Q1 2023 T-Mobile US Inc Earnings Call

Good afternoon.

Following opening remarks, the earnings call will be opened for questions via the conference line by pressing one followed by the four and be a Twitter by sending a tweet to at T mobile I R or at Mic Siebert using cash tag T. M U S.

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

Sure.

Alright, welcome to T Mobile's first quarter 2023 earnings call.

Turning me on the call today are Mike Sievert, our president and CEO , Peter Oswald our CFO .

Well as other members of the senior leadership team.

During this call we will make forward looking statements, which involve 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 our results as well as reconciliations between GAAP and non-GAAP results discussed on this call can be found in the quarterly results section of the Investor Relations website.

With that I'll turn it over to Mike Okay. Thanks, Jud Hi, everybody welcome to the call and as you can see we're coming to you live from Bellevue, Washington at our headquarters and I'm here gathered with a great group of our senior leadership team as we share with you. Some terrific results that we are posting today to kick off 2023, and I'll start by saying our result.

For Q1 continue to demonstrate that no matter the competitive environment, our unique formula of offering the best network and the best value continues to produce best in class outcomes. We again led the industry in postpaid and broadband customer net adds while continuing to deliver the best profitability growth.

And our consistent focus on reliably translating customer growth into industry, leading postpaid service revenue growth and unlocking substantial cash flow gives us the confidence to raise our full year guidance, just one quarter into the new year.

Now I'll also say Q1 was a quarter of celebration at T. Mobile I am so proud of how our now 10 year history of more than 20 on carrier moves have transformed to this wireless industry and more recently broadband for the benefit of customers and as you often hear us say, we won't see.

Stop so we announced last week, our latest on carrier move with phone freedom are moved aimed to free customers at other wireless providers locked into those three year contracts, while they are subjected to relentless pricing changes and Gotchas, we continue to make it easier for customers to come to T mobile and switched.

T mobile for peace of mind, knowing that with price lock, we wont raise their price for talk text and data and now with new into a part of phone freedom there'll be upgrade ready in two years, because three years is too long to force customers to wait.

Here's kind of a crazy sort of fact to get your head around AT&T reported the lowest postpaid phone churn in the industry this quarter and yet quantitative research data says that their customers have the highest self reported likelihood of switching away their customers report being almost 50% more likely to switch than <unk>.

<unk> or T mobile's customers the lowest churn.

But the highest apparent dissatisfaction and to me that means one thing their customers are trapped and we're here to solve it and that's what our latest on carrier move is all about that's what phone freedom is all about and it's the way we've been designing our groundbreaking unclear of your moves for a full decade now.

And as you know we hit another milestone this month.

The three year anniversary of our merger, we're wrapping up and integration that many have deemed it I think we'll we'll conclude that it is the most successful merger and telecom history.

And most of all we're celebrating what it was always about the.

The Dream, we had of leapfrogging from last place in the <unk> era to leadership and the five G era smashing the big biggest pain point of all by finally, giving customers in this industry, both the best network and the best value from the same provider and you know what we did it and we did it ahead of schedule meeting.

Our commitments and unlocking massive value in the process and yeah, we brought about a new level of competition to this market and a five G network to America, there would not have been possible without this merger and that makes customers and businesses everywhere the real winners.

Execution of our unique process called customer driven coverage and finally continued leadership and implementing advanced technologies, such as Standalone five G and multi carrier aggregation all of these things importantly are contributing to the best capital efficiency in our sector.

All of these strengths coupled with our unique opportunity in Underpenetrated markets are what enables a differentiated and profitable growth strategy that separates us from the competition and you know what we showed that again in Q1.

We added 287000 postpaid account net additions the highest reported in the industry once again and that means we're winning the switching decisions in the market because this looks at it at the account level.

And we had postpaid net additions of 1.3 million more than AT&T and Verizon combined.

This included postpaid phone net adds of 538000, we want a higher share of net adds year over year, even as the industry continues to moderate just like we predicted we would in previous calls.

Our increased share was driven by our strong phone gross adds as well as being the only national wireless provider to improve postpaid phone churn year over year.

Our consistent approach to profitable growth continues to deliver right on and sometimes even above our ambitious plans and that's even as the competitive landscape continues to shift and evolve.

In recent quarters, we've seen cable, giving away free first lines that don't by the way appear to be incrementally pulling from existing customers and incumbent providers, but definitely are driving their ARPA is down we've.

We've seen AT&T and Verizon significantly outspend us in media advertising I mean, Verizon alone has spent almost 60% more than T mobile in Q1.

And we can continue to see as I mentioned earlier, others lean into expensive long term device contract offers to lock up their customers. While T. Mobile was the only one to improve churn year over year and have the lowest upgrade rate improving churn, but with the lowest up.

Grades that's because our approach is not to slam customers with expensive unwanted upgrade contracts to tie them down for three years customers genuine we choose to stay with T mobile for the network for the value proposition and for the experiences and you know what that is how we want it to be.

You've heard us say before.

Our strategy is differentiated and durable because it's driven by taking share in the places where we continue to be underpenetrated relative to the market, but where we now have new permission to win this profitable growth playbook and the momentum. We saw in Q1 is exactly what gives us the confidence to raise our post.

Paid net add and financial guidance for the year.

Example, this T mobile for business, where we just posted one of our highest ever phone net add quarter in Q1 with the lowest business phone churn in our history and we're profitably taking share with more business account net ads and more business phone net adds than Verizon in the quarter.

