Q1 2022 T-Mobile US Inc Earnings Call
<unk> G error and I don't think very many people anticipated what we've already achieved in just two years. We now cover 315 million people with five G. That's 95% of all Americans and our five G geographic coverage with dedicated low band.
Spectrum is more than Verizon and AT&T have combined.
Which both by the way are still largely sharing spectrum with their LTE networks.
Haps, our greatest impact, though was to awaken the industry to the transformational performance of mid band spectrum for ultra capacity <unk>, we already cover 225 million Americans and nearly 85% of all T mobile customers with these game changing experiences we caused us.
Others to pivot from an apparent willingness to leave fast five G to a select few customers within arm's reach of a millimeter wave site and now we see them greatly increasing their investments in mid band spectrum and deployment. They are trying to chase us, but only to realize they will be and are years behind T mobile.
Pre merger, we laid out a plan to realize massive synergies from our scale and efficiencies only to raise our run rate synergy expectations by 25% after closing the merger.
We're delivering these synergies bigger and faster than expected to the benefit of our shareholders and synergies are ramping up even further this year as we're approaching some of our biggest milestones, including moving the remaining customers off the sprint network in the next couple of months.
Just over two years from merger close and we're also on track to upgrade or decommission substantially all of the sprint sites. This year less than three years from close we've been selectively decommissioning sites since the merger close and as of <unk>.
Q1, we've decommissioned roughly one third of the 35000 targeted sites with the big push coming in the second half of this year remarkable execution by the team as we pulled these milestones forward by more than a year.
As the unclear were committed to use our five <unk> leadership in synergies for the good of consumers and businesses, eliminating the biggest pain point in this industry, where customers were forced to make tradeoffs between network quality and value as the only national wireless provider with a clearly articulated and differentiated growth.
The strategy, we have led the industry in postpaid customer and service revenue growth in the two years since the merger closed in that time, we've delivered roughly 2 million postpaid account net ads and 11.5 million postpaid net adds including an industry best $5 3 million postpaid.
Phone net adds we were also the only national wireless operator to deliver double digit growth in both service revenue and core adjusted EBITDA over that period and we accomplished this while building the foundation for sustainable growth platforms across enterprise and government smaller markets in rural areas, Brian consume.
And the largest 100 markets and bringing real competition to broadband.
We've unlocked new experiences for consumers like the first truly unlimited five G plan with Magenta, Max and we've established T mobile as the fastest growing broadband provider, bringing a better product and value proposition to over 40 million potential households, and already serving over one.
Customers just a year after our commercial launch.
We are carrying this momentum right into 2022, delivering another industry, leading quarter of both customer and financial growth in Q1 built on the incredible momentum of our magenta brand.
We added 348000 postpaid account net adds our highest Q1 ever and the highest reported in the industry yet again as I've said before this measure of our total billing relationships as the best parameter that we're winning the switching decisions in this industry, while others appear to be leaning into adding line.
<unk> to their base, we're focused on growing the number of customer relationships and then deepening them over time across our products and services and we delivered our highest Q1 postpaid net adds in eight years with an industry best one 3 million, that's more postpaid nets than AT&T.
<unk> and Verizon combined.
This includes 589000 postpaid phone net adds our postpaid phone churn dropped by a whopping 17 basis points from Q4 to just zero point 93, the industry and best improvement both year over year and sequentially. We were the only national wireless operator to improve churn year over.
Our year as our competitors saw their churn increase this integration driven churn improvement really matters because our phone gross adds were the highest in the industry. Yet again in Q1 in fact, if the sprint churn was the same as the magenta churn postpaid phone net adds in Q1 would have been closer to 900.
That was it.
And I couldn't be more excited about high speed Internet, where we had 338000 net adds and I expect will be the fastest growing broadband provider in the industry for the second consecutive quarter demand just continues to build from dissatisfied suburban cable customers to underserved customers and <unk>.
All of our markets in rural areas, our net promoter scores continued to improve quarter over quarter and are now more than three times. The average NPS scores for cable customers.
First part is we're just getting started bringing the uncared of broadband so stay tuned for what we have in store next.
Magenta Max continues to see great adoption from customers, which is helping to drive strong <unk> and ARPA trends and we still have lots of room for further growth with the trends that we're seeing we now expect postpaid phone <unk> to be up roughly 1% in 2022. In addition.
We continue to see our prime mix of credit apps increase on a year over year basis, each quarter, showing that our network and our brand our consistently attracting the industry's best customers.
We continue to see good momentum in smaller markets in rural areas as we expand the reach of our distribution and network. The team is executing our precision playbook here to a tee coordinating the network and distribution build outs to unlock new experiences community by community. We ended 2021 effectively competing in about.
30% of households in these markets and we will continue to expand to more than half of households in smaller markets.
End of this year.
Our new accounts from smaller markets in rural areas grew 40% year over year in Q1, and these markets are also a great example of where our high speed Internet is helping to open doors for us to drive mobile penetration.
T mobile for business continues to build mind share with enterprise and government customers on the strength of our network and our ever expanding suite of products and services. We've built strong momentum across major verticals now such as the financial sector, where we continue to expand the list of large multinational banks relying on T mobile for <unk>.
Cure and compliant connectivity for their hybrid mobile workforce. Our network performance has also been a catalyst for over 31st responder agencies to join T. Mobile just in Q1, we recently introduced the first five G connected cars in America with Magenta drive for BMW, and we continue to be on the leading edge.
[noise] of advanced <unk> networks solutions like mobile edge compute and private networks I'm excited about building on our momentum with businesses in 2022, with our significant and durable five G network advantage.
