Operator: Good afternoon. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, please press star, then one. To withdraw your question, please press star, then two. You may also submit a question via X by sending a post to @TMobileIR or @SriniGopalan using #TMUS. I would now like to turn the conference over to Cathy Yao, Senior Vice President of Investor Relations for T-Mobile US. Please go ahead.
Cathy Yao: Good afternoon. Welcome to T-Mobile's Q3 2026 earnings call. Joining me on our call today are Srini Gopalan, Peter Osvaldik, Jessica Uhl, as well as other members of the leadership team. During this call, we will make forward-looking statements which involve risks and uncertainties that may cause actual results to differ materially. We encourage you to review the risk factors set forth in our SEC filings. Our earnings release, investor fact book, 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 Srini.
Srini Gopalan: Thanks, Cathy, and good afternoon, everyone. We are here in Bellevue today very much looking forward to discussing our results. First, I would like to welcome two new faces at the table, Jessica Uhl, CFO designate, and Chris Sambar, Chief Enterprise Officer. Jessica and Chris bring tremendous talent and experience to this leadership team, and I am thrilled to have them join us, and I am looking forward to all of you getting to know them very well. Turning to Q3, this was another great quarter of executing on our strategy, and it reflects our ability to optimize both volume and value to deliver industry-leading results. In Q3, we once again led the industry in postpaid phone net additions and 5G broadband net additions, both of which help translate to strong postpaid net account additions of 274,000.
Srini Gopalan: Alongside this, importantly, we saw over 4% postpaid ARPA growth year-over-year. We also saw 5G broadband ARPU grow year-over-year and sequentially in Q3. These strong unit results translated to industry-leading financial growth. Postpaid service revenue grew 9%, total service revenue 6%, core adjusted EBITDA 11%, and we reported a really strong adjusted free cash flow margin of 26%. What underlies all of this is our unique proposition of best value, best network, best experience. Let me double-click into that. From a value standpoint, this is something we continue to guard zealously. We are maintaining our unique backbook to frontbook pricing advantage, which is that on average, our existing customers actually pay less than our new customers. We do not, however, take our best value position for granted. Earlier this week, we launched our T-Mix portfolio, the latest example of disruption by solving customer pain points.
Srini Gopalan: For far too long, carriers have chosen how customers get value. 84% of surveyed customers want more control of how their wireless plans are structured, and T-Mix is smashing through this pain point by allowing customers to choose what benefits they want and allowing them to change them when their needs change. On customer experience, we are leveraging our amazing team empowered with digital and AI tools to deliver a best-in-class experience. Last quarter, we shared with you that the customer excitement around Member Month drove us to over 30 million monthly active users of T-Life. That was in June. That momentum continued throughout Q3, and T-Life now has 32 million monthly active users. As a result, more and more of our transactions are being done directly in the app ecosystem.
Srini Gopalan: In Q3, over 80% of our upgrades and half of our phone line activations were done digitally between customers using the app on their own or being guided through it by our associates. Underpinning both value and experience is, of course, our network, which positions us for outsized growth for the next decade and beyond. We have the industry's best network, both through the lens of real, tangible, lived customer experiences, as well as recognized through third-party awards. Our overall median speeds are approximately 60% to 70% faster than our two largest competitors based on Ookla data. The awards, they just keep coming. Among many this quarter, OpenSignal awarded us the global winner in 5G coverage. In fact, T-Mobile has been named an OpenSignal 5G global winner every year the program has existed, and no other US operator has ever been named a 5G global winner.
Srini Gopalan: Our margin of network leadership will continue to widen through our unreplicable spectrum holdings and our focus on leadership and innovation. Talking of innovation, we completed the world's first AI RAN call here in Bellevue, not in the lab, but out there in the real world using our network. We also continue to see more proof points in the physical AI opportunity, where we've progressed beyond connecting humanoid robots with eSIMs and are now testing how the network helps deliver the intelligence itself. To enable all of these use cases, we're partnering with Amazon Web Services, AWS, to build the first instances of our Kinetic Edge. Kinetic Edge is a distributed intelligence infrastructure for physical AI. It combines our nationwide 5G Advanced network and distributed edge with AWS's cloud orchestration and AI services.
Srini Gopalan: This puts together deterministic connectivity, compute, and intelligence closer to the machines and gives enterprises exactly what they need to take physical AI from isolated demos to production at scale. Let me now turn to how we're monetizing our unique capability to deliver the best network, best value, and best experience. In wireless, the consistent improvement in our network perception year-over-year, and our heritage of value and experience leadership allowed us to once again grow our share of postpaid households across the top 100 and in smaller markets and rural areas. T-Mobile for Business, now under Chris' stewardship, continues to flourish as we bring customers technology solutions powered by America's best network. Q3 marked the 17th straight quarter of positive ports, contributing to healthy double-digit revenue growth year-over-year. In the quarter, J.D.
Srini Gopalan: Power named us the most awarded business for business wireless customer satisfaction, as well as number 1 in both large enterprise and small business customer satisfaction. This is an incredible accomplishment and a testament to the power of our network, our brand, and our value. Governments and enterprises today are not only rigorously testing networks, but also focusing on how new network capabilities can solve their business needs before they make the buying decision. We recently won the top spot in the Department of Justice's wireless purchasing contract. As one of the largest public safety agencies in America, the DOJ is an incredibly discerning buyer. They've spent hundreds of hours of testing and evaluating our network against others before they chose the best public safety network in America. This is again proof that we're growing our TFB presence with large and influential customers.
