Q2 2022 T-Mobile US Inc Earnings Call

Good morning, following opening remarks, the earnings call will be opened for questions via the conference line by pressing star followed by one and via Twitter tweet two at T Mobile I R.

Or at Mike Sievert, using cash tag T and 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.

Alright, welcome to T. Mobile's second quarter 2022 earnings call joining me on the call today are Mike Sievert, our president and CEO .

Peter Oswald our CFO as well as other members of the senior leadership team.

During 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 in our SEC filings, which I encourage you to review.

Our earnings release, Investor Factbook, and other documents related to the quarter as well as reconciliations between our GAAP and non-GAAP metrics can be found on the quarterly results section of the Investor Relations website.

Also we're in the quiet period for auction went away. So we cannot discuss or comment on anything related to the two five gigahertz licenses and with that let me turn the call over to Mike. Okay. Thanks, John Good morning, everybody well you can see if you're watching us live on the web stream. We've got most of our senior team here in New York City today, and we are here to share our Q2 results and I am.

Extremely proud of our team for delivering another quarter of great results, while completing major integration milestones Q2 was another strong quarter of industry, leading growth for us in customers postpaid service revenues and EBITDA and based on our momentum we are raising our full year guidance.

Across the board again.

This just shows that the Untary your playbook, putting customers first and providing them with the best value and the best network continues to work in a competitive climate and in the changing macroeconomic environment.

Before I go into our results I do want to take a moment to acknowledge this challenging economic climate for consumers and businesses and what T. Mobile is doing to help customers stay connected inflation has been dominating headlines and dinner table conversations. It's a reality that millions of American families are facing as prices every day for essentials.

Skyrocketing all around them. That's why we did what the Uncared does best with three big moves last quarter to help customers when they need it most prioritizing customers' needs is exactly what continues to fuel our growth.

Others in the industry notified their customers that they're already overpriced bills are going up when they can least afford it naturally some has had asked when will T mobile raise its rates while building on our proud history as the gun carrier. Our answer is that we're not instead, we introduced price locks were standing by our commitment.

To customers and those who switched to T mobile that we won't raise the price of their rate plans. We're here to help broadband customers across the country as well with our recent launch of Internet freedom.

Broadband customers are some of the least satisfied in America the fees the contracts the price hikes that terrible customer service, it's all ridiculous and it looks a lot like the wireless industry a decade ago.

But it's all changing because we're making it easy for customers to break up with big Internet lock in their price and finally feel appreciated.

And we made T mobile business Internet available nationwide, which makes T mobile the first and only nationwide internet provider for business.

And third we saw another opportunity to help customers as travel is on the rebound, but like everything else travel has become more expensive and more complicated. So T mobile launched coverage beyond to help people get back out there and save money, while doing it we've got customers covered across the U S.

On their airline flights on the road and in more than 210 countries and destinations. This is what the on carrier is all about chasing down customer pinpoints and smashing them and right now with this economy. There are a lot of pain points out there and you know what this strategy.

Works again, and again, we delivered another industry, leading quarter of both customer and financial growth and.

In fact, we posted a record 380000 postpaid account net adds the highest in company history.

And the highest reported in the industry, yet again as I've said before this measure of total billing relationships is a strong barometer that we're winning the switching decisions in this industry.

I know the competitive market trends are top of mind and here's what we saw in Q2.

Postpaid switching activity increased year over year, and we benefited from more than our fair share of those switching decisions.

Fortunately, our network and brand our consistently attracting the industry's best customers driving the prime mix of our customer base to an all time high.

And we delivered our highest ever Q2 postpaid net additions with an industry best 1.7 million more than AT&T and Verizon combined again.

This includes 723000 postpaid phone postpaid phone net adds.

Our postpaid phone churn dropped 13 basis points sequentially to 0.80, and we were the only wireless service provider to improve year over year in fact, delivering lower churn than Verizon for the first time ever on a combined basis, including sprint.

The fact that our all in churn, including sprint is trending so strongly just two years out from our merger shows our team's fantastic progress and it is exactly what we told you would happen.

Okay, let's talk about high speed Internet, where our team delivered 560000 net additions I'm pretty confident that we'll see T. Mobile is the fastest growing broadband provider in the industry for the third consecutive quarter and most likely by a wide margin.

<unk> continues to build from dissatisfied suburban cable customers to underserved customers in smaller markets and rural areas I am so excited to see our broadband business hit this pace, which puts us right on track to meet the multiyear ambitions, we shared with you last year.

We continue to see great customer adoption of magenta, Max which is helping drive our strong <unk> and ARPA trends with the trends. We're seeing we now expect postpaid ARPA to be up roughly 3% in 2022.

These results reflect our differentiated strategy to unlock growth across smaller markets in rural areas T mobile for business network seekers, and the top 100 markets, who hadn't previously considered us and in new product categories like five G broadband.

They also reflect the strength of our network leadership as supported by nearly every third party recent reports from Fuklah and PC magazine, not only recognize T mobile for the fastest and most available five G network, but for the best overall network experience and open signal recently reported that not.

I only did our average speeds increase yet again the gap over the competition widened even further despite their C band deployments. We are winning this race and as I've been telling you we plan to stay ahead.

And speaking of network, we just hit some major integration milestones just over two years since we closed the merger we have successfully shut down most of the sprint network as at the end of the quarter. We had cumulatively decommissioned nearly two thirds of the 35000 targeted sites and can now.

A report that we will be substantially complete by the end of Q3 this current quarter.

Remarkable work by the team to deliver these milestones ahead, even if our recent year end target and more than a year earlier than our original merger plan.