Okay, Let me wrap up it's been a remarkable run in the first two years since our merger, we've unlocked better experiences for consumers and businesses by offering the best value and the promise of the best network for the first time in this industry has a history, we've unlocked shareholder value through industry, leading growth in postpaid customers and service rep.
<unk>, while delivering merger synergies bigger and faster than originally planned we're off to a great start in 2022 with a beat and raise quarter that not only lead this industry and growth of postpaid customers, but also service revenue core adjusted EBITDA and cash flows and positioned us to raise our guidance okay.
Cross the board just one quarter into the year. Our team is excited to carry all of this momentum through the rest of 'twenty, two and I'll, let Peter take you through our key financial highlights from Q1, and our increased guidance in more detail here alright. Thanks, Mike.
Can see we started off 2022 with very strong Q1 results are industry, leading growth in postpaid customers and highest postpaid phone ARPA growth in the last five years resulted in the best postpaid service revenue growth in the industry up 9% year over year.
Our strong service revenue growth combined with our continued execution on our merger synergies delivered year over year core adjusted EBITDA growth of 10% compared to the year over year decline in EBITDA that you see from others in our industry.
Our growth and profitability fueled higher operating cash flow, even with higher merger related costs.
Hold us to deliver industry, leading growth and free cash flow of over 25%, while accelerating our capex investments in the network.
So let's talk about how our great execution in Q1 set us up to raise guidance across the board for 2022.
We now expect total postpaid net additions to be between five three and $5 8 million up 300000 at the midpoint, reflecting our ongoing focus on profitable growth with our magenta brand as we continue our accelerated sprint customer migration.
We continue to expect roughly half of postpaid net adds coming from phones for the full year more weighted to the second half with the sprint migration impacts more in the first half and expansion in smaller markets in rural areas building throughout the year.
Consistent with Q1. This net adds guidance does not include the small subset of customers, who will not migrate upon the sunset of the sprint networks, which will be treated as a base adjustment as.
As we began the CDMA sunset at the end of Q1, we took an adjustment of 212000 postpaid phones in line with what we had guided as well as 349000 postpaid other devices, which were largely low arb, who Iot devices.
We expect to begin the L. T sunset at the end of Q2 and estimate our base adjustment of approximately 300000 postpaid phones and between 7% and 900000 lower postpaid other devices.
Anticipated impact of these adjustments is relatively immaterial and fully incorporated into our core adjusted EBITDA and free cash flow guidance.
Turning to core adjusted EBITDA, we now expect full year 2020 to be between $25 eight and $26 2 billion.
Up more than 10% year over year at the midpoint, which is up $150 million from our prior guidance driven by our growth in service revenues and merger synergies and excludes leasing revenues, which we continue to expect to be between one one to $1 4 billion as we transition sprint customers often.
It's facing.
We now expect merger synergies to be between five two to $5 4 billion up $150 million at the midpoint and weighted to the second half of the year, primarily as we unlock more network savings as site decommissioning accelerates.
As a result of timing of synergies within the year the impacts from the sprint network Sunset and an expected slight sequential decline in wholesale revenue, we expect core adjusted EBITDA in Q2 to be similar to Q1, and then higher in the second half.
Merger related costs not included in core adjusted EBITDA are still expected to be between $4 $5 5 billion before taxes, primarily representing network activities.
We expect slightly over one third of the total to occur in Q2, and then taper off in the second half of the year as merger related costs precede synergy realization.
Net cash provided by operating activities, including payments for merger related costs are now expected to be in the range of 15, 7% to $16 1 billion up more than 10% year over year at the midpoint, which is up $100 million on the prior guidance.
With the robust pace of <unk> deployments in network integration, we now expect cash capex to be between $13, two and $13 5 billion, which is up a $100 million at the midpoint as we capitalize on growth opportunities and enhance the customer network experience.
Together, we now expect free cash flow, including payments for merger related costs to be in the range of seven two to $7 6 billion, which we raised $50 million at the midpoint.
This is up more than 30% over last year, even with the higher levels of investment and does not assume any material net cash inflows from securitization.
We continue to expect our full year effective tax rate to be between 24 and 26% and.
And additionally, as we execute our strategy to continuously deepen our account relationships. We now expect full year postpaid ARPA to be up 2%.
As Mike also mentioned, we expect postpaid phone <unk> to be up approximately 1% for the full year driven by continued customer adoption of value added services, including the jump to Max.
And finally with the shutdown of the sprint CDMA and LTE networks certain wireline assets acquired in the merger will no longer support the wireless business triggering an impairment analysis.
As a result of the wireless network shutdown, we anticipate a noncash impairment charge in the range of $4 million to $500 million in Q2.
A cessation of wireless traffic also enables monetization of certain wireless assets wireline assets, which were previously supporting the wireless traffic.
Any cash monetization of these wireline assets would be recorded as gains in future periods if they occur.
Altogether, we see 2022 as another year of profitable growth and free cash flow expansion as we continue to invest in our network and the business.
What I find most exciting is our unique opportunity to unlock significant free cash flow by delivering industry, leading growth in customers service revenue and core adjusted EBITDA.
And with that I'll now turn the call back over to Jud to begin the Q&A.
Alright, let's get to your questions.
You can ask questions via phone by pressing star, one and via Twitter by sending a tweet to at T mobile IR or at Mike Sievert, using hash tag <unk>.
I will start with a question on the phone operator first question. Please.
Yes. So your first question will come from the line of John Hodulik with UBS.