Srini Gopalan: Broadband, another key component of our growth portfolio. Our 5G broadband offers near fiber-like download speeds over Wi-Fi, seamless setup, and an award-winning customer experience. Ookla once again ranked us as the fastest 5G broadband provider for both upload and download speeds. It's no wonder our 5G broadband customers continue to have the highest NPS of any broadband connectivity category, and that includes fiber. We're tracking well ahead of the pace we set for you to reach 15 million customers by the end of the decade. Importantly, in addition, our phone-like ARPUs in FWA have grown on a year-over-year and sequential basis. Our fiber business is also scaling well, with approximately 20% 12-month penetration and a sequential and year-over-year acceleration in customer growth. We're well on track towards our target of 3 to 4 million customers by 2030.
Srini Gopalan: To conclude, the environment we are operating in has been dynamic for quite some time. But through it all, this team right here is laser-focused on delivery, execution, and controlling our controllables. We are incredibly confident in our differentiation, consistently leading to outsized growth today and in the future. Peter, over to you.
Peter Osvaldik: All right. Thank you, Srini. First of all, I would also love to welcome Jessica to the T-Mobile team. The depth and breadth of Jessica's experience, not only as CFO, but also importantly as a strategic business leader at large, complex organizations, makes her a tremendous win for T-Mobile. Jessica and I will continue to transition over the next few months as part of this long-planned succession process. All right. Turning to our outlook. We delivered a fabulous Q3, which reinforces our strong guidance for the remainder of the year. Let me add some additional color. Starting with accounts, we now expect approximately 1 million account net additions for the year, once again, far exceeding the industry on real value creating share taking.
Peter Osvaldik: Turning to service revenues, we now expect full-year service revenues of approximately $76.8 billion, representing 8% growth for the full year, driven by ongoing outperformance of the postpaid business, partially offset by declines in the wholesale and other line, including from the faster roll-off of the Boost MVNO, as well as the ongoing trends in prepaid. As part of the postpaid outperformance, we now expect full-year postpaid ARPA growth of approximately 3.5%, up from our previous expectation of 2.5% to 3%, driven by our continued success in customer adoption of premium rate plans, deepening relationships with customers, as well as our rate plan modernization initiatives. This drives the all-important postpaid business to continue to excel in growth, with Q4 postpaid organic service revenue growth now expected to be approximately 7% year over year.
Peter Osvaldik: Core adjusted EBITDA is now expected to be between $37.35 billion and $37.45 billion for the full year, up $100 million at the midpoint from our previous guide. Our expectation for full-year 2026 cash CapEx remains unchanged at approximately $10 billion. Finally, we now expect adjusted free cash flow to be between $18.7 billion and $18.8 billion, up $150 million at the midpoint from our previous guidance. To sum it all up, the differentiation in the business continues to deliver industry-leading results, and this entire team cannot be more excited for the future. With that, I will now turn it back to Cathy to begin the Q&A. Cathy?
Cathy Yao: Thanks, Peter. Okay, let's get to your questions. You can ask questions via phone by pressing star then one, via X by sending a post to @TMobileIR or @SriniGopalan using #TMUS. We will start with a question on the phone. Operator, first question please.
Operator: The first question comes from Craig Moffett with MoffettNathanson. Please go ahead.
Craig Moffett: Hi. Thank you. I wonder if we could start with FWA. I know we're all sort of left a little bit in the dark without subscriber metrics, but we saw a pretty dramatic deceleration from Verizon, a little bit of acceleration from AT&T, and we're just trying to get a sense of what's going on with FWA for you specifically and for the industry more broadly. I wonder if you could just comment on that a bit. Also, I may have missed your postpaid phone churn number that you typically give on the call. Just as a housekeeping item, if I missed that, what was that number?
Srini Gopalan: Sure. Thanks for the question, Craig. Just before I begin to answer it, I read with fascination your piece on convergence and causality versus correlation. Really enjoyed it because it agreed with a lot of our views on it. To your question on FWA, look, we're seeing continued very strong momentum. Deceleration, et cetera, is not where we are. We're seeing really strong momentum, and we're tracking really well ahead of pace to our goal of hitting 15 million customers by 2030. I think I also commented on the fact that importantly, we're seeing ARPU growth both sequentially and year on year. I think a lot of that comes back to the pure quality of the product. I know there have been comments from others in terms of not offering above a certain speed, et cetera.
Srini Gopalan: The ultra capacity nature of our network just means this thing goes from strength to strength, in terms of both speeds as well as performance. I guess our NPS is the best way of thinking about how all of that comes together. The fact that we have category-leading NPS and broadband, including fiber, speaks to the fact that we're really not being impacted by any of these other issues in terms of network capacity or any of that. Andre, I don't know if you wanted to add any more color to FWA itself.
André Almeida: No, just wanted to add, as you said, I think the performance of the product has been outstanding. To your concern, Craig, around nets, although we don't divulge line nets as you know, I think we can state that we had industry-leading FWA nets this quarter. You can take that as an indication of what we're seeing in terms of our strength in the market.
Peter Osvaldik: Craig, we didn't give a postpaid phone churn number. We really are focused in on postpaid account net additions and postpaid account churn. Honestly, the postpaid phone churn came in about as we expected and also led to industry-leading postpaid phone net additions. Much as we said at the start of the year, I think what's demonstrated in our results, is when you focus on the right thing, which is account share taking and then translating that into financial leadership, that's what we're trying to keep our eyes on. That's what we're all focused on as a management team in the day-to-day. We're trying to resist the urge to kind of walk backwards and focus on KPIs that we don't think are the most relevant for the all up value-creating picture.
