Good morning, and welcome to the Verizon First Quarter 2019 Earnings Conference Call. At this time, all participants have been placed in listen-only mode, and the floor will be opened for questions following the presentation. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time. It is now my pleasure to turn the call over to your host, Mr. Brady Connor, Senior Vice President, Investor Relations.

Thanks, Brad. Good morning, and welcome to our first quarter earnings conference call. This is Brady Connor, and I am here with Hans Vestberg, our Chairman and Chief Executive Officer, 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 a 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 two. 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 on our website. The quarterly growth rates disclosed in our presentation slides and during our formal remarks are on a year-over-year basis unless otherwise noted as sequential. Now, let's take a look at consolidated earnings for the period. For the first quarter of 2019, we reported earnings of $1.22 per share on a GAAP basis. These reported results including net pretax benefit of $96 million related to a pension re-measurement triggered by the Voluntary Separation Program. The net impact after tax was a benefit of approximately $71 million or $0.02 per share resulting in adjusted earnings per share of $1.20. This represents growth of 2.6% on an adjusted basis compared to $1.17 a year ago. Let’s now move to slide 4 and take a closer look at our earnings profile for the first quarter. As a reminder at the…

Thank you, Brady. And welcome everyone to the first earnings call in 5G mobility era. Once again, Verizon has led the world in the development of new technologies with the launch of our 5G ultra wideband mobility network and the Motorola 5G smartphone. We launched our first two cities Chicago and Minneapolis and continue to deploy infrastructure in more cities, prioritizing cities that have made it easy to build there. Our initial launches are performing as expected on a brand new technology being deployed for the first time in the world. As more features within a network enhances become available for deployment through ongoing software innovation, we will provide increased coverage, improved capacity and greater throughputs. For our 5G Home product, we’re on track to launch additional markets when new customer equipment under the global standards becomes available in the second half of the year. These enable us to apply our learning’s from the initial commercial launch in 2018 to a broader base of customers. I'm super proud of what Verizon team has achieved so far and I'm pushing our teams for many more milestones and industry first that will give our customers the best experience. 5G has been a huge focus for us, but it hasn't taken away from our ability to enhance and improve the best in class 4G LTE network and superior customer experience. The network team continues to deploy leading technologies that improve our customer’s experience. We have 4G LTE Advanced capability in over 1500 markets across the U.S. and continue to be recognized by third parties for our superior network performance. Our One Fiber deployment is rapidly expanding the multipurpose fiber network outside our landline footprint. This will enable new revenue opportunities in the large enterprise, small businesses, public sector and the wholesale businesses, while…

Thanks, Hans. And good morning, everyone. Let's jump in with a recap of our consolidated operating and financial results. On a reported basis, first quarter consolidated revenue was $32.1 billion, up 1.1%. The primary driver of the increase was strong wireless service revenue growth. We are maintaining our full year GAAP consolidated revenue guidance of low single-digit percentage growth. On a consolidated basis, first quarter adjusted EBITDA margin was 37.2%. This was up from 37.1% and includes the headwinds from the deferral of commission expense and the impact of the lease accounting standard that Brady mentioned earlier. The growth in adjusted EBITDA is primarily due to wireless service revenue performance, as well as continued improvement in operational efficiencies across the business. Our business excellence initiatives have produced cumulative cash savings of $3.0 billion since the program started in 2018. At the end of the first quarter, we have completed the first two phases of our Voluntary Separation Program and have realized approximately $118 million of expense savings. Roughly 60% of the savings in the first quarter is attributed to the Wireline business with the remainder primarily in Wireless. We are on track to achieve our goal of $10 billion of cumulative cash savings by 2021. Our effective tax rate for the quarter was up over 100 basis points versus the prior year. Last year's ETR included certain onetime benefits due to the Tax Cuts and Jobs Act, which will not repeat this year. Despite the higher tax rate, we delivered earnings growth with strong operational performance. Based on the strength of the operational trends in the underlying business, we are raising earnings guidance for full year 2019. We now expect low single-digit percentage growth in adjusted EPS excluding the impact of the new lease accounting standard. This is an increase…