Before I wrap up I want to touch on cyber security following the criminal attack, we experienced roughly a year ago protecting our customers' data is a top priority for the company, which is why following the attack. We immediately took additional steps to protect our customers. We created our ciber transformation office and engaged.

Some of the top worlds top experts to help we're investing hundreds of millions of dollars to enhance our data security tools and capabilities to transform our cyber security program. We always knew that there was unfortunately be financial consequences from this attack and we were pleased to recently reached settlements that will resolve the class.

Actions and most of the consumer claims together, we believe these settlements will represent the biggest component of those impacts.

These costs were contemplated in our financial guidance and the amounts are consistent with precedents. We've seen in other similar agreements. We're now focused on moving forward as we continue to invest in and enhance our company's cyber security.

Okay, Let me give a quick recap before I hand things over to Peter I am very pleased with our company's performance and progress against our ambitious multiyear goals again this quarter, we outperformed against our plans and again led the industry in net additions of postpaid customers and growth in postpaid service revenue.

Core adjusted EBITDA and cash flows and as a result, we raised our guidance across the board again, the uncared value proposition resonates and it's sold well tuned to the Titans people want the best network and now more than ever they wanted at the best value from a team that's obsessed with their satisfaction.

Action our strategy is so simple, but maybe that's why it works quarter after quarter year after year, Okay. Peter over to you to talk about our key financial highlights from Q2, and our increased guidance for 2022 and more detail right. Thanks, Mike.

Can see we delivered another strong quarter with our Q2 results.

Our industry, leading growth in postpaid accounts and postpaid ARPA resulted in the best postpaid service revenue growth in the industry up over 9% year over year. That's strong service revenue growth combined with our continued execution on merger synergies delivered year over year core adjusted EBITDA growth of 10%.

Our second quarter in a row.

This just highlights our profitable growth strategy when compared to the year over year decline in EBITDA margins that you see from others in our industry.

That growth and profitability fueled higher operating cash flow and enabled us to deliver industry, leading growth and free cash flow, while accelerating our capex investments in the network.

And finally I wanted to highlight a few special items that impacted earnings for the quarter.

As we foreshadowed last quarter with the shutdown of the sprint network certain wireline assets acquired in the merger will no longer support the wireless business.

As a result, we took a noncash impairment charge of 477 million on a pretax basis in Q2.

In addition, we recorded a 400 million pre tax charge related to the 350 million class action settlement and other expenses from the data breach a year ago, which was within our guidance expectations for the year.

Alright, let's jump into the details of our increased guidance across the board for 2022.

We now expect total postpaid net customer additions to be between six and $6 3 million up 600000 at the midpoint, reflecting both the great execution of our differentiated growth strategy and progress on reducing sprint churn.

We continue to expect nearly half of postpaid net adds will be coming from phones for the full year.

As we mentioned last quarter. The net adds guidance does not include the subset of customers, who we do not expect to migrate upon our network sunsets, which were treated as a base adjustment as we began the orderly network shutdowns at the end of Q2, we took an adjustment of 284000 postpaid phones in line with what we had.

Guided as well as 946000 postpaid other devices that were not practical to be upgraded.

Turning to core adjusted EBITDA, we now expect full year 2022 to be between 26, and $26 3 billion up more than 10% year over year at the midpoint and up a 150 million from our prior guidance driven by our profitable growth in service revenues and merger synergies.

This excludes leasing revenues, which we expect to be between one point to 1.4 billion as we continue to transition sprint customers off device leasing.

We now expect merger synergies to be between $5 four to $5 6 billion up $200 million at the midpoint as we unlock more network savings driven by accelerated site decommissioning.

Merger related costs, which are not included in core adjusted EBITDA are expected to be between $4 seven and 5.1 billion before taxes, primarily representing network activities with Q2 being the peak quarter. We expect that Q3 will be closer to Q1 levels and then taper off in Q4.

Sure.

Net cash provided by operating activities, including payments for merger related costs are now expected to be in the range of 16% to $16 3 billion.

Up more than 10% year over year at the midpoint and up $250 million from the prior guidance.

Turning to cash Capex, we now expect it to be between $13, five and $13 7 billion, which is up $250 million at the midpoint with both the robust pace of our five G deployment and our success in high speed Internet, where we capitalize the routers.

Together, we now expect free cash flow, including payments for merger related costs to be in the range of $7 three to 7.6 billion, which we raised $50 million at the midpoint.

This was up more than 30% over last year, even with the higher levels of investment and does not assume any material net.

Inflows from securitization.

We continue to expect our full year effective tax rate to be between 24, and 26% and finally as we successfully execute our strategy to continuously deepened our account relationships. We now expect full year postpaid ARPA to be up 3%.

And we expect postpaid phone <unk> to be up approximately 2% for the full year driven by continued customer adoption of value add services, including the jetson acts.

Before I wrap up I want to celebrate an important milestone of achieving an investment grade corporate family rating for the first time in our company's history.

With the Moody's upgrade last week in addition to our existing investment grade rating from Fitch T. Mobile now has investment grade ratings from two of the three top ratings agencies.

This is proof of the investment community's confidence in our carrier playbook delivering on our substantial.

[laughter] delivering on our accelerated merger integration and synergies executing on our differentiated growth strategy and our ability to translate that into unprecedented free cash flow.

And with that I will now turn the call back to Jud to begin the Q&A.

Thanks, Peter 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 I R or at Mike Sievert, using hashtag T. In U S. We will start with a question on the phone operator first question. Please.

Well go first to David Barden with Bank of America.

Hey, guys. Thanks, so much for taking the hey morning, guys. Thanks, so much for taking the questions.

Obviously, Peter congratulations on the on the E reading.