Craig Moffett: All right. Thank you.
Cathy Yao: Thanks, Craig. All right, operator, let's go to the next question, please.
Operator: The next question comes from Kutgun Maral with Evercore ISI. Please go ahead.
Kutgun Maral: Great. Thanks for taking the questions. I wanted to ask about physical AI as well as your AI-driven network efficiency efforts. First, Srini, John Saw had a very interesting blog post this week on physical AI discussing, for example, the Kinetic Edge build-out with AWS and the work with Figure AI and Serve Robotics. As these initiatives move toward commercial scale, what does T-Mobile actually get paid for? Is it primarily connectivity or a share of the edge compute economics as well? Who funds the incremental compute infrastructure? Is it T-Mobile or your partners? Generally anything you could share around the model and future opportunity more broadly would be very helpful. Separately, you have recently reported spectral efficiency gains from the Ericsson trials. How close are those gains to being reflected in your capacity planning?
Kutgun Maral: Could they meaningfully expand the runway for 5G broadband or change your need for incremental spectrum? Thanks so much.
Srini Gopalan: Hey, thanks so much for the question, Kutgun. On physical AI, let me start by saying we are in the very early innings of this, of the evolution of how this plays out. I do not think there is anyone in this large virtual room who would debate what the world will be like in 2035, whether we are going to see millions of robots, drones, all sorts of other connected moving objects. I think that is a given when you future cast the world. Now, the question is, what kind of infrastructure do you need to support that? We have all seen what has happened in GenAI, where as GenAI has grown, there has been a huge infrastructure build-out and TAM to support that technology.
Srini Gopalan: Now, our view on physical AI, and I think it is a view that most people agree with, is you will need an infrastructure build-out to support physical AI, especially with millions of robots, moving things, et cetera, et cetera, that rely on AI. What we call physical AI loosely. I think that infrastructure build is going to look very different because that infrastructure needs to be different. It needs, for starters, at least three different things. It needs low latency connectivity, it needs inference at the edge, and most likely for a lot of use cases, it needs voice. Now, you put those three things together and what you get is a 5G standalone advanced network, which we are the only provider who has nationwide presence of.
Srini Gopalan: So we feel like there is going to be this big build-out, not going to sit here and speculate whether that is 2027 or 2028, but for sure it will happen by 2035, and that we are in pole position to be accessing that build-out. On the economics of the model and everything that we are doing on Kinetic Edge, the early use cases have really not been about selling connectivity or selling compute separately. They have been about selling solutions. And those solutions, typically what they have done, and this is the important bit, they have reduced the cost of the device because suddenly you do not need as much battery. You do not need as much AI on board because you can offload that compute. And when you reduce the cost of a device, people are paying for a solution rather than specific pieces of it.
Srini Gopalan: Most of our monetization to date has been through providing that solution as a whole and charging for the solution and taking a share of the reduction of the cost of the device. Now we will see how this evolves because I think this is still early doors on it. We love the fact that we are in pole position on this. As we roll into beyond 5G Advanced to 6G, as we double down on this, we are really excited about how this thing progresses. Part of the comment I was making earlier on people like the DOJ testing, what they are testing for is not just coverage any longer, but also capabilities. Because these more sophisticated buyers are fully aware that the world will evolve in a different way. And they are looking to test all of these capabilities before they actually buy the network.
Srini Gopalan: That is a big driver to why our enterprise business has seen substantial traction. John, do you want to pick up the piece on network optimization using AI?
John Saw: Spectral efficiency, yes.
Srini Gopalan: Yeah.
John Saw: On the question, Kudgun, on spectral efficiency, yes, we do bake in spectral efficiency gains when we do our planning and growth. Candidly, what we are pleasantly surprised is when we actually handed the wheel to AI for doing things like radio resource planning. The gains were actually more than what we expected, and we actually, just to be sure, took this out of the lab and tested this in New York in a lot of sites and we are seeing some significant gains that we were not expecting without the use of AI. The upside is not done yet, and we are optimistic that potentially there could be even better spectral efficiency coming. That was with Ericsson and with Nokia. They are already talking about spectral efficiency gains of 20% up to 100% as AI RAN develops. So we are very optimistic.
John Saw: What this means is that in the next few years, our customers, especially our fixed wireless customers, will get even better experience for that premium fixed wireless product that we offer as well. So very optimistic. The early results look very promising, and this is actually fielded in the markets, not tested in the lab.
Cathy Yao: Great. Thanks, Kudgun. Operator, next question, please.
Operator: The next question comes from Sam McHugh from BNP. Please go ahead.
Sam McHugh: Yeah, good afternoon, guys. I think you made it super clear you don't see any good reasons to give SpaceX an MVNO. We've talked a lot about this Kinetic Edge today already. How would you characterize your willingness to work with someone like SpaceX on edge mobile compute? You do already resell Starlink in SuperBroadband. Could you envisage reselling it in consumer as well? Do you see any benefit of trying to engage with them on this? Because it might be an alternative to them building out their own network for similar purposes. Thanks.