On the consumer side, we're winning with Prime network seekers in the top 100 markets, who increasingly recognize the T. Mobile offers the best combination of network coverage and capacity for their needs in fact, our prime customer base hit an all time high again this quarter.

And in smaller markets in rural areas. We are now capturing a win share of switchers in the upper thirties and that's in the roughly two thirds of this geography, where we're competing this is great news because it's showing that our strategy here is very much on track.

In addition, we added 523000 high speed Internet customers as we have continued to grow our gross adds every quarter. Since we launched two years ago I would expect that we added more broadband customers than AT&T, Verizon Comcast and charter combined for the fourth consecutive quarter.

And not only did we have the highest net adds but our focus on profitable growth translated into strong financial performance with core adjusted EBITDA up 9% year over year and free cash flow up over 45%.

Our Q1 results were just the latest example of how we have lots of room to run at T mobile and I'm confident in our ambitions for this year and beyond one thing you've come to expect from this management team is that we are never satisfied and you saw that again with our latest on carrier move to free customers from three year contracts and introduce new foot go five.

Plans that offer even more value than before.

As proud as I am of what we've accomplished in our 10 years as the UN carrier and in Q1, most recently I am even more excited about what's ahead for T mobile and I'm. So thankful that all of you are on this journey with us.

Okay, Peter over to you talked about the key financial highlights and our updated guidance for 'twenty three absolutely. Thank you Mike 2023 is positioned to be another year of best in class profitable growth based on our Q1 results and the updated guidance I'll share with you in a moment our continued increases in postpaid accounts and postpaid ARPA resulted.

And the best postpaid service revenue growth in the industry up 6% year over year, our disciplined focus on profitability resulted in a 9% year over year increase in core adjusted EBITDA and we grew our core adjusted EBITDA margin by 270 basis points year over year, while AT&T and Verizon were.

Flat to down.

In addition, as Mike mentioned free cash flow was up over 45% and unlock the highest free cash flow margin relative to our peers, we expect our industry, leading free cash flow margin to be a durable and differentiated unlock shareholder value going forward.

The strong financial performance also supported our share buybacks as we repurchased 33 million shares for $4 8 billion in Q1 with a cumulative total of $59 4 million shares repurchased for $8 5 billion as of April 21st.

It was also great to see our continued execution on profitable growth reflected in our recent rating upgrades from both Moody's to be double a two and Fitch, who recently upgraded us two notches to triple B plus.

These rating increases further strengthen our access to lower cost capital and the deep investment grade market.

Alright, let's jump into the details of our increased guidance for 2023, we now expect total postpaid phone net customer additions total postpaid net customer additions to be between 5.3, and $5 7 million up 250000 at the midpoint, reflecting growth across all of our market opportunities and we continue to expect.

Early half of postpaid net adds coming from phones for the full year.

Our focus on profitable growth allows us to fund those higher customer net adds and still increase our core adjusted EBITDA expectations, which are now expected to be between 28, eight and $29 2 billion. This is up 10% year over year at the midpoint based on higher service revenues and merger synergy.

These of course excludes the leasing revenues of approximately $300 million as we transition substantially all remaining customers off device leasing by year end.

Our merger synergies are expected to be between 7.3 to $7 5 billion in 2023 approaching the full run rate synergy target from our analyst day, a year ahead of schedule as we build towards the recently raised run rate synergy target of 8 billion in 2024.

We continue to expect merger related costs, which are not included in adjusted or core adjusted EBITDA to be approximately 1 billion before taxes and we also continue to expect cash merger related costs of 1.5 to 2 billion for 2023, and so they have underrun the P&L recognition to date.

Net cash provided by operating activities, which includes payments for merger related cost is now expected to be in the range of 17.9 to 18.3 billion. We continue to expect cash capex to be between 9.4, and $9 7 billion driven by a capital efficiency unmatched in our industry.

On the back of our network integration and five G leadership.

We expect Q2 to remain elevated just slightly lower than Q1, and then moderating in the back half of the year.

Together this results in higher free cash flow, including payments for merger related costs, which is now expected to be in the range of 13.2 to 13.6 billion. This is up approximately 75% over last year, thanks to our margin expansion and capital efficiency and does not assume any more.

<unk> net cash inflows from securitization.

And as I mentioned this also represents a free cash flow to service revenue margin, which has multiple percentage points higher than peers and based on the cadence of Capex I would expect free cash flow in Q2 to be slightly higher than Q1, and then a ramp in the back half of the year.

We continue to expect our full year effective tax rate to be between 24, and 26% and finally as we execute our strategy of winning and expanding account relationships. We continue to expect full year postpaid ARPA to be up approximately 1% in 2023.

Before I wrap up I want to give a quick update on the sale of our wireline assets to cogent. The process is progressing very smoothly led by Dave and the team at Cogent and we now expect the transaction to close in early May.

On a quarterly basis, this will lead to approximately $125 million lower wholesale and other service revenue and approximately 175 million lower cost of service expenses with a nominal impact to SG&A with.

With the mid quarter closing, we expect a partial impact in Q2 with the full quarter impact beginning in Q3.

So in closing, we expect 2023 to be another year of profitable growth and even greater free cash flow expansion.

We continue to extend our network leadership and further scale, our differentiated profitable growth opportunities.

And is that a good guide for the pace of the go five G upgrades and how that drives that that ARPA lift. Thank you.

Hey, Bill I'll start and maybe turn to Mike and Peter.

