Q4 2019 Earnings Call

Please standby.

Good afternoon, welcome to the T mobile U.S. fourth quarter and full year 2019 earnings call. Following opening remarks that earnings call will be open for questions via the conference line or via Twitter.

For those of you on the line please.

Press the star fall by one on your phone.

Most interested in so many questions during <unk> earnings call can do so also by sending that suite to add T mobile IR or John Ledger, using hashtag T. M. U.S. I would now like turn the conference are Mr. Nils Paellmann.

Good head of Investor Relations for T. Mobile U.S. Please go ahead Sir.

[laughter].

Thank you and I'm not sure what comes with your mobile it's what's going on it's one that's why you're not going on his call with me today on John My job I want to see no. Mike So you're not all kinds of him answer you know Braxton Carter I want to see all minimal.

No I don't know technology and other members of the senior leadership team.

Let me read that as far as Robert.

This call will make forward looking statements and projections on fundamental gone off your children and operating results all plants.

With respect to receive from a post merger with sprint and other statements that are not historical fact, such statements are based.

Dipankar expectations, all emerge from not subject to significant restaurant uncertainty is all part of our control that could cause our actual results could differ materially.

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And our annual report on form 10-K.

<unk> on the non-GAAP results, we discussed on this call can be found in the quarterly results such.

On the Investor Relations page of our website. In addition in connection with the proposed transaction on July 30 apprentice team, we filed a registration statement on former forwards he doesn't see related to the merger. The registration statement became effective on October 29 point to a gene and is available on the new T Mobile web site, it's sometimes boardman.

Suboptimal ones from the merger and related <unk> was not like your turn it over to John Let John John Okay, well done mills, good afternoon, everyone and welcome to T Mobile's fourth quarter and full year 2019 earnings call and Twitter conference coming to life from beautiful Sunny Bellevue Washington.

Yeah.

Got a lot to cover today, we're going to do a little bit differently. So first let me start with what everyone is curious about that's the deal.

Agee trial has concluded and our team didnt incredible job, making arcades backing it up with the facts, we are 100% convinced that this merger.

Sure will result in a more competitive market with lower prices in a better network customers as new T. Mobile our plans have not changed we played to build a transformational fiveg network that will unlock a massive amount of capacity 14 times more than T. Mobile today now we're waiting to.

Verdict, and we remain confident in a positive outcome. We firmly believe that the facts are on our side and while I'm sure. There are questions around the remaining steps in the process, including financing outstanding regulatory approvals final resolution would spreads on the business agreement. We are actively working those decision points as appropriate.

Well, we don't plan to answer specific questions related to the deal process on this call now as you all know Mike Sievert and I have been working on the CEO transition as he prepares to take over the range on May Onest I've center for and I'll say it again this company will be in great hands with Mike and the rest.

Senior leadership team, we have so carefully assembled.

CEO transition is a combination of a comprehensive multiyear succession planning process that I've worked on the board of directors as you can see from our results today, we continue to fire on all cylinders and will absolutely remain a disruptive for solving pain points.

And delivering value to customers. So today I'm going to hand, the call over to Mike who will take you through the results for Q4, and the full year, but before I officially hand that Mike Mike.

Couldn't pass up the opportunity for a quick teaser yep, that's right. We're working on another uncarrier announcement.

Our team of Eagle Geniuses are hard at work on plans to announce our next on carried a move that should come later this quarter. Because you know will never stop changing this industry for the better stay tuned for more and let the speculation games to be done all right, Mike and turn it over to you.

My job as.

I mentioned, it's an incredibly busy time here as we continue to work in our merger and clearly continue to simultaneously deliver outstanding business results.

Thank you all know we pre released are incredibly strong customer results in early January and once again led the industry with over 1 million branded postpaid phone net customer additions in Q.

For despite continued strong competition, particularly from rising and big cable.

For the full year 29, <unk>, we reported 3.1 million postpaid phone net adds in total postpaid net additions 4.5 million well ahead of our increased 2019 guidance range of four.

0.1 to 4.39.

And I'm proud to let you know that the financial results that were reporting today, our justice strong, beating our guidance range for both adjusted EBITDA and free cash flow.

Our team continues to stay focused and deliver all time record financials quarter after quarter, all while working on our pending merger.

So let's dive into those amazing Q4, and full year results first let's start with our financial since that's newly reported for all with me today service revenues hit an all time record high reaching $8.7 billion in Q4, continuing to grow by more than 6% year over year total revenues increased 4% year over year to.

7.9 billion in Q4 also an all time record high.

We're going to Q4 record highs adjusted EBITDA of 3.2 billion up 9% year over year for the full year adjusted EBITDA amounted to $13.4 billion up 8% year over year and comfortably beating our.

Increased 29, King guidance range of 13.1 to 13.3 billion.

We also delivered strong net income of $751 million in Q4 up 17% year over year free cash flow excluding payments for merger related costs was a record high 1.5 billion in.

For up 21% year over year for the full year free cash flow also excluding payments for merger related costs amounted to $4.8 billion in 2019, 31% yet another record high.

The best part is we posted all these strong financials, along with great customer.

We gained share and where the only one to beat expectations for service revenues and adjusted EBITDA during Q4.

We've always said that customer growth would lead to revenue growth, which would lead to growth and EBITDA and ultimately free cash flow, allowing us to continue to invest in our customers and our network. These results reflect ours.

Success in exercising financial discipline to bring growth and profitability has always and show that our winning formula continues to benefit consumers and shareholders like.

1.9 million total net customers joined the Uncarrier movement in Q4 that makes 27 quarters in a row and we've had more than 1 million total net.

Customer adds per quarter.

We added over 1 million branded postpaid phone customers in Q4, well ahead of our competition in a very competitive corridor.