Srini Gopalan: Thanks for the question, Sam. Let me start with the MVNO part of it. I think there's two parts of that question. Look, the way we've thought about MVNOs and our MVNO philosophy has fundamentally not changed, right? The way we think about it is, does an MVNO give us access to incremental TAM? Does it give us access to new distribution channels? Does it give us incremental capability of any sort? We've been very clear that in terms of satellite, we see it as a complementary product. Therefore, we don't really see the room for an MVNO for satellite or SpaceX in that context. Now, when you're thinking about physical and edge AI, again, from our perspective, we're steaming ahead and building our 5G SA as well as rolling into 6G.
Srini Gopalan: We see ourselves in the lead in terms of those capabilities, and we see no space for an MVNO here because what additional capabilities does it give us? Why does it change our ability to compete? If we are talking about SpaceX as a customer or us being a customer of them, that is a purely commercial agreement. But the answer to the MVNO is I see no room for an MVNO with SpaceX, either on the consumer side or on the physical and edge AI side.
Cathy Yao: Thanks, Sam. Operator, we will move on to the next question in the queue, please.
Operator: The next question comes from Sean Diffley with Morgan Stanley. Please go ahead.
Sean Diffley: Great. Thanks very much, team. I would love to hear how you describe the competitive landscape now as we move into Q4. It seems like others are focusing more on one in two lines where you guys have dominated historically. How are you approaching the market there? Secondly, just weighing buyback pacing versus future spectrum acquisition. Given the share price, is it possible you could step up the pace of buybacks here? Thanks a lot.
Srini Gopalan: Okay, let me pick up the first one, and then, Peter, maybe you can lean in on the second. Look, in terms of the competitive environment, I know we all like to obsess about specific elements of this and recent price moves and the rest. The way we think about this industry as a whole is fundamentally a multivariate problem rather than let's take price down in one place. Ooh, that changed our pool. Now we need to go back and correct something. So we think of this as how do we manage the balance between volume and value in a thoughtful value-creating manner.
Srini Gopalan: And in many ways, you could say we have the luxury of doing that because that is enabled by our fundamental differentiation across network, value, and experience, which is why you see us with industry-leading account volumes with 274,000 as well as a clear breakout on ARPA, where you see 4% ARPA growth. That formula is the heart of what we manage, and that is more than drop price in one segment, look to cover that up somewhere else, et cetera. In terms of the broader industry environment, let me just position where the industry is. I think if you take an arc of three, five years, there is no question that we have seen an increase in subsidies, and that has been driven by an increase in device pricing.
Srini Gopalan: Now, we have been very thoughtful about that, linked our subsidies to higher CLV opportunities such as higher rate plans, T-Mix, which is really a response to a customer problem, which is wanting to have more control over their wireless plan. Another way of putting that is don't give me a free phone if I don't need one. Allow me to choose what I want. Allow me to choose what I want and change that if my circumstances or my needs change is a further move in that direction of driving even more differentiation in terms of the way we deliver value.
Srini Gopalan: And as we look forward to Q4, look, Q4 always has variability, and in terms of the competitive environment in Q4, I think you will see more variability this year because of a set of circumstances, which is a staggered iPhone launch, the increase in device prices, the fact that you don't necessarily have all of the variants, especially the sell-down variants. So we will see how that plays out, and our guide contemplates all of that. Peter, do you want to pick up the-
Peter Osvaldik: Yeah. On share buybacks, it is really, I think, one, just to remind everybody through 23 October, we just disclosed in the 10-Q, we have now done $10.3 billion in buybacks this year compared to $9.9 billion in all of 2025. Also importantly, we increased the dividend per share by 15%, which is multi-years now of being able to do that, and that is a great position to be in. Ultimately, what you are asking about is rightly, what is the capital allocation philosophy and how do we see it going forward? In terms of the approach to capital allocation, it has been remarkably consistent and continues to be so. Starting with leverage, making sure that we have made the right investments in the core of the business, of course, looking at spectrum opportunities and accretive M&A.
Peter Osvaldik: After we are done with that, looking at shareholder returns and a balanced approach between share buybacks and dividends. As I look forward, by the way, I think the application of that formula, particularly when you think about investment in the business as well as investment in spectrum, it is what has really brought us to this position and not only the accomplishments that we have had to date and how the network has driven that but also what we see going forward, whether it is the 20 million account opportunity for network seekers, whether it is continued growth in 5G broadband, and I think you heard a lot of our excitement around physical AI and what we see happening there. 2027 and 2028 are going to bring a couple great opportunities to bolster that approach with the spectrum auctions that are upcoming.
Peter Osvaldik: I see, while of course, we will continue to be tremendously diligent in our approach to how we think about spectrum. You have seen that play out. Many things we have stayed out of, many things that we have purchased, the value creation that has come from it. So for 2027 and 2028, I see with those upcoming opportunities probably more and more of our capital allocation envelope being devoted to spectrum. What ultimately happens in those auctions, of course, again, we will apply the diligent approach to valuation that we do there, but we will probably reserve more of that capital envelope for that opportunity just because of what that means from a long-term value creation for the business.
Cathy Yao: Thank you, Sean. Operator, next question, please.
Operator: The next question comes from John Hodulik with UBS. Please go ahead.
John Hodulik: Great. Thank you. Maybe for Peter. The guidance for the year in 2026 implies a slowdown in EBITDA growth and account growth. Which is a little bit odd, just given Q4 is typically a strong seasonal quarter for account growth. I guess really just dovetailing off Srini's comments on the variability in Q4, is there anything to call out as we look into Q4, or are you guys just trying to set a low bar for Jessica here? That is number one. Then number two is just on churn. You said that the 12 bps higher churn is what you guys expected, I guess, really driven by the price increase you had. Just how is that trending now as we look into Q4?
