Q1 2025 T-Mobile US Inc Earnings Call
James Schneider, John
Unknown Executive, Peter Osvaldik, Jud Henry
Unknown Executive, Peter Osvaldik, Jud Henry
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 on our Investor Relations website with that let me now turn it over to Mike. Okay. Thanks, Kathy Hi, everybody. Thanks for joining we're coming to you from Bellevue, Washington today.
Mike: Got the whole team here and first of all let me welcome Sweeney go Pollan, our new Chief operating officer.
Thanks.
Mike: And can I say, it's still say new cuts you're already making such a big impact screening certainly joining us at one of the most exciting times in our history welcome to the James. Thank you, Mike it's great to be here. So turning to our results. This was another really strong quarter showcasing T mobile's outside.
Mike: <unk> performance versus peers and versus the high expectations, we set as well.
Mike: Listen I get a lot of questions about how we can be this consistent even as the macro environment constantly changes delivering industry, leading customer service revenue and EBITDA growth yet again.
Mike: And the answer is simple it's that our team is relentless when it comes to execution innovating on behalf of customers and importantly, we are building on T. Mobile's durable advantages of the best network, the best value and the best teams, our obsession with delivering for customers.
Mike: Mers and for shareholders quarter after quarter.
Mike: Let's start with wireless it is all about growth with even more customers coming to T. Mobile in Q1 this year than last year. In fact, we set a new record with our best ever Q1 for total postpaid net additions.
Mike: Postpaid gross additions were also a Q1 record.
Mike: In fact, you'll recall that last year 24, our greatest growth year ever.
Mike: And yet gross additions were up year over year. This Q1 versus that year in every single category across total postpaid phones non phones and even five G broadband.
Mike: This is an important indicator.
Mike: Okay seeing that customers continue to choose T mobile at higher and higher rates.
Mike: We also led the industry once again in postpaid phones, adding 495000, and importantly, we did it while growing our share of households, not just in smaller markets in rural areas.
Mike: But across the top 100 markets as well.
Mike: And our momentum is equally strong for T mobile for business, where we continued to lead the industry in both total postpaid and postpaid phone net additions, while adding the most ever customers in enterprise a record quarter.
Mike: Switching back to consumer our industry, leading value prop continues to encourage new customers to self select up the rate card, 60% of lines on new accounts continued to load onto our premium plans that's about double that of our current base. This contributed to postpaid ARPA growth.
Of nearly 4% our highest Q1 in eight years.
Mike: And we're not slowing one bit on the value and innovation leadership that customers love about T. Mobile just this week, we unveiled the latest value propositions from T. Mobile two very simple choices that we call experience more and experience beyond our new experience plans are the best Express.
Mike: <unk> of T mobile offering exactly what customers are seeking today and our new offers are designed to make it even easier for customers to compare and understand the superior value that T mobile delivers okay.
Mike: Turning to broadband I'll start with our five G broadband offering for the 13th quarter in a row, we led the entire broadband industry and customer growth with 424000 net additions we achieved multiple new records from our lowest five G broadband churn ever.
Mike: Adding the highest ever net business high speed Internet customers as you can see our new pricing construct which is aligned with our mobile offerings on good better best hearing is resonating really well with customers. While at the same time, we saw our highest ever Q1 ARPA growth in broadband showing that the business is in a really good spot.
Mike: Let's turn now to T fiber with the completion of our transaction on April 1st for Lou Mouse. We're now set to officially launch T. Fiber later this quarter something that's been in pilot for the last two plus years. This is the beginning of something great. Another step on our journey of profitably.
Mike: Serving even more broadband customers leveraging our many go to market strengths, including our million plus fixed wireless waitlist.
Mike: And we can't wait to close our Metro net transaction soon to further expand T fiber and bring better broadband choices Tomorrow Americans.
Mike: As always our ability to take share is enabled by our world leading five G network, where we have the best assets and a multi year lead and yet we still set the pace on implementing the most advanced customer facing technology. We're excited today to announce that T mobile.
Mike: Is now the first and only carrier in the country to roll out five G advanced nationwide, which is enabled by our nationwide <unk> Standalone core five G advanced is faster and more dynamic and more efficient we achieved a record 6.3 gigabits per second.
Mike: Download speed in a recent real world field test and we're also able to better serve our business and customer government customers with improved slicing and lower latency.
Mike: And of course third parties, just continue to affirm our leadership with Big Awards coming in from both open signal and root metrics yet again.
Mike: Now.
Mike: As cool as all this sounds I want to be clear that we arent doing these things just to see if we can we implement the technology advancements at this pace because it creates a superior customer experience, enabling us to squeeze more customer facing value out of every capital dollar we spend this.
Mike: Is just fundamental to our approach and it always has been ever since we were a lot smaller and it remains a core advantage today.
Mike: Speaking of.
Mike: We continue to rapidly rollout our beta of T satellite now with hundreds of thousands of active users I'm going to remind you T. Satellite is the only mobile phone satellite network that keeps you connected automatically no apps to open no searching for a connection phone pointed at the Sky tried to get our message out.
Mike: And most importantly, no missing messages if you leave the footprint of your terrestrial network without even knowing it. That's our goal. This is a one of a kind service and our aim is simple to make T. Satellite just work. So you are always connected and reachable even with your phone still in your pocket.
Now once in a while we break news on this broadcast and I wanted to let you know that after gauging the incredible response from customers, including broader than expected interest from competitors customers.
Mike: We've set our final launch pricing for T satellite at just $10 a month except.
Mike: Except of course for our experienced beyond and go five gene X plans that will include it for free and we're going to honor this price for AT&T and Verizon customers as well because this is the only place they can get a service anything like this with over 550 satellites and service and count.
Mike: Commercial service starts in July and this gen. One pricing will be good for at least a year.
Mike: For everyone.
Mike: Okay shifting gears, we're not only innovating in network, but a big part of our exciting growth journey centers on transforming customer experiences with digital and AI.