Hey, great good morning, guys.
Two quick ones I think.
Do you guys see any slowdown in tourist store tropical gross ads.
In March we're heading into April .
We heard something like that from from Verizon and I'm, just wondering it doesn't sound like it's given giving Peter's commentary about about growth accelerating through the quarter through the year.
And then similarly on inflation any impact on your business from from what we're seeing in the U S from some higher inflation. Thanks.
We've heard some of that to John and.
Not really but I'll, let John give you a little color on what we're seeing in retail and as we engage with the consumer and then I'll come back and talk about inflation, Yeah, you bet Hi, John Yeah, we're not seeing any of that.
We are seeing is a great Q1, as we reported with the 348000 postpaid net accounts and $1 3 million total postpaid and when you look at what we're seeing in March and April were actually seen.
The seasonal benefits that you would expect and actually switching improving on a year over year basis remember in Q1 of last year that was the depth of the pandemic when people were Katy bar the door back in January and February of last year and today, we're seeing the overall switching activity continuing to improve on a year over year basis. So when I look at traffic and I look.
With all the activity in the marketplace I'm, feeling really really confident about what we're seeing you can see that in both of our competitors, having elevated churn in Q1 relative to the year ago period wasn't the case for us our churn is unfolding exactly as we told you at what it's driven by merger integration synergies and we've achieved some really important milestones here on merger integration to where do you think about the customer.
Or is that have transitioned the sprint customers that are on the T mobile network with all of their traffic predominantly on T mobile who have T mobile plant T mobile device plants. Those customers are the ones. We've been telling you about the churn just like majestic customers and those are now 37% of our base. So we brought a substantial minority.
And that was a big factor in driving a whopping 17 basis points sequential churn improvement in just one quarter exactly on holding the way. We told you. It would there is a lot of work left to do up 37% is 100, that's going to take us some time, but it shows you that the thesis that we've been sharing is unfolding exactly as predicted.
Now as it relates to inflation.
I'm not sure what you're getting up and I'll talk about two things here, John one is and from.
From a cost structure standpoint, as we've said in the past our sector is actually somewhat insulated obviously, we need to watch labor costs and variable costs, but the vast bulk of our cost structure is in long term contracts around things like tower contracts backhaul contracts.
Technology contracts those types of things that are generally fixed and finite and known over a multiyear period, which gives us some insulation from inflation effects I think the larger question facing our society is what will the impact of inflation beyond consumers and the answer is we don't know right now there's a lot of consumer anxiety.
<unk> about inflation.
And customers have stressed out, but what we know is that T. Mobile is famous for being the value leader, we can save a family of four on postpaid $900 a year.
Every year.
Switching to T mobile and so as you know we'll have to watch what happens with consumer sentiment here, but if it is a difficult time theres, a real opportunity for us to stand up and serve more and more people as the value leader and will of course be ready to do that.
Great. Thanks, guys.
You bet John .
All right next we'll go to Phil Cusick with JP Morgan.
Hey, Bill.
Hey, guys.
So speaking of inflation at&t's out there trying to signal prices higher and backed off a little bit on their promotions.
I see your current promotions out there maybe talk about where you see your competitiveness versus peers.
And any ability to take price if needed over time.
Well I'll start by saying our envelope of value leadership has been remarkably consistent over time and so if you look at a multiyear arc.
We offer the best value to to postpaid consumers that has been the case for the entire Uncared journey and it's been about consistently the case in terms of the extent of that back in leadership now, we're always introducing new promotions, but I want to be really clear our strategy as a company is about showing customers the remarkable value.
Of Magenta Max that's our strategy and you can see how it's unfolding in terms of customer self selecting up our stack to buy our best products because they are the very best expression of the very best <unk> network and that is running on all cylinders, allowing us today with the best values and with incredible promote.
And the market to tell you about for the first time in the 10 years I've been here and outlook are rising and that was something we just did a few minutes ago for the first time in the entire decade I've been here on the strength of the strategy and so it really shows that we can have it both ways. We can have the best value in the industry remarkable promotions.
Bring competition to this market like we always have to no greater or lesser extent than in our past while simultaneously showcasing incredible value of our leading <unk> network in the expression of Manchester, Max and attracting customers to their best expression. So it's a really nice place to be.
We like this market competitive we know we're stewards of a healthy and vibrant marketplace that has room for all of us, but one thing is very clear.
As it becomes less known whether there will be enough room for the Verizon and the new entrants the cable companies et cetera, it's very clear that our tailwind of growth driven by our rational and.
Well articulated growth strategy is a real differentiator for us and that's something that I think people need to understand is there investors I know are looking for growth, but they're also looking for reliable safe bets on growth and that's what we strive to achieve quarter after quarter.
Thanks, Mike maybe one more on revenue if I can you talked about wholesale revenue down a little bit in the second quarter, how did those wholesale relationships and look at this point in terms of the run off of boost.
Boost and Tracfone. It seems like those are a lot more stable than than we were worried about a couple of quarters ago.
Yeah. Thanks, So I'll, let Mike talk about first I'll, just give you some context I know a quarter ago, we talked about reaching an agreement with dish.
A path forward, that's a real win win for everybody and that continues to be under review.
But of Justice, but I will say, we've gone forward with dish in a very productive way and they have with us.
Really finding a path forward and thats been nice to see for their customers and for and for all of our businesses.
But obviously, we have a large and diverse wholesale base and maybe I'll, let Mike can tell you about what's happening yeah. Thanks, Mike as Mike said, we reached an agreement with dish. We are waiting for the approval from Doj, but both companies are operating as it is if the deals in place and that partnership has been going really well for us.