Thanks, Matt. As demonstrated by our strong results, we have carried forward the momentum that we saw into 2018 through the first quarter of 2019 and our focus and execution in Verizon 2.0. We’re committed to creating great customer experiences as a result of the investments in our networks. We’re extending our leadership position in 4G, driving innovation in 5G and expanding our high value customer relationships, while creating value for our shareholders. We’re building momentum for our ultra wideband 5G network, our launch of the world's first commercial 5G smartphone signals the beginning of an era that would transform the way people live, work and play. Our strategy relates to foundation for the future through investments in our Intelligent Edge Network, enabling efficiencies throughout the core infrastructure and delivering flexibility to meet customer requirements at the network edge. We’re excited about the current position in the marketplace, our financial strength and our opportunities ahead of us. With that, I will turn the call back to Brady so we can get to your questions.

Thanks, Hans. Brad, we’re now ready to take questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question will come from Brett Feldman of Goldman Sachs. Your line is open.

Yeah, thanks for taking the question. Actually sort of two related questions here on mobile 5G. At your analyst meeting, you identified a key opportunity with your mobile 5G launches defending and growing your market share. And so, it was actually interesting to see that the first mobile offer was actually priced a little bit higher than your 4G offering and so that implies it's a little bit more of an ARPU driver. So the first question is, as we sort of watch more 5G deployments going forward, what's success factor do you think investor should be focusing on? Is it going to be subscriber metrics responding favorably or ARPU/ARPA metrics responding favorably? And then just the second part of this and this is something Hans alluded to earlier, which is that some of the initial reviews of the launch have noted that this is still an early-stage technology. And so the question is, you know, when should investors expect some of the technical adjustments to be ironed out so that you can scale your mobile 5G offering in a way that will deliver a more consistent user experience? Thanks.

Thank you, Brett. And if we start with the mobile 5G, as we said before, we see of course an opportunity when you’re early on a customer experience like 5G, you have a chance and we have high ambitions here to see that we can grow with subscribers. But again, we’re very early stage on 5G. I mean, we are absolutely the first in the world. At the same time, of course, we will see that we have an offering that responds to the enhanced, sort of technology and experience you will get from 5G. So that's what you saw on the first commercial offerings we did on the 5G moto. We will soon, as well announced earlier, come with our next phone and that we're going to discuss or announce how we're going to deal with that. But, clearly, the team has high ambition in this area. We think that our leadership and experience is giving us a way to monetize 5G for mobility. When it comes to the initial launch on the mobility in Minneapolis and Chicago, it meets our expectation what we have seen from the software. Remember, this - we are first in the world to adjust from all the way from the network to the chipset, to the handset and actually have an experience and we have a great experience out there, already right now in the Moto Mod. Basically constantly updates on the software, improving the throughput, the speeds and all of that and features. And, of course, we’re part of driving the improvements on 5G in the world and giving our customers the first experience. So I would say that I'm really excited on what I've seen so far. It's meeting our expectations, but we have much more to come out from when it comes to speed, throughput, coverage and all of that from the deployment on our Ultra Wideband 5G. And then, not forgetting that we also as well said so many times before, when we launched 4G, we didn't even know we're about carrier aggregation, which of course changed the whole game on 4G LTE Advanced, which we now enjoy more than 1500 markets on that, and that will happen with the 5G as well. And one of the most important features that I have talked about is of course the dynamic spectrum sharing that will come during next year, where you basically also can use, deploy wherever you are with 5G and then you don't need to allocate certain spectrum to certain technology. So I see a lot of technology innovation and we work with most advanced partners in the world here to actually stay in the lead.

Thank you.

Brad, we’re ready for the next question.

Thank you. The next question comes from John Hodulik of UBS. Your line is open.