We continue to make inroads into our growth adjacent sees T. Mobile for business is now present and over half of Fortune 500 companies and in 2019.

We added over 2000, new logos across enterprise and government.

Also in Q4, we announced if you'll recall on carrier 1.0 for new T. level, where we outlined not one but three major initiatives focused on utilizing the tremendous fiveg capacity of the new T mobile network to deliver fiveg for good.

Including the connecting heroes initiatives, where we've committed to providing free services to all state and local law enforcement and N.S. agencies, and I might add we've already seen a tremendous response with over 2000 agencies nationwide signing up for more information.

And there's project 10 million.

Which is designed to eradicate the homework over five years and of course T mobile connect slashing our lowest price plan.

We're immensely proud of these groundbreaking initiatives and can't wait to bring them to the market with the new T mobile.

So turning back to our results in a seasonally busy.

And competitive quarter, we recorded branded postpaid phone churn of 1.01% just two basis points year over year.

Two bip increase in churn compared favorably to all of our peers and our postpaid phone churn was better than 80 Mg for the fifth.

Quarter in a row.

The slightly higher churn was more than offset by higher branded postpaid phone gross ads, which were up 5% year over year in Q4, and again, a very competitive climate.

We grew both sides of the business with branded prepaid net customer additions of 77000 in Q4.

This momentum brings us to 68 million total branded customers and 86 million total customer connections, including wholesale as of Q4 2019, that's approximately 53 million more total customer connections since the launch of the on Kerry.

Underpinning all of this is our best.

First in class care team since probably feel them team launched team of experts T. Mobile has won the JD Power award for customer care every single time and this morning, we announced we've done it again, earning another record breaking score in the latest JD power U.S. wireless customer care full service study this marks the nine.

Time T mobile has ranked highest more than anyone in the industry at the stuck in the history of the study.

And T mobile has done and again the third time in a row setting a new record breaking score.

I have to reiterate this point these results further demonstrates our ability to aggressively compete and take share.

While continuing to execute on our long term strategy to balance growth and profitability.

Okay, Let's talk network for a moment as you know novel and team launched America's first nationwide Fiveg network in early December covering more than 200 million Pops and more than 1 million square miles right out of the.

Okay, a stark contrast of horizons fragmented fiveg strategy to sprinkle fiveg connectivity across 20, some square miles in select American cities, how to having already launched three fiveg capable smartphones last year, including two in December the can tap into our nationwide Fiveg we anticipate.

Operating and industry, leading smartphone portfolio built to work on nationwide Fiveg. This year. These new devices, including Fiveg smartphones from major Oems are expected to operate across mobile spectrum bands, giving us an advantage over Verizon, which is focused almost exclusively on millimeter wave fiveg.

We're looking forward to a potential fiveg device super cycle, given our lead in nationwide Fiveg coverage.

Let's not forget this is all while we continue to expand our Fourg LTE network coverage and deliver industry, leading performance our coverage reach is that parity with a TNT and Verizon with 327.

Million Americans covered with Fourg LTE as of Q4 2019 are low band spectrum investment. All 600, 700 megahertz combine continues to deliver for consumers with 316 million Americans covered by low band as of Q4 2019.

We have more than 33.

<unk> million devices that are 600 megahertz compatible already on our network today, which is like in nearly 8900 cities and towns in 49 States and Puerto Rico, We've made tremendous progress on the rapid deployment of our 600 megahertz spectrum over the last year.

More than tripling the number of cities and towns we cover.

This deployment covers 1.5 million square miles and approximately 248 million.

And you know we won't stop.

Okay. So to wrap up I couldn't be more excited about our performance. This quarter I hope you can tell we continue to work towards closing our merger to create the new T mobile and we're doing so without.

Skipping a beat in our business performance much to the frustration of ATM T. Verizon and Big cable Q4, 19 was another competitive corridor for T. Mobile and are unprecedented momentum continued as we gain postpaid phone share and delivered record financial results, yet again and for the full year, we beat our guidance.

For 19 in terms of total postpaid net adds adjusted EBITDA and free cash flow, while continuing to balance growth and profitability our guidance for 2020 Braxton, we'll talk about shortly shows that we remain confident in our standalone outlook, but of course it be that much more exciting to successfully closed this merger and begin to.

Rapid delivering rapidly delivering those fast benefits of the merger to America's consumers.

Well, Okay. It's time to pass the magenta Cowboy himself Braxton Carter to take us through the financials and our guidance for 2020, Braxton, Hey, Thanks, Mike I really appreciate it.

First of all I, just want to say on so.

We're excited about the future prospects of T mobile.

We got an amazing team are winning combination and works here to create continued value over the long run.

Super proud to report the route 29, too, but more importantly to give you a view on.

20, Twond <unk> on a standalone basis, which is very very strong guidance first of all strong that income amounted to 751 billion in Q4 up 17% year over year diluted earnings per share was 87 cents.

16%.

Due to effective tax rate amounted to 22% in Q4 for 2019 as a whole the effective tax rate amount of 25% at the low and over 2019 guidance range of 25% to 26%.

2020, we expect to them.

After tax rate in the range of 26% to 27%.

Note that net income you Peter fully burdened by the sprint merger related costs of 105 million in 12 cents per share after taxes, respectively.

In the fourth quarter.

The words.

Please note that.

These costs 126 million before taxes or concerns excluded from adjusted EBITDA adjusted EBITDA amounted to a Q4 record of 3.2 billion up 9% and include Lucy revenues.

Over 153 million versus 168 million per year for the full year adjusted EBITDA amounted to 13.4 billing them up 8%, beating our updated and increased 29 team guidance range of 13.1 to 13.3.

Yeah.

The adjusted EBITDA performance reflects strong cost management, especially with us today.