Couple of things that we talked about last quarter that you're seeing come to fruition. This quarter. One is we reached a wind down agreement with with Tracfone and Youre seeing that youre seeing that roll through our numbers.
<unk> also reached agreements with extension agreements with Google, which is a large exclusive scaled MBA that's in our portfolio.
A new agreement with Altice, So, we're seeing new and new and expanded ambient relationships at our portfolio and we're seeing a lot a lot of interest and a lot of growth from the existing companies in the portfolio taking advantage of the network capacity in the network capabilities. So it's a wholesale has been a really strong portfolio for us.
Cool Thanks, Phil Thanks, guys.
Okay.
Alright next question will come from the line of Michael Rollins with Citi.
And my thanks, and good morning, Hi.
I guess first on the fixed wireless broadband can you provide an update on the experience that customers are getting in terms of download upload reliability and what you may be seeing in terms of the early retention and satisfaction levels and then secondly, with the financial guidance up for the year what are the.
Stances under which T mobile could consider beginning share repurchases during 2022.
Great I'll start on the first one and maybe ask <unk> to pile in.
And we're really delighted with what we're seeing here I think this product has been a fantastic showcase of what the leading <unk> network can really do.
We're now operating at scale with 1 million customers net promoter scores have risen again quarter over quarter, just terrific to see now three times. The net promoter scores are a cable company.
Our download speeds meet the nationwide medians of cable companies and that's something most people wouldnt really appreciate.
Our average usage is three to 400 gigs per month and yet we're able to serve that with rising net promoter scores, we have a tail, 10% ish or so that are using a terabyte per month and so these are normative figures that you would see in an industry with a product that's really driving satisfaction, maybe you could talk about what's behind it and add any color yeah I mean.
They're great stops right when you look at how we're performing and competing.
This broadband space I think everybody said you know what happens with five G. Well look at what we're doing with this in home broadband experience and a million customers now a million our first million the first million [laughter].
So it's coming from just the powerhouse network, we have and I'd like to say, we're just getting started on this <unk> story, we're routing a lot of coverage. We're rounding a lot of spectrum on the sheer horsepower. We can provide all this fiber network allows us to support this great and increasing and improving experience so with super.
Loud about the performance we have come.
Customers are really enjoying this product.
To be honest and I'll say it again, we are just getting started in this space. We have an incredible <unk> network with a lot of new spectrum to come in and be dedicated on this <unk> capability and the performance and capabilities are going to continue to expand and improve and.
And Mike I think you know our basic game plan here, what's fascinating about this business as we are able to offer it nationwide now across 40 million homes and compete in a relatively even basis in all parts of this country because our go to market plan is based on an excess capacity model and so we aren't.
Dedicating large sums of capital to this business instead, our algorithms look at normal mobile usage, it's rapidly growing because of the strength of our <unk> network and we expect we will continue to rapidly grow. We also expect we will continue to take share we model all of that forward and find the pockets, where even all of those extra customer.
And all of their extra mobile usage wont soak up the capacity of this remarkable network.
It's where we approved applicants for five key home broadband and so that's really interesting because you have that fallow capacity and it's just the nature of our mobile network.
Spectrum coverage is relatively consistent and therefore, our capacity can be relatively consistent but mobile usage is mobile usage is in some places and not others you have to be everywhere to be competitive once you're there you might as well light up all your spectrum and so that's really the nature of this and it's it allows us to have the economics to be able to go to mark.
With a competitive offer for large swaths of the population and a price it attractively and still make a return.
You had a second question about buybacks I have lost the office pool came in and the third question.
So Peter please tell us what's the latest there.
Absolutely Mike as you said the momentum of the business. It gives us a lot of confidence in that opportunity that we expressed around 23% to 25, both the free cash flow generation and the potential for returns, but with regards to timing or starting our opportunity sets. There's really no update from what we shared with you last time that we have to share.
At this point.
Thanks, Okay.
You bet Mike.
Operator.
Yes, Sir next we'll go to Jonathan Chaplin with New Street.
John Thanks, guys I'm going to.
Speaking to Q3, if I may say.
<unk>.
I just wanted to slow down just to follow up on on Mike's question. I'm wondering if you could give us some context on where the ads are coming from and how much of a pull through youre seeing.
For fixed wireless broadband customers, who won previously chemo customers than taking mobile from you.
And then you gave us some great color on how market shares are progressing and small.
In small markets and rural could you give us an update on what's going on with market share in business and how you guys are tracking towards your objectives. There and then finally you mentioned.
Monetizing the wireline network does that mean selling it or we'll just have excess capacity on the wireline network. The deal then be able to to fill up by.
Good luck with the wholesale deals.
Are you sure you don't want to ask about top 100 or sort of an integration.
So that would cover all of the.
Okay, great Jonathan well, let's let's try to hit those in rapid fire first on fixed wireless maybe Mike you can give us a little color on where the customers are coming from and then John get ready to tell us about small markets in rural areas and what's going on there yeah. Thanks, Jonathan So as Mike said, a second ago because were deployed nationally with fixed wireless really the customers are coming from everywhere you are seeing.
Customers and top 100, where we are now providing a competitive choice to cable you are seeing them and smearing it where oftentimes we're the only high speed wireless alternatives in those communities Youre seeing good growth in business. So it's really it's really across the board and our growth is following the network expansion that Neville just talked about.