Great. Thanks. Maybe one for Hans and one for Matt. Hans, can you give us any early learnings you have on the - of the 5G home deployment? And I realized you’re working with pre-standards equipment and expect that equipment to be available later this year. Can you talk about the benefits that you'll see may be in terms of capabilities, installation and form factor, when you get that new standards-based equipment? And then maybe one for Matt. On the wireless side, it looked like the cost of service was a bit elevated this quarter and then have impact on margins. Is that all being driven by the lease accounting or was there something underlying operational issues that's driving that? Thanks.

If I thought and as you rightly pointed out, the first deployment of 5G Home that we did last year was based on our own proprietary standard and thus it was a limited [scope] [ph] and no development on the software. However, what we have seen is consistent speed keeping up 300 megabits per second minimum to our customers, which is great to see. Second, of course, the installation times has been reduced significantly since the beginning. So we have a great lot of learnings when we come out in the second half of this year when we have CPs on the global standard for 5G Home. And again it's sort of a multi-deployment, so it's the same equipment doing mobility in Home so with all improvements we're going to see on 5G mobility, it's going to go to 5G Home as well with the software. So a lot of great learnings, especially on the coverage, installation times and then keeping the consistent on the speeds, which has been very good.

Good morning, John. So on your question around wireless margins so we reported 47.4%. But as you touched in on your question there was some year-over-year noise from the accounting both the deferred commission expense coming from revenue recognition and the lease accounting about 85 basis points on there, so that's showing up in both the cost of sales and SG&A lines. But when you - so when you adjust for that the 47.4% gets you to about 48.3% so up year-over-year, 47.8% a year ago so nice improvement on the margin year-over-year, which when combined with the 4.4% service revenue growth means that we think we had a very good earnings quarter in wireless, high quality of earnings there and really setting the basis for the year as a whole.

Great. Thanks guys.

Thanks, Brad - thanks, John. Brad, we’re ready for the next question.

Thank you. The next question comes from Philip Cusick of JPMorgan. Your line is open.

Hey, guys thanks for the follow-up and a question. First, Hans, can you give us an update on the 5G equipment pipeline and the potential timing for - and our volumes as well as the impact to CapEx pace? And then second with leverage now in the low 2s, can you talk about strategic priorities beyond the current business? Can you envision making a strategic acquisition this year? Thanks.

So first of all, when it comes to the ecosystem of handsets et cetera, I think that as was alluded during our Investor Day, we see a majority of the handsets coming out next year having the millimeter wave spectrum. Many of the phones as I've already talked about, meaning the Samsung phone both the Note and the Galaxy coming this year will both have it 5G. We have the Moto already. We're going to see also LG phone coming out. So we see a much quicker ramp on ecosystem in that area to be clear. At the same time, the whole ecosystem from chipsets to equipment is ramping up quickly. But again, we are in the forefront of technology here, so of course we are being on the edge of the demands and the supply on equipment at the moment, but we feel good about that. Secondly, the question around our capital allocation. We remain very solid in what we have said before. Number one, we invest in our business, number two, we see that we can serve the dividend our shareholders, and thirdly, then we have our targets that Matt talked about on the balance sheet. That's really where we have the main focus. Then we talked at the Investor Day, there could be tuck-ins et cetera, but nothing else in that at the moment.

Thanks, Phil. Brad, we're ready for the next question please.

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

Great. Thanks very much. Good morning. Matt. maybe you could just talk about the wireless service revenue, the ARPA was strong this quarter, I think you mentioned people moving to higher priced plans. So where are you on unlimited adoption and the spread across those plans? And how much headroom do you have on that? And then perhaps on the network, can you just talk about the refarming of the 3G spectrum and where you are in that process, particularly in the major markets? Thanks.