John Hodulik: Do you think that you get that back over time, and that goes back into a more normalized area? Thanks.
Peter Osvaldik: Well, let me take that. There was a lot in that question. So Q4, one on EBITDA, I just want to remind everybody, of course, that when you are thinking about Q4, it is sequentially when you are thinking about it. Of course, Q4 is when we have the holiday season, generally tends to be the most promotionally intensive season, so you tend to see a Q3 to Q4 EBITDA investment profile as a result of that. The other thing that you have happening is M&A, because for the balance of the year, what has been happening is really odd timing with respect to which quarter included what M&A last year, including Q3, if you recall the timing of the close of UScellular as well as some of the fiber acquisitions.
Peter Osvaldik: What you have happening in Q4, and this is why I mentioned the postpaid service revenue of 7% on a year-over-year basis, is you are going to get a great picture of organic growth. That is how I think about EBITDA, 7% postpaid service revenue growth for Q4. On an accounts perspective, yeah, to your point, look, it is a 1 million postpaid net account additions guide that we are giving you, which is if you think about the heydays of the Un-carrier that we sometimes get asked about in 2014, 2013, we are delivering more postpaid net account additions in 2026 than during those days. Obviously, you are seeing that translate into just the magnitude of the absolute dollar growth in the financials as well. Q4, yeah, it has variability for all the reasons that Srini just mentioned. There is a difference in terms of the iPhone cycle.
Peter Osvaldik: There is no base model phone. We have to see how customers react to the OEM price increases. There has frankly also been some Q3 inventory constraints as well that have shifted some things from Q3 into Q4, including from an EBITDA perspective, because we do not recognize the cost until we actually ship it and fulfill it. So there is a lot of the variability there. At the end of the day, it is 1 million postpaid net account additions and of course, $100 million up at the midpoint of the range on core adjusted EBITDA. On churn, there is a couple dynamics at play, especially as you are thinking about it into Q4. One, again, seasonally for everybody, Q4 tends to be a higher churn quarter than Q3 because of the holiday season. There is a lot of excitement around it. I would expect that seasonality to continue.
Peter Osvaldik: So churn implicitly would go up, account churn as well. The other thing that you have happening in accounts, again, is there are more 5G broadband and fiber-only accounts. Remember we had UScellular as well come on board. So you are still going to see the dynamics of, well, yes, accounts include blended accounts, but they also include more and more 5G broadband only or fiber-only accounts, which offer obviously a great opportunity in the future for cross-sell and deepening the relationship. But just as a result of, well, broadband churn is higher than postpaid phone. It is a pure mathematical exercise. So those two things will still happen in Q4. All of that is contemplated again in the postpaid net account addition guide that we gave, as well as the core EBITDA range.
Peter Osvaldik: I am hoping some of that helps with all the myriad of questions you threw at me, and I cannot give you the spreadsheet as always.
John Hodulik: No, that is great. Thank you.
Cathy Yao: Thank you. Thanks, John. Operator, next question, please.
Operator: The next question comes from Kannan Venkateshwar with Barclays. Please go ahead.
Kannan Venkateshwar: Thank you. So maybe on ARPA, when we look at the mix here in terms of subscribers, there is a push towards family accounts that you guys are heading towards, whereas your peers are obviously focused on single line and double line accounts. As we extrapolate some of these mix differences, it feels like some of the ARPA strength could be structural and could basically, heading into next year, could also help your growth. So any color around that would be helpful in terms of the trajectory of ARPA growth from here. On the satellite side, Srini, we get your pushback on the MVNOs broadly, but there is also an advantage if you were to work with satellite in some ways in the sense that you could open up some of your spectrum capacity if you can lean on satellite broadband to some extent.
Kannan Venkateshwar: And of course, you get the coverage breadth. Your fiber scale is a lot smaller than your peers. To that extent, you get an advantage of using that footprint on satellite. Is this more a SpaceX specific pushback, or is this just philosophically something that you are not keen on with respect to any satellite provider? Thank you.
Srini Gopalan: All right. Let me pick up the satellite question first and then go to you, Peter. Kannan, thanks for that. I saw your note as well in terms of the shape-shifting nature of SpaceX's strategy. It is hard to refer to them now as a satellite provider or a satellite provider that is going to build terrestrial. It is hard to think about whether this is SpaceX alone or all of satellite. Let me answer that question in its broadest terms, right? Here is the way we think about broadband. We have got a great product in FWA, and really in many ways, except for some deep rural parts, satellite is an inferior version of FWA with even more constraints, in terms of things like what is the size of the beam, right? I do not see the synergy there between FWA and satellite.
Srini Gopalan: In many ways, two-thirds of our FWA customers come from dense urban areas. We see huge growth opportunities in those areas still, all under the fallow capacity model. We do not really see a synergistic opportunity with satellite providers, and that is a broader piece. We see it as a complementary product very much in the nature of T-Satellite. But if you are thinking of that in broader MVNO terms, I think it comes back to the philosophy with which we operate MVNOs, which is, what is the incremental TAM that something opens out? Am I willing to get into a deal for the incremental TAM? If it is a complementary product, I am very happy to look at a resale arrangement, which is exactly what the satellite was, which gets built into it. But an MVNO is a wholly different thing.
Srini Gopalan: I hope that clarifies where our head is at on MVNOs and more broadly, satellite.