So as the network expands and we have more capability would have more set sectors with capacity and we will continue to see growth all of that combined puts us on a really good trajectory to the seven to 8 million customers. We talked about in 2025 I think we're in a good pacing to meet that objective.
Great and John Kelly Youll get ready.
Also not only is Jonathan asking about it but also Roger Entner is asking again about business, what's going on with market share what kinds of customers are winning but John small markets in rural areas. You bet. So just to remind everybody smaller markets in rural areas everything outside of our top 100 markets approximately 40% of the U S. Marketplace. So we started this journey back in 2020 at 30.
<unk> percent market share and we finished at the end of 2021 at 15% market share so in very short order.
Sure percentage points in smaller markets rural areas and then what you've seen in Q1 is a plan that is unfolding exactly like we expected, which is 40% up on the new accounts that we've established on a year over year basis in smaller markets in rural areas. So I'm feeling really good about that the network expansion the distribution expansion, bringing that win.
The formula that we're famous for in the smaller markets rural areas. We still have a lot of opportunity. When you think about what Neville and his team have done from a coverage perspective, I mean, it's just amazing that arc five G coverage geographical footprint in smaller markets in rural areas is more than the combination of AT&T and Verizon.
We're 30% larger geographically then AT&T four times larger geographically than Verizon. So we're feeling really good about what we're doing there people need choice in these areas of course, when you think about it and I've said this a couple of times that really is the Sony. These places the trip back to the 19 nineties with just a couple of choices and when you bring real <unk>.
Petition to these spaces customers are choosing us at the rates that you know that we've expected and we're seeing today.
Alright, what's going on in business [laughter], alright, well listen we gave ourselves a pretty bold aspiration to be at 20% market share in 2025, and I'll tell you when Sharon rates today, we're already on track and there's still there's still room to run it we've got strong momentum in the financial sector, we're expanding the number of large multinational.
Thanks, relying on T mobile for security for compliance for their hybrid workforce.
Our network performance as the catalyst for over 31st responder agencies to join T mobile in Q1.
Mike mentioned earlier, we launched our first connected cars in the United States with Magenta Jive for BMW.
Launched T. Iot in partnership with <unk>, which is a disruptive solution that allows enterprises to access seamless global connectivity customers like Myoclonic, a leading global medical device company that uses <unk> to monitor their patients all around the world and this was the ninth consecutive quarter of <unk>.
<unk> of over 200000 connections in the public sector.
One of our new customers just the US department of Treasury. So we're seeing a lot of growth really good traction. We've got a lot of work to do we've got a runway ahead of US we are leveraging our <unk> network advantage enabled already to have active deployment in over 20 trials.
Network services. So we're very excited about the growth potential that we see there above the plan that we have already stated that we like to live there.
Jonathan one of the one of the things I reasons I made my joke at the beginning as you were asking about all of our growth trajectory before we ask Peter to wrap up on wireline I just wanted to remind everybody that what you just heard from the team is that we are absolutely on track with the bold aspirations that we shared now more than a year ago with you as we laid out our multiyear plan.
On this business and whats interesting about us that makes us so different as a growth that is that we have a rational articulated growth strategy based on proven areas of under penetration, where we know we have opportunity and where we are making down payments and are very much on track and that's.
That's what investors should be asking us about it. So I just wanted to make sure everybody is reminded that we have major underpenetrated opportunities in small markets in rural areas, 40% of this country, where we've already grown from 13% to 15% share and we're tracking beautifully we have major underpenetrated segments in business.
Huge part of this marketplace and probably growing in the wake of the pandemic, where we're very underpenetrated and were Cali, just reminded us our present performance would get us to those multiyear aspirations, we articulated a huge opportunity in high speed Internet and now two quarters in a row and I've showed you where the nations.
That's just growing broadband provider, our top 100 markets, where we lead the industry are also a big opportunity and you're going to hear us talking more and more about the growth trajectory that we see with prime consumers and quality seekers and the top 100 markets. Despite our leadership there are tens of millions of people in the <unk>.
Top 100 markets, who have never given T mobile a serious but because they want the best network now that we offer that theres, a huge opportunity for us to unlock there and you'll be hearing more about that and then finally sprint integration I already told you that sprint integration as a growth tailwind if sprint was turning like T mobile we'd be at 900.
One that adds this quarter and we and we're making the progress that we promised you with one of the biggest sequential churn reductions this industry's ever seen our best one in seven years.
<unk> 17 basis points quarter over quarter, all on the strength of executing like we said we would on a major growth trajectory. So that's that's one thing I wanted to make sure to remind people about and then finally my question was about wireline what's going on there what are the opportunities that we see what were you really talking yeah exactly Jonathan.
Yeah, as we see the wind down of the wireless traffic when we shut down the LTE network that does create capacity on the wireline side and of course from a customer perspective, we'll look at what's the right suite of products and services, particularly in the <unk> era to serve all their needs, but with the traffic going away. It does create some opportunity for monetization so will rationalize.
Things like buildings will rationalize routes and there's other things that have become quite valuable now or in the form of for example, IP before dresses that with.
The wireless traffic going away or potentially monetize able for us. So we'll look at the right suite of.
Products and services and monetization opportunities to create the most shareholder value as you would expect of us.
Okay terrific. Thanks, guys, obviously, we've got questions coming in on Twitter, we usually get interesting ones from Bill Ho I see one here Neville about network. It looks like we're up again and GE reach up to 315 million people where is that really going.
And where are we on ultra capacity five G can you forecast for us what to expect there because thats the real game.
Good question Bill and some.
315 million on a foggy footprint today, I mean, sorry, the headline again, 95%.