Yeah. Good morning, Simon. So as you look at the wireless service revenue, as you see the 4.4% was - was a good result in the first quarter. As we look at that the ARPA was a big piece of it. We continue to step customers up to unlimited, which is typically a step-up in our ARPA. We continue to add connections per account, and we think we still have the runway to do so. Unlimited is still less than 50% of our - of our total connections. So there is - there is runway there to continue that, and that's why you heard us make the comment on the prepared remarks that we see, service revenue for the balance of the year continuing to be in the mid twos [ph] to 3% range. So continued growth on a year-over-year basis, as we look forward.

On the spectrum, I think that first of all, the team has continued to do excellent. As I said, we still are gaining the majority of all the performance metrics in the market, so the team is doing good work. And when it comes to the refarming of the 3G spectrum, we have said that's going to be ended by 2020, and we're on plan for doing that and the team is working everyday to see that we're doing that most out of our spectrum.

Okay, great. Thank you.

Yeah, thanks Simon. Brad, we're ready for the next call. Operator Thank you. The next question is from David Barden of Bank of America.

Hey, guys. Thanks a lot. Maybe two if I could. Just Matt the - on the, sorry, the cost structure for the - the income statement on the dividend side, sorry, the depreciation side, we saw a step down of about $100 million there into the new year, with the big step up in kind of CapEx in the quarter. So if you could kind of address how depreciation is changing and contributing to the guidance? And then the second piece was just on the media side and I guess, corporate and other. If we look at the combined number that we back into by comparing the segments to the consolidated total, it looks like we had a step-up in losses there. Could you kind of talk about the profitability in that unit or if there are other things that are moving around in the corporate side, not related to the - to the media business? Thanks.

Yeah. So thanks, David. So on the depreciation and amortization side, couple of things in there. One, you've obviously got the impact of the lease accounting standards, so some items that would have flown through D&A, will now flow through above the line and so that's part of it. The other piece is - is the mix of our spend over the last year or so has moved to a mix of assets with the longer average life, it means, they are depreciated over a longer time period. So that kind of impacts the timing of how they come through on the - on the depreciation line of the income statement. On the - the C&O side, as you look at that number, you're right that there is a little uptick in the - in the negative results in that piece and where that's coming from, there is - there is two or three one-timers in the first quarter. They weren't large enough for us to adjust out, but net-net, they had about a $0.02 impact at the EBITDA line. So you see that flowing through there that one-timers. We - you shouldn't expect to see them through the rest of the year. And so, you got strength in the overall results of the business in the Wireless and Wireline segments being offset by those - those one-timers that I'll say add up to about $0.02 of EPS pressure that's sitting in C&O. So it's related to one-timers rather than Verizon Media Group is driving that number in C&O.

Okay, great. That’s enough. Thanks, Matt.

Yeah. Thanks, Dave. Brad, we’re ready for the next question. Operator Thank you. The next question comes from Craig Moffett of MoffettNathanson.

Yes, hi. I wonder if you could just comment on that - what you've learned about high frequency spectrum, the work that we did on the Sacramento market and then some of the - the press reports of your roll out of mobility in Chicago, in particular and then - and what some of the comments are - were yesterday from T-Mobile's, Neville Ray all sort of point at - at millimeter wave having real challenges for propagation. I'm wondering how you think about millimeter wave in the context of your broader roll out at this point of 5G particularly for mobility? And - and what role you think mid-band needs to play in that roll out?

Thank you, Craig. So when it comes to the millimeter wave, as I said before, I mean, that has lived up to our expectation on performance. And again, we're very early on in - in improving the software, how we can deal with it. We will need to remind ourselves, this is not the coverage spectrum because we will do it as far as the economic is sustainable, of course. But still, it's - it's very good ranges we can come up with and of course, the throughput and speeds are enormous. And again, we're very early on - on the - on the journey. I think that no one else in the whole industry knows more than Verizon about it. We're being onto these for two years and what we have seen on it, he said, it's a - it's a good strategy. And topping that, which I've said before the dynamics sort of spectrum sharing will be the next step for us to see that we have all the assets to deploy our strategy on 5G to meet the different type of use cases, we outlined at the Investor Day sort of the mobility case, the 5G home case and the mobile edge compute case. So that's what we're working with everyday here to improve et cetera. So the engineering team feels good about it.

