T-Mobile US, Inc. (TMUS) Earnings Call Transcript & Summary

Okay, everyone. Again, I'm John Hodulik. I'm the media, telecom and communications infrastructure analyst here at UBS. And I'm very pleased to announce our afternoon keynote speaker, Mike Sievert, President and CEO of T-Mobile U.S. Mike, thanks for joining us.

Thanks, John. It's great to be here. I'm sorry it's virtual. But you've had an incredible event, all done virtually this year. So well done. Congratulations. I much prefer to be with you in the room for our fireside chats though. So I made you a fire.

It's awesome.

I brought on a fire. Yes, it's just for you to make it intimate.

That's great. I can feel it. It's fantastic. Thank you. It's very cold here in the Northeast. I appreciate that. Awesome.

So we've got about 40 minutes of Q&A. And as usual, I got a list I want to run through. But if anybody in the audience has any questions, please e-mail them to me or text me. Batya is there, too. You can e-mail her. She will feed them through me, and I'll weave them into the conversation. So Mike, eighth month into the new role. Obviously, a lot going on in the industry and dealing with a sort of a global pandemic at the same time. Can you give us a sense for maybe how the company is performing, and as you look out into 2021, what your priorities are for next year?

Of course. Well, let me just, first, John, start by saying how proud I am of our team. And you heard me talk a lot about this at our Q3 results a few weeks ago. And the company is performing remarkably well. And you think about everything that we theoretically were up against. So putting together these 2 disparate companies on April 1 after fighting for the merger for so long, bringing together 2 different management teams, 2 different employee bases, 2 different customer bases, doing all that during the first moments when everything was falling apart in the global pandemic. And here we are, 8 months later. I still never had my senior team in a room together. We've literally never been in the room one single time. And yet, we were able to come out yet again in the most recent quarter and show you how we were performing. And it's just -- it's a testament to the best team that's ever been assembled in this industry. So I'm so proud of them. But yes, you're asking about next year, and the priorities are really clear. I know that our team is going to be evaluated on, not just next year, but over the next few years, on 3 simple things. Did we outgrow the market, yes or no? Did we unlock the value of this combination, synergy attainment, faster and bigger than we initially promised and therefore translate that to value creation, yes or no? And thirdly, did we make the smart investments that position the company for long-term success? So those are the 3 things we're focused on for '21. We have a clear-eyed plan for not just the year, but for the next 5 years, that we've spent this year of 2020 heads down developing. And now it's all about execution. And one thing our team is great at -- every team is good at something. Some are good at strategery and partnering. And our team is -- we're executors. We perform and we execute. And now we've got a plan. It's a pure-play business plan on an -- in an incredible market where we're positioned for long-term success. And in '21, we're going to execute to grow, to unlock synergies for value creation and to set this company up for long-term success.

Perfect. That's a great -- of setting the stage for the rest of the session here. But before we dig into each one of these, let's talk about sort of the -- sort of real near term, the competitive market we're seeing today. Maybe Black Friday is a big, big part of the year, the biggest -- I think the biggest selling day of the year for -- in the wireless market. How did that go? How were you positioned? And how were your promotions performing in the market?

Yes. If you're cool, I'll just go ahead and preannounce the quarter and give you the week-by-week, blow-by-blow just for...

Let's do it. That sounds great.

Yes. Obviously, you want to try to get a little bit of color. I can only give you a little bit, which is not much -- surprisingly, not much is that different than we predicted. What we told you at the quarter was that we saw a muted switching environment throughout the year. And yet, in Q3, with a dramatically muted switching environment, you saw how we performed. And one of the things we talked about was how we have a flexible model. We're pretty good at not getting surprised. And so far, what we see is unfolding pretty much like we thought. We thought this quarter would be back end-loaded, and it is. In fact, last week was the biggest switching week of the year in 2020, not Black Friday, by the way, the week after Black Friday. So some of the dynamics are a little different than other years. Black Friday wasn't a day this year. It's a season. And last week was the biggest switching week of the year, including the pre-pandemic weeks back in early 1Q. So nice to see that happening. So it's obviously a back end-loaded quarter just as we predicted. And so we'll see how it all shakes out. But I'm not seeing anything really, either in our performance or in our competitors' actions, that surprises me much based on what we saw unfold through the year.

I thought I would tell you, when the iPhone promotions came out, I was a bit surprised that AT&T was so aggressive from -- not only from new customers, but even more so what they're doing with the existing customers. Was that a surprise to you? And are these promotions, you think, driving volumes as we look at sort of fourth quarter of this year versus fourth quarter of last year?