DNA as a percentage of service revenues decreased by 70 basis points year over year in Q4, despite the increase of merger related costs, excluding the sprint merger related.

Cost that's to me decreased by 100 basis points year over year Q4, despite the headwind of 93 million from additional amortization of commission costs relative to last year from the adoption of a new revenue recognition standard and the per year.

Cost of.

So as a percentage of service revenues decreased by 10 basis points year over year. Despite the continued rapid rollout 600 megahertz platform.

Reported free cash flow increased by 15% year over year to 1.4 billion in Q4 due to 61.

Percentage increase net cash provided by operating activities with cash cap, that's relatively flat year over year at 1.2 billion in Q4, including capitalized interest.

Free cash flow in Q4 included 133 million of payments for merger related.

Excluding these merger related payments free cash flow would've been 1.5 billion.

For the full year 2019 reported free cash flow amounted to 4.3 billion up 22% year over year, excluding payments for merger related costs of 442.

Building on free cash flow would have been 4.8 million well ahead of our 2019% range of 4.5 to 4.6 cylinder.

Therefore, the actual three your free cash flow Cagar was 49%, beating our guidance.

Range of 46% to 48%.

Branded postpaid phone ARPU amounted to 40 579 in Q4 for the full year 2019, ARPU amounted to 46 Boe for down <unk>, 0.8% year over year right after that.

Good point of our 2019 guidance range or minus 0.7 from on this 0.9 as mentioned last quarter. This decrease was driven impart by a reduction in the noncash or nonrecurring benefit related to data stash as a majority of impacted customers had transitioned to.

Two unlimited plans by the third quarter.

For 2020, we expect to ARPU to continue to be generally stable in the range plus or minus 1% compared to before your 29 team.

In terms of customer quality, our results for the fourth quarter continued to be.

Strong with total bad debt expense the losses from the sale of receivables of 128 million or 1.07% of total revenue as compared to 118 million or one point, both 3% of total revenues in the fourth quarter or 28 team.

For the full year 2019, total biotics expense and losses from receivables were 0.97% of total revenues down eight basis points year over year.

Starting in Q1 20, we plan to report average revenue per postpaid account.

Or postpaid ARPU in addition to the existing ARPU about towards reflecting the increasing importance of non phone devices to our customers. We also plan to discontinue reporting wholesale customers and instead focus on branded customers in the wholesale.

In his which we consider more wells on the number of wholesale customers given the expansion of empty.

And I O two products now lets come to our exciting 2020 guidance since we don't know the outcome of the deal yet this is our standalone guidance for 22 Bonnie.

And all comment you know our playbook in seven years, we have never not hit or exceeded our guidance and over the last several years. In addition to consistently increasing our growth guidance on a quarterly basis. We've also done it with other Q financial minutes words.

We expect branded postpaid net customer additions to be between 2.6 3.6 million. This guidance continues.

Consider our long term strategy to balance growth and profitability in a continuation of the heightened competitive environment, we have seen recently.

We expect adjusted EBITDA to be on the range of 13.7 to 14 billion. This guidance takes into account leasing revenues were 450 to 550 million endpoints for me.

It also takes into account or continued network expansion in particular the 600.

Third megahertz in Fiveg Rollouts.

Pre close sprint merger related costs before taxes are expected to be two to 300 million in the first quarter of 2020, which does include approximately 150 million of consent fees payable to sprint if the merger.

It does not close these costs will be excluded from adjusted EBITDA, but will impact net income and cash flows.

Really excited about the sweet hard good cash Capex of 5.5 to 5.8 billion, you're looking excludes capitalized interest which is.

Spectrum to be approximately 400 million in 20 Twond me all in our cash Capex guidance is 5.9 to 6.2, which were leads to a very strong free cash flow picture free cash flow for 2020 is expected to begin the range of 5.4 to 5.8.

Building on that and 2020, excluding payments for merger related costs. The underlying net cash provided by operating activities is expected to be in the range of 7.9 to 8.5 billion, excluding payments for merger related costs or free cash flow guidance does not.

Assume any material net cash inflows from securitization.

Also note that we are expecting 2020 to have a similar seasonal development of free cash flow as in 2019 with a lower free cash flow and the first quarter ramping up later quarters based.

On a cash capex profile that is heavily weighted to early in the year similar to 2019.

Now, let's get to your questions. Please note that we cannot answer any questions related to the millimeter wave auction due to the quiet period, you can ask questions via phone.

Or via Twitter, we'll start with a question on the phone operator first question. Please.

Thank you if you would like to signal with questions. Please press star one touchtone telephone if you're doing it today speakerphone. Please make sure you function is turned off to let your signal to reach our equipment.

Again that will be star, one if you'd like to ask a question.

And our first question come from John Hodulik with CBS.

Great. Thank you.

Maybe a couple of questions on the guidance for Baxter.

It looks like the guidance for EBITDA hinted at the.

Midpoint gets you to about 4.4% growth for the year I think that's versus about 8%. What we saw 19 is that just some conservatism built in or is there some extra cost built in for the Super cycle.

Michael efforts and the cone and maybe if so what what that might look like and then.

Similarly on the Capex side, it looks like a network capex is being guided for down slightly on the year over year basis.

It was our belief that on a standalone basis, you guys would would need to ramp up.

The expenditures on small cells and additional capacity.

So I'm just wondering if that number is the number on a standalone basis going forward.

Or something else that'd be great. Thanks.

Yeah, great questions first of all.

Like thrown to the guidance I talked about our our playbook.

You know we.

All of this approach to our guidance in the screens.

In a conservative manner and other quarter to quarter.

It's just as we execute and perform during the year, we step it up as a program for last two years, there hasn't been a quarter that we have not stepped up you know adjusted the button, but there are other things that you need to consider.