Okay. Thank you.

Thanks, Craig. Brad, we’re ready for the next question. Operator Thank you. The next question comes from Michael Rollins of Citi. Your line is open.

Hi, thanks and good morning. Just two if I could. First, if you look at the 5G roll out for the home, I think initially your advertising to offer over several hundred megabits per second of speed to the consumer and more recently, we've learned that you've been trailing in over 100 megabit product. And I'm curious how that change in throughput affects the potential coverage in homes over time or the speed that you might be able to reach that initial 30 million home targeted that would accelerate that the pace of the roll out? And then just following up on the comments around the partnership with YouTube TV, what are your thoughts on potentially exiting the Fios video business and letting someone like a YouTube TV or another partner, just potentially manage that video business for you, so you could just really focus on the broadband and the infrastructure side of the equation? Thanks.

Thanks. Okay. Rightfully mentioned, we started with the 300 megabits per second in our - in our offering in the cities. Of course, we have said that we will sort of meet all the customer demands and that's why we are of course, are trailing out different type of speeds as well. And as you rightfully said, I mean, if you have a lower speed and throughput of course, the range of coverage will go out and go further. But again, we need to meet the customer demands in the markets, we're going to and - and the team with Ronan Dunne will see that we are competitive in every marketplace we go. But of course, you can see possibilities, we'll have different ranges of speeds on 5G home as well, but we're not there yet. We will come in the second half of the - this year and see what offerings going to have. On the YouTube TV, I think that what most important is that we are committed to support our customers with the optionality. Here we are creating, as we said from the beginning when we decided not to pursue our own investment in OTT that we will have partners in order to work out our strategy, networking [ph] strategy and give our customers optionality and that goes also for our Fios customers, and their You Tube TV will play a - play a role for us.

Thanks Mike. Brad, we're ready for the next question. Operator Thank you. The next question is from Matthew Niknam of Deutsche Bank. Your line is open.

Hey, guys, thank you for taking the question. Just two if I could. One on wireless, I think you called out some pleasantness with the churn levels given the promotional activity in the quarter. So maybe if you could talk about what you saw in the quarter? How that compared relative to expectations and typical 1Q seasonality? And then secondly, just to go back to the question on YouTube, what's exactly changing on the mobility side. Is just - is it just an ability for your mobile customers to watch YouTube on their phones or is there any sort of incentivization on the mobile side using YouTube as well? Thanks.

Thanks, Matt. So on the wireless churn, we saw what we would normally expect from a volume standpoint in 1Q with the typical drop off from the fourth quarter into the first quarter. We saw fair amount of competitive activity in the first quarter, and we really didn't participate in that until we got into the March time period when we start to see volumes pick up. We feel good about the momentum we have in the business, as we exited the first quarter, as we come into second quarter and expect to see that drive performance for the rest of the year. On the YouTube TV, I think is as you described and you heard Hans gives us the opportunity to combine that product with the core wireless offering and Ron and his team will - will make sure that's relevant to our wireless mobility customers having that additional functionality available to them.

Thanks, Matt.

Yeah, thanks Matt. Brad, we're ready for the next question. Operator Thank you. The next question is from Colby Synesael of Cowen and Company. Your line is open.

Great. Two questions if I may for - for Matt. The first one is on EPS guidance increase. Just curious how much of that you're anticipating coming from the operational businesses, so say differently, you're showing up in the EBITDA line item versus improvements that you're expecting below the line such as interest expense, taxes or other income I saw, for example, other income was $295 million or about $0.06 benefit in the first quarter at least that we weren't anticipating in our model. And then secondly, as it relates to the savings from the VSP program, you mentioned the $180 million to date and you mentioned $180 million to-date, and you've - I'm just curious, how much of that or how much more can we expect for the remainder of the year. And I guess, as part of that where can wireline margins go for this year, would you anticipate them continuing to go higher? Thank you.