Peter Osvaldik: On the ARPA question, I think your inference there was, oh, we have given up on one and two lines and we are getting multi-lines and that is driving all of the ARPA growth. That could not be further from the truth. I think what you are seeing is, again, the differentiation between the value, the network, the experience. There is plenty of customer pain points left, whether you are talking about a single line plan or a multi-line plan. You just saw T-Mix and that launch starting to address yet another carrier customer pain point that we are here to break. I think what is really driving customers and what is really driving ARPA, and we have highlighted some of this in the fact book as well that you can see, are a few things. Introduction of new rate plans and the ongoing adoption of premium rate plans by our customers.
Peter Osvaldik: We continue to see for new accounts coming to T-Mobile, 60% of those lines are on our premium rate plans. That is one big factor. Obviously, you have deepening of account relationships inclusive of ongoing sell and a 5G broadband, and now with fiber as well, other connected devices. You are continuing to see port-in ARPAs that are 20% higher than port-out ARPA. It talks about that proposition, particularly the network and the network seekers, is allowing us to capture higher value customers. In terms of your ask of what is 2027 like, we are going to update 2027 guidance when we get to the Q4 call. We are heads down here in terms of how do we execute this year and continue the growth that we see. Those are the main factors driving ARPA.
Peter Osvaldik: I can tell you, this team is heads down on whether you are a single line or a multi-line account family, we want you here because this is the place to be.
Srini Gopalan: To your point of whether there is something structural that advantages us, I will be boring, but go back to my standard thing of the structural thing is having the best network, the best value and the best experience. That is what drives a lot of the ARPA. Then we choose to compete in different segments based on value, but we also choose to compete based on where we get most customer traction.
Kannan Venkateshwar: Thank you.
Cathy Yao: Great. Thank you, Kannan. I am going to take one from the social board from Chaitan. What assumptions about 2030 traffic profile are you driving T-Mobile's network investment decisions today? Where do you expect the first meaningful capacity constraints to appear on the radio uplink, on Edge compute, transport, interconnection with AI infrastructure?
John Saw: I will take that. This is John. Chaitan, thank you for question. For 2030, we plan a traffic profile that is still downlink heavy, I think, but increasingly uplink rich, driven by the rise in AI usage, AI wearables, AI agents, and also the explosive growth by then of physical AI devices like humanoids, robots, delivery drones, vehicles and factory machines, et cetera. 2030, we will also see 6G networks being built, and T-Mobile will be the first with 6G in this country. With new applications like integrated sensing and communications, ISAC, I think 6G will be the first G where the base stations and radios behave as radars, as sensors, unlike the previous Gs. So that opens up a lot of new use cases with remote sensing, et cetera, that I think is going to drive a lot of usage as well.
John Saw: One thing I learned over the years of building all the Gs is that when you give customers a more capable network, they will find ways to use it, and usage always goes up. In fact, in the last 5 years, starting from when we started rolling out 5G, we see an explosive 5x increase in tonnage that we carried till today.
Srini Gopalan: Our speeds have nearly doubled.
John Saw: Our speeds have more than doubled as well. We expect nothing less from 6G, if anything, even more. Our capacity plan already assumes network payloads increasing like this, so we are more than ready for the growth in 2030. On your question on constraints, my job and my network team's job is to make sure that we have none.
John Saw: If there is one thing that we need to keep an eye on, it is the radio uplink, especially in dense and busy sectors, and especially with the growth in physical AI and a lot of AI agents. This is why 5G Advanced matters. This is why we roll out the country's first and only 5G Advanced network with uplink enhancements like uplink carrier aggregation, uplink MIMO, transmit switching, diversity, and higher power uplinks. They are also backed by our strong TDD spectrum depth that we can actually use to support a bigger uplink requirement if there is a need to. This is why with 6G, I am so happy that the FCC is now putting onto the auction pipeline the C-band 2.0 and the 2.7 gigahertz bands, all of which are TDD. It gives operators like us the option to allocate more
John Saw: capacity and more spectrum for the uplink.
Cathy Yao: Thanks, Dr. Saw.
Cathy Yao: Operator, let's get back to the queue with the next question, please.
Operator: The next question comes from Michael Rollins with Citi. Please go ahead.
Michael Rollins: Thanks, and good afternoon. I wanted to follow up on Dr. Saw's comments regarding AI agents, and from a customer perspective, curious if you are seeing any impact, any influence from the early use of agents, and how you look at that in terms of interacting with customers and what that could mean for customers trying to extract more efficiency out of the rate plans and hence the potential risk to revenue for wireless and broadband for that matter. And then just one other question, if I could. So you made the decision earlier this year to move to a three-year equipment cycle. I am curious what you are seeing from that, what you are seeing from device replacement rates, and given what you are seeing, is there a case to push that cycle even out longer for customers? Thanks.
Srini Gopalan: Let me pick up the replacement cycle, and John, can you lead into the agents bit?
John Saw: Yeah
Srini Gopalan: On how we are seeing that. On devices as a whole, look, I think the operating principle for us is really to give customers choice on when they want to replace their device. Part of the whole beauty of the T-Mix structure is that. Right now, whether we will go to 48 months or 60 months, whatever, it is all going to be for us, led by the customer and what we are seeing in terms of replacement cycles. At this point, we think 36 is the right duration. We offer both 24 and 36, and 36 is the right duration to go to. But the important piece for me is not just to restrict our thinking on choice to device cycle length. That is a very restricted view of how you give customers flexibility. We want to give them flexibility on whether they want the device at all or not.