First of all the headwinds from the new revenue recognition standard where you have the amortization under the conditions over time.

It affects the year over year compare abilities. So you have to take that into account.

Next we are continuing very aggressive roll out it's amazing what happened during 2019, you know with what level and the team accomplished under 600 megahertz roll out five g.

We have very.

Very large aspirations for those stern in new year, which does drive more off x. into the equation you got to build before that.

So that's all embedded in the guidance as your question on the Supercycle. We are the only carrier who didn't have a death and upgrade rates and the fourth quarter and that's what I've really good thing because operating as reinvesting and the value proposition and.

We have sized what we believe.

Will be the Ah upgrade outwards for the upcoming here in our guidance what when it comes to the cash cap Ass, yes, there is a slight up.

But remember that.

A lot of what will you do as project oriented and now that we have rolled out the extent of low band tops. We're shifting those dollars into five g. and continued roll out of the 600 megahertz, Yeah, There's a base.

Lines.

But every year, we've had a project and those projects role to other areas. We believe that we use the adequately design of cash <unk> guidance. If it's similar to the last several years will be at the very high end of that guidance and I think that's an appropriate way to what data.

But we do believe we can accomplish everything we need to do with that guy great questions and glad to provide the additional detail.

Extraction.

And our next question coming from Phil Q. sick with J.P. Morgan.

I guess, thanks, 'cause if I can typically your promotional in one Q1, others are quiet.

Can we assumed that the new uncarrier announcement could play into that.

And then level, what do you see an average five g. versus forgie experience for customers so far.

Can you talk about utilization in the five G. network today, and how customer experience should change is that network hills up thanks a lot.

Yeah.

I can start on the first one and that maybe see it find that wants to add some color yeah, what we like to be when it comes to our promotions is unpredictable and you're right. If you look in the in the past there have been someone cues, where we've come out swinging because we know other people aren't and that's you know that's worked out very well for us but here we sent at almost half time, you know I don't.

Lay out for you the rest of the quarter owing to the the main part of the strategy being we like to be unpredictable, we didn't t.'s and uncaring amount and I will say that if you look at the broad picture of our on carry them as they don't always signal price what they signal is solving tank lines, sometimes there's promotional intensity involved with that sometimes there's not I, but we're really excited.

This one a pain points in this industry are far from solved and we'll be demonstrating that yet again before the corners out anything gotten that yeah I I mean, the only thing I'd add to that is what you signed queue for and what we did is when the market heats up competition gets bigger we end up doing what we do everyday which is which is when in the market share and take care as we go forward.

Only done with the network, where we're poised in position with 600, and our nation might fight G., we actually want to take advantage of that and if that means stirring the pot and getting competition gone and we're going to keep doing some of that 81.

And now we dare to turn to Neville rags to discuss the comparative <unk> experiences that he sees and for those of you that need us a short break I would suggest now.

Yeah.

The other people not wanting to ask the question. Thank you for them.

<unk>.

Yeah.

Off time, you're going to get that from John So ticket a ticket [laughter] anyway right.

I I doubt that feel but on it.

I'll be Super quick obviously, we were incredibly excited about launching the first nationwide find you know what can you.

It'd be great pleasure everyday to hear about H.T.M.T. <unk> and trying to catch is at some point this year might be next but I mean, we've gone and laid down you know that first nationwide glamorous like g.. So huge accomplishment, we had to do an incredible amount of work you know to open up kind of the F.D.D. on a dual around.

2.5, <unk>, so kudos to the to the T. not make that happen shoeprint pulling from business to position ourselves so what's coming through without fill his new spectrum right. This isn't just about rolling out fajita T. mobile we're rolling out all about 600 spectrum that we should killed in the motion not too long ago. So we're adding.

New spectrum, new capacity back to the capital question all of this five zero now we're deploying and future proofing you know this network. So we've we've come a long way right now five g. experience everything we do is incremental <unk> might save money on top of our L.T. light. So when we had about five feet goodness on top of what we have an L.P.H.

Ringing in some markets 30, 40 megahertz of spectrum coming in now with 600 megahertz deployment. So on a lot of that going into Rural America places that have been traditionally badly served never got full g. until 10 years. After you know the new York's M.L.A. gone it so we spread into five feet goodness.

All over the U.S. so super excited the incremental experience is good but we're just getting stuff we have a long way to go obviously with the closing of the transaction. The hopeful closing with sprint you know you're going to see an incredible layer of depth of spectrum, especially in you know metro nothing ever used to stop you know going in on top of.

Well, we've done with 600 megahertz like G.. So industries are established way too early to talk about how much you'd like <unk>, we seen good pick up on the two devices. We launched in December, but it's very heavy dice still feel for the industry.

One more thing till while we're on this topic, you're you're bringing together too interesting topics network and promotional intensity and I want to do point out one thing, which is these results that we announced for Q. for you know a million close paid bone that adds leading the industry significantly again, we're in an environment, where what we were talking about with all that competitive.

Density out there with these topics that level just talked about we were talking about the network absolute accredited Matt and Janice and they're marketing and communications teams. We spent a higher percentage of our dollars and our energy on network, then I can run number and yet delivered in quarter of results in a promotional intensive period, when we weren't talking.

About the other topics the promotional topics as much we're laying a foundation and telling people about this differentiation that we have in the back that we've caught up with the competition on network in our place to just spring ahead of them by G.. So that's very exciting at what like what like really meant to say is Matt and Janice did that while he and I were.

In Washington, and cord putting attack.

So we really do mean it was led by them Ah at last half as I like the the talk about the Uncarrier move in uncaring moves always signal one thing, which is a really bad day for variety in an A.T. and that to me. That's just ended up itself worth every every single moment.