Of all Americans are covered with T. Mobile Spuds, you service more coverage and AT&T and Verizon combined.
That's something to sink in but I Love. Your question is about where do we go from there.
I almost want to say, we got to give the competition a chance.
So far in front, you're asking what happens at the end of 'twenty, three and beyond and of course, we will continue to expand and improve the quality of this network.
At 300 million people from the 225 today will be covered with ultra capacity and so that's our end of 'twenty three target that's way over and above anything to AT&T and Verizon have stated around their ambitions on mid band rollout I think the Alba rich there was $250 million, so we're going to be.
<unk> provides a way more coverage.
The other piece Bill is a lot more spectrum and so today, we have more dedicated <unk> spectrum than AT&T and Verizon combined in play and really we have just started on that rollout of mid band and even low band spectrum. So over the next couple of years a lot more spectra.
Coming to the last part of your question was about what's happening with speeds, we didnt kind of the three to 400 megabit per second speeds than we planned and anticipated. Yes. We are on the mid band footprint in that mid band footprint is going to get bigger and stronger the lines are getting wider and faster, we're hitting more and more parts of the country many of those.
Opportunities that Mike and John just outlined we are bringing a massive multi lane freeway to town.
This is going to be an incredibly exciting journey over the next couple of years and of course, we won't stop there we will continue to improve and enhance the network, but I don't have any stats to give you above $300 million yet on ultra capacity. So.
Its very interesting whats happening here, you've heard us say before that we.
We see that we're two years ahead in the <unk> right now and two years from now will be two years ahead in the <unk> race and that's not equipped that's not a competitive quip that that's actually an aspiration that we take very seriously and you know and you just heard <unk> say that by the end of this year, we will reach 260 million people with ultra capacity.
That's an aspiration that Verizon has by the end of 'twenty four except only 250 by the end of next year, we'll be at 300 and what's interesting is our goal is that in many places is not just to have 300 million people deployed but in many places to have fully 200 megahertz of five G dedicated spectrum.
That's remarkable in terms of what we can do to change customers experiences on smartphones to serve enterprises government customers and of course broadband and other new applications and so that's.
That's our aspiration, we take it very seriously and one of the things you should you should judge us on it and we've been through over and over and over again to the things that we said we would go do because we've been very clear eyed about this strategy for many years and I think that consistency is something that people should acknowledge.
Okay, let's go back to the phone.
Alright next question will come from the line of Craig Moffett with Moffett Nathanson.
Great Hi, Thank you.
With this topic of rural markets for a minute.
You've talked about this being 40% of the country and I think last quarter. You gave some interesting color on how you can even further segment that 40% of the country into areas, where you've already introduced retail stores and and presumably come in behind low frequency spectrum with.
Some mid band filling in some of the denser areas of those otherwise non dense market could you just.
Sort of talk about the segments within the 40%.
Much is left that is sort of truly greenfield I guess in the sense that you really haven't gotten there yet with a real retail presence.
And we're even that 15% market share that you talked about may be quite a bit lower and then in the areas that are a little more mature within the 40, what that looks like.
Absolutely I'll start and then I'll ask John Fryer to jump in.
And maybe maybe Neville is well I'll remind you of a couple of things that we've said in the past and something I said in my prepared remarks, what we do for this 40% of the country, we call. It our precision playbook, we've divided that segment of the country into 775 sub markets and what we do is study our relative competitive.
And so it starts with the network is our network every place people in that local area need for us to believe that we have all the factors of success required to win market share. Now. This is observable because we are number one in many places in this country. We know what it takes and we take that same observable logic and we apply it now to place.
We were never highly competitive and what we've said in our upfront remarks is that we believe we are competitive across about 30% of those places are pops represented by those places and that will be a competitive across about 50% by the end of this year now I'll get I'll guide you there are some layers of complexity.
So that's sort of our base level and above.
Those levels that we can get to above that but we measure that number because what we see is when we have that level of competitive competitiveness, what we call right to win.
We are able to see when shares in line with our aspirations such that we know that the price that we've promised you is within reach and that's really important. So again, we're in those 30% of Pops, where we already have a right to win we are winning.
And so that that gives us a lot of <unk>.
Confidence in this strategy will be at 50% by the end of this year and maybe John you can talk about what's going on as we enter each of these markets.
Formula we bring to make sure that we get the wind share thats required for us to grow our market share you bet. So.
That's what.
Mike just said in terms of really staying focused on this overall cocktail and proven recipe of success when you think about.
Network readiness distribution entry and then really bringing this.
Differentiated localized marketing to the markets to go and drive choice in consideration of some of those things. The other thing too that I don't think I've mentioned is that we took an opportunity last year to reorganize a huge portion of our company around smaller markets in rural areas. So I've got seems all across the country that are focused on the top 100.
Markets and exclusively on the top one of the markets. So you think about right here in New York City La Chicago Dallas. Those teams are focused on those markets and then also we took a big portion of our team and focused them on smaller markets in rural areas. So for example, if you're in.
Washington State, we've got a team that's focused on greater Seattle Tacoma and then another team that's focused on rural Washington State driving the commercial sector that works because success. So that we're looking for in those particular areas and what we've seen is that when you focus teams and give them the kinds of tools that they need to go drive the commercial success and we're looking for.
And all of the Accountability, we're just beginning to see real traction around that and what that does to us. It creates an overall kind of feedback loop and listening system within our company. So that we can go and take further action, where we have more network that we need to really kind of dial in in a particular area. If we need more marketing in a particular area that and the network is really good.
