS THE FOURTH INDUSTRIAL REVOLUTION IN THIS COUNTRY. IT WILL BE FOCUSED CERTAINLY ON CONSUMERS, BUT MORE ON INDUSTRIAL APPLICATIONS, SO THE AUTONOMOUS CAR, HEALTH CARE, SMART CITIES, EDUCATION'S A BIG DEAL FOR US. THINGS LIKE VIRTUAL REALITY AND GAMING THAT WE TALK ABOUT. THIS IS GOING TO PROVIDE THAT. AND THE STATUS OF THE TRIALS, I'LL JUST SAY THEY HAVE GONE BETTER THAN WE ANTICIPATED. VIRTUALLY EVERY VARIABLE, WHETHER IT'S LINE OF SIGHT VERSUS NONLINE OF SIGHT, HOW IT ACTS IN VEGETATION, HOW IT PENETRATES BUILDINGS, THE DISTANCE THAT YOU CAN TRANSMIT WITH MILLIMETER WAVE, ARE ALL BETTER THAN WE HAD PLANNED.
FABER: WHAT ABOUT THE MONEY YOU'RE GOING TO NEED TO SPEND YOURE AT $18 BILLION CAP X ROUGHLY. DOES THAT GO UP, DOES THAT NEED TO GO UP BECAUSE OF THE EXPENSE OF 5G?
MCADAM: WE DONT THINK SO, AT LEAST IN THE SHORT TERM. WE HAVE REPURPOSED. WE DONT SPEND ANYTHING OF 3G ANYMORE. WE DONT BUILD FIOS IN THE OLD ARCHITECTURE ANYMORE. THIS NEW FIBER ARCHITECTURE IS PURPOSE-BUILT. IT'S – YOU CAN USE IT ACROSS ANY APPLICATION INSTEAD OF PURPOSE-BUILT. NO, WE THINK WE'RE FINE.
FABER: YOU THINK YOU'RE FINE. LET ME MOVE ON TO THE COMPETITION THAT WE ALL KNOW IS RAGING IN THE WIRELESS BUSINESS, OF COURSE. THE UNLIMITED PLANS, FOR EXAMPLE, AND YOUR WILLINGNESS TO GO THERE IN YOUR COMMENTS YOU SAID THERE WAS SOME CONCERN THAT LIMITLESS WOULD BE A RACE TO THE BOTTOM. BUT WE CAN DIFFERENTIATE A LOT FROM THE COMPETITION. WHAT DOES THAT MEAN?
MCADAM: YEAH, YOU CAN. YOU'VE SEEN THE EARLY STAGES OF THAT AND WHAT WEVE DONE WITH OUR NEW OFFERINGS THAT WE ANNOUNCED IN THE LAST COUPLE OF WEEKS. SO, YOU CAN GIVE A DIFFERENT QUALITY OF VIDEO. MOST PEOPLE ON A CELL PHONE CAN'T TELL THE DIFFERENCE BETWEEN 400 AND 1080P. SO, YOU GIVE CUSTOMERS THAT SORT OF OPTION. AND WHAT – THE OTHER THING THAT IT'S DONE FOR US, DAVID, IT'S ALLOWED US TO CUT OUR COSTS. I TALKED ABOUT REDUCING OUR CASH COST BY $10 BILLION OVER THE NEXT FOUR YEARS. BUT AS YOU MAKE THE NETWORK MORE EFFICIENT AND YOU SIMPLIFY THESE OFFERINGS, YOU CAN STILL DIFFERENTIATE YOURSELF IN THE MARKETPLACE STARTING WITH THE NETWORK, BUT THEN DOING THINGS LIKE OUR NEW LOYALTY PROGRAM, VERIZON UP, TO DIFFERENTIATE YOURSELF FROM THE COMPETITION.
FABER: I GET BOTH FIOS AND I'M A WIRELESS CUSTOMER. YOU HAVEN'T LINKED THOSE TWO YET. YOU'RE NOT GIVING ME A BREAK THERE YET.
MCADAM: WELL. I WANT TO DO THAT WITH PRODUCTS VERSUS JUST BOTTOM OF THE LINE – BOTTOM THE BILL DISCOUNTS.
FABER: ON THAT SUBJECT, WHEN I LOOK AT ONE OF YOUR COMPETITORS, AT&T, ABOUT TO CLOSE THE TIME WARNER DEAL, THEY'RE ALREADY OFFERING A DISCOUNT ON DIRECTV NOW. THEIR OVER THE TOP OFFERING. 10 BUCKS, I THINK. THERES A POSSIBILITY THEY'LL BE BLE TO SAY TO PEOPLE, YOU KNOW WHAT, YOURE AN AT&T SUBSCRIBER ALL ALONG THE WAY HERE, HBO IS FREE. THAT'S PRETTY COMPELLING. HOW DO YOU RESPOND TO SOMETHING LIKE THAT?