Right I was ready when you want to take on on the well Gonna take one here you go get it to Wade So pod wants to know what's up with levels sure that comes up with this should it's like you know that's the beauty right.

Hey, we will send you one oh, yeah. There you go and you'll data I really feel like we should take one of waltz questions. Because if we don't he's going to just keep putting them up there.

Become way I mean or any of these wall questions like you want to take their shall we wait most of our statements [laughter], Okay, all right well keep typing away. It will go back to the phones will get the it'll get.

Up there and artists next question over the phones comes from Michael Rollins with city grip.

Hi, Thanks.

During the opening comments you reference competition from a cable and variety in during the quarter.

And I was curious if you can freeing the competitive impact that you saw it in half and how your strategies involving whether it's geographically or across the river calls to keep their subscriber growth going and then just secondly on that subject content <unk> update.

To what the content bundles are doing for your base pay for your economics, whether it's with Netflix or Amazon Prime. Thanks.

I'll start and throw it away my can say that the simplest way to think about it is Comcast and charter had good strong quarters.

Spending shit loads of money to take customers from Brian and I I think that you know that the highest level you can see you know when you when you pay $160 million of loss in your wireless business to gain about 270000 customers that are coming mostly from her eyes and certainly not from us there's a lot more to it but.

Like you want to pick them they seem to be Duke it out you know we've seen over this journey of seven years, we've seen every circumstance of competitive intensity and I will say too far and Q3 to a certain extent. These were highly competitive periods and you see you see as John says variety and responding to cable cable responding to rise and I you see the pre.

Paid kind of foundering, except T. Mobile's, where we grew yet again and and what's interesting is while while there have been changes over there there haven't been changes over here and we've been saying pretty consistently that our model flexes for more competitive periods and less competitive in the last competitive period, you have falling church.

Iron and you know we lead the pack and Balling turn in fact, even in this competitive period, we had the best year over year churn performance relative to our prior year, but when it's more competitive and switching picks up you know that's an opportunity for us because we have more jump balls to go. After so we don't hear competition you solve horizon posting had.

At great expense to their either by the way some of the best growth numbers that we've seen from them in years on customers and yet our numbers were as good as ever so it's not coming from our side, but they're all Duke in and out over there I I'm curious about <unk> approach they definitely got the pedal down on grounds and they're spending.

A lot of money to get there and missing expectations on either side all about loading up a network. That's out of capacity. That's <unk> you know to us that's fascinating lot to see what you know what becomes of all that but take one thing you should take some assurance of it's not coming from us and doesn't affect our approach really much at all.

Porno remember too if you look at the overall herself to the big table players, they're bleeding video customers. So they certainly in a portion of their business understand a concept that they haven't had to learn about it yet and wireless which is called turn.

This is pretty much low hanging fruit subscribe was coming in bleeding video customers skimming off some some wireless customers, but once churn comes back around the you know the block you know customers customers won't forget who the most hated companies in America were and still are so we'll look forward to that is another learning.

This is the term for cable companies and then there's the consequences of Bogo Kaluza that I think we'll have to figure out you know what happens in the market Briars indefinitely led the way with Pogo some of the rest of the industry responded we we do those promotion, sometimes but over the years, we've learned through a variety of different things that we do what kind.

Kinds of promotions cause sticky customers that last that are real and fundamental and what kind are kind of round trippers and a lot of this stuff that we see happening led by <unk> does raise real questions as to how real out those added customers how long will they be around and we'll there'd be a bounce back phenomenon. It's some of the quote on.

Quote market growth on the Postpaids side of the equation really just that artifact.

Those are unknowns, you know, but again, it's it doesn't affect our strategy, we'd been down some of those roads in our past and you know we're very focused on what we're doing which is taking legitimate share from 18 chambers.

Okay.

<unk>.

Thank you are next question 'cause from Simon Flannery with Morgan Stanley.

Thank you very much good evening, a couple of questions for <unk>, Oh, sorry for.

Mike on on the <unk> subscriber projections, how are you thinking about the key verticals around things like we try to expansion enterprise segments 55, and over what where do you see the opportunities to to drive that is that changing from what you did this year as well and then for natural how to C.B.R.S. playing.

Here strategy and dynamic spectrum. So thanks.

Yeah assignment on the customer find you're going to see a continuation and by the way. This strategy that we'd been outlaying for you is really working well you didn't mention that but t. mobile for businesses firing on all cylinders, we saw the biggest quarter in our history and the enterprise segment and there's been a change to.

In how enterprises are engaging with US you know first it was small and medium where we had a right to win and we started a couple of years ago wedging into enterprise discussions, but honestly our role was more as a price <unk>. You know we were getting a little piece of enterprise business in exchange for you know offers that really police their main contracts with.

A.T.N.T. and rising suddenly over the past year, and particularly the past couple of quarters. It's been a change we shared a couple of the numbers with you in our remarks Big Enterprises, you know strategic engagements out of the corner office are partnering with us across the enterprise and that's that's really exciting it's a testament to the network.

That we've made in the solutions that we've developed in our teams tenacity at working our way into more strategic relationship. So that's a that's something we're very excited about you mentioned suburban and rural growth, obviously very important over 55 military continues to contribute. So these these Jason sees if you if you will have been.

Part of the strategy now very clearly for over a year and a half and or one of the reasons. Why you know we have a business that's able to deliver a million posts paid brung ads in an environment, where some of the competitors like cable and brides and do can get out with each other we're able to generate more good than their past and it shows the resiliency of our models. So so thanks.

<unk>.

Assignments no two questions you have the C.B.R.S.. So obviously the unless some stuff is moving into you know, we we can pretty deploying up now with some of the sharing mechanisms you know out in out in the market. The auction on the license segments of the 70 million that's coming up <unk>.