Mike: Our flagship digital platform T life is clearly resonating with customers compared to just last quarter, we've nearly doubled the percentage of our postpaid phone upgrades completed digitally with well over half of upgrades being digital by quarter's end and growing.
Mike: And our new intense CX AI features pioneered with open AI are already significantly reducing the need for customers to reach out to our care team, we're solving customer pain points before they happen and meeting our customers exactly where they want based on these early results the audacious multi year.
Mike: Goals in this area that we set out last fall appear to be more than on track.
Mike: Okay, I want to come back to our underlying theme of delivering thoughtful profitable and durable growth our best in class customer results also translated into industry, leading financial growth across multiple metrics again in Q1.
Mike: Our postpaid service revenues once again grew 8% year over year and overall service revenues grew 5%.
Mike: That's a rate that is more than triple that of our next closest competitor.
Mike: For adjusted EBITDA also grew 8% year over year double the average of our wireless peer group.
Mike: We also delivered $4.4 billion in adjusted free cash flow, a new Q1 record translating to once again industry, leading adjusted free cash flow conversion from service revenues of 26%, a new Q1 record and about double that of our closest competitor.
Mike: We have had a powerful start to 2025.
Mike: Our story is so simple and it's consistent we have built sustainable long term durable advantages, allowing us to continue to offer a highly differentiated value proposition that's right on point, our execution, our focus on customers and on setting the standard in innovation and.
Mike: Allergy transformation are the things that continue to set us apart, we have always aimed to deliver thoughtful profitable and durable growth and that's exactly what we continued to do across every area of the business again in Q1.
Mike: Let me end by saying we are far from complacent.
Mike: This team right here, along with our thousands of coworkers come to work every day and act like we are running for our lives and constantly coming up with new customer ideas and new ways to improve how we serve them to smash the pain points that still make this industry notorious at T. Mobile we call. This mindset, we won't stop.
Mike: So.
Mike: We won't stop and for those of you that are counting on us and I know you are I want you to know we won't slow down either.
Mike: Okay, Peter over to you to give an update on our guidance all right. Thanks, Mike as you can see 20 twenty-five is off to a strong start so let me provide an update of our expectations for the full year with our financial guidance now also reflecting the inclusion of Vista Bliss and Loomis starting with customers we continue.
Mike: To expect to deliver total postpaid net customer additions of between five and a half and 6 million of which approximately half will be postpaid phone net additions both of these remain our highest ever expectations at this point in a year.
Mike: We're also increasing our postpaid ARPA growth expectations to be at least three 5% for the full year as we see continued deepening of customer relationships. This is up from our prior guidance of around 3% and at the same time, we expect postpaid phone <unk> to grow at one 5% this year, even higher than that.
Mike: Last year's growth of 1.1.
Mike: With the higher expectations or ARPA and <unk> growth. We now expect 2025 organic service revenues to grow at an even higher rate than where we guided last quarter.
Mike: We now expect core adjusted EBITDA to be between 33.2, and $33 7 billion for the full year up just over 5% at the midpoint.
Mike: Turning to cash Capex, we continue to expect cash capex to be approximately nine and a half billion.
Mike: Finally, we now expect adjusted free cash flow, including payments for merger related costs to be in the range of 17, and a half to $18 billion driven by both margin expansion and capital efficiency and resulting in industry, leading service revenues to adjusted free cash flow.
Mike: Version.
Mike: Alright, let me also spend a moment, providing some more color on the close of the JV transaction, which acquired limos.
Mike: Going forward the consumer experience in our retail business is fully owned by US and we also share in 50% of the JV economics, we will treat the acquired customers as a base adjustment in our second quarter results.
Mike: And as we fuel customer growth, we expect the retail business will be slightly accretive to service revenues and neutral to adjusted EBITDA and adjusted free cash flow this year.
Mike: Additionally, our 50% equity stake in the JV will be reported below the line as an equity method investment and is expected to be immaterial to net income this year.
Mike: After closing Metro net we will provide you with a more comprehensive update regarding the contribution of both of our fiber JV is.
Mike: To sum it all up in Q1, we continued to show we can consistently execute and continue to deliver outsized and profitable growth.
Mike: And with that I will now turn the call back to Kathy to begin the Q&A Cathy Peter Okay, Let's get to your questions. You can ask questions via phone by pressing Star then one and via acts by sending a post two at T. Mobile IR are asked Mike Sievert, using cash tag T. M. U S. Neil I'll start with a question on that.
Speaker Change: Operator first question please.
Speaker Change: Our first question comes from Ben Swinburne from Morgan Stanley. Please go ahead with your question.
Ben Swinburne: Thank you good afternoon, I guess two questions, maybe I'd love to hear from screening I know, it's been a short period of time, but you know the company well now that you've been in the seat. What do you think is the biggest opportunity ahead at T. Mobile anything you think the market in particular and it doesn't fully appreciate.
Ben Swinburne: And then I don't know if I can get more out of you guys on T fiber, but now that you've closed loomis and you're going to start selling the product can you tell us a little bit more about sort of the go to market and expectations for kind of driving that business into it.
The base, especially the fixed wireless waiting list in your existing wireless customer base seems like a.
Ben Swinburne: I'm pretty big opportunity out of the gate here now that you've closed that so would love some more color on Luna is now that it's done.
Speaker Change: Thanks, Ben will restart with screening and I'm going to go over to Mike Katz, Okay cool.
Mike Katz: Thanks for that question, Yeah, it's been about.
Speaker Change: 50 days Inn, and like you said I'm not new to this company has been on the board for well over four years, but.
Mike Katz: Just some early impressions nothing quite prepares you for being here.
Mike Katz: Incredible combination of a focus on kind of smashing customer problems.
Mike Katz: Huge intensity and commitment to quarter to quarter delivery, but also an incredible boldness for the vision and making a step change difference to this industry and to our performance. So I've really enjoyed my first few weeks here.
Mike Katz: To your specific question on the biggest opportunities.
Mike Katz: I think.
Mike Katz: This company has got something incredibly special in terms of its culture.