Obviously everyone's going to want to know how.

How that informs your plans to begin executing on the stock.

Stock buyback program, and and and and kind of your your maybe updated thoughts around that in light of the recent actions and I guess second if I could just on the guidance increase in core adjusted EBITDA of $150 million with the with the merger synergies now going up to two two.

200 million two key results kind of being I think ahead of where street expectations were and in light of the new wholesale agreement that you've you struck with dish, which likely means that the kind of pressure on the wholesale business is not going to be nearly as much as was feared.

I guess it sounds to me like that 150 could be larger in if you could talk a little about maybe some of the reasons why why it might not be larger given some of the inflation on the other pressures and are in the market. Thanks.

I'll start with.

The first one and then like it get Peter wound up to answer the second one.

First of all I, just want to congratulate this whole team and and our finance Department and Peter first and foremost for achieving this major milestone we have sought.

To be an investment grade issuer for many years, it's been a goal of ours and now we have two of the three rating agencies I certainly hope to see S&P soon and that's just an exciting moment for us and particularly with what has happened this year in the high yield market, it's particularly important as.

As we've said all along about the share buybacks. There's there was no preset designated things that needed to be accomplished before our board with deliberate on this but with where high yield markets are right. Now clearly this is a very important milestone.

Unfortunately, we don't have an update for you other than to reiterate what we told you in the past looking at all of our momentum our financial performance. We continue to see upwards of $60 billion in share buybacks in 'twenty three 'twenty four 'twenty five in total with the possibility of beginning sooner and absolutely nothing has changed on that front, but we've accomplished them.

Very important milestones toward that end.

Lately.

Alright, and on your other question or core adjusted EBITDA and what are we seeing from inflation and what are we seeing from dish and with synergies up 200 million in core adjusted EBITDA of $1 50, what are some of the delta items in there. So first just with regards to dish I think we're very pleased to have reached agreement gone.

<unk> gone through all of the settlements of the disputes as well as the CDMA shut down and we're looking forward to being great partners with dish in the future. The agreement struck it gives us tremendous visibility into what revenues will be in the coming years and while that's down over at analyst day expectations.

It's about three quarters of what we anticipated in analyst day through the duration of the plan period, So very pleased with that.

The other thing I'll say from an inflation perspective, as we've talked before.

Theres been a great great work by Neville and his team's early on lock in a lot of our significant cost into long term contracts whether that it was on the capex side with the OEM vendors as the network rollout happened whether it was with tower operators, whether that was with backhaul. So we'd been able to get a lot of those costs fixed of.

Of course were seeing some pressure as everybody else says, particularly on the labor space, but that's all contemplated into the guide itself.

Synergies up 200 million is just again speaks to Neville and his team and how quickly they're moving on decommissioning in a in a very efficient and customer friendly manner and the other thing I'll point to is we just raised net adds guidance by 600000 at the midpoint. So obviously the S. Part of SG&A will be the thing that we're.

Investing in to drive that growth as well as that quicker acceleration of the network allows <unk> to continue building quicker and you have some earlier cost associated with that which of course pays off and the ability to acquire customers with this value prop. So those are all the components as I think about them, David that last points, particularly important to.

As you've seen something from this report you've seen that we have incredible momentum right now on growth I mean, more postpaid net additions than AT&T, and Verizon combined plus or including 560000 buy and large high speed Internet connections and those things cost us money to generate that growth and an in period basis and so.

We're anticipating as you saw in the guide continued success. There also are accounting approaches as Peter has explained in the past is a little different than our competitors. We take the preponderance of those costs in period, rather than racking up billions of dollars on our balance sheet that would come in the form of negative revenue charges. Later. So those are some of the key things that explain that.

Between the increase in synergies and the increase in EBITDA.

Super helpful guys. Thanks.

You bet, Yeah, let's go back to the phones.

We'll go next to Simon Flannery with Morgan Stanley .

Great. Good morning. Thank you a couple on fixed wireless if I could first if you could just update us I think you'd talked about our current growth being driven by fixed wireless can you just talk about new to T. Mobile you know what's that doing in terms of pulling through phone adds and into reducing churn what sort of impact you're seeing is this bill.

So the more important part every month of the base and then I guess question for novel and why you're you're at a 560. This quarter you are annualizing at over 2 million. It seems like it's accelerating on a steady basis. If you extrapolate that out that takes you pretty much at the top end of that $7 million to $8 million by 'twenty five it looks like you could exceed.

And what's your capability in terms of network capacity to to handle the five you know.

More than say five 600000 ads per quarter or is this going to be sort of the run rate to take us to that guidance by 2025 banks.

Great well I'll jump in first and then turn it to Neville.

I am so delighted with what's happening here I mean 560000 net adds is a run rate that if you just do the math gets us to the goals that we've established and so this is really now a run rate business.

That we're very excited to be seeing success around and not a lot has changed and that remains the case that the majority of our net additions are coming from existing T mobile customers and that's terrific to see and we not only like that trend, but we doubled down on it with offers during the quarter as you saw Internet freedom.

Put in an exciting offer for magenta Max customers to create a bundle and we've seen the uptake of bad has been has been really terrific. So for example loading of.

The new high speed Internet product late in the quarter and early in this quarter has been coming in a little above $45 as compared to 49 to 50 in the base. So you see that.

Getting the benefit of that bundled blended in now and most of the sales continued to be to our existing customers that being said. It also has a terrific front door for the company and you can see that it's driving new relationships, but increasingly those new relationships are not just stopping at high speed Internet, So theyre coming in buying high speed Internet and.

Going ahead, and switching including Magenta Max So that's starting to work.