So we we know a lot of L.C.B.R.S. already we see it as primarily a you know a small so spectrum layer house, you know some material limitations not so much from sharing but from power limitations, but there's something that and so he joins the you know the the the tool bulk so to speak and we have.

No one license other opportunities we continued to explore and expound upon so essentially memory I don't think is gonna be transformative I can we will know about but it's it can be helpful.

Second question was on dynamic spectrum sharing so that's the ability to shabbos L.G. and fight G. on on a common radio we've been you know or keep proponent and drawing for about technology, but it's it's like clearly for us when we're in a position where we can deploy fajitas, we've demonstrated on a low band spectrum.

Because we have moose back from Tonight, we've not have to wait for a D.S.S. to mature as a varieties of news for example of rice and stuff Tonight. They don't how people. It would be went out be assessed are really the points in lower bound they don't have enough spectrum to go do it I'm overseeing. Unfortunately is you know we are seeing some time to to let you still have this amount of information coming.

True.

To fully test in the software and capability in the feature.

And it's gonna be a tough year on D.S.S. will keep pushing the industry will but suddenly this was one of you know the the main two members right now that's a that's very late delivering on capability. The good news for us is that.

Once we've demonstrated you don't have to wait for D.S.S. from the amount deployment.

Okay I want to take one of these questions that came in from one of our favorite fans, Kyle Romanov and Kyle again.

<unk> crises that even with the superbowl past brightness continuing to spend heavily on their AD campaigns hitting their L.T. network against the T. mobile five Gee, you guys' plan to keep responding could potentially be a promotional response from t. mobile I didn't we could probably talk about this on multiple different layers at one is let's not let's not.

Just go past the Super Bowl because it was a huge embarrassment over eyes and the amount of money that they spent in how badly they failed to show anything in there by G. and the you know in the gratuitous commercials. They tried to run which flopped miserably and of course, you know we came right back with.

A lot of information in a blog pointing out the fallacy of what they're talking about but also talking about in the Navy Matt can show use t. shirt, because we had a very very good to fight with horizon and not come out and yes tell your momma is a is it for that reason, but you guys want to talk a little bit about this at all that yeah.

I think I think the first of all.

Isn't it so amazing horizon feels the need to try and poke at T. mobile for being a leader in coverage inside g. coverage and while we have on a nationwide basis.

It's a great question about it potentially promotional response I don't think there's anything promotional a nature and doing what we've done with our 600 megahertz network and by G. and having that nationwide. We're going to continue to do what Mike said, which just tells a story to every one across America that T. Mobile's here are coverage is amazing significantly better and they thought it was and when.

Couple that to our industry, leading for very long time customer service and value proposition. There's no. Other choice you got to get on your T. mobile so that's going to remain a consistent piece to actually go out this.

Yeah, one one loves thing for me I mean, it would be fun to run around the country and show wherever license like G. doesn't look like.

I I think you know 300, and you know so it would be millions and millions of square miles compared to maybe you know the the the few hundred thousand square miles with that with.

Reached the body. So we're we're proud of where we owe him funny cheats fool can run around and fun somewhere where one of speech the low on the network, we beat brilliant on L.T. speech Tonight.

<unk> without funky on top where even better than the facts if they want to find the street corners somewhere when you know that they can.

I can navigate something different so be it oh that sweet.

I think nevils been doing a a very good and responsible job, helping the country understand what five g. is and what it isn't I mean, it didn't take long for people to not fall for the five G.E. debacle from A.T.N.T. and the more good for rise in doubles town on.

Position that five G. is millimeter way you know the time is going to come you can you can poke fun at a nationwide layer of five g. in low band, but when that's combined with the mid than capability and millimeter wave and you start TV applications that require a full capability of all three.

That's when you realize that they're playing a different game and they're stuck and just keep asking them. You know please explain to us how millimeter wave alone can deploy five g. capability said I I think that's you know superbowl is fun, but there's a serious dialog taking place and I I think I think last thing I saw <unk>.

<unk>, it's been downgraded because people don't see any catalyst for where they're headed and we're very clear that what we're doing with the low band, It's a star and it's a pizza the puzzle, but when the puzzles done.

We win and consumers when it's got to be huge so thanks, Kyle we we just use your question to that say whatever you want [laughter] I'd operator.

Thank you are next question come from Brett Feldman with Goldman Sachs.

I think sticking the question you know Braxton, if I look at the Standalone guidance. He's given for this year, even if it is conservative decision outlook for a company that would be organically delevering to eat without growth and material cash generation. You know obviously plan a for you guys right now is to close the deal with sprint, but I'm sure. The contingency thought about how you would allocate and prioritized.

Capital going forward, if he would remain stand alone how do you think through the right calls in that capital under that scenario in other words is it makes sense to sustain dry powder to evaluate whatever spectrum opportunities could evolve you had previously had a capital returns program is that something investors should be thinking through a anything you can do to help a thing through the way you.

The the board prioritize that would be very helpful. Thank you.

Yeah sure thing Brown really good question <unk> first of all we are going to witness deal and remember with new T. mobile fully fun doing a business plan to give us through.

The three year period, where we're unlock in 6 billion run rate of synergy, which is going to be a massive value creation. Yeah. We do pause nine going on board approved by back.

When we entered into the transaction response, but we've been very clear.

I'm doing and we're only going in and a half into in a very unfortunate for America situation that we would return.

Capital to our shareholders. Our focus is totally doing on closing the murderer, we have not finalized knew any phase, saying or reallocation that was a multiply your program remember was with 234 billion dollar program.

And right now it's academic <unk>, we believe that we're going to close but if that fact of do for where should we will certainly you know I'd be out to the street with guidance and how we're looking at.