MCADAM: WE HAVEN'T SEEN THAT MOVE THE NEEDLE YET AT THIS POINT. IT'S JUST LIKE UNLIMITED, IT WAS OUT IN THE MARKETPLACE FOR QUITE A WHILE BEFORE WE FELT WE HAD TO RESPOND TO IT. YOU'LL HAVE LES MOONVES ON IN A FEW MINUTES. IF WE WANTED TO OFFER SOMETHING LIKE HBO, CALL LES AND GET SHOWTIME IN A COMMERCIAL ARRANGEMENT. I DON'T NEED TO OWN THE CONTENT IN ORDER TO PROVIDE THAT TO CUSTOMERS.
FABER: SO YOU'RE NOT CONCERNED ABOUT THE COMPETITION -- LEDGER AND T-MOBILE, THEY RECENTLY DID THIS NETFLIX DEAL. IT DOES APPEAR THERE IS – THERE IS INCENTIVIZING GOING ON AND YOU HAVE RELIED SO LONG ON THE QUALITY OF YOUR NETWORK BUT THAT MIGHT NOT BE ENOUGH TO MOVE SOMEBODY TO YOU AS OPPOSED TO GO TO ONE OF THESE OTHER PROVIDERS.
MCADAM: WELL, I DON'T KNOW THAT YOU HAVE TO GIVE AWAY SOMETHING THAT HAS VALUE IN ORDER TO SELL YOUR SERVICE. AND I THINK THAT'S WHERE -- THAT'S THE EDGES WERE GOING AROUND AT THIS POINT. LET ME GIVE YOU THE COMPARISON TO HOUSTON. WHEN THAT HURRICANE CAME ASHORE, WE LOST LESS THAN 2% OF OUR CELL SITES. SOME OUR COMPETITORS SAID PUBLICLY 75% OF THEIR NETWORK WAS DOWN. SO THIS WAS A CASE WHERE ADVERTISING CLAIMS MEET REALITY. AT THE END OF THE DAY, CUSTOMERS WILL BUY BASED ON THEIR EXPERIENCE DOING WHAT THEY NEED TO DO, NOT WHETHER THEY HAVE NETFLIX OR NOT.
FABER: RIGHT. WELL, YOU GUYS HAVE ALWAYS DONE A GOOD JOB. I WAS WALKING OVER HERE THROUGH THE MEMORIAL OF THE WORLD TRADE CENTER, AND I REMEMBER THOSE DAYS WHERE YOU GUYS WERE HEROIC IN THOSE EFFORTS. NOT TO MENTION SANDY. THERES ALWAYS SOMETHING, YOU GUYS GET THE NETWORK UP PRETTY QUICKLY.
MCADAM: OUR TEAM RUNS THROUGH A CRISIS AND I COULDN'T BE PROUDER OF THEM. JUST AN EXAMPLE, THE TELETHON THAT WENT ON THE OTHER NIGHT, WE HAD 4,000 EMPLOYEE VOLUNTEER TO STAFF THOSE PHONES TO TAKE CARE OF THOSE HURRICANE VICTIMS. AND AS YOU MENTIONED ON THE AIR, WE'RE THE ONLY COMPANY THAT'S DONE $10 MILLION TOWARD THE RECOVERY EFFORT. SO, I COULDN'T BE PROUDER OF OUR TEAM AND HOW THE'YVE RESPONDED.
FABER: BACK TO CONTENT BECAUSE YOU DID SAY DURING YOUR TALK THAT SOME CONTENT DEALS ARE COMING FOR YOU AS WELL. WHAT DOES THAT MEAN AND WHAT WILL THEY BE?
MCADAM: WELL, HOW WE THINK ABOUT CONTENT NOW IS DIFFERENT THAN, I THINK, THE OTHER CARRIERS DO. YOU KNOW, IN THE PAST WE'D THINK ABOUT 5 MILLION FIOS SUBSCRIBERS OR 115 MOBILE SUBSCRIBERS. AND OUR OLD FACETS NOW WE HAVE 1.3 BILLION USERS. SO I THINK FIRST ABOUT HOW I CAN ADDRESS THAT GLOBAL AUDIENCE AND THEN USE THAT SAME CONTENT TO COME OVER TO OUR WIRELESS ASSET AND THEN ULTIMATELY TO OUR FIOS ASSET.