Mike Katz: <unk> customer problem I think the big opportunity, we have is taking that alger and putting that together with what we have now as easily the best network.
Mike Katz: In this industry along with the huge strides that we've made in our digital capabilities and Mike talked briefly about them you know more than half of all the upgrades now being done through T life I think the real big opportunity is to bring together. This culture. This incredible thing that we've built along with the best network and now.
Mike Katz: World Class digital technology to continue smashing customer problems in a different and more enabled context.
Love It okay. Thank you <unk> fiber the go to market approach how can we expect like yeah. No. Thanks for the question Ben and we agree with you where we're also really excited about this and we think it's a big opportunity and for exactly the reasons that you. Just said you know the the assets that we have we think can make a real difference as we get into the T fiber biz.
Speaker Change: <unk> and Mike said that we're going to do our launch late later this quarter and you'll you'll see us leverage some of these capabilities in our go to market approach you know things like our brand and leveraging our national advertising campaigns that we already do for our broadband business today at things like on the ground distribution and if you look at a business like Loomis <unk>.
Speaker Change: I've never had the benefit of our big retail distribution.
Speaker Change: Distribution in the ground in those markets with with big customer flows coming into them that will be immediately be able to take advantage of the.
The customer list with HSI, because HSA as a fallow capacity business and we do have customers like Mike said over $1 billion that are sitting waiting.
Speaker Change: Waiting span from T mobile some of those customers happen to be in these lose most markets that will immediately be able to serve so you're going to see us start to and begin once we do our commercial launch take advantage of those and bring people straight onto T fiber.
Speaker Change: Thanks, guys perfect. Thanks, Ben.
Speaker Change: Operator time for the next question please.
Speaker Change: Our next question comes from Sam Mchugh from BNP Paribas. Please go ahead with your question.
Speaker Change: Go ahead Sam.
Speaker Change: Okay, let slip I realize you are next power.
Matt: Yeah, Hi, Matt I'm, sorry, I was on mute I did the classic.
Speaker Change: Hi, Irene is all a couple of questions. One is just on the price ups, you manage them incredibly well last year.
Speaker Change: In terms of churn, but some of your peers have struggled more recently I think with price ups. So as we're looking into Q2 should we think about pretty decent step up in churn rates I guess, that's question one and two it looks like you could have gone a bit heavier on you know kind of marketing and promos and trying to win customers in Q1.
Speaker Change: As you can see the strong EBITDA results did you hold back in the first quarter I'd love to hear your views on kind of industry dynamics. Thanks.
Speaker Change: Alright, well thanks Sam.
Speaker Change: First of all on the pricing you know what we are out there doing right. Now is really just completing a project that we started last year to get after some long outdated plans you know first price increase of this kind in more than a decade, and I think because of that our customers.
Speaker Change: I have a lot of evidence of it I think they understand especially since we take our time in a test and learn method like we've been rolling this out we understand how to talk to them about it and explain.
Speaker Change: Explain to them, what's behind it and they've been accepting it and so that's gone really well, it's only affected some customers, but it is millions of legacy rate plans and the churn artifacts that you see from that are temporary in nature. I mean, the notifications were in one queue. The bill actually changes in Q2, so you see the effects across both quarters so far.
Speaker Change: It's coming in just as expected. So you know and again that shouldn't surprise you because we've been doing this in such a stepwise fashion over a period now of many months of rollout.
As it relates to promotional intensity.
Speaker Change: My personal view and I'd like to turn to Jon Freier next.
Speaker Change: Is that the nature of competition keeps changing but the extent of it isn't changing the way a lot of investors think of this as a kind of a misunderstanding out there I want to be clear that like overall in the industry. While it's competitively intense the industry overall is more successful now than it has ever been.
Speaker Change: Think about that overall industry cash flows over the past 12 months or they are just about 50% higher than 2022 levels. Just three years. Prior that's amazing and that's on the strength of five gene. It's not on the back of customers customers are experiencing three times more data and four times better.
Speaker Change: Feeds across the industry not T mobile than just five years ago for every dollar that they spend so customers are getting more the industry based on cash flows, which as you know cash is king is more successful than it has ever been even in the environment of the promotional intensity that you're asking about specifically on Q1 and every <unk>.
Speaker Change: Single quarter, we can do more than we do and we're guided by this.
Speaker Change: This discipline that allows us to go after the ads that we think are going to make the biggest long term difference to our business that we can really serve people over the long haul and maybe you can talk just a little bit about the competitive dynamic that we saw in Q1, John and how we were able to deliver these outsized results. Yes. So as everybody knows as you can see from the release there was just a phenomenal quarter for us of one.
Speaker Change: One 3 million total postpaid net additions in and leading in the overall gross adds across every single postpaid category and like Mike said, just a few moments ago. The competition is always changing sometimes you're competing a little bit more on pricing on your traditional plans, sometimes it's a little bit more on devices and what you see in this dynamic.
Speaker Change: It is more of a of a promotional on devices kind of competitive intensity in the marketplace, but that's been pretty generally consistent from the last several quarters and what we have found is customers continue to love a great product a great value and paired with an.
Speaker Change: <unk> experience and that's why you're seeing the kind of responsiveness that youre seeing from us quarter after quarter after quarter and not just in some of our high growth areas, but also across like Mike said in his prepared remarks across our top 100 markets and across smaller markets rural areas, even in our top 100 markets, we're still growing our cross <unk>.
Speaker Change: Each one of the cohorts that we talked about in our capital markets day, where we're number three in share position or number two in share position, perhaps even number one in share position, we're growing across each one of those categories and continuing to find ways to win that's resonating with customers I think a lot of people would be surprised to hear we're still gaining share in the top.
Speaker Change: 100 markets versus a year ago and you know.
Speaker Change: We're not but some are and you know just goes to the strength of the differentiation of the value proposition I think T. Mobile is in a spot right now where it's more differentiated versus the competitors than it ever has been in our history with the strength of our five G network. All the things we're doing with T satellite the magenta status kind of member benefits of membership.
