Q1 2021 T-Mobile US Inc Earnings Call

Please stand.

Hi.

Good afternoon, following opening remarks of the earnings call will be open for questions via the <unk>.

Line by pressing the star.

Star followed by one.

And the of Twitter by sending a tweak.

<unk> IR.

Sure, Mike Sievert using cash tag.

U S.

I would now like to turn the conference over to Mr. Jud, Henry Senior Vice President and head of Investor Relations for T Mobile U S.

Please go ahead Sir.

Welcome to the T. Mobile's first quarter 2021 earnings call on our call today, we have Mike Sievert, our president and CEO.

Peter <unk>, our CFO as well as other members of the senior leadership team.

This call we will make forward looking statements, which involve a number of risks and uncertainties that may cause actual results to differ materially from our forward looking statements. We provide a comprehensive list of risk factors on our SEC filings, which I encourage you to review.

Our earnings release, Investor Factbook, and other documents related to our Q1 results as well as reconciliations between GAAP and non-GAAP results discussed on this call can be found in the quarter. The results section of the Investor Relations website.

I'd also like to note the historical results prior to the second quarter of 2020 represent the Standalone T mobile prior to our merger with sprint with that let me turn the call over to Mike.

Thanks, John Hi, everybody.

Thanks for being here and May the force be with you all I don't know if you can see us if you're not watching we're coming to you live from our T. Mobile fight night Octagon here at our T Mobile headquarters and I'll tell you. It is great to be here in Bellevue with so many of our leadership team members as we gradually and safely finding the right ways to be together in person at work and even better.

We had another great quarter of results to talk about today.

The show incredible work done by this team as we continue to push T. Mobile even further ahead of the competition, while doing what we do best putting customers at the center of what we do we are off to a terrific start in 2021 from accelerating our network leadership, which is fueling customer momentum.

Delivering merger synergies and expanding our addressable markets for growth. We have again demonstrated that our unique winning formula and balanced approach enables us to grow share while delivering strong financial results.

In our increasingly connected world, we recognize our role as stewards of this profitable company and industry, while continuing to US are unclear of your DNA to bring change to wireless and broadband alike to disrupt the status quo and ultimately benefit customers and this quarter was no exception.

We achieved our three core ambitions first delivering industry, leading growth by expanding our addressable market and growing customer relationships second delivering substantial enterprise value by realizing merger synergies faster and bigger and beginning to transform our business and <unk>.

Finally positioning the company for long term success with sustained five G leadership are strong and getting stronger brand and the best customer experiences I'll start off with a few highlights first T. Mobile led the industry of net add growth yet again building on our existing fame for superior.

<unk> and customer service, while making big strides in network perception to fuel our momentum and we did it while simultaneously delivering better than expected service revenues and core adjusted EBITDA.

We continued to further expand our five G leadership to deliver America's largest fastest and most reliable <unk> network with multiple third party experts now taking notice of network perception metrics on the rise. This is so great to see because it will translate into.

The two overall network leadership as we serve both businesses and consumers and third this unmatched five G advantage is already unlocking new and Underpenetrated segments of customers for T. Mobile, we're giving more of consumers and businesses the opportunity to experience the bed.

<unk> five G.

Combined with the best value and delivered from the best team.

Fourth we've been busy this year executing on our growth plan with a number of unclear of your moves in strategic initiatives and finally, yes, it's another beat and raise quarter for T. Mobile we beat expectations with continued customer growth increased profitability and of rapid unlocking of merger synergies, which enables us.

To raise guidance for 2021, just one quarter end of the year, something Verizon and AT&T, we're not confident enough to do despite all of their happy talk on their calls alright. So let's talk about some of these in a little more detail.

As I mentioned, we led the industry in total net adds in Q1, we delivered $1 2 million postpaid net adds including 773000 postpaid phone net adds and our postpaid phone churn improved sequentially to 0.98% we'd mentioned before of how our.

The opportunity to improve the elevated churn from our sprint base would be of tailwind for our business and this is already starting to unfold as we were the only wireless provider to improve churn sequentially as we execute the same worse. The first playbook that has led us to the industry best churn rates for our T mobile branded customers.

This quarter's results are particularly important and show that we continue to make great strides improving churn for both our T mobile and sprint customers by providing them with best in class experiences while others in the industry saw their churn rates flat to up from Q4.

On prepaid we delivered 151000 net adds which were the highest in three years and reflected record low industry, leading prepaid churn of just 2.78%.

As I mentioned the perception is absolutely catching up the reality of that T. Mobile is the clear five G leader with five G quickly, becoming one of the top things that customers say, they're looking for in the next wireless provider and we're extremely encouraged by our perception trends in the quarter. They showed that our network is increasingly becoming of cattle.

For customers to choose T. Mobile in fact, the percentage of customers, who say T. Mobile is the five G company has increased nearly 120% over the last just a year and a half and we saw an immediate uptick in customers switching to T mobile with the launch of magenta of Max which.

The additional momentum for us to continue to outgrow this industry.

As you've heard me say before and I plan to keep reminding you of T. Mobile has the scale and the resources to do something that has truly never been done before offer the best value and the best network freeing customers across the country from having the compromise and providing them with our teams of award winning customer service.

<unk> on top which is our secret sauce. This opens the door to further penetrate prime consumers and businesses that require the highest quality network experience.

And compelling reasons for them to adopt more premium plans. Another differentiator is that only T. Mobile is operating with a synergy backed model, which allows us to simultaneously grow customers and profits while also investing big in the business and with the rapid expansion of free cash flow.

We are ahead for us we are positioned to have great strength and flexibility from a balance sheet perspective.

Okay now, let's talk about those merger synergies and our continued progress on integration for a moment last quarter. We shared our initial 2021 guidance to be more than double the $1 3 billion in synergies that we delivered in 2020 today, we're already raising our synergy guidance for 2021. This progress includes can.

Genuine to migrate sprint customers to the T mobile network to improve their experience, which is key to unlocking synergies. We've already moved 20 per cent of sprint customers to the T mobile network and of really hit our stride in the pace of our migration process. In addition, and this is important we are now carrying a proxy.

Similarly, 50 per cent of the total sprint customer traffic on the T. Mobile network. When you include the seamless roaming that we provide those customers to improve their experience. This is twice as much as just last quarter.

In Q1, we took another important step forward in our integration process as we transitioned many of the sprint customers onto our go forward rate plans. This migration is important for two reasons first it brings our sprint customers closer to having the full on carrier experience by giving them the new value proposition with all.

All of the associated T mobile benefits and second it says it sets us up for a seamless billing migration in the future.

It's important to understand that separating the brand network rate plan and billing migrations into discrete events, which can be done at the convenience of the customer and our business plan. That's a unique and powerful feature of our integration approach and one that is already proving its value.

As we shared with you on analyst day, we're executing our integration playbook to deliver the merger synergies bigger and faster than originally promised to ultimately provide run rate synergies of $7.5 billion, 25% higher than the original merger plan and over $70 billion on an NPV.

This will enable us to invest in initiatives to maximize our long term growth and cash flow generation and to deliver truly innovative transformational experiences for customers for years to come.