You're right, we're going to be working a stock from opportunities you know on a scale on various that's part of the equation. We have to explore the you know numerous you know potential opportunities that was nice you know leads to some of the c. band stuff out there, but there's lots of golfing in this area and more to come if that's where we.

Thank you I'm going to take one of the writing questions. One of the seventh up to that Walter Paycheck has sent in cause I think there was some confusion on this point a number of people. He says the merger agreement.

Meeting with sprint was never updated does that mean any change in deal price stuff. The table a number of people will confused when the long stop date of the business combination arrangement agreement came on 11, one the V.A.D.C.A. was still in fact, we have a fully in effect D.C.A.

But at 11, one without an amendment either party has a walk away right. So you know in effect. The partnership is still strong. We just have not updated it to you know remove the walkaway ability and no. It you know doesn't mean that we can't you've had a very strong partnership.

Sprint and we've had very good discussions and if there is a need for an amendment to to the beach gay, including possibly a price we wouldn't handled that very swiftly. After the deal was approved so I hope that explains you know that nuance there.

Okay people got some more time nor to operator.

<unk>. Our next question will come from Craig Moffett with Buffett Nathan So.

Hi, Thanks.

Any event that that deal who is not approved would there be row for you as <unk> to do a spectrum of sharing type of deal. It seems like that 10.5, it's obviously been a very big part of of the appeal of the transaction and I can imagine there's a lot that spread.

Wouldn't need if the transaction didn't happen.

Yeah, I I make two points one is the deal will be approved.

Point number to the the deal will be approved.

Oh, that's what's your question.

It was not approved there are there's certainly a myriad of things fit sprint and we could consider doing too harbor. Some what would have taken place for the companies come together, but like board is that the deal will be approved.

Well given that the guilt will be a proof that I'm going to ask a different question.

H.T.N.T. talked about possibly sort of joining the negotiations for it envy it over in that when do you ever do that and under what circumstances that for it for a cable I made after after you had to having best cable where you would you accept them as partners.

Yes, we would I I mean, you know in the new T. mobile we've been pretty clear on this I think which is the new T. mobile has is all about capacity you know just an unprecedented expansion of network capacity and so our jobs to build that network up economically already we have.

Pretty lucrative wholesale business, but in Standalone, we have diminishing capacity in our best use of that capacity is with our branded business. So growth aspirations are more modest there in the new T. mobile you know, we are but real interest in growing or wholesale side and the retail side of the business. So what are we to entertain it absolutely and you know I you know we've we've.

Indicated that as well through the process.

Okay.

But.

Okay.

Rare.

All right next question come from Peter Subpoena with Bernstein Research.

Hi, I'm incidence of some G.N.A. [noise] the long market T. mobile as included terrific mugging game, but they've <unk> been driven more by cough itself because it's the cost to serve in S.P.N. any leverage this year I guess is the merger expenses I think there was a name.

The other two year or more for the fourth quarter and I'm wondering.

Forward if you're on your current trajectory is there more significant us to leverage opportunity as the company matures.

Yeah, I think that the answer is absolutely awesome opportunity.

You know first and foremost when you look at us today.

You have to understand you know in our business model, where there was a cost to bring the subscribers on and I know you very much a crusade the level of growth. The your obtaining has a direct correlation to the sewing expense.

And tends to be associated with the business.

And if we were more mature slower growing barrels most you would actually see an explosion of margin and significant scale and B.S.G.N.A. ones, but you know we are.

And have been a a very significant growth company, we only have significant growth company in wireless other than the cable guys, who are now coming into the Spurs.

But when you put that aside there are other officials to assist part are hard to hear that hey, you know to look in involved with Bozeman sort of never be place uncomfortable with the status quo and I'm. The there are other opportunities even in the higher growth.

Area, it's one of the bread things about <unk> is the.

The or energy hundred scale that we get is a massive walk.

But even without you know there are certainly expectation of margin expansion as we continue to grow and scale organically with the borough smells and your point on the efficiency of our cost of service or you know our our our network expenses.

On the early years, we were showing great assertions to bear, but remember what we're doing right now we have slowly edge to it out and have a nationwide geographically equivalent area in the U.S. in that took a lot of additional off x. to do so we do that with the low band spectrum.

Now, we're rolling out of five Gee, you're nothing pistols or phenomena, you will go see what the law the carriers and some of the scale efficiency on the networks are the equation in the transition period will be <unk>, but even without so do you saw scale you know from across the service standpoint.

So bottom line <unk> to expect continued margin progression I know sort of things were super excited about with a new T. mobile is there's a massive <unk> protection.

My final comment if there if you look up the difference in the margins and twisted tune into the lives of M.T. mobile. It's all scale I can guarantee you were more fish enough, what we do them what they do and that's the power of you know in organic scaling opportunities that we have with it though.

Thank you okay.

Operator.

And moving on to Rick Prentice with Raymond James.

Basically afternoon or two questions guys first one.

What will the judge whether you already know that if you'll be approved lately expecting a note of furniture [laughter].

No I I should be clear, we know we're going to win we just don't know when [laughter] <unk>. It and we really don't I mean, we could we could guess and speculate but yeah. We're hoping it's imminent, but you know if it could be could be whether the judge decides so we don't have any inside track at all as to when it will be.

So we'll keep you posted in pretty sure you'll hear us loud and proud when it is but gets us not today.

Okay second question more needy is obviously a lot of wireless has to do with getting spectrum building a network opening stores and getting the customers.

Talk about your 600 megahertz and your low band.

About 75% of the population covered with 600, but about 50% of the geography at Continental U.S. help us understand back to John question about Cat back in time is about market share what should we think about happening with the the network in the stores in 2020 and 21 that low.

So what the network yeah. So yeah. Thanks. Good question, Rick I mean, obviously, we we talked to anyone Bronx and talked about you know the major investment we're gonna make from a comfortable perspective into the network. This year and we continue to push on 600 megahertz footprint. So how's your point of about pointing out 200 million you know pumps about a million.