Srini Gopalan: We want to give them flexibility on they may not need it right now. They may wait for the new version in 6 months. That is okay. We do not believe in the current view of you either take it at acquisition or you lose the chance to. A lot of our philosophy on how we think about customer flexibility, including on device choice, is reflected in T-Mix. John, do you want to talk about agents and our view on that?
John Saw: Yeah. Thanks, Mike, for the question. We have not really seen anything to date, nor do we see anything emerging around Muse or Instinct or any of the AI agents that are out there. But as you would expect, we are watching this very closely. We are being very thoughtful about it as we continue to advance in an AI-centric world. We are going to see more and more of this. But I think it is also important to remember that we are the customer champion on this. When you think about fairness and transparency and value, we have always been the champion for this. Transparency has always been a big, huge thing for us, and making sure that customers are getting the very best value for every dollar that they spend with us, making sure that customers are getting the best product quality, and of course, getting the very best experience.
John Saw: One of the things, too, that I think it is also important to note is we have this asymmetrical advantage at T-Mobile, unlike our competitors, when you look at the front book versus back book. Back book being much lower on average than front book. So we feel like we are very well-positioned on this entire front. Just like AI search, if there are people asking about their wireless relationship and are they getting the very best deal of all the options out there, just like AI search, we like those jump balls and people asking those kinds of questions.
John Saw: because it is going to lead them to, if you are not with T-Mobile, you should be with T-Mobile. If AI agents are proliferating that in some way in the future, and again, we have not seen anything of significance, but if that is happening in the future, we see that overall really a good thing on balance. But we are being very thoughtful. We are staying really close to it. But I like where we sit here relative to our advantages and what this could do potentially in the marketplace.
Michael Rollins: Thank you.
Cathy Yao: Thank you. Thanks, Mike. Operator, next question, please.
Operator: The next question comes from Peter Supino with Wolfe Research. Please go ahead.
Peter Supino: Hi, everybody. A question about spectrum. Last quarter, you spoke positively about the auctions the FCC is planning for 2027 and 2028.
Peter Supino: Many investors are interested in understanding how to reconcile your leading position in spectrum with your appetite for those auctions, and particularly given you have talked about FWA as a fallow capacity model. I just wondered if you could expand on the driver of your interest in those spectrum auctions. Thanks.
Srini Gopalan: Sure. Thanks for that, Peter. The way we think about spectrum is there are two factors that drive our appetite for spectrum, and I will come back to C-band and 2.7. One of them is a commitment to continue to drive network leadership, not for its own sake, but because of the opportunity that it has opened out for us historically and the opportunity leaning in. If you just go back to 5G from the point we made the decision to go all in on 5G, it has had a dramatic, transformational impact on this business, in terms of our small markets and rural area share going from 13% to 24%, in terms of being able to drive a fallow capacity business to 15 million FWA customers by the end of the decade, in terms of the opportunity it has opened out in enterprises.
Srini Gopalan: As we look forward to things like 6G and where that goes, the same set of opportunities exist, and you also have, in addition, this whole idea of what the TAM could be for physical and Kinetic Edge AI and how that drives it. That is one set of considerations, which is just looking at the overall impact of network leadership and its multifaceted impact on different parts of our business. And we look at that very rigorously. In parallel to that, there is also a very analytical build or densify versus buy piece that determines the value of that spectrum. And you have seen us at points in time, walk away from spectrum because the densify versus buy clearly pointed us in the direction of densify. A good example of that is the EchoStar spectrum, where we walked away from that deal because it did not make economic sense.
Srini Gopalan: So keeping these two in balance, making sure that we understand the upside of network leadership and its multifaceted impact on the business while being really rigorous about thinking through analytically the right price to buy that spectrum is the way we approach it. So as we look at C-band 2.0 or the next C-band auction and 2.7, that is how you should expect us to approach it. We, in general, in principle, always welcome the coming of more spectrum to the market because it opens up a ton of possibilities. That does not mean we are going to pay an uneconomic price for it. So that is the balance of how we think about it.
Cathy Yao: Thanks, Peter. Operator, let us go to the next question, please.
Operator: The next question comes from Michael Ng with Goldman Sachs. Please go ahead.
Michael Ng: Hi, good afternoon. Thanks for the question. I just have two as well. Could you talk a little bit about some of your cost and digital flow initiatives, just given the success that you have had with T-Life and then the network optimization across your RAN footprint? Just as a housekeeping item, I was just wondering if you could talk about the drivers of the wholesale and I think the prepaid outlook change for the full year. Thank you.
Srini Gopalan: Let me pick up the cost piece and more broadly, I think the AI and digital transformation, and then Peter can come back to the housekeeping stuff. We are really pleased with the progress we are making on the AI and digital transformation. Now, this is multifaceted. It starts with things like what we have seen in care. We boldly said three years ago that we would reduce the number of calls coming into care by 75%. We are well on track on that journey. We have seen real progress there in terms of our AI voice assistant, in terms of not just call deflection, but proactive call prevention by solving the problem before the customer has it, which comes back to our broader philosophy on digital and AI, which is this is not about cost.
Srini Gopalan: This is about improving the experience so that people do not need to call, so that people do not need that service. We use it extensively in driving our network optimization with our self-optimizing network, but also all of our CapEx is directed by an AI-driven tool that we call customer-driven coverage, and that is providing really, really strong results as well. I think the one place we have not talked about as much in the past is how much AI is fundamentally changing our tech capabilities, especially on our IT stack, and the extent to which. You look at something like T-Mix, and you should go have a play with the flow. Something like that is fundamentally enabled by a very different AI-enabled tech stack that has resulted in significantly higher throughput and also significantly lower cost to own, inclusive of the cost of tokens.