No. It wasn't surprising to me. I mean if I was AT&T and thought I was about to lose all my customers, I'd do something extraordinary, too. And that's what they're seeing. I mean the market understands T-Mobile's advantage. And AT&T is not alone in understanding that what we've got at the dawn of the 5G era is the ability to lead all through this era with a superior product and a superior value simultaneously, something no company has ever been positioned to do. And obviously, they see that and they feel that they need to act. Now they will try and convince you that what they're doing is economic. By the way, it's nothing too extraordinary, nor surprising, but what they will do is talk about how it's economic. But just step back and think about it. If you have a company that has 1% churn, that means 99% of the people each month don't leave. And so if you do extraordinary things for the base that are outside your norms, for the 99% that were planning to leave, it's hard to make that pencil. For us, a lot of that's in our run rate. We have a long tradition of treating existing customers well. That's what the Un-carrier is about, sort of a new discovery with some of our competitors. And that's -- it's not something that takes us too much by surprise.

Got you. And do you expect that this sort of period that we're in and these promos that really came about around the new iPhone, do you expect them to roll off in January? Or do you think that this is a sort of new run rate?

I got asked this at the quarter announcement as well. And one thing I'll point out is I don't really see much happening that's particularly extraordinary. The premise of the question that you're asking and like questions we fielded then was, "Boy, this crazy intensity, is it going to ease up?" And I'm kind of like, "What crazy intensity?" There's -- sure, there's big offers out there, but there always are around big launches. And so I haven't seen much happening that's particularly a new level of competitive intensity in the market.

Got it. Okay. So moving on, obviously, Sprint deal closed again about 8 months ago. Take us through or level set us where you are in terms of the integration of that business.

Well, it's one of the things I'm most proud of. Now I will say that the government accidentally gave us a little extra time to plan this thing than we were counting on. And we used it. We used it to make a plan that was rock-solid. And Neville and team are just running at an extraordinary pace. We're actually starting and finishing thousands of tower builds per month. It's just -- it's a massive machine. When you think about it in terms of numbers on a spreadsheet, it's one thing. But when you picture all those thousands of crews out there touching physical infrastructure and upgrading it per month, thousands per month, it's absolutely impressive. It's a build on a scale that this country has never seen, and the engine's running incredibly efficiently and ahead of schedule. So -- and that's the big piece. Synergies come first and foremost in terms of scale on a network. Distribution and marketing is the other piece and then back office. And so we can take each in turn. Network is running at an incredible pace. I know we're going to come back to that. I know you're very interested in it. Distribution and marketing, again, really great in-year in 2020 performance. We talked about $1.2 billion already being achieved in terms of run rate synergies in 2020. A big chunk of that was marketing and distribution, where we moved by August 2 to completely rationalize a nationwide distribution fleet, unbelievable execution by our team, and to do the same with go-to-market. So we have one master brand now, T-Mobile and Metro by T-Mobile. So all that marketing firepower is being thrown behind one master brand that's increasingly becoming famous as having the best values in the market and soon to be perceived as having the best network simultaneously with the best value.

And have you harmonized the plans at this point? I mean, obviously, there's probably still -- people that are still on Sprint plans, but you have one set of sort of one rate card to go to market with at this point?

We do. We do have one rate card to go to market under the T-Mobile brand. But as you -- as the premise of your question suggests, we have tens of millions of customers that come from 2 legacy bases. And so they do have different plans still. And one of the things we were able to do, and this is an innovation on this merger, is we were able to develop an approach where the billing integration, the network integration, the brand integration can all be discrete events. And that's different than prior mergers. Normally, you would have to do those at one time, cut somebody over from old to new. Their bill, their network, their brand association all changes. That's not the case this time. So we're able to execute these integrations for customers in order to maximize for 2 things: their experience and our convenience. And that's different than having to face these things being -- happening all at once. And so, for example, we can go into an area, and as we get capacity on the destination T-Mobile network, we can migrate traffic off the Sprint network onto that destination network without having to touch those rate plans or billing relationships at all. We might move the brand relationship from Sprint to T-Mobile in advance of that, or we might wait until later. And so those kinds of things are really great for our planning and execution because, again, we can make sure that the experience is great for customers, but we can also make sure that the integration happens with each one of those, network, billing, brand, operating in the most efficient way for us, and that's really important.

Got you. And you mentioned billing integration. And it seems like whenever there's a telecom transaction, the billing integration always seems to be something of a nightmare, right? It seems to never fail. I mean where are you in that process? And do you think you can assure us that, from a customer, a potential churn event, that you guys can manage this in a seamless way, despite the fact that you're putting together 2 very large organizations?