First of all we're really excited about this new lineup that I'd want to point out a couple of things one magenta Max continues to be in the lineup and so this is being added to magenta Max and as we think about the price point represented by these kind of mainstream popular plans, we're going to be kind of thinking of it as magenta Max and higher so that would include magenta Max It would include the new.

<unk> got five G plus plan kind of as a category and what you see as you know our expectation is that that run rate we've been seeing in that sixties will carry forward and you know we've certainly seen that since the launch and it was true for magenta Max all through Q1, so really great to see that our popular plans.

Also our highest value plans packed with the things T mobile customers are looking for and maybe Mike you can talk about unpack that a little bit yeah.

Yeah, I mean, I think like Mike said that it is a great representation of the differentiation of our strategy, particularly as it comes to the way that we construct rate plans and do pricing because with <unk> and <unk> plus you see new plans that are incremental to our portfolio that really give customers choice.

And with it with these plans we packed in the most benefits that we've ever done in our plan with increased <unk>.

Roaming in Mexico, and Canada, which is the most popular destination for our customers' increased hotspot, which we're seeing utilized more especially in a post pandemic world where people are moving around and working everywhere and with go five G. Plus the first plan, we're guaranteed in the plan new and existing customers get the same deal on phones not a promotion like like you see from other folks.

As reflected in our ARPA and it's one of the reasons why we look a lot of ARPA and we focus a lot on opportunities, where we can attract customers and retain customers that demonstrate a really high C. L V. Like we see with business customers and like we see with with 55 plus customers and so you'll see you'll see us continue to focus on those.

Kinds of accretive value, creating opportunities in our portfolio.

Yeah, I think the only thing I'd add in.

And Mike said, it really well is it's such a mixed driven metric and for example on the segments that Mike spoke about 55 plus brings in customers with C. L vs that are actually above the average C. L V right. They may have lower ARPA, but very high accretive silviu, because that's how we really model everything and the growth that we're trying to drive as you know was profitable.

Growth for us so on an ARPA based metric because of that mix shift I, probably expect it to be sequentially relatively flat, but yes. That's as you pick up some more mix of potentially five G. $5. You can go five G plus excuse me <unk> everywhere here then.

And then you could see some opportunity in the latter half of the year, but ARPA and accounts is really where the focus is to create that value expansion in the company.

That helps thanks, Scott Thanks Bill.

Our next question comes from Simon Flannery with Morgan Stanley . Please proceed.

First of all you're asking about our fiber trials and I don't have a lot new to report there other than this is a team that obviously through our leadership in high speed Internet on five G is very committed to being winners in broadband and so for us being able to get involved learn understand what drives C. L V understands the service.

Models, and the technology models et cetera.

That's very important and you see us continuing to do that we haven't taken any decisions beyond that other than that anything we learn there is accretive to us being in this business and you see that we are already in this business as a major player in the five G variant.

As it relates to what we're seeing in the business itself I'm very pleased I mean net promoter scores for this business continue to be higher than average cable and higher than average fiber in the country. So people love what T mobile's, serving up to them and that's important and it informs the churn models as you're saying now we have a very young base.

And so to your point, we look at it on a cohort had view and some of those aging customers from earlier, we've really like what we're seeing in terms of their retention. So really pleased and you can see net promoter score is kind of an indicator of that and Mike why don't you jump in and anything else you want to share on that I would just say as to Mike's point is that as the customer base is growing.

We're seeing work more cohorts and the longer tenures, we are seeing sequential decreases in insurance and it really does start with what with what Mike said. This is a great product. It's a product that really that doesn't require any tradeoffs from customers. It's got a great NPS and youre seeing it Paul.

Heavily from from cable cable is the biggest contributor to our customer our customer base in this in this business and.

And we've built a model and a go to market process that now is reliably delivering you know plus or minus 500000 customers a quarter, which gives us a lot of confidence in this number that we talked about a couple of years ago of us getting to seven or 8 million customers at the end of this planning period, Okay and late of last part of your question was about where do we go beyond our current.

Model and I want to remind everybody what the current model is before answering that because it kind of speaks to the opportunity here because others have cyanide, what we're doing and said well you know theres a limited opportunity to that what they are doing over there were like right. I mean, we've said that all along we expect this to be a seven to 8 million unit opportunity of the way we're doing it right now which is essentially.

Selling excess capacity on our network. So remember the way. This works is we have created a nationwide.

Mapping of every household in this country map them to every sector on every tower and determined which sectors no normal amount of mobile wireless use will take up our rapidly expanding capacity and that is where we approve applicants for high speed Internet on five so we're essentially selling our excess capacity, we see that that takes us in.

To those high single digit millions of households in the planning period now. The question that you asked about millimeter wave is really part of a broader question that says whether for millimeter wave or not would we entertain the idea of a capital burden five G home Internet plan and yeah, we would entertain that it would have to be smart we'd have to have a way to make it capital efficient.

We haven't taken any decisions on that I know, if you want to share a little bit of our thinking or are you know kind of what we see as the opportunity off but the short answer of it is we haven't taken a decision on it but of course, we're interested in it well thanks, Mike and Great question, Simon and I I I would say that our two dot five spectrum that we're using today is serving us so well because we have so much.

Excess capacity, we are moving now from 200 and this quarter, we're reporting 275 million Pops covered by this mid band spectrum and we're moving towards 300 coverage by the end of the year, giving us new opportunities also to serve other HSI opportunities then I would say that we're always.

Looking at millimeter wave and we are doing trials and testing, but it's limited in reach and we have to remember that is limited in reach and we will put it into an economic formula over time to see if it makes sense to pursue it.

Terrific.