As a very successful cycle anything to add to that Mike or John .

That's the only other thing I would add is what we're all we're also seeing more and more customers pick both at the point of sale I think my dynamic that's that's been driven by exactly what you just said Mike this powerful bundling that we've done what we've done with magenta Max and you know, we we continue to see that growth coming from the two areas that Mike said upfront.

About two thirds coming from.

Suburban and urban environments, where they're switching from cable and a third coming from rural where where we are the only high speed the alternative and that's that that's been an exciting area of a pocket of growth. It will continue to expand as the network expands a little over half are switching from cable and here's an interesting thing that came out.

And the <unk> study.

This past this past month.

You know and this is based on comprehensive it's.

It's a comprehensive speed tests and for the first time T mobile five G surpass the nationwide speeds of cable providers looking at Comcast and charter on cable connections as compared to T mobile customers on <unk> smartphones. The T mobile customer five G speed test nationwide need.

Ian we're higher.

And that really shows you are at one more data point on the competitiveness of our ability to use this network to serve high speed Internet customers. Okay second question.

Yeah. Thanks, Thank Simon you've opened the door for me to talk about like see network loves to talk about that's all the time.

[laughter] quote I'll be I'll be brief.

No.

The in home broadband story, it's just a it's just a tremendous testament to the progress we've made with rolling out at a really accelerated pace five two network I mean, we clearly have a very strong leadership position you know one five G. M. It's significant it's durable you know we are we are here.

To lead on this five G story, you know for years to come and so you know we announced in the materials today are low band network now 320 million people covered 97% of all Americans are mid band footprint, our ultra capacity five G, which is where the frog G story really comes to life 235 million people.

Covered well on our way to 260 million by the end of this year.

And that footprint covers 87% of T mobile customers today, so tremendous progress, we're actually hitting some of the highest production rates and a two year history rolling out mid band.

Well over a thousand sites, you know moved into various radio upgrades on a weekly basis inside the month of July so real momentum across the board on what we can do on in home broadband to your to your question. Simon is a real product. That's in home product is in home broadband product is a testament to our fog gene.

Network growth and as Mike referenced that Uccle report, if you look at the fixed broadband industry and the median speeds, it's lower than what T. Mobile is being recorded as you know delivering on our medium speed basis, and so it's not just about footprint, it's about capacity and the spectrum story.

And today, we have over 110 megahertz of dedicated mid band spectrum on average across that mid band footprint and over 30 megahertz of extended range frog G. Spectrum. So 140 megahertz of dedicated foggy spectrum and it has that capability of coverage plus five G depth.

Spectrum that allows us to push into these five cheap broadband stories on this growth and we are really I mean, we were a year into this business Simon with <unk>.

Very confident about the projections and capabilities that we've mapped out over the coming years, but this network is really starting to now getting traction.

The integration with sprint is all over all the shopping to be honest two thirds of the sites have been you know dicomed are less than 1% of the sprint traffic customer traffic now on that legacy Sprint network high confidence, we will bring that to a close as we exit this quarter.

And that's driving a ton of goodness the spectrum that we can migrate and move across.

The coverage and the capabilities that come with one very strong powerhouse network and a little over two years from when we started this progress. This process. So great progress very confident in what we're delivering delighted with the speeds that we're delivering on and home broadband and I think with bringing to the market probably the real first.

Did you use case everybody's been hunting for this thing, but in home broadband fixed wireless is here and it's here to stay.

You know it was time and one of the things that Neville said I think has been under discussed which is how much spectrum. We have against this leading mid band five G footprint. There's a lot of discussion about the fact that we have 235 million people covered with mid band Ultra capacity five G as compared to 70 for AT&T 135 for.

Verizon as they begin their C band deployments, but what's really interesting is what Neville said about the depths of spectrum across that 235 on average. He said 110 megahertz of mid band plus 30 of low band 140 dedicated to that five G layer and that's unique.

And it will be unique for sometime to come and it really allows for the kinds of capacity throughput and performance that we've been talking about on this call. It opens up not just high speed internet opportunities, but really exciting opportunities in the business space that our competitors can issue press releases around but where we're ready to execute and support.

<unk> right now are with advanced network five G services. So we'll talk more about that later, but thanks for your question about that thank you.

Okay next our next call.

Well go next to John Hodulik with UBS.

Hey, John Thanks, Good morning, guys.

Two issues are two areas I like to explore first on the macro side. Mike you know you said the consumer is feeling some pressure I mean any impact so far in terms of the slower pay.

Payment or on bad debt and are you seeing any evidence that.

Your value proposition.

Is actually driving some flow share versus your competitors. That's number one and then I thought the highlight of the quarter was the phone churn 80 bps.

Any color you can give in terms of the.

The disaggregated, what you're seeing on the magenta side or on the sprint side and how close are we to getting that sprint churn down to where we are with magenta and further improvement in that metric. Thanks.

Absolutely John well first let me just take the first question on what we're seeing and you saw that our bad debt returned to more historic levels. This quarter and we're very comfortable with it at this level you know one of the things that makes us different than our competitors. In this space is we have a long history and a deep competence at dealing with custom.

<unk>, who have variable economic circumstances, and so it's not new for us that some customers are stressed out financially we know how to work with them on that front.

You've seen our bad debt levels return to more historic rates.

There have been other things driving that bad debt as well one of the things you see is that our VIP balances continue to rise and in E. T balances Windows go bad it hits that bad debt metric as opposed to leasing, which we've been rapidly moving customers off does not so theres an artifact. There. There's also some accounting artifact that caused us to be mothballed.