Those are amazing experiences really began with the network T. Mobile is already America's largest fastest and most reliable five G network. The country has never seen anything like our network build we're tracking ahead of schedule and the results are clearly beginning to differentiate not just.

On five G, but on network performance overall.

With so much focus on five G. It is worth noting that with this build we have already quietly eliminated the legacy advantages that AT&T and Verizon previously enjoyed an L. T E, which is where most traffic remains today in fact, our LTE coverage and performance are essentially the same as AT&T.

And Verizon now across the country and without common foundation in mind, our demonstrable lead and five G really becomes the differentiating factor in overall network performance. This is putting T mobile in the pole position to become the only provider with the network that can kick start this new era of connectivity by delivery.

Our ultra capacity of five G to nearly everyone across the U S team.

T Mobile's extended range five G. Now delivers coverage across one 6 million square miles, reaching roughly 295 million people offering roughly 33% more geographic coverage then the so-called nationwide five G of AT&T and Verizon combined.

About one third more than the two of them combined.

But with our rapid expansion of ultra capacity five G. That's our game changer, we're rolling it out at an unprecedented pace to deliver the truly transformational speeds and capabilities enabled by two and a half gigahertz and above.

We brought ultra capacity five G to over 100 million people by the end of last year, and we've already expanded that to over 140 million people today.

And we're well on our way to covering 200 million people nationwide by the end of 2021, that's this year.

In the last month alone multiple independent third parties, including Uccle open signal in umlaut gave numerous accolades to T. Mobile's five G network based on real customer usage from millions of device measurements. This shows that not only does T mobile have the fastest five G. But and this is equally important as you know T mobile.

Delivers dependability, where customers live work and travel and Uber recognize T Mobile's five G as the most reliable.

And the most available the bar.

Line is this we are really starting to pull away from the pack like we told you. We would last week open signal released their latest report also showing the T mobile customers average five G download speed increased by 23% just since the beginning of the year while speeds on other networks.

Stayed the virtually unchanged widening the gap to competitors is T. Mobile now has nearly 50% faster speeds than Verizon and 30% faster speeds than AT&T. This increase is all about our rollout of Super fast ultra capacity five G.

And as I said earlier consumers and businesses are taking notice as perception is finally, starting to catch up with reality for consumers that is reflected in positive early trends around our magenta Max plan, giving customers the industry's only truly unlimited plan.

Putting the full capabilities of our ultra capacity of five G. In the palm of their hand, the early indicators that we see from the gender Max customers underscore that the most discerning customers increasingly consider team of them. When we offer the right plan that really showcases our five gene network and magenta Max customers are taking full.

The advantage of that differentiated five day network with usage levels, 40% higher than other five G customers and a whopping <unk>.

70% higher than our LTE average usage with more video music and social media engagement on their smartphones.

Okay listen I know I've said, a lot about our five G leadership and the truth is I'm not here to convince you that we're well ahead I think you know that.

What will become increasingly clear is the contrary to what you may be hearing from our competitors T. Mobile is positioned to maintain our five G leadership for the duration of the five G era. Thanks to our superior spectrum portfolio are unprecedented deployment momentum and our synergy backed model.

And second that this will matter greatly.

To the choices that consumers and organizations make we have the best portfolio of spectrum in the most mid band spectrum, both today and into the future with our recent C band purchase and we're using the latest technologies like massive mimo and uplink carrier aggregation to unlock the full potential of ultra capacity of five G. The result.

We will be amazing customer experiences that drive brand choices.

At our March Analyst day, we spent some time unpacking the different growth opportunities, we see to expand our addressable markets through new or Underpenetrated segments, well, we aren't wasting any time as you may have noticed from all of the activity that we've announced so far this year with the rapid deployment of our high capacity of <unk> network, we commercially launched our five G home Internet offering.

To more than 30 million households at the beginning of this quarter. Meanwhile.

Others in the industry are still in the planning phases of what wireless home broadband could look like you know in the future for.

For the businesses, we saw one of our best ever quarters for phone net adds in Q1 and more importantly, we see increased engagement around how these five G capabilities available only from T mobile in a meaningful way can really benefit their companies, we're bringing the <unk> to the business space and breaking down antiquated construct of just like we.

Did for consumers by increasing our specialized sales force and building tailored products for large enterprises and government customers. This includes our recent W. FX lunch and innovative suite of products that are ideally suited to help companies adapt to the hybrid workspace of the future with fully featured secure calling in <unk>.

The band products and the peace of mind of having unlimited data for those customers who've been handcuffed by the pooled data plans from the other carriers I mean at a certain level can you believe that I mean, we dragged this industry kicking and screaming into the unlimited era for consumers and yet the carriers are still selling pooled.

Shared and limited data to enterprise customers all of that is about to change because of T mobile.

We've long said that smaller markets and rural areas, which make up 40% of U S households are a major upside for our business and we've made major progress there as well as a result of all of our focus but now we're kicking it all into a higher gear. This quarter, we kicked off plans to add significantly.

More points of distribution to reach beyond our urban areas, including our innovative new hometown experts distribution model. This will create 7500, new jobs in small towns and rural communities over the next few years many of them beginning to be filled this year.

And we announced that we're building on our decade long relationship with Google to give customers a broad range of premium pixel devices are great messaging experience on Android, which is so needed and the evolution of our T vision initiative to offer Youtube TV as our premium cable alternative product on our TV platform.

So as I get ready to turn it over to Peter to comment on our financials I do want to just take a moment to thank our team.

For delivering just a remarkable quarter, while operating in the pandemic and weathering. So much uncertainty we continued to overcome these challenges and delivered the highest total customer growth in the industry, while simultaneously delivering strong service revenue core adjusted EBITDA and free.

Cash flow growth, we continued to execute our unique integration approach to unlock merger synergies and we continue to offer the nation's largest fastest and most reliable <unk> network as backed by multiple third parties and the thing is.

Customers are just starting to notice with positive momentum on our network perception and many initiatives. We have launched across multiple customer segments. We are well positioned to continue profitably growing over time and to deliver on our mission to be the best in the world at connecting customers to them.

Our world.

Okay now, let me turn it over to Peter to comment on our financials and our guidance taken away Peter Awesome. Thanks, Mike as you can tell this team is firing on all cylinders, we kicked off 2021 with strong Q1 results and good momentum across the business as we look at our expectations for the full year.

We executed on our winning playbook and beat expectations, yet again in Q1, So let's briefly touch on these great results service revenues grew to $14 2 billion driven primarily by our continued customer growth.

Cost of services of $3 4 billion reflects the continued volume of site upgrades to support the rapid deployment of our five G network with lower merger related costs from last quarter as the timing of these costs will vary each quarter.

G&A expenses were $4 8 billion as we advance our integration efforts and included benefits from increased synergy realization.

Net income of 933 million and diluted earnings per share of 74 cents were both better than consensus expectations and included merger related costs of $220 million or <unk> 18 per share on an after tax basis, our Q1 effective tax rate amounted to 29%, which.

Reflects Q1 rate benefits from stock based compensation.

Core adjusted EBITDA was $5 9 billion driven by continued service revenue growth and synergy realization.

Net cash provided by operating activities totaled $3 7 billion, while cash purchases of property and equipment, including capitalized interest amounted to $3 2 billion as we continue to aggressively invest in the build out of our nationwide <unk> network.