Srini Gopalan: We are seeing a broad impact of AI and digital across the board. Obviously, things that happen in T-Life and greater penetration further helps reduce care volumes, further helps reduce the amount of service that is required, and makes it a more frictionless, painless process to be a T-Mobile customer. So it is all going really well. We are feeling very good about it, and we are doubling down on how we drive this transformation going forward. Peter?
Peter Osvaldik: Excellent. Michael, on the housecleaning items, there is really a couple things. On the wholesale and other service revenue line, when I am thinking about what is the drag 2026 relative to 2025, it is, while it was a long-standing expectation that both Tracfone and Boost would come off, we make estimates at the start of the year, at the mid-year, and those have rolled off at a little bit faster pace than we anticipated. So that is all that is happening there when I think about 2026 relative to 2025 and the downward pressure.
Peter Osvaldik: On prepaid, again, we foreshadowed this. This is a continuation of a trend that we have seen and talked about this a little bit at Q2. For Q4, I expect that sequential change might be just a slightly bit higher sequential change. When you step back, I think what is really happening in prepaid for us is there is a subset of prepaid customers, I would call them the higher value, more prime customers, that we have seen trend-wise start engaging more directly with postpaid brands. We have long had an established small migration program where some of those higher value customers, in a CLV accretive way for us, would move from prepaid to postpaid. I think as an industry and as T-Mobile, we are seeing some more direct engagement with postpaid.
Peter Osvaldik: When I think about that small subset of prepaid customers, it is important probably to not delineate them between prepaid and postpaid, but think about it a little bit more fluidly. I step back and think about that in the context of the total postpaid service revenue growth, what we are seeing. Because the fundamental question from you would be, okay, is the postpaid service revenue growth healthy then? Are those accounts healthy then, if you are seeing some of that direct engagement from pre into post across the industry and us? I think you have seen both in our 3.5% full year ARPA guide increase, as well as the 7% organic postpaid service revenue increase, that it is a fabulous business that we are seeing in postpaid.
Michael Ng: It is very clear. Thank you.
Cathy Yao: Thanks, Mike. Operator, next question, please.
Operator: The next question comes from Sebastiano Petti with JPMorgan. Please go ahead.
Sebastiano Petti: Hi. Thank you for taking the question. Just a quick follow-up, I guess, Peter, on your response to John Hodulik's earlier question on seasonality in the Q4. I mean, should we anticipate that there is, in addition to typical seasonality on churn, should we anticipate that there is some level of maybe upward pressure, residual upward pressure related to the rate plan modernization within the Q4? That is my first question.
Peter Osvaldik: Sure. [crosstalk]
Sebastiano Petti: That is my first question.
Sebastiano Petti: Yeah. Great. [crosstalk]
Peter Osvaldik: Okay, go ahead. Ask your other one. [crossstalk]
Sebastiano Petti: Yeah, let me just get out of the way. Sorry about that. As you think about, obviously lots of focus on converged footprints and fixed footprints, has your view on the merits of incremental fiber M&A or accelerating the fiber build through additional on-balance sheet investment, has that changed at all? Particularly, it seems like some of the spectral efficiency gains you are talking about maybe suggest that there is more runway to FWA above and beyond the 15 million. Just trying to discern between those two. Thank you.
Srini Gopalan: Maybe I will take the fiber M&A question, and Peter the other one. I will come back to, we do not believe in convergence when you define it as there is a very strict form of convergence, which is fixed line along with wireless. We are huge believers in bundling, which is multiple line phone accounts, which is FWA with our phone account, which is more and more often actually our credit card, and which can also be fiber with it. It is just one form of bundling, right? There is no panacea in convergence, nor do we see a sharply differential churn benefit other than having more relationships. That sort of informs our view of fiber, because we do not approach fiber from a, we need this because of convergence. We look at fiber as a standalone business based on the return on equity that it lands up giving us.
Srini Gopalan: So we will be thoughtful and choiceful and not chase a number of homes passed. We will look at it from a very rigorous return on capital employed and what does this land up meaning in terms of accretion to equity value before we head into those. So if those deals do show up, we are very interested in them. What we have seen is typically these tend to be first to fiber, near first to fiber type deals. They tend to be specific footprints, and we are always interested in them. We have seen and shown that with the existing acquisitions, the T-Mobile brand and the T-Mobile distribution adds more value to it. So if those do show up, we will play, but we are not going to go chase a certain number of homes passed.
Peter Osvaldik: Great. Yeah, on the churn question, so as a follow-up, there is of course the regular seasonality.
Peter Osvaldik: You will see the math, as I said, of just the makeup of postpaid accounts and 5G broadband and fiber-only accounts churning predictably as they always do at a higher level structurally than postpaid phone churn itself. Then you are right, there is a little bit of, we did mention there will be some residual. Typically, when you see something like a rate plan optimization, it is a couple quarter impact, although the Q4 impact will be much more muted. But we do anticipate a little bit of impact in Q4. All of that is contemplated in the guide that we gave you, though.
Cathy Yao: Thanks, Peter.
Sebastiano Petti: Thank you.
Cathy Yao: That is all the time we have for questions today. Thanks everybody for joining us. We look forward to connecting with you soon. For any additional questions, please reach out to the investor relations or media departments. Thank you so much.
Peter Osvaldik: Thank you.