Where miles.

We can readily take that number up.

Sunday, 40% gain you know 2000 in in 2020, so don't footprints going to expand materially.

<unk> dot reach will extend into you know a broader swaps with the U.S., including rural we have a plan to go do it. It's it's great. It's great benefit for us while we were running out 600, we're getting more fight you footprint I'm around incapacity into the network. So you know it's a it's a it's a great when for us on on all dimensions.

And what time this year is all about continuing the much that we started you know in 2009 teens and I love that because I want <unk> to be chasing my tail nationwide five g. and what we do and 2020 for the next few used if he gets a nationwide. This year, we're going to be passed them. So.

That's not whether line is drawn for US we will continue to expand the reach of that network funded under very capable to do.

Distribution, it's pretty simple right now we have distribution convenient to about 265 million people I. We told you that number before and that's up from 230 million a couple of years ago. So we've seen a nice expansion and so obviously, there's more opportunity there was a big difference between 265, and a 327, which is our current network coverage.

I went to you know we don't have an announcement today about an expansion plan, but I would tell you just from a color standpoint, I wouldn't expect a big distribution expansion, what I, what I might forecast is a realignment into more suburban areas and greenfield areas and small town in rural there may be parts of this country, where where over this.

And you know so but <unk>, there's certainly an opportunity for us to go after continued expansion and making our distribution convenient to more and more Americans and you know so when we're ready to talk to you about that we'll we'll out some more effects I operator, so I would say there is you know we don't have the schedule yet.

At least a greater than zero percent chance. This would be my last earnings costs and there's nothing I'd rather do if it is then take the next question being the last question from I'm not sure who it is but let's let's just see if it's all I think it is.

And that question will come from Walter Paycheck with light shed.

[laughter] Java I wish I could give you really something very salty for your last call that I'll I'll have anything for you on that fun.

[laughter] die for entering the one on the on the V.C.A., though that was definitely very helpful. I'm, Mike on the gross ads I know I understand the play Buck right, but just curious is 2019 a growth add growth year, you've talked a lot about the replacement <unk> maybe.

Not a extending further and.

Five g. and assuming that murder closes is this is this going to be organically a another grow sad or eight gross at growth you're from you guys and then I've got a follow up on D.S.S. from level.

Yeah, you know well it depends on what happens in the competitive environment and one of the things we've it sounds a little bit.

Arrogant why we say it but I I the summary way I'd say it is will deliver as many gross and as we need to deliver the net add growth that our business plan requires and we've proven over and over again, we can do that there were times through the last 18 months when churn was rapidly falling across the industry and switching was decreasing and and.

Order to gain the nets, we didn't have to spend your money on gross and we didn't need to deliver the operating performance of this business <unk> has been very clear for years, but it's all about a balance of growth and profitability and we keep that balance and every corner there's growth we could've gotten.

And but what happens in a in a period of rising churn and rising switching that's a great opportunity for our business model, because where the next share taker and we know how to go get those ads when we need them and those ads can get more efficient as well when there's more jumped balls and so it's a better time to grab the girls because there's more people in the market and so that's a nice opportune.

82, and the true if we don't know, we don't know, which circumstance, we're going to see but we have a model that competent and ready to execute whichever way it unfolds through the year.

Got it and then on the S.F. <unk>, what now I Gotta Gotta get those the F.F. one at because obviously the rising is highly rely on it I mean <unk> you are pretty regularly.

That's a disappointment you're saying the last big question for John is going to be about D.S.S. I I'll have shot of our now has from about we work you know light shed is in we work. So we want you to come visit us and fit I'll.

<unk>.

Definitely fruit water at our we work.

[laughter], but not what can I add idea please.

Even pretty old you've been pretty negative on and your comments here, saying, it's late it's a tough year are there any issues in terms of like one company indicates that it's just the waiting for it to be in a phone is it an infrastructure issue is it a phone issue when is it can it be available and does it have any impact on the amount of <unk> when it gets.

Support does it take away any capacity from the spectrum is going to deployed on.

Well, it's it's it's in the radio stuff level right. So that's the primaries I'm surprised me area of concern right now so the radio buttons as the supply you know the the infrastructure be put up on on time was that's that's where the problem shifts in the software that I was seeing as we learn mall the boy.

You know D.S.S. it kind of eats away on the net capacity seems to shine radio if you rush into that now some of the only roll out some work arounds and pieces that we've seen a pretty corrosive. They would suck up capacity just by moving out the feature so the benefit you might gain outside of something on.

So you know the capacity most could be pretty brutal so well, let me what we've been working pushing on the speech or we will one of the first in the industry to drive list. So I'm not being stupid negative about it I'm, just saying you still challenges and you know for a variety soon as a big challenge I think you more than anybody you've highlighted some.

The spectrum and capacity challenges the per item house.

Greek D. she put out I'm D.S.S. is not going to maturity help them. It's just gonna when I told them to put something out. So they can talk about fun to coverage because let's be honest nothing on millimeter wave in terms of fun to coverage they need something so we'll see that right now you know what we see February of 2020.

It's tough wrote this year.

So what's the next job wait what's your next job.

It's gonna be I sent a place called like shit.

[laughter], we'd love to have yeah, I'm asking for water [laughter].

But hey, thanks, everyone for a two and again, we look forward to speaking your to your again next quarter and another great courtroom for a t. mobile. Thank you for your site.

Thank you operate layson.

Thank you ladies and gentlemen is concludes the T. mobile U.S. fourth quarter and full year 2019 earnings call. If you have any further questions. He may contact the investor relations or media departments. Thank you for your participation.

You may now disconnect and have a present day.