Yeah. Thanks, Colby. So I'll start with your second question. So as you think about the VSP savings in the first quarter, we said approximately 10,000 V Teamers, who are leaving the organization, as a whole around half of those came off at the end of December. So you had a full quarter impact from those. The second tranche was at the end of - end of March. So really minimal impact from those. So as you think, when you get to a full run rate, it's going to be significantly higher than that $180 million. 2Q will be a blend. It will be more than the 5,000, but not the full 10,000. It really be 3Q when you get to a full run rate benefit compared to the $180 million that we saw in 1Q. And as you say, more than approximately 60% of that benefit came from the - in the Wireline segment. And so we expect to see that continue to help wireline margins for the year, as a whole. So we think that - that will be something that will be a positive, as you think about managing the - the cost in that business to offset some of the trends on the revenue line. In terms of the EPS guidance, so I want to just make sure that we level set, where were - where we were. We wanted to make sure we kept it in the same basis as last time. Last time, we said that the adjusted EPS before the impact of the leasing standard would be similar to last year, last year is $4.71. And so we said adjusting the guidance to be low-single digits up. And to be clear, even after accounting for the new leasing standard that would put us…

Thank you, Matt.

Okay. Brad. We’ve got time for two more questions, please. Operator Thank you. The next question comes from Mike McCormack of Guggenheim Partners. Your line is open.

Hey guys, thanks. Matt maybe a -- just a quick comment on the wireline revenue side, how much of I think we saw from an FX perspective headwind? And then maybe if you can try to bifurcate between the competitive landscape versus technology migration? And then, I guess I'll beat the YouTube TV one more time, just sort of thinking about and maybe this is for Hans. As you think about the synthetic double play economics for consumers, it doesn't appear at least on paper, but I'm seeing that there's a significant discount you're offering and maybe we haven't seen everything yet, but sort of like the rack rate of $50 a month for YouTube TV plus a naked [ph] broadband or stand-alone broadband product. How do you think about those economics and how competitive will that be against current double play offers? And I guess also the risk of cannibalization of the current Fios TV customer base? Thanks.

Thanks, Mike. So on your question around the wireline revenue, there was a little bit of headwind from the FX, primarily in the enterprise space, but it didn't offset the ongoing pressures that we see from the technology shifts. So we would expect some of those -- those trends to continue, as we go through the quarter. We certainly expect the Partner Solutions revenue trend to improve versus the number we saw in 1Q, but still be negative on a year-over-year basis. But we are continuing to expand the offerings that we have across the wireline business based of fiber based products and newer technologies. Those are continuing to grow, as we go forward and offsetting the decline in legacy products. And in addition to that wireline revenue has opportunities, as a result of fiber build. We're able to offer our services to small, medium business, to enterprise, to even on a wholesale partner basis in geographies that we historically haven't. So that will bring some incremental revenue opportunities to -- to our wireline customer base in addition to what we're doing with new products, as we move forward.

When it comes to the YouTube TV and what we offered in our initial 5G home launch that was sort of a stand-alone offering. This is what we're doing right now. We are doing an overall agreement with YouTube TV to be offered to our home and mobility and Fios customers and final commercials, we have not decided yet. But clearly, we will - we will do it - compared to the offering for our customers, but we're also creating the optionality for our customers to get YouTube TV. And again, it comes back to our main strategy that we are focusing on doing the network, we're doing the platform, and we are doing the integration, but we're not taking sort of the investments of - of TV platform nor for the content. We see that is our role in this - in this ecosystem. And remember we have the best distribution, the best network and a great brand and that's what [ph] we can expect partnership like with YouTube TV. So that's a little bit different thinking.

Great. Thank you, guys.

Yeah, okay. Brad, we've got time for one more question. Operator Thank you. Your last question will come from Walter Piecyk of BTIG. Your line is open.