Joining the call with you very much.

Alright, operator next question please.

Our next question comes from John Hodulik with UBS. Please proceed.

Yeah.

Great Hey, Mike.

Maybe a couple of quick just on the on the competitive environment. You mentioned Verizon has been a little bit lighter from an advertising standpoint, I think from a promotion standpoint too.

And Comcast we heard that you had some success with their sort of.

Relying on for similar with charters and doing just how would you characterize the competitive environment in wireless and as it stands today and sort of what gives you the confidence to sort of raise the postpaid numbers as we look into the rest of the year and then on the buyback a bit higher than we thought and you are sort of pretty far along on the authorization should we expect.

The buyback to slow through the year as you bump up against that existing authorization.

Great. So competition in buyback I'll start on competition, and then turn to Jon Freier.

You know I would say, it's competitive out there and that being said you know I've probably done 50 of these calls for T mobile and that's been the case for all 50 of them.

It's competitive out there and we've made it more competitive through the creation of this version of T. Mobile what I said in my prepared remarks is that we have demonstrated time and time again that regardless of the competitive milieu, we find our way through two accretive profitable growth and that's because our strategy is so differentiated so I'm not going to repeat all that here other than to say of course it is.

Really competitive I find the industry.

A rational level of competition, even though the competitors you talked about have been pulsing in and out some of the offers have been eyebrow raising but they pulse in and out I think to me it feels competitive and rational and we look at our differentiated strategy and what we have within our control and we see our way through to increasing.

Our overall guidance for the year, but maybe tell us on the ground John what your team is seeing as we compete last quarter and this quarter. Yeah. You bet. So yeah like Mike said it is a competitive environment, but that's nothing really new for us and we're seeing continuing to see real solid demand out there. When you look at our overall traffic when you look at the interest we're seeing incredible demand.

That you can see obviously manifested in our Q1 numbers and even so far in Q2, we're seeing really strong demand and like we said earlier in our prepared comments not only strong demand as a whole, but strong demand around prime customers and the fact that we had our highest mix of prime customers, we're continuing to see a very healthy activating.

Revenue number in terms of new accounts switching to magenta, Max and now grew five G plus since we even launched that on Sunday, we're seeing really good numbers as kind of an early peek into whats happening there and then I would just tell you to from what's happening in the marketplaces again, our differentiated position in what we're doing in smaller markets in rural areas and one of the things.

We talked to you about in 2021 at Analyst Day is we had this ambition to move from 13% share of households to 20% by the end of 2025 and what we're really excited about is that we're already halfway there. We're now at 16, 5% in terms of our Cheryl household position so more than halfway there.

I'd halfway there, but in less than half the time or that planning horizon and when you look at what we're doing relative to others, it's really coming down to four things in smaller markets Rural areas. One is we're building out those some the markets out there with network and distribution. We're now playing in two thirds of smaller markets in rural areas 140 million people 50 million house.

Holds 40% of the U S to where really unlock and switching and getting switching moving last quarter. I told you that switching was up 350 basis points on a year over year basis, we're sustaining that with now post page wind shear and the upper thirties three.

<unk> three is when you look at what's happening with high speed Internet, we talked about that just a few moments ago, but that's a new front door for us that gets even before people are thinking about switching mobile we can get into the household as a catalyst for customers to be thinking about moving their mobile services into T mobile from AT&T, Verizon et cetera, and then lastly, what.

We have that's different in those particular markets as we have a dedicated and focused team where we're building out hundreds of stores about you know a little bit more than 400 stores. Since we've started this venture out in the smaller markets rural areas. So when you look what's happened under the ground strong demand really getting after it and 40% of the U S from smaller markets Rural areas and then when you look at the overall health.

Quality of the customer that we're talking to it's never been better. So it's been two years and we've made our way halfway from 13 to 16, 5% market share and we're only really competing in two thirds of the space. It has just been this rapid fire.

Deployment and its you should be so proud of what's happening there.

John at the risk of Filibustering. Your competition question I have one more thing I feel like we shouldn't answer a question about competition unless we talk about cable you know and.

We're a very competitive company. So one thing I'll give our team a little bit of credit on is that we are pretty good diagnostics and telemetry on what's going on in the marketplace and so we're able to kind of see what happens with each of the competitors as the quarter unfolds and I can make a couple of predictions for you and you saw it in Comcast numbers. This morning, very strong charter had a blockbuster quarter, we think and.

Phone net additions and we saw that unfolding through the quarter, but one of the things we tried to do and when we sort of make up at least for us when we make our operating decisions as we try to figure out what's behind it and double click into it and what we see going on is that for example in this big number there about to report.

About 75%, we think of the uptick from prior normal normal levels, let's say a year ago or in non parts sort of printed net adds like drop you a free line in the bag or.

You know kind of low calorie net ads and so we try to kind of adjust for that when we make our operating decisions as to how fast Oran and where and how to compete.

Because they're really it's kind of a quantitative easing happening in the marketplace. So it's just new ads being printed that don't appear to be coming from any of the incumbent players. So it's kind of important to adjust for all that at least for us as we make our operating decisions it looks to us about 75% of the uptick has been those kinds of nets.

So you actually asked two questions.

Your second question was about the buyback.

Right and let me say a couple of things that I'll turn it over to Peter.

I wouldn't read too much into how fast we're going and I cannot make any predictions for you as to how that will play out in the future I can just tell you that generally speaking we're going fast because we think we're getting a relative great deal on the stock and you know it's not normal for management to talk a lot about valuation, but since you know you've hired us to conduct this buyback on.