Speaker Change: Benefits that we're able to convey to people and the day to day superior experience that only T. Mobile people can provide and that's showing up an all time record Q1 customer results. So you know my general sentiment on it as does.
There's a great neighborhood this industry and T mobiles, the best House in it.
Speaker Change: Awesome.
Speaker Change: On the EBITDA.
Speaker Change: Yeah, I mean, it's just as Mike said, it's every the question of are we slowing down in terms of what we could've gone again, it's absolutely you know we optimize every quarters. We've long said for the most value creation in terms of the number of medicine Q1, much like on customer growth much like on subscriber growth much like an <unk>.
Speaker Change: Grow for service revenue growth was very strong from an EBITDA perspective, and that allowed us of course with the M&A activity as well to increase the guide for EBITDA for the year and have confidence in delivering that guide as you know one of the things. We were doing this year is investing for some of those amazing opportunities that we laid out a capital markets.
Speaker Change: Day that underpin the 2027 guidance that we gave and we see a lot of that whether it's now shifting over to new macro site build on a network or continuing to invest in digitalization and the opportunities that that unlocks from a customer value perspective, and love perspective, and secondarily the cost elements of it we'll see a lot more of those happen as.
Speaker Change: We get into Q2 and the balance of the year. So that's kind of shaping as I think about EBITDA, but very pleased obviously with the Q1 results across all financial metrics.
Speaker Change: Thanks, Sam Operator next question please.
Speaker Change: Our next question comes from Peter Zaffino from Wolfe Research. Please go ahead with your question.
Peter Zaffino: Alright. Thanks.
Speaker Change: If I may one.
Speaker Change: New Molson Metronet and U S. Cellular you have a lot of future EBITDA that is coming over the next several years and not in your long term guidance.
Speaker Change: Budgeted the cash for those excluded from your buybacks and your long term guidance since I wondered when and how you might incorporate those acquisitions in.
Speaker Change: Your EBITDA guidance, and then kind of on a parallel M&A track I Wonder if you could talk a little bit more about cable assets as theoretical strategic assets for T mobile, especially as the number of fiber assets dwindle. Thank you.
Speaker Change: I will turn to Peter on the first one maybe I'll pick up the second one yeah. I mean, that's a simple honestly, we'll update you subsequent to as and when those acquisitions close so both for metro and that as I said earlier, we'll give you a kind of a bigger picture around the total T fiber strategy. Once we close that and U S. Cellular will give us an update to the initial figures that we gave in the press release early on.
Speaker Change: As and when we close the transaction, but you're absolutely right, it's very exciting to be in a position where those strong 2027 guidance figures that we gave actually excluded all of these elements of M&A. So that's something but now some of the cash but includes the cash outlay, Sam I'm going to talk about.
Speaker Change: The capital investment profile and.
Speaker Change: And we'll do that just like we did it for Luna until we closed Lou most of this quarter as you saw in our guide we indicated to you that this will be slightly accretive to service revenues will be about neutral to EBITDA. This year, because it's a growing business and subscription business.
Speaker Change: And that overall between that and our positive momentum on the ARPA were seeing positive upside to our prior guide on service revenue is probably squeaking and closer to 6% than the prior guidance of around 5% based on both those dynamics. So second question do we want a cable asset.
Speaker Change: Hard to answer that one you know I don't want to sort of.
Speaker Change: Laid on rumors and all that stuff, but I think we've kind of mostly shown our hand here you know look we're a growth company I mean, we are a growth company and so what you show US what you see is our interest in five G. Broadband that has made us the fastest growing overall broadband company in America for 13 quarters and you.
Speaker Change: <unk> also seen US show our hand in terms of wireline Internet as having an increased interest relative to other things in pure play fiber why because it's a growth category and we also think it's the most elegant way to serve customers. It's lower cost, it's a superior product and it's more consistent with the way we run our company. So I can.
Speaker Change: Talked broadly about rumors and speculation and all that but our strategy is pretty clear here and I love. The hand, we have because we are leaders in broadband today intend to continue to be and I think youll see T fiber continue to play a bigger and bigger role slowly and systematically overtime.
Speaker Change: Thank you operator next question please.
Speaker Change: Our next question comes from John Hodulik from UBS. Please go ahead with your question.
Speaker Change: Great. Thank you.
Speaker Change: Mike It seems like churn is sort of across the board from the wireless carriers here. It seems like a lot of it is driven by price actions. So two questions. So first of all in the past you've said that a bigger switching tool. It is good for T mobile because it allows you to take share do you still believe that's the case number one and number two do you think we pushed a little.
Speaker Change: Too hard on pricing because of that because it does seem like you're seeing a little bit more sensitivity than than I would've thought for the for the entire industry.
Speaker Change: Have we pushed as far as do you think we can go and then one quick follow up are you guys seeing any macro pressure in the prepaid market or on the wholesale market that is starting to emerge from what we're seeing in the economy.
Speaker Change: Okay, Great I'll start maybe I'll turn back to John on the macro pressure on prepaid in question.
Speaker Change: So overall, you're right you saw across the industry churn was just on the margin a little elevated and I think theres a number of dynamics there that probably have more to do with kind of macro questions then with competition.
Speaker Change: P. I think people, there's a certain element out there where people are in a time of uncertainty about the future of grabbing what they can afford now and so you're seeing kind of some amount of probably move forward of upgrades and switching and so churn was a little elevated for everybody and upgrades seem to be happening at pace and.
Speaker Change: I don't know if that's tariff questions are what's the what's the economy going to look like tomorrow questions. I'd say, you know whenever I get asked about the economy. My first answer is no. We're not really the people to ask I mean, we're probably the the least Canary in your coal mine because.
Speaker Change: People feel so strongly about this category they will find a way to keep paying their bills, but there might be a little bit of a pull forward dynamic happening and of course it is competitive out there, but as I said in response to a prior question I think the nature of that competition just keeps changing by the way in the first moment when it changed sometimes again, you see a little bit.