Free cash flow amounted to $1 3 billion, which was fully burdened by merger related costs of $277 million and increased over Q4, driven by our strong operating performance.

Postpaid ARPA or average revenue.

Revenue per account was $132 91.

And our postpaid account net additions were nearly double what we saw in Q4.

Meanwhile, postpaid phone <unk> was 47 30.

In line with our guidance of of roughly 1% sequential decline as a result of the lower sprint customer of <unk> arising from rate plan migrations growing lines per accounts and lower late and reconnect fees with improving customer payments activity.

With the great momentum in the business. We now expect Q1 to be the low watermark for <unk> this year and for <unk> to be above Q1 levels for the remainder of 2021 and be within less than a 1% dilution compared to 2020 on a full year basis.

Taking a look at our financing activity in January we issued 3 billion of senior notes that set record low yields for five year eight year, and 10 year tranches and the high yield market Inc.

Including issuing 10 year unsecured notes below 3% then in March we issued $3 8 billion of senior notes at an average interest rate of 3.18%, which also allowed us to redeem 2 billion of our six 5% senior notes continuing our opportunistic approach the draw.

Five down our cost of debt also in Q1, we paid $8 9 billion related to our C band spectrum purchases funded by cash on hand from some pre funding we have done in Q4 and a portion from our financing in Q1.

This excludes our estimated the C band relocation expenses of $1 2 billion, which will be paid over time through 2024.

Okay, let's talk about how this momentum impacts of our outlook for 2021 with another beat and raise quarter from T. Mobile our guidance reflects the Opex investments ahead of us in the network and growth initiatives that Mike discussed while simultaneously delivering on our promise of continued profitable growth.

We now expect total postpaid net additions to be between four four and $4 9 million up from our original guidance of four two of $4 7 million, reflecting our continued focus on profitable growth building on our current momentum and the share taking opportunities anticipated in the second half.

Of the year with an increasing switching environment.

Core adjusted EBITDA is now expected to be between $22 eight and $23 2 billion an increase from our original guidance range of 22, 6% to $23 1 billion, primarily driven by higher merger synergies along with customer and <unk> growth.

This assumes a continued reduction of leasing revenues now expected to be between three seven and $3 9 billion for the year versus original expectations between three eight and four point of 1 billion driven by a faster transition off leases and fewer device step ups on older lease promotions.

<unk> related costs not included in core adjusted EBITDA are now expected to be between $2 seven and three point of $1 billion before taxes, primarily driven by network activities compared to original expectations of between two five and three point of 1 billion before taxes. These costs will continue to be lumpy quarter to quarter as us.

Saw on Q1 relative to Q4, and we expect the significant sequential increase in Q2 and again in Q3.

Net cash provided by operating activities, including payments for merger related cost is now expected to be in the range of 13, two to $13 6 billion up from our original guidance of 13 point out of $13 5 billion.

We expect cash purchases of property and equipment, including capitalized interest to be at the high end of the original guidance range of 11, 7% to 12 point of $1 billion. As we continue of robust pace of our five day deployment and network integration, while also realizing procurement savings from our increased scale, enabling our invest.

<unk> dollars to go further.

Together this results in expected free cash flow, including payments for merger related costs to be in the range of five 1% of five 5 billion higher than prior guidance of $4 90 to $5 4 billion, reflecting growth and the strong cash flow generation capabilities of this business and does not the <unk>.

Soon any material proceeds from securitization.

We continue to expect full year effective tax rate to be between 24, and 26% and lastly, we expect higher merger synergies in 2021 of between two eight and $3 1 billion compared to our original expectations of between $2 seven and three point of 1 billion driven by strong execution of.

Of our merger integration.

Altogether, our momentum and execution gives us confidence in 2021, while continuing to invest in our network and the business to unlock the significant expansion in future free cash flow. We're excited about the mid and long term guidance that we shared with you at our analyst day with massive free cash flow.

<unk> and free cash flow margins on service revenue better than our peers. We're on track with our plans to unlock significant value for shareholders, including substantial potential share repurchases ahead alright.

Alright enough from me, let's get to your questions you can ask questions via phone or via Twitter, We will start with the question on the phone operator first question. Please.

Thank you if you would like to signal with the questions. Please press star one on your Touchtone telephone if you join US today. He's a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.

Again that is star one if you would like the signal with questions. Our first question will come from John Hodulik with UBS.

Hi, John Great Hey, how are you guys doing.

Great.

Great a couple of questions first industry phone adds were pretty much off the charts. This this quarter any sense on what's driving that I mean is it are the stimulus checks people are getting you.

Do you think the adding to the to the growth that we've seen and then I thought the commentary on the on the <unk> going forward of it was interesting I mean, you didn't give a percentage about what how many sprint customers have been migrated over to.

T mobile plans, but I guess are you guys, saying that you guys are far enough through that process that you expect dilution from the from that to the lesson as we go forward and then just sort of any.

The commentary on trends beyond that would be great. Thanks.

Okay, I'll start with the industry trends on net and maybe see if John prior wants to add anything and then Peter I'll, Let you address the <unk> question some great news in there.

The question, John kind of got to the answer in a certain way we saw a lot of industry activity in Q1, particularly in the second half of the quarter that we think was driven economically buy of Heather of being a lot of money and us and the economy stimulus tax refunds et cetera.

You know in our competitors think they suddenly got competitive in the second half of the quarter and they were talking about their sudden momentum I think they lost sight of that larger picture of that there was probably of macroeconomic circumstance that was driving it and you know we're really comfortable with that type of an environment. When there's cash in the system and are less.

Environments of less switching and less going on as you've seen over the past year and our strong performance. We've got a model that's very flexible, but that's at least was our read on it and it's certainly continuing you know Q1 has you know us off to a strong start across the board you heard some of that from our competitors as well.

As it relates to looking forward you know I I'm very confident that we are in many respects a return to work of company. You'll remember we've talked all along that our model is one that relies on switching and we believe switching will in the macro sense through the year it will gain momentum and that doesn't have to be.

Every week and every month, but take it this way the second half generally we think will generate more production for us than the first half just generally because we will see more switching and T. Mobiles always a beneficiary of switching and that's about you know.

The economy getting back after it people getting back into stores and as we've all seen that starting to happen now, but we think more in the second half than the first half as it relates to competitiveness of the brands and the offers and how we think it's looking out there I'll turn to John and then I'll turn to of Peter on the RP question. Yeah. You bet. Thank you Mike Yeah, We just continue.

To be very pleased with our position in the marketplace today and like Mike said, the first of the first part of the quarter was an interest in part of the quarter, because we were coming out of Q4. When you look at the pandemic. The number of cases, hospitalizations et cetera, et cetera, and then with the tax refund and the stimulus money coming into the marketplace.

Saw a really good uptick, but one of the big things that we saw it too is that we launched our merchant of Max plan at the end of February and what we saw with those two things was one really kind of an uptick in terms of the of the attractiveness of that particular rate plan in terms of the people taken that rate plan, but also you know something that was really a great benefit in terms of people.