Their behalf, we have to make operating decisions with an idea in mind about whether or not we're getting a relative value and our team thinks and our board thinks it is and so we have authorized moving quickly because we look at this rapidly developing cash flow picture and a lot of people are increasingly valuing T mobile on our value relative to cash production and we see a lot.

Potential ahead for a diminishing opportunity for us to be able to grab shares at these share prices and so we're moving really fast I cannot predict for you, though what that means going forward, obviously, we're going to take it one step at it yeah.

The only thing I would add Mike because of course, we're I'm personally very.

We're excited about how it's gone.

And while we can't speak about anything more than the 14 billion target.

That's been approved by the board.

Remember what allows all of that is the cash flow generation of this business as you'd mentioned and frankly, both with regards to the longer term the underpinning of that opportunity for up to 60 billion in share buybacks through just the end of 2025 and now here we are in 2020 three already remember this machine and this free cash flow production continues.

Then to 26 and beyond but the one thing I look at is that is the underpinnings that allows the shareholder return machine to go and you just saw US once again raise what was already ambitious guidance for the year based on our confidence just a quarter and so with that regard and how the share buybacks are progressing I'm very pleased okay, we better keep moving here I gave.

You have quite an answer there John .

Alright, Thanks, Operator next question.

You bet.

Our next question comes from Jonathan Chaplin with New Street Research. Please proceed hey, Jonathan.

Hey, guys.

Two questions as well if that's okay.

The color you just gave us on small market some of the progress you're making on market share. It's a super helpful. I'm wondering if you can give us exactly the same context or business in terms of where you are in sure and any color you can give us around sort of a number of business accounts or business lines. You have would be super helpful. And then on the.

The pone freedom plan wage.

Looks like it it really has the potential to unlock trapped customers. As you suggest can you help us understand what the impact of that is on EBITDA expectations for the rest of the air.

You've got on the positive side, obviously, you're pushing people into hierarchy plants, but then presumably you trigger a higher upgrade rate and so that's a cost against it and how do those two things together in the guidance.

Okay sounds great.

Let's go first to Cali, I'll just say.

She's going to give you exactly what you asked for which is some color on what's going on but probably not what was behind what you asked for which is lots of racking and stacking of market share numbers and things like that we're moving really fast here and we want to keep it competitive.

As to some of the details, but maybe tell us what youre seeing in the marketplace connecting snake and thanks, John for the question and you know we have a long standing goal to be the growth leader in business and I'm really pleased to see that we're making very nice progress towards doubling our market share we're growing in customers and in revenue and we're taking share from AT&T and Verizon in fab.

In Q1, as Mike mentioned in his opening remarks, I business day, count graph I've found out ads and our phone churn were all better than Verizon and AT&T reported declines in first not quarter over quarter, we saw two and a half times growth in connecting heroes. So Winnie.

And we're winning across every segment and enterprise we were selected to be the exclusive partner nationwide for AAA and to develop real tight connectivity using partners like Dow pad with a collaboration tool and in our film solutions, Siemens energy and selected T mobile as their exclusive partner U P. S.

Oracle Valerie.

All companies that are choosing at T mobile because of the quality the value and the performance of our network and in the government space I'll add I'm actually really proud of the team for the work that we've been doing with veteran affairs. The VA just selected T mobile as their primary partner for nine years and with over 50000 phone lines.

As well as partnering to create health care solutions in the vertical.

Very excited about the in F&B and what I can say in F&B is we've seen net positive port trends versus Verizon for four quarters straightened around so its great profitable rate great C. L. These competing not only like I said on the best value, but also our superior product and experience and you know this is.

Bye because they've tested the product and we surpassed the competition it could be a little bit of a canary in the coal mine for us too because of that fact that last fact that you just showed shared kelly that businesses aren't going so much on brand reputation they actually they actually check out the phones like sometimes hundreds of them before making these decisions and comparison.

The head and so business is through their testing now that we now have the best network and we do get questions about well how are you going to keep competing if the incumbent guys just keep slashing their prices to hang on to those customers and what is missed in that dialogue is that that's not actually the only factor going into this decision process I mean businesses have corporate liable lines.

For a reason they want to take responsibility for this connection because it's mission critical and we can save them. Some money I mean, where the UN carrier, but they are picking us because we're the best network and that's been a breakthrough that I would say it was not the case the same way a couple of years ago. So you're hearing a lot of optimism. There one thing we did here as we listen Dan where some.

In the industry's kind of saying, hey, there's a sort of a sector decline happening lots of layoffs companies aren't interested in business lines anymore, there's sort of a pause going on that is not our experience and you can hear that in the optimism of what Kelly sing. Okay. Your second question was about our phone freedom and what's going on there.

So maybe we'll start with Mike and then there was a particular EBITDA outlook question associated with it.

Yeah like I mentioned before we phone freedom kind of had two big components to it one was the rate plan go go five <unk> plus.

Which you know Jonathan as you indicated has this benefit of upgrade built into it and then the second thing, which I think is also an important input to the second part of the question. You asked is we launched a promotional program called the easy unlock and what the easy unlock the insight it's really going off of is both what Mike talked about in terms of the dissatisfaction.

Fashion that AT&T customers have 50% more report that they want to leave their current carrier than Verizon and AT&T, and Verizon and T mobile and when they want to leave it's incredibly difficult difficult both because of long term contracts, but also because they're they have the most customer unfriendly unlock appropriate product.