Speaker Change: Of a pull forward and there was a lot of focus on devices over the past few months. Your question about kind of how much more of this can we take I mean, I don't know how to answer that other than you know it.
Speaker Change: It is competitive and again when you look at the lens of the company company's overall in the industry and their performance. It's similarly competitive because the company's overall are delivering all time record success, certainly T mobile leading the way in our financial growth on things like service revenues EBITDA and cash flow.
Speaker Change: <unk>.
Speaker Change:
Speaker Change: Switching to your second question on Oh, and is switching still an opportunity for us absolutely and I think you can see that in our all time record results in Q1 that corresponded with the question and then what's happening in prepaid John and is there any anything about the macro environment.
Speaker Change: That might be affecting the industry prepaid nets or what are your observations yeah. John. Thank you for the question you know what's happened in that our prepaid business is really great. This question that got asked last time in terms of what might be happening with immigration and I responded I didn't think that a whole lot was going to be affecting our business because.
We have a premium monthly subscription business for the most part in our prepaid segment largely led by our Metro by T. Mobile brand, we're serving nearly 25 25, and a half million prepaid customers now and that's turned out to be exactly the case, there's been some uncertainty out there that's affecting some transactional prepaid brands that's more than other <unk>.
Speaker Change: He is versus ours, our business has been very very stable in this area and as you saw that we had another quarter of growth. When you look at the last four quarters, our 350000 posts prepaid net adds over the last four quarters. This particular quarter that we just finished nearly 50000 and churn that's actually reduced also on a year over year basis.
Speaker Change: Just by seven basis points, so we're seeing nice stability in our overall prepaid business.
Speaker Change: What's also happening when you look at any kind of delinquency rates or payment arrangements or anything thats happening with the consumer none of that's really changed in our business at all so it's very nice and stable as Mike said, we might not be the first Canary in the coal mine to tell you what's happening because people find this category, so indispensable and if there ever is any kind of.
Speaker Change: Change and there's more of a value orientation, while we're ready to serve customers because we know how to serve customers and that kind of an environment as well. So yeah very very pleased in the overall prepaid business and what we're saying and I think John you asked also about wholesale and what we're seeing there and great question, because there's obviously a lot of moving pieces in our whole.
Speaker Change: <unk> and other service revenue component and what we're really seeing there and the underlying trends so theres a long expected.
Speaker Change: Things happening there with respect to dish and Tracfone and those are declining as we anticipated what we have in the underlying business. If you take away. The expect addition, tracfone declines is actually growth and when you take that and couple it with the other service revenue, which was really T ads as well as the M&A from <unk>.
Speaker Change: Bliss, we believe Q1 was really the low point for us in wholesale and other service revenue and we anticipate that growth to continue throughout the year and probably will end full year in that 2.9 ish billion range between the underlying wholesale growth again, excluding dish in Tracfone long expected and then T ads.
Speaker Change: Including Bliss and vis star and our ability to scale those.
Speaker Change: Great. Thanks, John Operator next question please.
Speaker Change: Our next question comes from James Schneider from Goldman Sachs. Please go ahead with your question.
James Schneider: Good afternoon, and thanks for taking my question I was wondering if you can maybe comment.
Speaker Change: Contextualize.
Speaker Change: The contribution you're expecting in broadband in your overall.
Speaker Change: Postpaid net additions for the year do you think you can sort of maintain this pace of high speed Internet.
Speaker Change: Fixed wireless additions above 400000, and maybe give us a little bit of color on how much fiber adds you might expect once you close both lumens and now metro net by the end of the year or some kind of a run rate and then as a sort of second question one of the sort of ask.
Speaker Change: What environment, you're seeing right now in terms of gross adds thus far in Q2.
Speaker Change: Your competitors have talked about an elevated gross AD environment actually accelerating into Q2 I'm wondering if you're seeing the same thing. Thank you.
Mike Katz: Okay, great Jim Thanks, I'm going to turn to Mike I mean, we probably aren't going to give you too much. We don't really guide on these metrics, but at least we can tell you a little bit about how we're feeling about it and what we're seeing on fiber broadband and a little preview on T fiber yeah.
Speaker Change: What we're seeing on fiber broadband is just fantastic and I think the team that runs. This for US is just done an exceptional job Mike mentioned in his opening comments 13 quarters in a row and five G broadband being the leading broadband provider in this category and you've heard me say this before so I'm, sorry, if you're getting tired of it but the reason for that first and fourth.
Most is because it's a great product.
Speaker Change: Broadband is an essential category for people and they're not going to compromise and five G. Broadband is meeting the needs of millions of millions of customers across across America, and that's and that's really what's driving the growth for us in this in this category and you're seeing that reflected in things like churn, Mike Mike mentioned upfront. This was the lowest churn quarter that we've seen in our broad.
Speaker Change: Van business.
Speaker Change: Being in our satisfaction scores, we've long been the leader in NPS scores and our <unk> fixed wireless business and that lead is growing.
Speaker Change: The biggest delta between us and the other categories in Q1 that we've that we've ever had.
Speaker Change: You're also seeing a we made some adjustments in pricing at the end of the year.
Speaker Change: Mike mentioned, the <unk> gains that we had year over year and you know your yours youre seeing customers like we see in our postpaid portfolio self select into the broadband plans that offer them more and more value. So this business is going great and it's one of the things like we talked about when we first discussed fiber has given us so much.
Speaker Change: Confidence about our opportunity to succeed in fiber as well because we can use a lot of these same capabilities that we've built and running a national scaled fixed wireless business to go succeeded fiber and I think succeed with some with some advantage that would enable us to a.
Speaker Change: Penetrate more.
Speaker Change: And penetrate faster into the markets, where we have fiber and getting into the specific numbers are not ready to do that yet met and when they will save that for after we close the next transaction, but it's.
Speaker Change: Where we're really looking forward to it and think we're in a great position to succeed I think it was very much on track for the 12 million subscribers, we talked about last fall by 2028 as well.