That really value of incredible network experience and value of the very best rate plan that they can have of the market. We saw more people switching the T. Mobile during that particular time, so we love our position we're incredibly confident like Mike said, we expect to see the second half continued to accelerate and continue to improve what youre seeing in the pandemic has really kind of it's kind of a tale of two <unk>.

One there are some places that are kind of reopen and some other places like Texas, and Florida, but theres other huge states like New York and California that are still in the process of reopening and of course as you continue to see that you'll see the switching pool continued to expand and when that happens we're always the share taker of and we love our position when the competition is at the highest and Peter alter.

And again, well do that so Peter the question second part of the question was about your remarks, you mentioned that Q1 would be the low watermark for <unk> for the year and we see rising trends through the balance of the year why is that yeah couple of things and I think you'll have the question on the sprint base and it's the majority of sprint customers that we migrated in Michigan was part of the plan there.

As we highlighted in analyst day, but there's another element here of that's so exciting and John just talked about it a little bit and that is magenta, Max which really does two things one it demonstrates the power and the capabilities of this five day network, Mike talked about the usage profile of these customers and frankly, the take rate has just been amazing.

Alright.

Great momentum coming off of Magenta, Max and it does the second thing of it shows the as John mentioned that there are premium customers that are attracted to this premium network as the perception continues to improve and understanding in the consumer base continuous to evolve around just what it is that Neville and team are building. So those of the things that really allow.

For us to get the optimism around the <unk> for the remainder of the year and not only <unk>, but remember that the plan here and the growth strategy to unlock all of this massive free cash flow is predicated on the ARPA growth and were equally as excited about ARPA, which we expect the grow during the course of the year as well.

Great. Thanks, guys.

Thanks, John.

Thank you. Our next question will come from Jonathan Chaplin with New Street research.

Thanks, guys. Two if I may is starting off with Peter.

You've got growing customers growing <unk> and growing synergies during the year. If I just take this quarter's EBITDA and annualize it I get the 24 billion, which is about your guidance.

Why wouldn't should we be looking at the $24 billion in EBITDA one of the toward the price cost side. It would all upset that tremendous story on top line growth adds.

Synergy capture the.

We might not be thinking about and then maybe for us.

John.

It looks like the lines per account went up a lot this quarter.

Your line is in the Boston you grew income.

I'm wondering if you can give us a little bit of color of what's going on at the current level of buses the the lines per account level.

It drove the difference of the trend there. Thanks.

Sounds good theater I'm Gonna start Yeah, let me start great questions. So let me start with EBITDA and I guess, it's the story of what have you done for me of lately, but remember at year end, we definitely talked about all of the initiatives and the investments that we will be making this year to unlock what we shared with you at analyst day, the massive expansion both of poor EBITDA, but of free cash.

Flow and that really begins in Q2, you saw a lot of of the initiatives that we put out there W effects, what we're gonna do from of T mobile for business investment smaller town and rural hometown of experts of the distribution expansion in those areas. Those are investments that are really beginning in Q2. So that's that's an element of what I would think about from Q1.

That doesn't continue into Q2 right as they're trying to create the run rate because we're making those investments, but I'll tell you what.

From a year, where we were thinking about the investments that lead to the free cash flow of targets that we shared with you at analyst day I'll take it right.

It's significant year over year growth on a pro forma basis, even before you consider the fact that last year had significant COVID-19 costs that were out of core EBITDA of that have become part of the run rate of the business. So I couldn't be more excited about the trajectory of the continued profitable growth in Q1 already being able to meet.

Meaning fully increased guidance for you and all the while making the significant investments for the unlock of that promise free cash flow now I don't know John if that if you're watching on video of it you can literally see a twinkle in theaters I when he talks about the cash flow of potential if that's the sort of a thick ex U.

Literally hurts us when he talks about that part.

And that's all that's all net of an investment year and it's very interesting your point Peter that this is an investment year.

To get to that cash flow of future and yet.

In this investment year everything is pointing up in terms of the raised guidance that we've delivered across the board or communicated across the board today. So that's a good place to be John The second question from Jonathan was about lines per account and also of what's going on with accounts. Yeah. So two things here as everybody knows we really drive our postpaid phone net adds from the from too.

As one from the new accounts that we create from switching from our competitors and to deepening our existing customer relationships that we have today. So we saw both of those things in action and the very big way in Q1 first of all of them are number of new accounts doubled from Q4, which is just fantastic news of shows of the momentum that's happening in terms of the switching to.

T mobile and then too.

We had an opportunity to really deepen relationships as well with our existing customer base one of the things too just to remember is that traditionally our sprint branded customers. They typically have the lowest number of lines on a per account basis. So we have more opportunity to really deepen our relationships and grow them there as well. So we've had a lot of interactions with our existing customers, allowing us to really grow.

Of the accounts and then of course, you know typically what you see in the tax refund and you know kind of of stimulus event. There's a lot of people that are looking to grow the relationship with us. So we love the we love our approach on both of those and we want to consume the to take that forward into Q2 and beyond.

Jonathan I don't know if your question was getting a desk and you know it might be because our competitors are constantly filling everybody's ears about this which is and what part of that is free lines as their free other free lines going on and the answer is yes of course always has been and it's just it's a small percentage of our total gross activations, though and I love. The fact that our competitors have decided to focus on this because if they think this is <unk>.

The driving our success God bless them I hope that I hope, that's what they actually thing versus just what they're trying to position with you, but what John said us actual paying accounts total account relationships were up and up big This quarter 260000, net new postpaid accounts and in those accounts, what we saw as customers of deepening their relationships.

With us and one of the things we've always found at T. Mobile is that when we can give customers something they really value.

And we can grandfather them on that thing they really value, it's fantastic for churn and as you know we were the only sequential gainer in churn. This this quarter with a decrease churn versus prior quarter and again, the very best churn in the industry on the T mobile brand. So churns of tailwind and this is one of our tools, giving them something that they value.

That they know if they leave they're going to have to give up and it's been a part of our game plan for awhile. So anyway I do know if you were getting at that but you gave me a chance to talk about anyway [laughter].

That's great I think Peter has probably got a twinkle in us I about the $23 billion.

The end of EBITDA guidance as well.

Good morning.

Thank you Peter.

None of us so well that's right.

Terrific.

And our operating mines.

Absolutely. Our next question will come from Craig Moffett with Moffett Nathanson.

Hi, Greg Hi, Thank you.

Two questions if I could.

First as long as we're on the subject of of what your your competitors' spilled People's years with the.

They've talked a lot about their their porting ratios being positive against T. Mobile I Wonder if you could just talk about what you see in terms of of porting ratios in the competition versus each of Verizon and AT&T and then I wonder if separately, if maybe we could hear from Mike a little bit about the pipeline for.

The commercial accounts and I thought the blog post from a couple of days ago was where the exciting I I'd love to hear more about the kind of the sales process and what.

What how long the the typical sales cycle is to land some of those large accounts and.

And what the pipeline looks like at this point.

Yeah, great great great questions I'll start on the first one of them.

Both of our major competitors are porting very negatively to our flagship T mobile brand.

And what they get in their telemetry is the combination and so they can't they either won't tell you that our don't know, but they're they're porting very negatively to T mobile and overall now if you look at the overall account growth as I said, we're growing overall accounts are growing 260000, net new account relationships grew.