Process and the entire industry and what we wanted to do is make switching incredibly easy and that's what we did with that program and I think that's one of the things that will really help us unlock the switcher pool, a little bit, which when we know happens T mobile has the disproportionate winter.

Yeah, and with regards Jonathan to the EBITDA guidance, I mean, frankly, even at year end, we had already assumed a certain level of opportunity here customers were clearly telling us, especially through the back half of last year, but they are looking or what the best value Best network combination can provide in the form of magenta Max at the <unk>.

And so that was an inspiration that we said we were going to pack and even more fully featured playing out there. So I'd say all of the revenue assumptions around this as wireless customer acquisition, leading to high see all these as all packed into core EBITDA.

The guide that we provided you I know there was also a question on social around well, how does that impact the contract asset and frankly to say that was the contract as it went up sequentially from Q4, but that was really some of the promotions that we had in place and continued into Q1 as well as some of the business promotions, but in the current core EBIT.

<unk> that we put out there there's an assumption actually about the contract asset will decrease through quite an immaterial net impact for the year and again in the current guide that we gave.

Good stuff, okay, great. Thanks, guys.

We go over to that.

One's coming in on Twitter.

So off get ready, there's you're always popular and your topics always popular online.

Let's see I'll go to Bill Ho I want to talk about the network.

And this is really about he's giving some stats here, but I think the question is really about can you tell us about depth and breadth.

So you know we.

We have 275 million.

Million people covered by ultra capacity five G mid band and we're going to 300, how easy or hard is it in these last 25 or how easy or hard is it in the last 100, and that's kind of interesting if you compare to where the competitors are right now and what's still ahead of them. But then in that can you also talk about that how much spectrum is where we're going right and it was.

Start with the breath.

We continue to build out and we are now reporting the 275 or to catch here and we are about 25 to go we're very confident that we're going to reach the $300 million.

By the end of the year.

It gets harder and harder and as a rule of thumb I would say that it's about three times harder for every 10 that you add so that's about as hard as cats and the reason is of course, the geography of the U S where.

It's a very vast geography with a very high population density in some communities. So it's very easy when you start out and it gets harder and harder to do it but.

But we're very confident that we're going to reach that with the build plan that we have today.

When it comes to the to the depth of the network is just amazing how we continue to just move more and more frequency assets over from LTE to five G. We today have 150 megahertz dedicated on our mid band, which is giving us tremendous speeds will increase our speed advantage on the downlink speeds.

Per the competition in this last quarter and we are actually going to end up the year with 200 megahertz of dedicated spectrum just on the mid band. So it's just fantastic to see that journey moving forward with our tech team, which means with each passing day. The overall capacity of this network is rapidly expanding its a fad.

Turning thing when you listen to what <unk> says too about how the easy part is that first 100 and something million Pops right.

Generally corresponds to where our competitors are and so we get questions. A lot about hey, you guys jumped out with a couple of your lead and five G aren't they catching you and hopefully you can understand when you see where we already are and where we are at the end of the year now they're still years behind us because that last part is really difficult and it's really important for.

For the overall.

Perception that a customer has about the brand you have to be great outside the core urban's it with a high capacity offering for somebody to believe you have a high capacity offering and that matters to them, even if they don't live leave that space. All the time, so it's really important and it's a one of the many reasons why we have a durable leap okay.

Should we go back to the cost.

Let's do it operator next question please.

Yes, thanks for taking the question.

Mike. So you made an interesting observation when you were talking about churn you pointed out that you had the best year on year improvement in churn, but you also noted that you don't yet have the lowest churn in the category and that's interesting. Because you also noted that you have very large cohorts in your customer base that has a group exhibit a lower churn profile than comp.

We'll cohorts at your peers. So it certainly seems like there's an opportunity to keep driving churn down across the base. So when you look at the pockets of your customers where the churn profile is still elevated why is that you know how do you think about how much of an opportunity that is in is it actually part of your underlying business plan to continue dry.

Ensuring lower or do you think you've hit some sort of plateau.

Yeah. Thanks, Brett.

Listen I think we're at a fascinating sort of historical moment in the history of our company.

If you think about it we have spent six years on the chapter of our company comprised of Dreaming about and then completing and then integrating the merger that would allow us to leapfrog AT&T and Verizon from being last place in the LTE era to first place in the five G here and now we've gen.

<unk> gotten that done we have the best network in the country, we have the best values and we've generally completed that merger and so now you know we have work to do to convince the American public that it's true and I to me I'm inspired a little bit by the journey of Standalone T mobile that did achieve the lowest churn rates in the industry even without the.

Advantages of the network strength and so now you see us really focused on prime customers. We had the highest prime rate in the history of our company right now you see us focusing on business customers, you'll see us focusing on travelers.

Some of the best customers in the industry now waking up more and more to the fact that T. Mobile is the best choice for them and that's a journey.

Convincing the country that what's true is true will take some time, but let me tell you. This our goal you know the answer to your question is yes. Our goal is to have the lowest churn in the industry on postpaid phones and we already have it on prepaid we're going to have it on postpaid phones of course, we should I mean, we have the best network and the best prices that.

We should have the lowest churn and so we've been through this worst to first journey before with Standalone T. Mobile, we're kind of midway through it with the new version of the company and full of optimism about where it can finally land.

Those big sort of quarter by quarter kind of merger driven lurches forward are mostly behind us right because the integration is behind us. So now it's that hard slog just like we showed you we could do when we were Standalone T mobile.

Thank you okay.

You bet.

Great next question please.

Our next question comes from Michael Rollins with Citigroup. Please proceed.