Speaker Change: As it relates to your question about kind of add momentum inter quarter I thought I'm surprised it took till the fifth question to get at that.
Speaker Change: I'm going to resist the urge I really want to tell a peter to put his spreadsheets on blast and just send them out.
Speaker Change: But you know last quarter, we resisted the urge to give you much inter quarter color, we're going to do it again I can tell you a few things. One reminder, Q1 was an all time record in terms of postpaid net additions and gross additions for T mobile.
Speaker Change: We also moved up on <unk> and ARPA on the strength of self selection of the rate cards. Some of the optimizations in the overall competitive dynamic. We also moved up service revenues related to all that marginally.
Speaker Change: We're defending the highest guide we've ever had on postpaid net additions and therefore funds for our Q2, even better than last year's guide, which was an all time record year. So those are the things I can tell you hopefully you can tell we're feeling great about the year. We think we're very much on track for the things that need to unfold for us too.
Speaker Change: Deliver our year as well as our multi year guidance to you, but we're going to resist the urge to provide intra quarter.
Speaker Change: Dynamics for you Okay, great. Thanks, Jim Operator next question. Please.
Speaker Change: Our next question comes from Craig Moffett from Moffett Nathan. Please go ahead with your question.
Craig Moffett: Hi, Thank you.
Speaker Change: Let me ask the obligatory question about tariffs.
Speaker Change: Since it's likely that we'll see fairly significant tariffs on handsets coming in how do you think that plays out in your business do you think that.
Speaker Change: We are likely to see higher handset prices and if so will that dampened upgrade rates or is it likely that those will be absorbed.
Speaker Change: By the promotions that you and your competitors offer and so I'm just wondering how you think about how that plays competitively.
Craig Moffett: Yeah. Thanks, Craig.
Craig Moffett: Yeah, I mean, it's pretty hard to predict right now what's going to happen from a tariff standpoint.
Craig Moffett: Obviously, it's a moving target we certainly understand the goals of the administration.
Craig Moffett: It's not clear how much this is going to affect the handset market I think to the extent that it does land and if it's a material thing ultimately I think we're going to see that the customer is going to wind up having to bear that cost taking on something big in the tariff fronts, just not something our business model is interested in trying to do or able to try to do so.
Craig Moffett: The customer is going to wind up bearing the cost of that and probably the dynamic of that would be a slowdown in upgrade rates exactly to the premise of your question.
Craig Moffett: And that has other tumble on effects in terms of possible benefits and possible cost to us that we would we would adjust for add it all up right now we haven't seen anything that causes us to think theres any kind of material impact to our business coming either way and you know obviously, if something changes on that front.
Craig Moffett: Our investor community would be the first to hear but right now we don't see anything on the horizon that would rise to the to being material are causing us to second guess our guidance that we've shared with you anything to add no.
Craig Moffett: No I think that's everything we see today it is embedded in that EBITDA guidance again, we reiterated capex guidance. So we're continuing build we're continuing on all of that front, but as you mentioned it is a very dynamic environment and we continue to monitor it of course.
Craig Moffett: Thank you operator next question please.
Speaker Change: Our next question comes from Timothy Horan from Oppenheimer. Please go ahead with your question.
Speaker Change: Contests, and today, they're seeing more and more subscribers using their mobile devices to replace so.
Speaker Change: They are home broadband or are you seeing much of that and.
Speaker Change: I know you have a new price plan out there with 250 gigabit hotspot is that intended to maybe help that process and I guess related to that are there. Other things you can do to create almost quad play like services, so people cut their wireline or broadband. Thanks.
Speaker Change: Yeah. Thanks, it's always been a dynamic we've seen Tim in the category, especially among.
Speaker Change: The prepaid sub segment. So there is a pretty significant part for example of our metro by T Mobile base, where their metro phone is there only connection to the Internet and the percentages go down as you kind of move up the prime scale and into postpaid.
Speaker Change: It's always been a dynamic that we've seen I don't I don't have any evidence, it's really changing in a significant way.
Speaker Change: But on the other hand as people are faced with top economic choices.
Speaker Change: And some families are you do see that they prioritize wireless that that we've seen and we've been seeing it now for nearly a decade that when when forced to choose they would prefer to have wireless and broadband that's the most important connection in their life.
Speaker Change: But I'm not seeing a sort of secular change in the dynamic there so far.
Speaker Change: Okay, Let's go over to social are we've got a question from Roger at Nerf or Kelly Kelly to talk about the T priority progress when do we expect for the year.
Speaker Change: Hey, Thanks, Cathy and Hey, Roger Thanks, Thanks for the question and Nick I am seeing the key priority is one of the most exciting growth opportunities ever think T. Mobile for business. In fact, we just delivered the all time best ever quarter for first responders and with T.
Speaker Change: Priority and I'll.
Speaker Change: I'll tell you our.
Speaker Change: Growth is happening across the country in smaller markets in rural areas and top 100 markets. We welcomed the city of Las Vegas, We welcomed him police Department, we welcomed him, Oklahoma City Police Department and and so many more in fact that list is the best quarter for new account growth with first responders to smell our funnels are up 50%.
Speaker Change: And year over year and it really is in a pretty fantastic solution for first responders and all I'll remind you guys. It is the only truly nationwide slice available for first responders on a five G standalone core.
Speaker Change: <unk> architecture, so we're seeing the double the.
Speaker Change: Capacity, two and a half turn speed and and the priority and preemption along with the most availability in the most reliability and really resonate with our first responder customers and I couldn't be more excited about it but thanks for the question Roger.
Speaker Change: Okay. Thanks, Kelly will go back to the fore now operator next question. Please.
Speaker Change: Our next question comes from Greg Williams from TD talent. Please go ahead with your question.
Greg Williams: Great. Thanks for taking my questions.
Greg Williams: You spoke a little bit about cable M&A and you mentioned.