We're looking in our bad debt charges now than before plus the return to more historic norms long way of saying, we're very comfortable with where it is and we know how to execute in this environment, but to your point. It's very interesting. There is a flight to value that I believe is beginning to happen you see it in our suppress churn rates.

Our comfortable where they are our progress across both T mobile and sprint to the premise of your question. Our net add performance. Our overall account growth performance was the highest ever in our history for any quarter in any season was this quarter 380000, new account additions.

And so there is a flight to value that is beginning to happen and T. Mobile is famous for value in our category at a time when this product category is becoming more and more indispensable we're famous for value while showing you that we're second to none on the quality of the product and so that's something that I think positions us.

Very very well for the times and on that zero Dot eight zero look I am just so proud of the team. We told you two years ago that we would execute our worst to first playbook and a lot of people looked at us and said yeah, but you know you you've got sprint now.

And and here, we are with 0.80 in combined churn and possibly some room to run you know, we'll see where we go are there. There's obviously offsetting pressures here on that involves side that all of the carriers are seeing but we look at Q3 and it looks to us like we will beat our 2021.

Earned by a similar margin in Q3 as we beat it in Q2, you know mid to high single digit Bips improvement.

Versus last year and of course theres seasonal effects in the second half of the year as switching tends to be higher due to phone launches. So we're very comfortable with what we're seeing and we believe that as we continue to get more and more sprint customers settled with the right rate plans, which is the last component of our integration that potentially there's some more momentum to see.

In the quarters ahead.

They think they ended up here I think you hit it all really wrong okay.

Great. Thanks, Mike.

Thanks, John .

Yeah.

Okay operator.

Yes, we'll go next to Craig Moffett with Moffett Nathan.

Yeah, Hi, guys.

So a.

Theme, we've been hitting with everybody sort of I wonder if you could reflect on on the new revenue opportunities aside from fixed wireless that come from five G. Whether it's mobile edge compute private networks, Iot and <unk> and talk about how your thinking has evolved about the Si.

Is are those revenue opportunities and how it is that you.

T mobile can most effectively compete to get what's there.

You bet, Craig and let me first start by saying, we're a lot further along in this space and in thinking around it and execution around it then you.

You would probably surmise from our press releases and I'll have Kelly talk about some of what's going on out there, but where I'm hesitant to take an early business like this and forecast. It forward for you when it's in its infancy and our competitors haven't had much choice about that.

And so they've gone ahead and given some some big.

Aspirations in this area, but our view is it's an emerging market and you know we can achieve what we set out to achieve.

Generally speaking in the car business, but that being said there are exciting things happening and what's interesting is this.

This five G network leadership is getting us conversations with Cio's C. He owes the corner office that our company never earned before you know we were talking about start to smartphone plans with the procurement office two years ago, and that's the big difference and Kelly, maybe you can share a little bit of what you're seeing in the kinds of <unk>.

Stations, you and your team are having big snake and so it's been an exciting time to spend time with CIO and CTO as theyre looking at their own digital transformation, they're looking at their own ways to manage costs be efficient and effective and get connectivity that is on not only the largest and fastest most reliable sites.

Only provider that has the society Standalone Court, which C. I always understand that matters kill EM solutions like advanced network services.

We we talked about how he launched and this is the internet as a part of our Internet freedom on carrier move this past quarter and but for business. This was significant because we're the only provider that truly has nationwide internet businesses, which allows us a really great front door to sit down and talk about.

We can connect your retail locations and working with places like tractor supply and circle, K and orders down and but we also are sitting down and talking about hey, how can we use edge compute solutions and Iot connectivity in order to really help you staff the business problems that you're facing us as leaders, we also launched or announced our relationship.

New customer sell G. P. So you don't know Delta P. That's the world's most extreme sailing competition.

And we saw it in the last rate 240000 data points transfer from 6400 sensors, and we were able to deliver up to a 50% reduction in latency that gives athletes a competitive advantage and stands at really stunning deal at the race, though broadcasting retail. We're also doing a lot of work with this advanced network solutions.

In the automotive industry and because of our relationship with D T and Archie Iot platform that we launched and told you about last quarter, and we're able to provide seamless global connectivity and for their b to B to C solutions as well as for employees, who are traveling internationally as a part of our last and most recent UN carrier moves.

We've seen a lot of action.

We don't want to just cancel my view that we like to have the phone lines and we're seeing the lowest levels of business Sunshine in our history and I think we just heard that Verizon and reported it to their highest and so and we're growing in business, we're growing in enterprise in F&B and in the public sector as well and.

We're very interested in where we're headed with this advanced network solution I'm glad you mentioned coverage beyond and all of that too because not only are they are incredible opportunities for us to do deep.

<unk> services for enterprises as they look to create network as a service and outsource some of that thinking too advanced networks like ours, but we're still interested in the car.

And you know coverage beyond was an investment in something that originally put us on the map with enterprises in the first place or simple global move in 2013 was our introduction to enterprise and today, we've launched coverage beyond which not just double down it multiplies the power of that move by.

Many times, so that now business customers and consumers can travel the world and have high speed data the highest on offer in that country completely included in our most popular plan not low speed data and it is a breakthrough. So we're very excited about what that portends for business customers and consumers now, but I'll give you the.

The last word on this question Yeah, I mean, I think we are.

I'd say this Greg you know we are the best positioned company in the U S for all of the folks you opportunities the Kelly outlined but there's just no doubt I mean this <unk> thing is is for Reals to mobile I mean more than 50% of our entire network traffic is now on five G over 55% actually.

And that number continues to increase as we see greater engagement and great discussions with all manner of of opportunities business leaders as well as our consumer base and we continue to really push the foggy architecture. We're the only company as Kelly referenced with a Standalone network cool, we're the only company.