Thanks, and good afternoon, Hi.

Two questions first going back to the customer unlock opportunities, whereas the industry and T mobile on Esim capabilities and is this a topic that's important to helping you propel unlocks in switching opportunities and then just secondly, do you have visibility on whether or not dish will exercise.

Its option to buy your 800 megahertz spectrum and if they don't.

What is the next steps for T mobile with respect to that spectrum band.

Great I'll start with the dishwasher and then that gives Mike a chance to think of an answer on the ECM one.

The.

No we don't have visibility into it yet dish asked for an extension and the decision we didn't object to that of about 60 days.

And the way our consent decree works is it's entirely up to them. We're here to support them and so we'll wait to hear what they decide I'm in touch with Charlie.

So you know as I learn more we may engage in and be able to be helpful. In that.

But it's the way it works is it's entirely up to them and so if they want the spectrum under the terms of the consent decree.

It's theirs and if not the way. It works is that it would go to auction and.

It would maybe be in the hands of someone else and so we'll wait and see how it all unfolds and we're here to support whatever decision that they make.

On E Sim.

This is fascinating how this has all happened across the industry and there hasnt been that much discussion about it.

One of the Limiters has been this phone locking.

Nominal that you know, we're talking about with phone freedom, because what happens within ECM is unlocked phone, even though that that second Sim is available. If the phone is locked you still can't use that second Sim very easily and so theres been some barriers to the friction coming out of this system the way E. Sim, maybe promised but we're big fans of it.

You saw us a few months ago introduce great switching capabilities for you to actually try our network on the second Sim. If your phone allows that that's been a lot of fun for people to be able to test drive our network, but Mike maybe you can give some color on what we're seeing.

Was going to say something really somewhere where we're big fans of Esim really for two big reasons.

One we think it's a much better customer experience you don't have to deal with plastic and switching in and out of your phones. Every every couple of years when people are upgrading.

And for a company that wins when switching happens eastern desert doesn't make switching easier and we've tried to take advantage of that with the technology that Mike mentioned earlier, where we launched an app, where you can easily test the T mobile network side by side with your incumbent network on the same phone and when you're ready to switch you can just do it in a couple.

Clicks and so yeah, we're fans of visa and were really supportive of it and we're optimistic that it will help accelerate even programs that we talked about today with that phone freedom.

Okay.

Twitter Roger Entner.

Want to talk about T mobile for business I think we hit most of that unless you want to provide any color on what we're seeing with HSI in T mobile for business and then separate question about.

With our new go five G plans. They are raised prices do we think that'll impact our subscriber growth and I'm glad you asked that because no and in fact, the way we kind of did this as we added these plans and that won't be immediately obvious to everybody, but we added them. So if you present at retailer online you can still get magenta and magenta Max but these new plans.

In the early days now that we've put them out there theyre really turning out to be very popular and so I'm not worried even even notwithstanding the fact that theyre being added I'm not worried at all of these are going to be really popular plants, because we design them right.

The needs that we're hearing customers want in the marketplace and this is really an interesting thing because we call. It go five G for a reason.

Our five G customers are using massive amounts of data on our network and people say well, what's the what's the killer App of five G. And there are a lot of killer apps are five D. But one of them is usage on your smartphone, which if you have T mobile and magenta Max or now go five G. Plus you have massive connectivity and customers are so.

Looking it up and that's a real differentiator for us and so we want to play into that advantage and encourage that kind of usage because once they see what their phone can do they're not going to want to live without it and we're already seeing that now at scale with millions of customers at magenta Max or above.

Okay.

So let's go back to the phone Jud, let's do it operator next question. Please.

Our next question comes from Craig Moffett with Moffett Nathanson. Please proceed.

Hi, three questions if I could.

One is I wanted to stay with the dish theme for a minute.

It's becoming more and more openly discuss that.

This may eventually be a liquidation story if that were to happen.

And if the FCC, where we're willing and how much appetite you have for more spectrum.

And it sort of leads into my my second question, which is just with respect to two five G.

The new applications has been somewhat slower to develop than might have been expected.

Wonder if you could just update us on five G usage growth and how quickly.

The consumption of network resources is proceeding with five and if that is the differentiator you had hoped and expected it to be given your spectrum and network advantage.

Yeah.

On the first one.

Now I'll turn to Mike for the second one on the first one Craig I'm not going to answer it because my friend John Stankey kind of did answer it and I think he was very unfairly misquoted you know he gave an innocent answer to a hypothetical what kind of along the lines of anytime there is spectrum of course, we're interested and there are all kinds of headlines that he wants to buy additional spectrum.

Listen I first of all I'll say I think it's a little premature at question two I don't I don't count dish or Charlie out very easily you know I've known him for a long time. So I think it's a premature question.

But then finally it raises a larger issue.

And if the if you reframe it this way, which is does this wireless industry have enough spectrum over the long haul for American competitiveness I'd say never you know always theres an opportunity for more and you know that that speaks to public policy.

The FCC losses to auction authority this year and T mobile and others have been urging Congress to restore that because we need our strong regulatory body to be able to work with other agencies create an ongoing long term pipeline of spectrum for all the players in this industry. So that we can continue to have connectivity in this country. That's the best in the world.

And I know the FCC feels that way.

I presume my competitors feel that way, but I think it's very important that we get back on track with this and that auctions that are completed.

Put to use for the American consumer because there's work that's pending there and that the FCC regains its authority quickly to be able to lead in this in this space going forward the way they've done so well in the past and I think that's very important for our company for our competitors, but also for American competitiveness.