We need a little bit more investment from a marketing perspective, we get that real feedback when you have a team that's focused on a total geography, including the top 100 markets almost always the top one or two markets take that focus because of the tonnage of the of the population in those areas in the established muscle memory and so that's a big part of our formula that we.
Or executing today that we put into place last year and something thats proven to be really successful and like we talked about too. When you look at this accelerated buildout of whats coming thanks to Neville and his team with not only extended range five G, but that ultra capacity five G and the majority of the growth that's going to be happening in terms of covered pops, there's going to be a smaller mark.
That's in rural areas. That's one more big reason why we need to be organized the way we are to drive the playbook that we've laid out for you.
A lot of times, our breakthroughs come from willingness to lead things in an unconventional way like with team of experts a few years ago. John just told you about another big breakthrough management concept that we've fully implemented across the country that we think is a big part of our I guess now not so secret sauce.
That's awesome.
Great and by the way so before we go back to the phones now back to you. There's a question from Tech life channel at Tech like 30 to what's going on with those 10000, new sites because five G coverage is great, but what about coverage so what's happening with our promise to site expansion and while you're at it.
You did say in our prepared remarks, where we are on decommissioning. This is the year of decommissioning, we expect to complete the task. This year, maybe you can give an update on how that's going to be yes sure. Thanks, Mike Let me build on both Europe and John's comments on spirits.
Back to the last call and last earnings call. We talked about how this was the year, where we were accelerating capital.
And we were bringing in increment incremental investment into the plant in 'twenty two.
A big Big chunk lion's share of that is focused on expansion of coverage in our footprint and so a big part of what we're doing is making sure as John is getting ready to roll and distribution of new capabilities into the smaller market in rural areas, We're making sure our coverage is second to none.
On top of the coverage of course, John referenced this.
Rounding this mid band capability. So that we don't just trying to have a great network, we have an incredibly strong network with fudgy capabilities.
Competition simply can't match and just to navigate through some of the steps we talked about earlier on in many of these small market in rural areas.
T and Verizon have no plans whatsoever to bring.
<unk> mid band capability and five G.
So were going in putting in a very differentiated.
Proposition and one that will stand the test of time and so that share gain is getting started moving it's a super exciting space. So we've always said 10000, new sites as part of the plan, but as we combined the sorts of assets together and we are eating into that in 2022.
A couple of thousand in and we'll be continuing to build as we move through this year and next we're also upgrading a lot of sprint sites.
Critical to enhancing coverage and performance across the network. So we've always said north of 10000 of those were about a third of the way through that build so we're adding coverage in many many dimensions both in humira, but also in core market areas and inside top 102, where we're adding great sites for capacity and building.
All of those different aspects of performance and last but not least my cost about.
Referenced decon and so this is the year, where we will complete all of the <unk>, but we said we would do as part of combining sprint and T mobile together and.
We announced in the release, we're about a third of the way through at the end of Q1 on the 35000 site Docomo ambitions mountain number is accelerating and it will accelerate heavily as we go through Q2 and Q3, we want to get the lion's share of that done earlier in the year. This isn't all going to happen in Q4.
And we're making great progress and I'd add as we see declining true.
And so the work on the intense work across the entire business to manage the customer experience as we navigate and work through E. Com is extraordinary and going very well and we are incredibly confident about our ability to execute and complete this integration in advance of the Timeframes that we've talked about prior.
Nevertheless, this team are very busy this is as you know the peak capital year in our business plan and we have teams that are upgrading literally hundreds and hundreds of sites every single week in.
In a year, we're going to simultaneously reached 260 million people with ultra capacity <unk>, while completing the shutdown of the sprint network, well and ahead of our schedule. So.
We're very much on track and it's fantastic to see the teams execution in every part of this country. Okay. Operator, let's go back to the pump.
And next we'll go to Brett Feldman with Goldman Sachs.
Great. Thanks, Hey, and this is actually sort of a follow up to what you guys were just discussing so we look at your results for the first quarter and your cost of service excluding merger related costs actually down tick a bit. Despite the fact that you had I think a new tower lease in place. Despite the fact that you still had the CDMA network up and running I think for essentially the entire <unk>.
And as Neville just pointed out you still have the large majority of the decommissioning in front of you but of course, you're also still investing so I guess the question really would be how should we think about the opportunity and the pace of further improvements in that cost item throughout the remainder of the year and maybe at what point would we expect to see the full synergy.
Benefit of having completed the network projects in your cost of service line item and then just the second question.
The comments you made before about the excess sprint churn and how it affected your postpaid phone net adds it sounds like that headwind has diminished a bit from what we saw in the second half of the year I'm wondering if that's a signal that we R&D through the peak pressure associated with that and then just as an update on that if you can give us some insight as to what the true.
<unk> profile that legacy sprint cohort looks like as they continue to make the migration fully over to T. Mobile. Thank you great I'll start with the second one and then hand it to Peter on the first one.
We are delighted with what we're seeing.
This year on sprint customer response to everything happening on the network and service and plan front.
And you can see it in our results. So I'm one of the things I mentioned, a little while ago is that right now we're substantially complete with about 37% of the customers, bringing them what I'll call all the way across now.
Vast majority of our customers are on the T. Mobile network now almost all of their traffic is on the T. Mobile network now will be moving to shut down the sprint network. This year, we have a lot of work to do to make sure that the customers come across with T. Mobile plans T mobile phone plans.
Our remaining leases on their line and all of their traffic on the T mobile side when those things happen.
<unk> is the same.
And we have achieved that milestone now for about 37%.
Thanks.