In the U S to push to move voice services, but we saw a new radio onto that fucked you like why is that important because as a company. We're a five to your business.

We're not in the business yet of retiring LTE.

We all focused on that at some point in time, you know in the coming coming years. This this five G network is moving at incredible pace coverage.

Spectrum and architecture, and we have a lead on all corners of that dialogue against our competition, which positions us incredibly well for future growth across all segments. So the luggage without progress in the fuzzy story is not just beginning I mean, we are into it T mobile on the growth vectors is starting to shape up.

This incredibly well.

Beautiful, Okay and before we go back to the phones I know, we have some coming in on Twitter I see a few upfront Genesis did you find a somewhat we should be tackling here. Yeah. We have a couple of let's start with Bill Ho He's asking percent. Notable examples as an enterprise or medium company wins from T. Mobile for business I know Kelly may have some good things to talk about there.

And to your point earlier on our on our coverage announcement curious how that's impacting the business probably both consumer and.

Key for me anything to double down and I know, you're just kind of answered some of that right. I mean, we had did some great work with Autozone and General Mills, We spoke we did and an interesting solution using a N S and edge compute and some smart warehousing, where we built a combination Cai that network and public network and we've been working with.

A lot of global automakers, using those Archie Iot capabilities as well as.

Escalation for vehicle to vehicle communication and then you know another cool thing in F&B, because because we're seeing a lot of growth in SMB as well and we just announced that we partnered with Apple to launch the only wireless plan that includes Apple business Essentials, which is really cool for small businesses and to really what they're looking at.

Cost when you're looking at getting more efficient and effective and how they can manage all of their devices at lunch with an incredible rate plan, an iPhone 13, new credits, but that wasn't really big announcement recently, so lots of exciting new logos only some of which we say because of agreements with customers, but the other thing that's happening that's really interesting is that we are deepening.

And ships with enterprise customers across the board remember a couple of years ago, we were kind of winning some accounts all along the lines of Hey, if I throw you a few of my lines will you know kind of unofficially will you help me reprice My AT&T business and all you know you'll get it some of them are that's never really spoken but you can see the rfps were sort of designed for that.

And what happens now is some years later customers are coming back and saying actually I'd like you to bid for the whole kitten Caboodle now and so there's the potential to deepen with customers is really happening and that's a dynamic that's driving ourselves. So hopefully Roger entner anvil that answers some of your questions about T F b.

Just get ready for the next maybe I'll go back to the phone, while we could do that so operator.

Yes, we'll go next to Jonathan Chaplin with New Street.

Thanks, guys.

Uh huh.

Two follow ups on prior questions actually so nevertheless, I'd love to just the context you gave around fixed.

Fixed wireless broadband and the capabilities of the network was great.

I'm wondering if you can address what you think you can serve in terms of capacity.

And capacity, you've got tend to but the total number of subs you could put on the network.

I know you said in the past that seven to 8 million that you expect in 2025 isn't a limit so we'd love to know what the what the limit is.

Then just to stick with the theme on.

Enterprise for a second I'm wondering if you guys could give us a sense of how you're progressing towards that 20% sure where you are at at this point and.

You said that you.

Too soon.

To put a market sizing on the mobile edge compute and private network opportunity does that mean that none of that opportunity is in your long term plan.

Great. So let me start with Peter to talk about the last two questions about the plan and in the 20% share et cetera, and then we'll pivot back to your earlier questions. John Yeah, Jonathan as you know all of them because of all the reasons that Mike just described around an emerging business why we're best positioned to capture it it wasn't.

Something that we built into the plan when we did analyst day targets because it was too early we didn't want to bake the plan with something that we didn't have a good view and a roadmap to how to get the growth, but we're seeing the capitalization of that so that is all upside potential upside to the plan very excited about that in terms of progression in enterprise space. So you heard.

Kelly say, we're actually what's exciting about this is we see growth across the entire T. Mobile for business segment. It's not just enterprise. It's government. It's it's S. M. B. So we're excited about the progression in all of those categories against our goals.

Great and then how many millions and millions of customers can we support.

You you know well, we're not really going to be able to answer that because we don't have we don't know.

It kind of it kind of depends.

One of the things that we've disclosed in the past that our model, which is an excess capacity model is based on our anticipated share gains in mobile.

And the usage of our base in mobile, which we expect to continue to rise at a rapid pace are arriving in this planning period at around 80 gigs per mobile customer and.

Maybe that will be higher maybe that will be lower and that's obviously a very important input to this and obviously so the availability of spectrum and our ability to reform spectrum to deploy it et cetera, but I don't know you want to take a stab at answering his question or are we just going to it was going to say we don't know.

[laughter] well.

I'm not sure, but we want to announce revised numbers today. So I mean, Jonathan you you know our story well you know the $7 million to $8 million that we put out into the marketplace. Some time back but to mikes comments just now if if you look at where we are we're ahead on our coverage rollout on five G. We're ahead on that.

Spectrum transition we were ahead on our integration goals that we established when we put that plan together there are many factors coming in but we see great consumer adoption.

Five G side.

Capacity generation for this business is ahead of schedule you know, we always said that if you compared where.

This business would be as a combined T mobile and sprint in 'twenty four 'twenty five against the Standalone T mobile that multiple was about a 14 X one full on capacity, we're about halfway through that already in terms of the capacity with generating so we're in the business of creating a lot of headroom for growth for the company.

And can we bend that curve some more I'm sure we can.

But we're still early into this business as we said we were a year in driving great numbers and.