Greg Williams: Pure play fiber and you being a growth company and that would be your focus but as media reports out there that thing you can be presumably passing on the lumen fiber to home asset that could be a fairly attractive price. So you guys have that $20 billion disposal capital envelope, just curious to hear your thoughts of that type of M&A and that sort of size of a deal to augment your T fiber business.
Greg Williams: Yeah. Thanks for the question I mean, I don't really have anything new to report here, what I've been saying for a while is that we are interested in the space.
Greg Williams: You know out there kicking the tires.
And you know our appetite is limited and it has to be just the right thing and we've kind of shown our preference for pure play fiber doesn't mean, we're going to limit ourselves to that but we've shown our preference for that we also love the strategy that we've already unveiled I mean, if you think about.
Greg Williams: Our fixed wireless product moving to $12 million.
Greg Williams: Our leu, most and Metronet moving to 12 to 15 million homes passed.
Greg Williams: On top of 12 million customers, that's a pretty substantial footprint already and allows us to be choice will you know if there's things out there that we think could really add value and that we could drive a great return for our shareholders like we have in these first two weeks, where we predict IRR in excess of 20% then we'd be interested and you know problem.
Greg Williams: Really the simpler and more elegant and more pure play the better but you know, it's not a hard and fast rule.
Speaker Change: Got it. Thank you okay. Thanks, Greg Alright, well go back to Sasha. This is question from Chetan Chetan Sharma for are probably off congrats on a great quarter could you. Please give us some insights into how slicing usage is growing across different applications and industry segments.
Speaker Change: Yeah, often then maybe Kelly go ahead of alright, well, thanks for the question and.
As you know the network team in the company went all in with five year from the beginning we had a standalone core already back in 2020 launched and in 'twenty to 'twenty. Three we started to play around already with network slicing. We started in sports events, because it's a great way to show that it really works we did it for our PGA golf, we do.
Speaker Change: Did it.
Speaker Change: <unk>, we can do.
Speaker Change: We can do a critical communications for the events on the network size all of that has led us in 'twenty four to industrialize. This bunch more I think one of the best examples of this is we launched a security slides, where we can tie Tim seem security all the way through his slides into the network core and as Kelly mentioned earlier.
Speaker Change: The T priorities, probably the bus demonstration of how well this really works much more to come we can see several use cases that are coming up in health care manufacturing in in retail. We're slicing provides the network experience that people really want and all powered by our <unk>.
Speaker Change: Formal five year network end to end with Standalone core Kelly.
Speaker Change: That was very well done.
Speaker Change: Just take out on the road.
Speaker Change: I I just was going to mention when it comes to a broadcasting slice and we announced this past quarter and interaction.
Speaker Change: Interaction that we had with Disney Studios, where we provided private five G and in network security Slash, where they were able to broadcast from remote locations and to their studios real time and that was on island stitch and that was a very cool use case and Keith and secure we literally have tens of thousands of SMB customers that are signing up for Ts and secure when they don't have.
Speaker Change: A N sophisticated I T Department for instance, this is a really fantastic and use case for them and point of sale system since become a fantastic ways for people in sports and entertainment to make sure that they cut down on long lines that they provide security and that the fan experience is just the ultimate experience.
Speaker Change: With our point of sale space. So yes, it's been a really really great momentum in them I think are what I would say here is we're just getting started I mean T priority has been and the most scalable and it's and I think really nailing the pinpoint in the use case on the head, but where we're just getting.
Speaker Change: And to that just getting started 0.1 of the things we announced today is that we're nationwide with five <unk> advanced and that makes the slicing capabilities easier because in the early going part of the challenge was slicing as each implementation is kind of a bespoke program and now we're moving into the phase, where we can automate implementations for our customers, which just opens up the <unk>.
Speaker Change: Ham considerably for us on the kinds of opportunities that Kelly and off just talked about so we're very excited about this moment.
Speaker Change: Okay. Thanks, well go back to the phone queue. Operator next question. Please.
Speaker Change: Our next question comes from Ken on the Quechua from Barclays. Please go ahead with your question.
Speaker Change: Thank you.
Speaker Change: So Mike.
Just in terms of the fiber question I think all of US have heard of basically figuring out why 12 to 15 million is the right number.
Speaker Change: And I think in the past you've described this as more of a <unk>.
Speaker Change: Bundling mechanism fixed wireless being top of the funnel and you're funneling people are upgrading people to fiber.
Speaker Change: Some point, but if you end up with $12 million, then 50 million fiber bad things just seems inadequate broadly just from a long term perspective, so it would be great to get your thoughts on.
Speaker Change: 115 million is the right number for fiber.
Peter Zaffino: And then Peter from.
Speaker Change: When we think about the the fiber business and the impact on the P&L.
Speaker Change: I appreciate that you may not want to give us the details right now, but directionally. If you think about the business initially there might be some fixed payments you have to have.
Speaker Change: <unk> jv's, even before revenue start kicking in so.
Speaker Change: Directionally do these businesses.
Speaker Change: Become a drag initially and then over time, the essentially instead contributing and become accretive how should we think about between book.
Speaker Change: Yeah.
Speaker Change: The next two or three years.
Speaker Change: Okay can on those are two great questions first on the question about fiber. Your question really goes to our why what is our why why are we doing this and all.
Speaker Change: I'll just kind of return you to our general premise here is actually pretty different than the premise that some others have in this space and you know their premises are really based on the deep interplay with all the other products that so called convergence and for us on fixed wireless theres some of that obviously that opportunity, but the much bigger question for us is whether or not.
Speaker Change: We can based on our Knowhow and our embedded investments in our big customer base and our five G network and our data and our strength of our brand and our distribution, whether we can just quite simply on its own make a superior return in wireline fiber than a purely disinterested financial investor could and we think we can.
Speaker Change: Can you know those first two transactions, we unveiled that we do see very strong IRR potential overall, and it's just kind of different than the premise that I think others have in the space.
Speaker Change: And it's sort of showcases why we have the preference.