Much higher than it was just a few months ago and so you see the result in the sequential churn them, because thats more and more people achieve that level more and more of them churn just like T mobile insurance and that's what unfolded over the last quarter and so that gives us a lot of confidence in our plan I want to make sure that people don't connected to something happening just two months from now.
We shut down the sprint network, it's not just the network traffic the network traffic is already on Tmall. It's the whole thing getting them migrated to the right plan the right service structure, and importantly, getting them on a T mobile phone payment plan and making sure. There's no more leases because those are sources of dissatisfaction and thats where were at 37%.
It'll take us some time this stepwise move through the base, but what we know is that when we do they love T mobile on the other end and they churn like the lowest churning brand over the last two years and so that's fantastic.
And then specifically to your first question will turn to Peter on the cost structure, Yeah, Brett absolutely and you are seeing great scale Justice. We promised it would unfold on cost of services as you think about this year and the shaping of course as you mentioned in Q2 Youll continue to have rapid investment as Neville and team continue to build these new sites.
Rebuilt sprint sites, while we'll continue to still have sprint LTE costs. So as I think about the year shaping its very much in line with the synergy commentary that I gave that as we go through the rapid decommissioning and accelerated decommissioning and get through all of that by the end of the year Youll see those benefits come out and cost of services.
And the totality of course, we're looking at 2024 to achieve the full seven $5 billion of run rate savings. So that's that's how I think about the shaping for the balance of the year, it's nice to see things unfolding. The way we predicted we're very much on track for the $7 5 billion, we increased the in your synergy attainment with this.
Guidance and of course that results in and also an increase in cash flows to 30% year over year cash flows and the present guidance so terrific to see that happening.
Listen we promised you a one hour call and so with apologies to those still in the queue, many of whom I'm really sorry, we didn't get too because we love you, but I will take the last question operator.
Certainly we'll go next to Simon Flannery with Morgan Stanley .
Great. Thanks for fitting me in so great to hear the updated guidance on.
And that adds if you look at the first quarter. It looks like the industry is probably going to do close to 2 million phone add some theres been this concern about a deceleration in the industry growth. So it'd be great to get some perspective about what you're seeing and how you feel confident about it but not just your growth, but also that the industry can sustain these sort of eight nine.
Milligan type ad numbers.
Implied by what we've seen from the other so far and then just novel anything to comment on supply chain available earlier of tower crews et cetera, given again some of the macro constraints we're seeing.
Let me start with Netherlands supply chain, and then I'll wrap things up with an answer to your question Simon.
I'll be very quick Simon I mean, we're in good shape and based on you know the uranium.
We put in place with our Oems in North tower crews and of course, we have the advantage you know we've been at this for some time now.
As our competition is really just trying to get started.
Specially in At&t's case, so were strong obviously, we are not sitting on our hands.
We are very very closely managing supply chain opposition does not come from inaction and just letting it happen, we're very engaged with all of our suppliers across the U S. In both internationally and right now we're in good shape and you can see in terms of the <unk>.
<unk> some growth on the network and the investments we're making.
And Simon I'm glad you asked that because your question goes in my mind that goes right to the heart of what a lot of people want to know about this sector right now and I would characterize it really it in terms of two important questions people have one is there room for everybody. What's going can this growth continue and whats going to go on when the when the growth slows down.
And if it slows down we will it get unhelpfully competitor those are the big questions I think on People's minds, and I got to tell you I'm not concerned about those questions.
As I've said in the past first.
First of all I think what we're seeing is some of that is happening in the dynamic right now out there and in the very timeframe. When people are asking these questions. They're asking hey, how are you going to navigate if things slow down we delivered 1.3 million postpaid net adds the best in eight years.
More than AT&T, and Verizon combined and the very timeframe when people are saying what about are things slowing down how are you guys going to do if things slow down and I love that you are asking that because it reminds everyone listening that this is a business with major underpenetrated growth opportunities that we are.
Proving we know how to execute against and that's why we reliably bring the performance quarter after quarter and so the second question people have which is isn't it going to get crazy out there. If there isn't room for everybody, which is I don't know, but I can tell you that the amount of competitiveness that we bring is is consistent over time.
We are the competition, we liked it competitive it's been relatively consistently competitive through our actions three years now customers and this is that the beneficiaries right now the cost per unit and this and this.
Industry is lower for consumers and businesses than it's ever been in a time. When every other category is rising prices, we're driving ARPA improvements without price improvements and we're bringing a level of competitiveness in this industry. That's so exciting for consumers and businesses, while delivering on financial performance that we promised you and that's.
And so people have these two questions is there room for everybody I don't know that's not I'm not burdened with that I can tell you that this quarter. It looks like there is cable is about to report I think they had a healthy quarter, we're going to see nice numbers that our telemetry has usually been pretty good at predicting what to see there but.
But we delivered an eight year Q1, all time almost high and that shows you with that our growth strategy has integrity and its reliable safe quarter after quarter growth that comes in just like we promised you it would and it comes in with a healthy industry and a dynamic where T mobile can achieve.
That's cash flow aspirations so.
Look we like it we look at the industry. We know we play an important role as stewards of a healthy industry and we think it's a healthy industry and whether or not it's a healthy industry, it's going to be an industry that's healthy for T mobile.
So you guys I think that's all the time that we have we really appreciate you thanks for coming quarter after quarter with your great discussions and we look forward to engaging with you Mark I appreciate it.
And ladies and gentlemen, this concludes the T mobile first quarter earnings call. Thank you for your participation you may now disconnect and have a pleasant day.