Both this quarter from last quarter, and that's across all of our brands T mobile and sprint combined and so what that means is that porting at least as it relates to the combination is a bit of of weird artifact and that's why we haven't been focusing on it recently and you know they can't really get a good read on it either because of the data that they're getting so you got to look at overall growth and that's you know.

How we look at it and yeah. We're very pleased I mean, it's a the overall momentum for our business with declining churn is something that we've told you would become a tailwind and that's the artifact will start to resolve itself as churn on sprint dissipates and that's that's fantastic if we can lead the industry.

And postpaid nets, while dragging around this level of sprint churn well, that's a fantastic tailwind for our business. So I hope they enjoy this moment, where they can at least look at one artifact and probably fuelled by promotions that actually, especially incentive part of incentivize parts on their own and.

Because it's going to be short lived.

If that makes sense.

Yes.

The only thing that's the Lilly and Mike Sorry, I don't know what we're seeing on the accounts yep, yeah, if it fell.

Question, you know I think one of the things that you that you probably know us in this space when youre talking about businesses and government agencies sales and activations tend to be a little bit of a lagging indicator because of the sales cycles are long, particularly when you're talking about big complex multinational enterprise and large government agencies. So you know my.

At the top mentioned that we had one of the best quarters that we've that we've seen today in T mobile for business phone nets and that really that success this quarter really as of Q.

Accumulation of successes from many previous quarters as this team has leveraged.

This network advantage, that's been building, which really started as we as we got to parity in the in the forging area of allowed us to really engage with enterprises in a way that we hadn't build those build those funnels up and start accruing successes like we did in Q1 and what's happened over over the course of this last year is we've been able to take now a differentiated network assets.

Which by the way network is the key variable that the companies that we're dealing with making their wireless decisions on and really start stacking that funnel with new opportunities.

New opportunities that include both companies that we haven't engaged with before.

And existing companies that were able to go a lot deeper with so when I look at our business today coming out of it coming off of Great Q1, and I look at the funnel the funnels and the best place the that it's ever been both both in the public and private sector and it really gives me confidence of a sustained success throughout the year as well as setting us up for success over the net.

Couple of years.

And our next question will come from Phil Cusick with J P. Morgan.

Hi, Phil.

Thanks, Frank for your questions sorry at the time to get the close out with us.

Hey, Phil it's going on.

I guess following up on my previous question can you quantify at all what the business. So that's our and then second any kind of early read on the whole broadband uptake in the first couple of months. Thank you.

Mike you want to take the first of all of the short answer is not going to be not really but I'm not really but I will say up significantly both on the sequential and of your year over year basis and.

I would say generally better than what you're seeing from competitors.

And how's the broadband going down yeah, Oh, it's the thanks for the question and I'd say, we're what three little over three weeks and post our launch on broadband and I would say, where we're just as excited as we've ever been about this business after launch and really what I'd say is after the launch we've seen two things that are very consistent with.

What we saw when we were piloting and.

One is that we have but just on a bigger scale, we have customers who are coming to us in fact, I was talking to a colleague yesterday, who said the customer approached him and said I had no idea I could get those speeds in our neighborhood.

And it's such a great feeling we're seeing that more and more especially when you think about our presence in rural and suburban and even many parts of urban America, where they just don't have people just don't have great choices. They might have one choice of might have might even not even have any choice.

And the other thing we're seeing too.

And I think that was even representative of this. The example, I gave you is we continue to attract customers that don't have a wireless relationship with T mobile and so these are customers with one of our competitors from the wireless service, but they're taking our home Internet service and so as we start to what we love about this business to us that it gives us the ability.

The ability to establish a relationship with someone who isn't of customer they get to understand and know our business real well that gives us a great opportunity to continue to up sell and I think Mike's even seeing the same thing as he's talking to us to enterprise customers with us as well. So again, where we were just getting started and we're as excited about this business as we ever have been.

Am I getting a lot of questions about about how you pitch this to customers what kind of speeds the U.

Total customers, who expect that sort of the minimum versus average basis.

Yeah. So what we tell customers is in and the service we offer us. It's a you know on average customers are going to get speeds over a 100 megabits per second.

And I think what is great about this too is it.

We're in many places are with those kind of speeds that are competitors like haven't even gone to yet.

And so when you combine that with what we what we offer which is really a great reliable service for a great price no promotions no exploding promotions no fees you know taxes included all of the things of the UN carrier does backed by our of Great customer service. It's we find it's a really compelling proposition from.

People I mean, Phil it sounds like you're shopping you can go to argue that the tool on line and see if you're one of the 30 million households that now qualify.

It's called me I'll get someone to call you take.

Take care of them.

Like us.

Thanks Man.

I'm proud of them.

Moving on to Simon Flannery with Morgan Stanley.

Great a couple of questions for Neville if I could you disclosed you have taken the network with the mid band up to 140 million Pops and now you're up to 325 Megabits a second average speed, perhaps just help us think about how <unk>, how that's going to go through the the balance of the year and maybe if you've got any early data on how many phones are on five G. What the usage is.

And then that some of the peers have been talking about supply chain, which seem to be getting mixed messages any color on that and perhaps just last day Michael on the CDMA network. How are you thinking about the shut down there at this point.

Terrific Simon Great question, Nobody want to start Yeah, you know thank Simon obviously, we're just delighted with the progress that we're making you know we have a ton of network momentum and if you look at the stats. It's it's it's almost embarrassing when you look at some of the competitive stops the route there, especially when you look at the high performing ultra capacity you know fudge.

Services, the hundred and 40 million I mean goodness, we're almost half the people in the U S covered already and the competition is not even got out of the gate.

But we're not slowing down some of them were not sitting on our hands. The pace. The we've secured we intend to maintain and accelerate as we go through the balance of this year and into next the nation wide goal is right. There for us for 2021 to reach 200 million people and speeds will continue to improve another dimension to think about.

All of them all rollout, it's not just you know the the scale and geographic mass of that but also the spectrum assets and by the end of this year, we'll be committing 100 megahertz on 2.5 to the folks you're service and ultra capacity five G and think about that that's as much as AT&T and Verizon picked up in the C band auction.

Mid band Us at portfolio through the end of 2023.

That's just for this year. So we've always talked about speeds hitting full of hundred megabits per second per.

On average.

And that's of target clearly in our sights on one we would hope to get to you know by the end of this year, but 'twenty. One is going to be Fabulous 22 is going to be even better you know, we're not stopping us nationwide and we're certainly going to try and increase the GAAP that we have against Verizon and AT&T now answer.

Apply chain from you know of network perspective Simon.

Maybe this is the advantage that we have because we started a program. So much earlier and we put massive commitments multibillion dollar commitments into the market with all key vendors in Ericsson and Nokia. So we're accelerating the pace of deployment, we're deploying more radio gaea than we ever have.

The pace that's much much faster than we've seen in the past and are all supply chain deep into the supply chain is very strong at this point in time, you know one of the network site no issues for US there are two of them and.