Second question is about absent <unk>.

<unk>.

It was sort of it kind of came out.

And I will say our competitors kind of led the way on this with a lot of hype and euphoria around 20 gigabit connectivity in millimeter wave and it's going to change the world and you know, we're all going to be kind of human cyborgs and stuff like that and we kind of never felt that way I mean early on we went right to five G is a much better like 10 times better at Lee.

<unk> four <unk> and that the killer apps are gonna be smartphones at first and theyre going to be our ability to get after home broadband and we we focused on the mid band asset and eventually the rest of the industry followed we were right.

And the average T mobile customer is getting 10 times the connectivity that they got in 2018, 10 times faster, that's amazing and so and what they're doing with it is amazing and so that obviously is unfolding, but theres still the kind of cyanide questions people get which is where's all this augmented reality you said would come.

And I'd say well first of all you know our jobs to create a great network and we have the best in the country and as hardware and software developers look to our network to create innovations around I think they will choose T mobile, whether they're moving faster or slower than predicted it doesn't directly affect our business that much we need to be the network that they choose as they.

Get inspired with massive connectivity not just in fits and starts in parts of the country, but all across this country. The way T mobile can uniquely provide and that's why we work with developers the way, we do but the rate and pace. They go that that's up to them.

Anything that the only other thing I'd add is let's not forget about HSI because HSI I do I do think is still one of the big killer apps for <unk> that you're seeing play out right now 3.2 million customers running their home internet in their house over our five G wireless network and using hundreds of gigs a month on.

Average it both in there.

The Big top 100 markets, but also importantly, many customers in rural areas. Some of which this is the first high speed option that existed and it only happened because of <unk>. So I don't think we can forget about HSI being one of those big killer five G applications.

Terrific that's great.

Helpful.

Alright.

Operator, we've got a time for one more question. It's the last one array or we're just getting warmed up.

Alright, Great. Our next question. Our next question comes from David Barden with Bank of America. Please proceed.

Thanks, So much guys, Yeah, Hey, Mike Thanks for taking the questions I'm glad you're you're warm the.

I guess the first question would be you know.

With the stock.

The performance of the business has been great and the stock's kind of just keeps bumping up against this $1 50 level and I want to come back to this notion of the Softbank top up shares 48.8 million.

Has there been any evolution in your thinking or conversations between yourselves and D T and softbank about using the remaining buyback authorization is simply clean that whole system that whole exercise up it seems like it would be the most elegant and non disruptive way to do it and I'd love your comments on that and then.

The second question is and I kind of know what your answer is but I just kind of want to hear how you frame it which is that you originally for most of the states not every state.

Pledge that you would not raise prices in mobile for three years and that expire at April one 2023, and then you came out with your new carrier plan, but it's within your toolkit now to be able to raise prices, if if inflation or other things happened could you kind of give us a sense as to how you.

You think about that relative to kind of T Mobile's brand positioning in the market. Thanks.

Yeah sure.

We maintain and have for the entire decade long journey of the UN carrier and envelope of superior pricing versus our benchmark competitors and we intend for that to continue now as things shift and move we maintain that envelope and it's not a it's not a matter of sort of a static price or being dogmatic about a price.

As always gotta be static, but we always want to be a relative value and we can do that sustainably because we have a great balance sheet. We have the right capital structure, we have the right spectrum structure and other advantages that allow us to continue to profitably have a pricing envelope superiority versus our benchmark competitors, so but as things move in the market with.

Or otherwise of course, you know, there's an opportunity for us to move along with those things, but we have you know the customer is our north star and our brand value proposition to take care of that's why you have seen us so focused on offering higher value offers that customers' self select up to and it really shows their love for our brand that when we put something out there like <unk>.

<unk> Max or now go five G plus they flocked to it.

Our customers are buying up our rate card voluntarily in an era of inflation because they appreciate the value of what we're putting in front of them that speaks a lot about the brand and about the covenant between us and our customers on this brand.

Okay. Your first question was about the.

The Softbank true up shares and just kind of remind everybody. There you know there is this 48 million some shares that would trigger upon $150 stock price being at an average 45 days the Wap and.

And the short answer to your question is of course, I mean of course, we talk to them, they're close partner of ours, we talked to D. T. All the time.

We're aware of this question in this issue.

But we have nothing to report and so but I mean, it's of interest and it's you know it's not lost on us why you're asking the question.

There ever was to be a transaction has to be something that would that would work for everyone. I will say this.

And the earlier question about our buyback pace, we've already bought back more shares than this potential dilution of that and we intend to buy back a lot more shares going forward.

Should our capital program continues to support that as we've outlook. It would and so this is this is actually a fairly small potential event in the Grand scheme of the shareholder remuneration that our cash flow production supports and so anyway without anything to add to all that now are perfect. We said anything to add to the whole show.

Show must go on right.

Well well, we appreciate you guys. Thanks for tuning in and for asking all these questions I am so proud of our team. It's a fascinating year. It was fascinating for us to watch how it all started in the different perceptions people have but one thing I hope that you take away from US is that we are a team maniacally focused on delivering for you. What we promised you we would do.

And that's what we show up and try to do every single time and I'm. So proud that this was one more quarter, where we were able to put down great results and outlook for you in 2023 that we're gonna be proud of so thanks for tuning in everybody Celia.

Yeah.

Ladies and gentlemen, this concludes the T mobile first quarter earnings call. We thank you for your participation you may now disconnect.

Pleasant day, everyone.

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