Verizon CEO Hans Vestberg joins Yahoo Finance’s The First Trade with Alexis Christoforous and Brian Sozzi to discuss the company's second quarter earnings results. Verizon is Yahoo Finance's parent company.

Video Transcript

BRIAN SOZZI: Welcome back to The First Trade. Verizon is out with second quarter earnings that topped analyst's profit and sales estimates. Joining us now is Verizon Chairman and CEO Hans Vestberg. Hans, always good to speak with you here. It was a-- listen, it was a challenging quarter, challenging three months for the world. What are some of your biggest takeaways from the quarter?

HANS VESTBERG: Oh, first of all, we have to acknowledge that we are in a historical time with multiple crises at the same time. Of course, the pandemic has continued to spread, especially here in the United States. And then, of course, the economic downturn. And then topping that with a racial injustice. So of course, handling your business as usual at the same time, I think, it's a really big task.

But I have to say our employees has done a fantastic job in this quarter, because we serve our customers with one of the most important infrastructure, mobility and broadband. And the big takeaways for me is, of course, that even though our stores has been half-closed, we have been able to deliver in new ways, curbside or digitally to our customers. We have also see our enterprise customers and our government-- government customers adding much more capacity.

So we ended up on a-- on a very good note when it comes to our earnings. Our earnings per share $1.18. And in there, we have $0.14 of impact of COVID-19, so very good. And we actually conclude the first half year of 2019 compared to 2020, we're actually ahead of 2019, even though we have $0.18 of COVID impact in the first half of 2020.

So very good. Strong cash flow. And we saw in the June time frame also a lot of new customers coming in. We ended with 173,000 new net additions, full net additions, which is very strong in times like this. And many of them on the wireless side went up to our unlimited premium, and now we're way above 50% on the-- our unlimited plan. So a lot of good things in an extremely difficult time.

ALEXIS CHRISTOFOROUS: Yeah, Hans, certainly an impressive quarter, given the backdrop we're all living through right now. And in case we didn't mention it, of course, Yahoo Finance's parent company is Verizon. And Hans, you know, a lot of Fortune 500 companies have had to make the difficult decision of either shrinking or doing away with their dividend payment altogether. I know Verizon is a dividend-paying stock, about 4 and 1/2% quarterly. How comfortable are you with keeping the dividend and keeping it at that level?

HANS VESTBERG: I feel really good about that, that I can put my board of directors in a position to continue to have a growth on our dividend that we've had for, I'm not sure if it's 13 years or whatever, but a long time. So remember also, if I look into the balance sheet this quarter, we have a record high like we did on it. Not only that, we had a commitment as a corporation to come back to the credit metrics that we had pre-- the Vodafone acquisition. We actually keep that this quarter.

So we are back where we actually committed to be some five years ago now with a long-term work, with a balance sheet that had, of course, a very good cash generation at the same time. So our capital allocation is clear. Number one, it goes to the business. Number two, it goes to the dividend to our customer.

Number three, we work with the balance sheet. And number four, it's buyback of shares. But we have also said that buyback of shares are unlikely in the near future, as in coming up a large watch on-- the C-band watch on-- on Spectrum later on this year, which we think is important to know the outcome before we-- we come back to the fourth priority of our capital allocation.

BRIAN SOZZI: Hans, the pandemic has really exposed a lot of rural communities and their need for high-speed internet. It's mission critical, especially as we go back and we look to potentially going back to school in the fall. What's your solution? How do we solve what is emerging to be a crisis to get rural communities high-speed internet access?

HANS VESTBERG: Oh, this is, of course, we're working with every day. And of course, we already have the widest spread broadband network in the country with our 4G network. But of course, there are still hot spots that are not covered. What we are doing right now, we have just announced, I'm not sure how many so-called new so-called work or partnership with-- with municipalities, with states where we are going to rollout broadband for them to see that the children or students can actually continue to study, because it's going to be a multi-mode for many students where they partly might be in the office-- in the school, and partly, of course, being remotely from home.

So yesterday we announced seven new states that are taking up our service, so that's how we work with it. And this is very near and dear to us. And we are doing broadband. We want student to have technology in their hands. We want them to study STEM.

And that's why, since 2012, we also have the Verizon Innovative Learning, which we have invested $500 million in in order to bring schools that are underserved to get them technology, broadband, and STEM technology. And we are just announcing, but we're adding schools to that as well. So we're-- we're combining our business with the strategy of supporting society. And that's the best way to do it.