And we will see I think as we exit this year with continued strong growth in this space will be in a position to look forward into 'twenty three 'twenty four with great momentum and hopefully some some stronger numbers. We've been an early adopter of so many techniques and technologies that have allowed us to unlock capabilities for our customers and their networks.

Pace and level and Olson Abdul and their teams are constantly chasing new ideas and capacity is one of the <unk>.

Centerpieces of our conversations now because of the premise of your question. So it's a topic. We're very interesting I will tell you that we won't load customers beyond where we can give them a great experience and for you know right now our net promoter scores continue to rise there 30 points higher than the competition, they're triple what they are from the.

Provider that our customers are switching from we just won a major nationwide survey of all Isps that are scaled named us the second highest in customer satisfaction in the country and the and number one was a fiber provider and so you know our customers love this product and it's really important for us and for our.

Brand that we continue to load customers, where we know we can serve them well and but hopefully that gives you. Some some color on where we stand.

Fair enough thanks, guys.

You bet.

We Wanna go onto Twitter for another one sure. It's a great question from Roger about churn you're growing significantly with often free connected devices. How are you going to prevent to have the same to your churn off experience that the others are having have experienced when they drove connected device net adds kind of ties to alan's question about churn from some of the smaller players as well.

Yeah, and you know, maybe we start with that with Mike on this one I will say well what's going on in the market is very different from what you saw from our competitors some years ago there aren't buying.

By and large we're not by and large driving this through free devices or three free connections.

What's happening is we live in a <unk> world now and people are getting real utility and value out of tablets watches and other devices because of the strength of our network because of the changing lifestyles connected lives, but Mike maybe you can give a little more on what we're seeing yeah, Hey, Roger Thanks. Thanks for the question.

I do think in a world where people only differentiate off of giving free phones like the risk that you pointed out. It is a is a real one.

And in our model, we recognize that a lot of the competition has moved to two free devices and we feel like we've done a really good job figuring out how to deliver on free devices, but not make that are big point of differentiation you know our big point of differentiation is what you've heard from several of US today. It's this value proposition that gives customers.

The best value without having to make any tradeoffs on network and you know that that proposition I think is more important now than it ever has been before because you know what the macroeconomic environment customers are looking for ways to save money and not have to make tradeoffs in experience and really only T. Mobile is the one that provides that you know right now.

Mobile customers T mobile families can save 225 Bucks on T mobile not just through their core wireless services, but with all the value that we pack into a plan like magenta Max and the included benefits that we give them things like streaming services and everything else. So I I think what you're what you're seeing is and what you'll continue to see us as customers picking us.

We have the best overall value position, because we can save them and expenses across across their entire lives and and that's translating into things like you saw this quarter with sequential and big year over year churn decreases.

And as it relates to connected devices, we're also watching usage and you.

It's very important that those devices are actively used and paid for and they are and so that's something that's very important. So we don't get surprised it's a great question.

Ah Okay, let's go back to the phone.

We'll go next to Phil Cusick with J P. Morgan.

Yeah, Hi, guys. Thanks.

Mike You said that the prime mix is at an all time high what is the mix of the base.

As well as in births incoming accounts or if you can give us something that sort of relative.

And then you're talking about bad debt and we noticed the DSO stretch out a couple of days what changes have you seen lately in customer activity anything and you can tell us around traffic lever levels, lower payments or traffic and increased charge offs.

Sounds good felt well lets go to Peter owed us to say, what we're seeing yeah definitely.

We're not giving the prime mix of the base, obviously for various reasons, but it is up significantly in terms of what we're seeing from a payment pattern perspective on a year over year basis in ball churn is up and remember you had last year was tremendously muted.

There was still a lot of stimulus money there was still not really the switching activity happening. So we're seeing what we're what we anticipated is that you would see an increase in involved churn still below pre pandemic levels for us.

And we.

We talked about bad debt, a little bit and of course, what we did in Q2 as well as member of the accounting standard changed a couple of years ago, and now forces us rightfully so to look forward as well and so we did a macroeconomic loss overlay in Q2 that was significant whereas last year that wasn't happening in fact, we had some releases happen as we saw.

In Voltaren way down so I do believe Q2 of course, we're watching the macroeconomic trends very carefully and customer payment patterns of behavior, but I believe Q2 based on everything we're seeing now is the high watermark in terms of bad debt expense for us in 2022 and again it goes back to that.

Tremendous core competency that we have that we actually built on even further.

When we saw some of the FCC holds happened we created even further differentiate it tools to help our customers and now we're saying that pay off in dividends now.

And like I said in my opening remarks, we're comfortable here and increasing our EBITDA.

Feel confident with how we're handling the macroeconomic picture there.

There are places in our P&L, where there are pressure points, but there's also a lot of opportunity for us to stand up and serve customers at a time when they need a company to provide them with a fantastic value.

Great, Let's go back to the phone.

Well go next here, Brett Feldman with Goldman Sachs.

Brett I think and I also have sort of two follow ups. So you had talked about migrating sprint customers to the right rate plans I was hoping you can maybe just give us an update where are you in terms of migrating the legacy sprint. This fully over T. Mobile you know when do you think that'll be done and are you continuing to see the churn improvement in that co.

For it as it unfolds and then the second question is you seem comfortable with this kind of 500000 or so fixed wireless net add quarterly run rate.

What's going to be the driver of that particularly as we think out the next few quarters I'm specifically interested in the extent to which you may be expanding distribution I think it's available to over 40 million potential customers today, I don't know where that might go and what have you seen or what are you expecting in terms of fixed wireless churn.

You bet, where do we want to start.

They return to Mike on the first one.