And that's true on the smartphone side too you know, we're seeing no supply issues and we're forecasting no supply issues on either network gear or smartphones. So I think that's important for everybody to understand and it kind of dovetails into your last question as it relates to our C. D M. A sunset and upgrade of those customers is going really well we're on track to do that on time as we've been communicating.

The catering at the end of this year beginning of next year and a big piece. We have to do is we have to migrate all of the sprint customers in order to get there and that's going really well as well last month you saw on our five G. For all initiative, we announced are really awesome unprecedented offer which is every single metro and T mobile customer can bring any phone I mean adeel.

Phone in two of T Mobile star and upgrade two of five G phone for free totally free and we're making the following commitments of sprint customers, which is every single customer will be transitioned to a compatible device.

Or have the opportunity to transition to a compatible device before this upgrade happens at the end of the year and not one single customer will be asked to pay a penny more for a full five G. Four G rate plan, that's compatible with the future and it's so important that we do this because of the digital divide we've seen over the past year and a half is wide.

And people, who don't have access to the latest technology are at risk of falling behind so we're full steam ahead on this transition and we're gonna make sure. Our responsibility is as it relates to our branded customers and we're going to make sure that every single one of them has the opportunity to be ready for the benefits of this upgrade and not one single customer will be asked to pay up.

Any more for their rate plans, so full steam ahead and on track.

Thank you.

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

Thanks for taking the questions Hey, guys. So you know when we go back of some of the key underpenetrated opportunities talked about whether it was in the business market or the rural markets I mean really you're you're underpenetrated from the count standpoint, you just would have a lower share of the counts in those markets.

I always seem to do than others, which is why you have a lower share of subscribers and so the question is as you gain traction against growing your account penetration in those market would it be reasonable to think that your account growth might actually pick up a bit relative to your net adds because they can be increasingly net adds associated with near the counts as opposed to penetration.

Of all the accounts and I ask that because it would seem like that could be a tailwind for your art to it.

Net adds that are associated with new account that you believe tend to come in at a higher RPM. So I'm first of all checking to see whether there's logic to that if there's an offset we should be thinking through and then just going back to some of the usage statistics, particularly on the magenta Max plan I'm curious have you seen evidence that people are actually using the T mobile mobile devices of replacing from the landline when they when they go up.

The Max and I'm just interested in any other insight you might have about what are the use cases of people are using so much more data on their phone as well. Thank you.

Some of it I'll start with the first one on Max and use cases, and then we'll flip to it sounds like it was business and consumer I don't know Peter view of of an opinion about account growth and as it relates to <unk>.

You know we are so excited about magenta, Max and one of the things that I was just commenting on was how important it has become to get people connected with contemporary connections in this pandemic. That's become so clear that you know if you're not fully connected with the best and latest technologies, you're at risk of falling behind not just falling behind digitally but falling.

Find economically and magenta Max as a differentiated offer because its on a differentiated network and it's really a showcase that use cases for five G are already here, we don't have to wait around for the next couple of years for people to invent use cases, they're doing that and it's exciting separate topic, but they're here today and people when you.

Give somebody a true unlimited plan on of five G phone, that's screaming fast on the biggest and best of <unk> network in this country. They use it and its of truth, that's been around since the beginning of the Internet and the net in the mid 19 nineties. When it became popular with consumers, which is we've never been able to outrun the insatiable demand of customers have on the.

Most popular platforms for data and so when you provide the industry's only true unlimited plan. They do what they do they use it up in this case with video a full high Def video and smart.

Smart usage of all of the social media platforms and music and other things and Theyre also using it for work and I think what happens is a light bulb goes off when you provide somebody with true unlimited on of five G network, that's faster than an average Wi Fi connection they stop roaming around the world looking for Wi Fi hotspots, I mean, I you know when I think we're all about to start.

Traveling again to a certain extent I don't go into a hotel or a conference room and start hunting around for a password for Wi Fi I've got a more powerful connection than that already in my pocket and that's the kind of mentality that magenta Max unlocks, it's a real differentiated offer and by the way. It's the only the beginning okay and you were going to talk about accounts and ARPA, So who wants us.

Start on that one well why don't I start and then John you can add on us.

That was my cats, but yeah, it's an interesting perspective, and you know it really is going to depend I think on the mix of each quarter you talked.

You heard my cats to talk about the success of TSB.

And particularly as you go into the Underpenetrated large enterprise market you could see.

It could be one account, but have many lines associated with a little bit different dynamic than consumer I think as you see some of the penetration happened in smaller town of rule, yeah, absolutely that could happen, but don't forget we're always going to continue to invest in our existing subscriber base and particularly as we continue on this journey of worst the first in the sprint churn.

<unk> as well so it's gonna be a mixture, but yeah. There is definitely correct and some of that thesis, particularly in smaller town of rule I don't know John or Mike. If you have anything to add to that yeah. I mean, I think you I think you hit of Peter when you think when you're thinking about large enterprise.

Both have the dynamics of a single enterprise, having really large scaled wireless deployments and honestly with a lot of those companies. We already have presence than we've had presence for a long time. Our role of has just changed you've heard us talk about this at analyst day, historically, our role as a little bit of of stocking horse to create price pressure for AT&T, and Verizon and what you've seen particularly recently with our growth.

Is there more and more choosing us and we're displacing the incumbent for the wireless projects. There's a lot of our growth has come from customers that had technically been customers of ours before but we're just majorly deepening our relationship with them.

Then I would just finish up and say, yes, we are definitely excited about our smaller markets and the real opportunity and like we talked about at the analyst day, almost two months ago. You know that's 40 per cent of the entire geographic market in the country and we've got of market share of about you know the low teens and we're trying to get that too we will get that to nearly 20% over the next few years.

That's for sure and sort of like you said, Brett that that's got the huge opportunity for new accounts of course definitely but just remember one of the things that I said earlier too that when you look at our sprint branded base that we are going to be migrating more and more to our T. Mobile base that traditionally has had some of the least penetrated the number of lines on a per account basis.

So there is still big opportunities for us to deepen our relationships with the customers that we acquired through the sprint transaction.

Back in April of last year. So so you know net net of those two things sure Theres ARP, who are opportunities for us of new accounts, but there's also offer opportunities for us as well as we deepen our existing relationships.

Great questions Brett Thanks.

And moving on to Michael Rollins with Citi.

Hi, Mike.

Hi, good afternoon.

Two questions if I could the first one was the prepaid churn came down and just curious if you see the temporary change or if youre seeing something fundamental happening in terms of the retention rates per prepaid customers and then second leased devices all of it looks like it was down from 40.

$1 2 million in the base of $12 4 million in the base in this latest quarter was down 13% sequentially. Just curious if you're taking an active approach to quickly reduce the amount of these leased devices in your base and what that steady state mix might look like for T mobile between installments of leases in the.

The teacher.

I'll start on the first one and see if John wants to pile in.

You know it's too early to tell I think what we're seeing is that half of our market position for metro by T. Mobile is exactly what the market is looking for where you know you saw our highest net add growth in three years on metro we're the leading.

Brand from one of the major network providers, the leading brand and yet we're still growing and we're growing in value of two with churn falling and that's that's fantastic and just kind of shows that we are well positioned to value proposition I think it's going to turn out to be very prescient that we decided to align metro around the T Mobile Master brand Metro by T mobile because as the <unk>.