FABER: YOU SAID -- HOW DO YOU MAKE OATH MATTER, I GUESS? YOU SAID YOU'RE GOING TO MAKE OATH, THAT BEING AOL/YAHOO MATTER. I GOT TO BE HONEST WITH YOU - IT'S NOT CLEAR TO ME. IT DOES MATTER RIGHT NOW TO A LOT OF PEOPLE. I KNOW THEY HAVE A LOT OF PEOPLE AND EYEBALLS, CONCEIVABLY, BUT IT'S NOT THE POWER OF AN HBO OR A DIRECTV OR ANYTHING LIKE THAT. HOW DO YOU THINK IT MATTERS?
MCADAM: NO. WELL I THINK THE FIRST THING IS WE NEED TO GET THE INTEGRATION DONE. AND TIM ARMSTRONG AND HIS TEAM HAVE DONE A GREAT JOB. THERE'S A TREMENDOUS TALENT AT YAHOO. WE'RE GETTING THE PLATFORMS ORGANIZED AND THE PRODUCT STRATEGIES I'VE SEEN WILL BRING CONTENT TO CUSTOMERS WHEN THEY GET UP IN THE MORNING, THEY'RE GOING TO WANT TO GO TO THAT OATH APP AND SEE WHAT THEY CONSTRUCTED FOR THEMSELVES. SO I THINK THAT WILL MATTER TO CUSTOMERS AND THAT'S GOING TO PULL MORE PEOPLE TO WIRELESS SERVICE AND ULTIMATELY TO OUR 5G SERVICE.
FABER: GO90 HAS NOT BEEN A SUCCESS. WOULD YOU AGREE?
MCADAM: YEAH, GO90 HAS BEEN THE PLATFORM WE WILL USE TO DELIVER THE VIDEO SERVICES OVER OATH
SO, FROM THAT PERSPECTIVE IT'S BEEN A SUCCESS. GOING TO CONSUMERS WITH IT IS AN
OTT PLAY IT'S A VERY CROWDED FIELD. WE MAY PARTNER WITH SOMEBODY, WE MAY USE THAT, BUT I'D SAY FROM AN INFRASTRUCTURE PERSPECTIVE, WEVE BEEN SATISFIED WITH IT AS A CONSUMER OFFERING, NOT SO MUCH.
FABER: WHAT HAVE YOU LEARNED FROM THAT EXPERIENCE THAW MAY THEN, THEREFORE, CHANGE AS YOU TRY AND HAVE A NEW APPROACH?
MCADAM: FROM AN ENGINEERING PERSPECTIVE, IT'S THINGS LIKE INFRASTRUCTURE AND GETTING THE
SYSTEM TO SCALE PROPERLY. BUT IT'S ALL ABOUT THE TYPE OF CONTENT. AND AS I MENTIONED EARLIER, AND I'VE TALKED ABOUT IT FROM A YAHOO! PERSPECTIVE— SPORTS, NEWS, FINANCE, AND LIFESTYLE, WE STAY IN THOSE SWIM LANES, CUSTOMERS WILL RESPONDS.
FABER: YOU WON'T BE BUYING DISNEY OR CBS ANYTIME.
MCADAM: I DON'T PLAN ON ANY OF THAT. THANKS, DAVID.
FABER: LET ME END ON A DIFFERENT COMPANY QUICKLY. YOU'RE ON THE BOARD OF DIRECTORS OF GENERAL ELECTRIC, GE. JUST CURIOUS, ARE YOU DISAPPOINTED AT ALL IN THE PERFORMANCE OF THE STOCK PRICE? AND ARE YOU HAPPY WITH YOUR NEW CEO?
MCADAM: WELL YOU KNOW, NO BOARD OF DIRECTORS IS EVER GOING TO SAY UNLESS THEIR STOCK IS GOING UP A PERCENT A DAY THAT THEY'RE HAPPY. BUT, YOU KNOW, I THINK JEFF DID A GREAT JOB WHILE HE WAS THERE. JOHN FLANNERY IS A TREMENDOUS LEADER AND I THINK HE'S GOING TO GO INTO THE BUSINESS, CLARIFY THE STRATEGY AND MOVE THE COMPANY FORWARD. SO, I THINK ALL OF THE DIRECTORS ARE VERY EXCITED ABOUT JOHN.
FABER: WELL WE APPRECIATE YOU ALWAYS TAKING TIME WITH US. THANK YOU.
MCADAM: THANK YOU, DAVID.
FABER: YOU'RE WELCOME. LOWELL MCADAM, CHAIRMAN AND CEO OF VERIZON. BACK TO YOU, GUYS.
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