I can speak to that one maybe on micro the fixed wireless in terms of migration of rate plans. You saw certainly the first part of last year. As we said we did a significant amount of the rate plan migrations to the target rate plans. There is still some more of that to go and planned both this year as well as the start of next year, but we're through the vast majority of it.

And the question was also when are we going through the billing migration, which we always said was going to be disconnected from the network migration to make it a seamless to the customers. We can and that plan goes through middle of next year as we build the capabilities on and then really seamlessly convert customers, which has already begun.

We're already in the process of doing that but to make that again as churn friendly and as consumer friendly as possible. That's gonna go through mid next year and so maybe I can just on the you know it's harder to answer you saw we didn't disclose sort of a sprint migration figure. This time, only because it's becoming harder and harder to do so.

As Neville said in his remarks less than 1% of of the traffic is now on the legacy Sprint network, we will be at networks shutdowns this quarter having decommissioned.

Substantially all of the sites and so now it becomes much more of a picture of do they have the right rate plan do they have the right device plan you know are we.

Have we re engaged with them and gotten a recommitment from them et cetera, that's a stepwise process, but you can see the incredible progress that we're making with combined churn being at 0.80.

And then as it relates to fixed wireless first of all I, what I said in my remarks was that we have achieved now a pace that are if you were to extrapolate. It forward. It gets us to our goals that wasn't a forecast for you, though that wasn't a prediction that it will be at that pace it could be higher it could be lower this is an.

<unk> business, it's going really well and what's interesting is I don't think we've yet fully tapped our base with this with this potential I don't think we have yet fully tapped the opportunity of prepaid with this potential which has been newer and distribution John and team have done a fantastic job, bringing this to metro.

<unk> still represents a minority of our connections and yet we're the only one with our most recent carrier move to provide a nationwide broadband services businesses. The sales cycles, there are longer and it's a good thing that we have lots of potential tailwind here because I'm, obviously as the base grows we know that math is math and churn will grow.

And you know that's just that's just obvious and so we have to outrun that and then some and you know we're very confident in and feeling like we're in a great spot anything both Mike and John to add to what we're seeing how distributions going the value proposition maybe I'll just turn and then John can talk about distribution I think it's too early you know we launched this business a year ago.

It's too early to make like big broad comments about churn and the thing that I'll point to that we we've said in some of our earliest comments is N. T. S. On this product is amongst the best in broadband providers only bested by one fiber provider by a single point.

And then the performance that customers are getting is you know is is if they're not making any tradeoffs and I think that's one of the things that's really resonating with customers is a great price, that's reliable and predictable and not making a tradeoff on their incumbent service and I think I think that's what's resonating with customers and that will be a big part of our strategy is making more.

We are aware of that going forward or Joe if you want to talk about disrupt yeah. The only thing I would say is that we're still ramping in distribution. We've got this product across all of our T. Mobile stores. We've got a service from a digital point of view, our telesales teams et cetera, and then just most recently in the previous quarter, we announced this and launch this metro by T mobile so.

Still you know driving that and ramping and it's like Mike said, we've got you know quite a bit of opportunity are still when you think about an underserved segments like our prepaid customers with high speed Internet. So many of these customers don't even have a product they can't get that they can't afford it you know et cetera from your typical mainstream cable provider and what you can get with this particular product.

The price point with the all in total cost of ownership is just incredible. So we you know we continue to see that we have more runway here and we're continuing to build that and we might have even more distribution opportunities with other partners in the future as well.

And operator, we could probably squeeze in one last question.

We'll go next to Michael Rollins with Citi.

Thanks, Thanks, Hi.

Two questions if I could first just going back to the volume side of the equation as you consider the.

Postpaid net adds in postpaid phone outlook, what are the expectations for the industry growth for the rest of the year and are there any notable changes.

In the landscape early in the third quarter, and then separately just maybe taking a step back I was curious if you could give us an update on the possibility to monetize this spring wireline assets.

And if there are other considerations for T mobile to consider the use of M&A to accelerate the core strategy for the company.

Okay on volume you know our forecast don't imply.

And industry run rate you know our job is to win switching decisions and you saw in our quarter. That's exactly what we did then so we're not deeply dependent on industry net ads.

That being said what we're seeing is overall switching is up about 3% in the marketplace. We have not seen any substantial changes to that as we've entered into the new quarter or any other substantial changes to the overall competitive dynamics since the quarter ended so that's that's what we're seeing across the board as it relates to.

Sprint wireline asset.

You know you may have seen we made some announcements that we're no longer using that asset to support our wireless business.

Obviously conducting a review as to the best way to manage that asset, it's a terrific product with a deep deep legacy in our company and its important that we make the right decisions there for the long haul taking into account how the market has changed over time.

M&A listen you never rule that out you know you never rule that out that being said one of the things I hope you're getting from this call is that we are very very confident as a management team and our ability to execute with the hand, we're holding them you know in a broad market, where all content and communicate.

<unk> have left their linear forms and have landed on the internet and the Internet is going mobile. We are this nations, leading pure play mobile Internet company and we are executing very solidly for our shareholders with a clear eye towards returning value to those shareholders. As a result of our efforts and so we're very pleased with where we sit.

But smart management teams never rule out ways to further benefit our position for shareholders and that's a great place to leave it listen I Hope you got from this call our confidence we're having a lot of fun here, we're taking care of our customers were leading this company into a new era of the uncared and quarter after quarter.

Our our aspiration is to continue to post results that increase your confidence in us as a management team. Thanks for tuning in today everybody I appreciate it.

Yeah.

And we can close the call.

Ladies and gentlemen, this concludes the T mobile second quarter earnings call. Thank you for your participation you may now disconnect and have a pleasant day.