Our investments start to take route what's really important as the customers I've said this in my remarks that customers give us credit for those network investments and that means they need to know theyre part of that network and metro customers do.

As John Rolls out in smaller markets, you know, we're gonna be able to do that in a unified way, which is much more efficient to go after smaller markets with metro by T Mobile and T mobile together with unified distribution and that's fantastic. So we have of more premium offering that attracts people with a credible and legitimate.

Net need to be in in this wireless category long term not coming in looking and leaving and that's important and I think right now in our economy with how much people are relying on their connections if you're a prepaid customer that is of very good place to be positioned I'm not forecasting churn for you I think that would there's so many ins and outs, but I liked.

Where we are I like the overall health of our Metro by T Mobile franchise, John anything to add to the get the only thing I would add to that is yes. We do we just really love our early retention rates of our prepaid customers on metro by T. Mobile as well. This is something that we are seeing that's a little bit different from our offer construct compensation construct et cetera, we're seeing the improving.

Early survival rates of our of our new accounts that we acquired through our metro by T Mobile brand and products. So we're seeing that which is fantastic news and the like Mike said, just a few moments ago. You know, we're gonna be able to have metro by T mobile and T mobile all within our T mobile stores in smaller markets in rural areas, because it would be extraordinarily inefficient for us.

To put of T mobile store and the right across the street put of Metro by T Mobile store and like Mike said Metro by T Mobile and T. Mobile they have met so in smaller markets in rural areas, you should be able to go to one store and be able to get anything and everything that T. Mobile has to offer so we're looking forward to Venezuela.

Last one on leased devices, Peter it's happening unfolding slightly differently than we had outlook. So maybe you can comment on that yeah, well, Mike really of the plan is the same as we laid out at analyst day, where it's really bringing customers onto the T mobile value proposition and when you think about that midterm timeframe of the goal was really to get lease revenue is down to one to one 5 billion and ultimately to be below one.

Billion by the long term targets that we put out there and its giving everybody. The again the T mobile value of proposition all new originations of practically on E P and taking a worthy of the Ericsson. So theres definitely incentives were talking about it with sprint customers, but it's also on their terms right to make it be something that isn't from irritants in it.

<unk> creator, but to quickly migrate them onto all of the goodness that the team all the value proposition of house.

And the operating before you go out of the bonds I want to ask my team here, we do have some coming in from Twitter as well do we want to go to one of those are two or three of those rapid fire mode anything like that James is what's your opinion you want us to I would I think you've got some good ones on the enterprise momentum in Ws accidents, and on our or Big UN carrier move on rural.

Kind of distribution in the Gray American type of G upgrade Okay. I think we kind of talked about the great American five G upgrade of little bit, but if there is a good question here, so where did it go.

The Bill Hull, Okay. So bill host us since the launch of Wf ex that sense for work from anywhere from can you discuss the reception of among.

Among the broad business segments. So how's it going we did the launch of you've made a few comments earlier, Mike but can you expand on yeah, that's going on of pay bill good to hear from you.

The with that with W effects. The reception that we've seen so far has been great and kind of exactly what we expected you know one of the.

First things that we've seen as we expected that bringing a new set of business services to market would enable us to have another dimension in which to facilitate conversations with enterprise and government buyers and we've absolutely seen that so far and we've begun the testing process across all of the products in there but.

But the kind of get to the second part of your your your question one of the really big pieces of the reception that we've seen is one of the things that's been so appealing about what we launched particularly the home office Internet product is the fact that it's nationwide.

Is it as businesses are starting to do their planning for a mixed work environment, where some employers are going to be in the office and some are gonna be remote including in their home, having a single nationwide solution and solutions to help facilitate this mixed work environment has been particularly important for them and we think that's one of the most exciting things about.

What we did particularly with that home office Internet product us give a single nationwide broadband solution to enterprise something that they really can't get anywhere else. So it's going to it's going great. So far and look forward to keep the Oh, that's an eye opener. When you think about this offering that is available essentially nationwide for employers they really can't get that anywhere any place else but.

Their employees not to have to be on an unsecured Wi Fi network sharing the Wi Fi with the kids to try to do their job and that's you know that's something that we've all seen you know what what that experience is like over the last year. So that's the breakthrough here, while we got you Mike one more of them will go back to the phone for Jim Patterson could you comment on the Big announcement, we made about lumen and what we're doing.

Especially as it relates to.

Distributed computing, yeah really excited about it and I think the Illumina team is excited too because as they think about bringing edge compute solutions to market what was important to lumen and particularly to the customers that they're looking to bring the solution to is a big distributed powerful five G network and as you heard from Mike and you heard from level earlier Nobody's got a bigger.

Nobody's got a more powerful nationwide <unk> network to bring these true mobile edge compute solutions to market. So we're really excited about it and the Illumina team is really excited about it as well and we've already begun our engagements with customers who are working on some use cases I expect to have.

Something to talk about that later in the year when those come come into market and.

And we think Theres a lot of of exciting potential there to really help enterprises transform parts parts of their business business and bring new services to their customers. So more to come on that one and see what happens Jim you asked my questions and he starts to pre announce the awesome stuff.

You're welcome.

Alright, operator lets go back to the phone.

Thank you. Our next question will come from David Barden with Bank of America.

Hey, guys. Thanks, so much the rest of the question I definitely the.

Sure Hey, guys.

So I guess I have a question for Peter on the guidance and I apologize it's in four parts.

So I guess I I heard your comments earlier.

With respect of the Twinkle in the eye for the rest of the year, but specifically with respect to kind of how you changed the guidance.

How much was related to one Q versus plan and how much was related to changing expectations for the rest of the year.

And the second question part two was.

How does the increase in travel and roaming.

And the things that have been happening I think faster than people expected.

Impact your outlook or or maybe hasn't yet impacted your outlook.

And then part of three was.

At the Analyst day, you talked about churn in your base case plan going to one 5%.

But with where churn is now relative to the last quarter versus to the weighted average of year ago.

It's clear at least I think that it's not going there.

So has that changed yet is the base case and then finally.

Part of.

Part D. If I could was.

What did you kind of baked into the plan is the outcome from the Verizon Tracfone merger. Thank you sorry.

Oh Wow.

The fire mode, Peter let's see how you didn't back them out of all four of them Alright, No answer yes, no one clear versus plan the rest of the year because of its actually bolt right. It's more momentum in terms of integration and that's why we have the synergy raise but it's also what we're seeing in terms of of course customer and the momentum in the business and our people that we talked about magenta Mac. So.

It's a combination of both that allowed us to update our guidance for the remainder of the year roaming and travel.

I would say I don't know, it's hard to really know, but I will tell you, there's probably no better provider as you start thinking about travel opening back up of roaming open in Europe. When you think about mobile without borders when you think about what we offer to our consumers in terms of international roaming.

Roaming the capabilities. If you go to Europe or other countries I would say there's no other provider that's better so maybe more and more consumers love it hasn't been fueling much of our switching in the last year. The way it's been a major contributor in you know in prior years. So that's it's a fascinating point on sprint churn, if you're saying are we cutting in half.