Mike Katz: Serena ear, a global expert in this space you've seen the perspective, both from the U S. From Europe, maybe you can comment on your views on convergence and how our strategy is a little different here at T. M. U S. Yeah sure. Thanks, Mike So just picking up from where you left off we normally tend to the foot to convergence as a significant shift in <unk>.
Mike Katz: Consumer mobile buying behavior, where they move to buying our wireless products form their wireline provider.
And that's the thesis of a few players here as you said our thesis on how this market evolves is different let me give you two or three data points that kind of support where we stand on this.
Mike Katz: The first one of those is more than 85% of the U S. For over five years has had the option of buying wireless from their wireline provider now to the extent that they have chosen to do that that's built into our run rates.
Speaker Change: I think the second piece is behind the thesis of convergence is this a story that somehow convergence is inevitable in the U S. Like it was in Europe, there's a flaw in that theory it isn't inevitable in Europe. Some of the biggest European markets, whether that's Germany, what I recently worked in or the U K have convergence led.
Speaker Change: Those that are lower than the U S and that happens because whether the change in consumer behavior or not happens or not is down to market specific things and you look at the U S. The extent to which we have family plan bundling and wireless in the U S is probably the only market I know where wireless churn is significantly.
Speaker Change: Lower than wireline, Sean, which tells you something about the quality of those lives.
Speaker Change: In this relation so you put all of that together and that IR pieces unconverted is different that said, we see a significant opportunity to make equity enhancing investments in fiber and so the question for US is always going to be what's a good investment in fiber versus whether its big enough and that's the difference in questions with answering I think yes, well said.
Speaker Change: And I think to the very specific question you asked about the $12 million to $15 million I, you know I hate to be.
Speaker Change: Given unsatisfying answer, but it's sort of it depends you know we're going to follow the capital allocation strategy that Peter has laid out over and over again and to the extent that we see opportunities based on all of our strengths better embedded capabilities and knowhow to make a superior return and therefore deliver you our shareholders with a superior return.
Speaker Change: We're interested and that may not mean that 12% to $15 million is where we end, but its certainly taken the first two JV plus our wholesale partnerships, where we think were tumbling too with the transactions already decided on and we'll see where the future takes us on this one.
Speaker Change: You know as you were asking kind of about the long term growth and how does this play out I won't speak to Medtronic at its not closed it wouldnt really be appropriate for us to do so but as I think about this first off on the Loo. Most JV there are no fixed payments we aren't.
Speaker Change: Saddling ourselves with fixed payments all of this is funding accretive growth and that's the exciting part of all of US is whether it's remember we have 50% economic interest in the JV itself. The infra cryo, which is going to continue to grow in the case of voluminous as well to pass a significant number of households, and for US it's about <unk>.
Speaker Change: Customer growth funding subscriber acquisition. So that's what we're investing in right now and as you think about what that returns from a value proposition into the longer term. That's what we're doing here. It's not just funding today's growth its funding the growth of T. Mobile beyond 2027, even how do we set this company up.
Speaker Change: To be a high growth company. Many many years beyond just the capital markets day that we gave so it's important I think to think about these structures because of the way we did M. S cash generating structures now retired.
Speaker Change: About metronet in particular in the case of the current plan that we put into the press release was the case for this we are already going to be seeing distributions back before the end of that 2030 period, and the six and a half households, a six and a half million households passed there, but all of this is funding strong value accretive customer acquisition.
Speaker Change: <unk> and creating great long term value creation for T mobile.
Peter Zaffino: Thanks, Peter Thanks cannot operator, we have time for last question.
Speaker Change: And our next question comes from Jonathan Chaplin from New Street. Please go ahead with your question.
Speaker Change: Thanks, guys just one from me following up on the fiber discussion.
Speaker Change: Does it matter.
Speaker Change: Where the fiber locations are to you.
Speaker Change: Is it.
Speaker Change: Is it a matter of sort of building fiber in.
Speaker Change: Market fit don't have fiber today.
Speaker Change: Or is it more important for you to have markets and growing cities.
You might also be markets, where you need mobile capacity at some point in the future and would love your thoughts given that you can get better returns on these assets than disinterested independent operators would love your thoughts on market structure does it mean.
Makes sense for you guys to deploy fiber and in markets that might have two players already.
Speaker Change: Or would you stick to two player markets. Thank you.
Speaker Change: Thanks, Jonathan let me try to simplify it.
Speaker Change: The shortest version of the answer is not really.
Speaker Change: In other words geographies not one of the primary inputs into our thought process on this and the reason for that is that so far based on our experience in fixed wireless and in our pilots of T fiber.
Speaker Change: There's a strong industrial logic for both places, where we're highly penetrated and where we're less penetrated than you know the obvious industrial logic kind of speaks to itself you know where we're highly penetrated we have more embedded advantages and therefore less friction.
Speaker Change: Where we have less penetration we have more upside it can be a great front door and we're just pretty open minded on that front.
Speaker Change: And part of it is if you look at our high speed Internet business in five G. It is geographically distributed all over the country because it really isn't about marketing in one city or another or in a rural area versus a suburban area. It's about finding pockets all across this country of capacity, where no normal amount of mobile.
Speaker Change: Usage anytime soon will take up our capacity and where we approve applicants for fixed wireless. So that's our fallow capacity model and since it is so widely geographically dispersed the natural synergies you know don't inform the decision as it relates to geography.
Speaker Change: And based on that I forgot your second half of your question already what was it again it was about geographic or are we going to go into places with two existing fiber broadband.
Speaker Change: Broadband player I mean, the the very our intention is to move quickly and for the majority of our work to be first to fiber and that's where the returns are best that means there is probably a cable operator, there may be fixed wireless available in that area, but our intention generally speaking.
Speaker Change: Generally speaking is to be first to fiber.
Speaker Change: Thank you everybody. That's all the time, we have a we're excited to speak to you again soon if there are any further questions you can contact the IR or media departments.
Speaker Change: Ladies and gentlemen, this concludes the T. Mobile's first quarter 2025 earnings call. Thank you for your participation you may now disconnect and have a pleasant day.