Thanks. Two questions. First, I want to go back to -- to Craig's question. Hans, you mentioned that millimeter wave not your coverage spectrum, I think that's a little different than - than what you guys have talked about before, so maybe we can talk about that dynamic spectrum sharing. Can you talk specifically about what - when next year that would be available? Which -- which spectrum bands you'll be putting the 5G and are on in order to enable that for coverage? And then, Craig - on the - going back to Hodulik's question on the expenses because I kind of got lost with all those numbers. I'm not sure, what you're referring to on the 42%, 47%. If we just look at network expense and SG&A, as your aggregate OpEx for wireless, it's up 10% year-on-year, how much of that is - has to do with this commission accounting and is this the kind of run rate, particularly on the SG&A side that we should expect going forward each quarter or was there some kind of one-time impacts on just the overall level of this OpEx particularly in SG&A? Thanks.

If I - if I start with the first question there that I don't think we've changed any thing about what we thought about millimeter wave, how we're going to deploy that and we're deploying massively at the moment. Remember, the majority of all the traffic is in dense urban areas, where we are now initially are focusing of course, getting -- an even greater experience for our customers and 5G experience, the real 5G experience. At the same time, we get the owners economics of having the best spectrum position there. When it comes to dynamic spectrum sharing and which spectrum, we're going to use et cetera and when will come into play? It will come into play next year. Right now, we're in discussion, but of course it's going to be whatever low band you want to have, mid-band and high band that's how it works. But all the time, all the spectrum will be sort of exposed to dynamic spectrum sharing. The good thing is for being a leader like Verizon, we can impact on own ecosystem, how this will be done and that's why we're in discussions with the chip set manufacturer and equipment manufacturers to have the best solution and again using the engineering skills of -- of the Verizon team.

Yeah. So, Walt, on the wireless margin, the reported number was 47.4% as we mentioned in the prepared remarks. There was 85 basis points of pressure from the combination of the two new accounting standards, but the vast majority of that pressure came from the deferred commission expense. So as you think about the language we've used over the past few quarters related to the revenue recognition standard, you had the benefit last year. And then we said, you'd have year-over-year headwinds in both ‘19 and ‘20 until you get to a run rate on the amortization of those commission expenses being close to the actual cash expense upfront. So about 85 points of pressure, a lot of that’s showing up in the SG&A line, as you point out, and that will continue throughout the year to varying degree. In addition to that, we did have a little bit of change in shaping of the advertising spending in wireless over the course of the year, a little more in 1Q this year than last year. I expect that will equal itself out over the course of the year as a whole. But the big impact was the impact of the deferred commission expense, so that's why we called out the 85 basis points so that you can get to 48.3% from the 47.4% and compare that year-over-year. And you see that wireless margins on a like-for-like basis actually grew year-over-year on an increase in revenue, so we think very strong quality of earnings within wireless in first quarter.

Got it. I think the confusion is I think a lot of people look at margin on a service revenue as kind of a more appropriate way to look at margins, which appear to be down. So total revenue with equipment is - I mean, is your operating margins really have anything to do with equipment?

Not significant, but that's why we put the -- make sure the 85 basis points was in the commentary, so that we give people a little more transparency and do the comparison year-over-year. So hopefully that helps.

Great. Thank you very much.

Okay, thanks. That's all the time we have for questions. Before we end the call, I'd like to turn it back over to Hans for some closing comments.

Thanks, Brady and thanks Matt. Just to sum up, I mean, the 5G era is here and we are positioning the company for long-term growth by taking advantage of the full array opportunities it has to offer. I think, during the first quarter, again, we delivered solid financial and operational performance in a competitive marketplace. We remain confident in our strategy and prioritized led by building the best network, creating platforms to further monetize data usage, maintaining a disciplined capital allocation model, and creating value for our customers and shareholders. By that, I would like to thank you all for attending this call today and have a great day.

Thanks, everyone.

Ladies and gentlemen, this does conclude the conference call for today. Thank you for your participation and for using Verizon Conference Services. You may now disconnect.