Are we updating the plan I think we talked a little bit earlier, you know as we see the country reopening on a more nationwide basis, John spoke to the fact that it's a little bit different in different parts of the region, we do see and anticipate switching to increase so it's hard to know whether today's level and what we saw in Q1, it's really representative or whether some of that switching which again.

That's the share taker of as a real positive for us will impact until we go through the totality of that playbook of bringing them from worst of first so a little bit a little bit of wait and see there, but really really pleased with the progress that we're seeing and I'm Verizon in Tracfone certainly for 'twenty, one non I can't speak to when they're going to close.

Other than what you know what they say in terms of external views, but in analyst day, we did say that we'd do assume track phone, which is roughly about $750 million of high margin service revenue to us would go away over the period and likely by the midterm.

Well done.

Thanks, Dave.

Sure.

Yeah and work alright, operator.

And our next question will come from Ric Prentiss with Raymond James.

Hi ranks in the afternoon everyone.

Let me go back to the opportunity in Rural America, and small market of America, you mentioned, some the small towns of all Tomorrow's and distribution picking up.

Net originally talked also about the increasing rural sites by 10000 update us us.

For us how that's going I've seen some of the comments on line talking about coverage out of the world.

So can you talk a little bit about those 10000 sites to install the hyndman over what type of thing.

Yeah, that's the figure fantastic question right because they go hand in hand, right. We go into and really put the distribution and marketing firepower in place. Once we know we have an awesome and competitive product and that's the part of it so rapidly changing so I don't know, but do you want to start with this one.

Yeah, I mean, I get as good of talk to you Rick.

So the the real real pieces is huge for US right I mean, that's the massive differentiator between what we're doing and if if we're honest with ourselves AT&T and Verizon haven't even announced what they're going to do in rural America with Fudgy. If you look at the extended range footprint. We have today, you know more than AT&T and Verizon combined.

I mean, there is only one choice on on five G. In Rural America today, It's it's T mobile and with the materially Youre right Rick in the plan as we move through the next couple of years, we intend to add about 10000 incremental sites to the T. Mobile network. So some kind of some sites come off with the commissioning and we add some additional sites and that's.

All of the time, there will be several thousand of how did this year there would be more in 'twenty, two and again in 'twenty three so not necessarily an even split but we continued to improve and enhance coverage across the us the the the full coast to coast footprint of the us but in the rural you know.

Territory drums, Crazy busy rolling out distribution and the the network is just going from strength to strength and really it's a tremendous upgrade.

In many parts of the U S, where we're bringing five G service has been a.

Pretty damn awful for many many years Rick one of the things we said in our remarks at the beginning was that this build which is synergy backed and ahead of schedule will result in T mobile not just having the best five G network, but the best network with the most coverage.

And I think that's important to understand that as our goal is the is the best overall network in this country with the most coverage the most availability.

And that that's such an unlocking and for us for customers of course Theyre. Just now just beginning to understand that this is where we're headed in the five G where we already are and that's such a fantastic potential opportunity and potential tailwind for our business as we go forward.

The squeezing one more rapid phone question in the past you've talked about content goes to the Internet Internet goes the mobile it seems like there was in the pending now to say mobile goes to club can you talk a little bit about what five G of network slicing might mean and can you maybe alluded to what you guys see us the opportunity is mobile headed to the phone.

Well first of all Rick I'm. So flattered that you are quoting us on that that it makes our Oh, that's awesome look look the.

People are asking what are some of the use cases that will fuel five G, especially as it relates to enterprise, but you could also say with consumer and of course, its cloud and you know this this notion that enterprises don't wanna be buying and deploying assets. They want to have networking as a service they want to have.

Computing as a service and that that does raise the very interesting prospects for our business as it relates to being able to ultimately serve enterprise customers with networking as a service, but even putting that aside which is a fascinating area that our business model will it doesn't rely on yet but that we won't be left behind us.

John.

The other issue is that.

Customers, both consumers and businesses alike as they rely on cloud are going to need very high speed low latency network for that experience to be good the more local your compute is the less of your network matters.

And the more cloud your compute is the more of in your network of matters and people are asking well T. Mobile's five G advantage matter as it relates to choice or will it be an advantage that customers don't care about our notice while cloud is a differentiator there because the more enterprise customers and consumer applications rely on the cloud the.

More of our network shines and it really showcases the potential again tailwind for the future.

Great. Thanks, Mike.

You bet.

And moving on to Colby <unk> with Cowen.

Great. Thank you.

There's an expectation that competition is going to increase and I think we all think about that fairly generic we when we say that.

That's expected in the in the second half of the year.

And the expectation that switching is going to improve which would you've also are expecting I'm just curious.

What you've baked into your EBITDA guidance in terms of flexibility to respond to that competition to the extent of that show itself and it is aggressive.

And then secondly, just the point of clarification.

You mentioned that you expect <unk> to be up.

In Q2.

Do you need to Keith you for Q versus.

First is the results in <unk>.

I'm just wondering if that's the linear in other words, you're obviously up over <unk> higher than <unk> and so forth. Thank you.

Well it kind of be first of all of them. Thanks for the question. It's awesome, you're our last question of the day of those are great questions and if you have your pen out we'll just give you the <unk> figures for the next couple of quarters.

That'd be operating we're gonna start we're going to start with our people because it's the great question and then I'll come back to the competition piece. So Peter Alright, certainly and also how much we baked into the EBITDA from promos by quarter I think of all of that.

But yeah no they're they're excellent question no. It's not necessarily linear you know, there's obviously seasonality the promotional aspects. There's other things Theres one investments come you know how much of a mix from T mobile for business or consumer, but it is a low watermark in Q1, and the rest of the year will be higher than that but not.

Italy linearly increasing.

And to your other question it really goes to our whole philosophy and mentality. Some people who follow us closely and if you look at our track record on guidance and then our actuals you know would be forgiven for saying we're conservative if you look at our at our actuals and our track record and we don't feel conservative we just feel like we're prudent and we never know what we don't know.

This is of hyper competitive business and so what we do is we give you guidance that covers what we think are the most reasonable outcomes and yeah. It may get more competitive this year and if so we will execute and perform and deliver on our ambitions. Yet again, we've been through this journey long enough and we have a model that's flexible enough and we have a set of assets on our end of <unk>.

End of cards, that's strong enough that if this is a muted environment. We're good if it's of hyper competitive environment. We're good we're not going to bring about change like that we like and how it is now we think it's serving consumers incredibly well thanks to the innovations that we bring but if somebody else brings it and they they do stuff that totally changes things work.

And yeah, and if we have to be read of your hiring us to be ready and we give you guidance that showcases that we're ready and that's why sometimes it appears conservative when really it's just prudent and we will see how this year unfolds I certainly hope that we will be back next quarter with of beat and raise and that certainly of always our aspiration and anyway.

Great question, the and Don I appreciate you and I appreciate all of US. Thanks for tuning in for this we're celebrating here at T. Mobile. This has been a fantastic start to what I, certainly hope and expect will be a fantastic year. Thanks, everybody for joining us.

Thank you and ladies and gentlemen, this concludes the T Mobile U S. First quarter 2021 earnings call. If you have any further questions you may contact the investor relations or media departments. Thank you for your participation you may now disconnect and have a pleasant day.