ALEXIS CHRISTOFOROUS: Hans, talk to us about the impact COVID has had on your retail stores. I believe Verizon has over 2,300 company-owned retail stores across the country. Are most of them open? What are you doing in states like Arizona, Florida, where the virus is raging on?

HANS VESTBERG: No, so we-- we have our own stores in that magnitude. But then, of course, we're partners as well that are only selling Verizon and, in total, almost 8,000 stores, I would say. What is happening is that in the low in the second quarter, we probably didn't have more than 30% open. Right now we're at 77% open. And at the end of the month, we're 100% open.

But we have done a lot of innovation. I mean, we are doing curbside delivery. We are doing touchless retail when you come into the store. Not only that, we also see that where you can book a time to come into a store. We have limitation. We have masks requirement to come-- come into the stores.

So a lot of things has changed for us how we deal with our customers. And it seems like our customers like it, and we are adjusting to them. So we almost going to have all stores open.

Then it can happen that we need to close a store here and there because there have been an impact of COVID-19. But we clean them up quickly, and we're back in business soon as possible. And our heroes at the front line serving our customers every day, I'm really proud of them.

ALEXIS CHRISTOFOROUS: Hans, are you at all re-evaluating, though, the real estate exposure? Any thought to perhaps the-- the value proposition of having all these retail spaces?

HANS VESTBERG: No, I think that we always have been on a fairly balanced view on how many stores we have. Of course, the way of purchasing technology from us will be different. But nothing outside business as usual, come in and say, hey, we're going to shut down X amount or something.

Business as usual, we're always looking into stores where there's not a lot of foot traffic, and we move them, et cetera. That will continue. That would have been happening in any case. But there are no generic sort of now we can reduce 20%. We think we have a really good set up.

The only thing we need to continue to do is innovate so our customers are liking to buy from us, which they seem to do, because the numbers in the quarter was great. We had, as I said, 173,000 net add-- ads on the phones, which is great at times like this. And we had a record load share, and if 0.58% left us in a quarter like this, that means that there's a great loyalty among our customers.

BRIAN SOZZI: Hans, Verizon is accelerating its 5G deployment. How are you doing that during a major health pandemic? And what is the-- where are we at with 5G looking towards the back half of the year?

HANS VESTBERG: First of all, I'm really excited about the back half of this year. But our team has done terrific work. I mean, they are actually on plan or ahead of the plan of some of the biggest commitment we've ever done on-- on deploying technology.

So this year, we're going to do 60 cities on 5G mobility. That's five times more base station that we did in 2019. We're going to launch five cities with 5G Home. We're going to do nationwide 5G, as well as we're going to launch 5G mobile edge compute sites together with Amazon. All that is on plan for us.

And the second half is going to be exciting. And we are building a 5G that is so transformative, we're not building an incremental 4G to 5G. This is the ultra wideband with throughput and latency that is 10x whatever you have today. And not only that, of course, we're building the 5G Home solution and the 5G mobile edge compute on the same network, which is a totally different way of how you rethink the usage of the capital we have deployed on our network.

ALEXIS CHRISTOFOROUS: Hans, want to get your thoughts on the Verizon Media Group of which Yahoo Finance is part of. We've also got "HuffPost" and TechCrunch in there, Yahoo News, et cetera. We saw growth in active users, new subscription products as well, but revenue really took a hit, down more than 24% because those ad dollars were shriveling up. Any signs that that is changing here in the third quarter?

HANS VESTBERG: First of all, I would like to echo the innovation we have seen from all our online activities from Yahoo Finance, news, sports, et cetera, has been great. We are-- we are increasing the foot traffic from our-- our loyal customers, both from a subscription point of view, et cetera. That is catering for us in the future to have a really stable business and continue to innovate.

When it come to advertising, you're absolutely right, the whole industry took a hit. You know, I can see it from Verizon ourself and how we are advertising in the second quarter, of course, it's down. And that hits, of course, our advertising revenues at-- or in Verizon Media Group, down 24%. But if you look at the last month or the quarter June, that came down to only a decline of maybe 80%, 90%. And we actually believe that we can be in low single digits on-- on decline in the third quarter.

So yes, we think we have a great product. We got a lot of third-party acknowledgment on our ad platform in-- in the second quarter. And I think we're off to a good start. But to be honest, there is a market of advertising that have been shrinking, but I think we're doing well in it. And it-- I think we'll reach our low point.

BRIAN SOZZI: All right, really-- really good to hear that. Let's leave it there. Verizon Chairman and CEO Hans Vestberg, always good to speak with you.

HANS VESTBERG: Thank you, guys.