Well, we can. And that's, again, because of this discreteness that I just talked about. And so what happens is once we have the same plans on the 2 legacy systems and the destination system, then it becomes much more seamless for the customer. We also have the same presentation layer. So underneath it, you've got very different billing logic, but the presentation layers are unified, which means you can present it as a T-Mobile-branded bill or a Sprint-branded bill, regardless of the engine that's underneath and regardless of the rate plan that's underneath and regardless of which network that customer is attached to underneath. And that's really great from an execution standpoint. And so again, we're focused right now mostly on network, getting capacity built on the destination network so we can move traffic to it. And we don't have to worry about the underlying biller yet because we're getting those presentation layers unified. We can tell you -- when you've got enough T-Mobile goodness, we'll tell you you're T-Mobile because we -- our judgment says your experience is good enough and enough of your connections are on the destination network and you're getting Un-carrier rate plans and Un-carrier service. We'll just tell you you're T-Mobile, even though you might still be on the legacy Sprint biller because we control the presentation layer discretely from the billing layer. And it's just a number of innovations that we were able to develop during the pendency of the deal that are very, very different than what have happened in prior mergers. And what it allows us to do is what we do best, execution.

Got you. All right. So again, a couple of questions on the network. As Neville has explained this in the past, it's a function of building capacity on the T-Mobile network, migrating that Sprint traffic over and then starting to take down the Sprint network. Obviously, this is happening on a sort of more of a local basis. But when will you start -- when do you get to the point where you'll start taking down the Sprint network and starting to realize some of those network savings?

We've already done some on an isolated basis, but this is mostly a '21 and '22 endeavor. And by -- in between those 2, mostly '22, because the actual decommissionings, to your point, the premise of your question, it sounds like you understand it well, the actual decommissioning happens very late in the process. And so think of it more as '22 than '21, but you'll see a lot of it happening through both calendar years. And this is really great. We've done this before. This part, this is different, of course, but this part is exactly like what we did with Metro and to where we go build that capacity on the destination network, start dynamically moving the traffic over. And then when -- in each area, when you've got enough of the traffic moved and you believe you can carry it all, you go ahead and shut down the prior Sprint legacy network. And that allows, of course, dynamic farming of even more capacity onto the destination network. So that's the process. We've -- this same team has done it before with great success and almost no customer defections. And we're chasing it really ambitiously. We're trying to move really, really quickly on this because the scale of the benefit is enormous if we're able to execute quickly.

Absolutely. Maybe talk about the 600-megahertz deployment. How extensively has it been rolled out maybe? And what percentage of the phones in the base can utilize that 600? And maybe then talk about the capabilities you're able to -- that you've been able to sort of realize with the addition of the DISH spectrum you're leasing at 600 megahertz.

Yes, terrific. All great topics. So as of the last quarterly announcement, we were reaching about 270 million people with 600-megahertz Extended Range 5G. And that's 5G, even more on 4G LTE. And these are dedicated lanes and, to your point, increasing dedicated lanes because during this farming process and transition process, we're actually leasing additional 600-megahertz spectrum from a variety of parties. And what that allows us to do is to open up really wide, dedicated Extended Range 5G lanes, so different than what you're seeing from our competitors with DSS instead. They don't have those dedicated lanes, and so they're having to divide up their LTE spectrum into both technologies. It doesn't get you much. Our dedicated Extended Range, 600-megahertz 5G is 2x faster, in some cases, 3x faster than LTE. So it's a really nice pickup and experience for customers, but importantly, also gives us the capacity that we need to move quickly on migration. And that's obviously the bigger payday for us and for customers. So those are the numbers, about 1.4 million square miles as of the last quarterly announcement. That's about 3x what Verizon has, about double what AT&T had around that time. And again, we announced that we weren't stopping there. We're moving very quickly for the year-end time period. The next time we talk to you, shortly after the new year, we'll have covered significantly more than those numbers. And so terrific progress there. Most of the phones are compatible with 600 on the LTE front, right now, close to 6 million on the 5G front and rapidly growing because, as you know, some of the most popular ones have only very recently been launched. And so -- and again, this is something -- this level of device compatibility is not something we had in prior mergers. And boy, is it great to see because we're able -- again, it's a thing that's allowing us to move quickly.

Got you. Maybe shifting to the 2.5 deployment. Obviously, that's been something that's been ramping up. Where are you -- how far along are you at this point? And maybe talk about some of the capabilities you get as you bring that spectrum online.

Well, this is maybe the most exciting part of the whole story. I mean I do like talking about Extended Range LTE because it's a big advantage versus what the others are doing with DSS. But boy, this mid-band buildout, this is the game, and we are way ahead of anybody in this area. We plan to stay ahead. So what we talked about at the time of the earnings was that we had an ambition and still have it, and we're tracking really nicely to be at 100 million covered people by the end of this year, certainly by the next time we talk to you. That's incredible. The other guys are bumping around, like Verizon with Ultra Wideband, maybe 2 million, 3 million, 4 million. And they're talking about a lot of new cities, but little parts of cities and towns. You know their strategy. I predict they're going to have a wholesale change in their strategy over at Verizon. They're going to discover that they need to have a mid-band-centric 5G approach. This is the way that you get very, very high ultra capacity 5G experiences to people by the millions and tens of millions. Our signal reaches miles, not meters. And so that's really important for the everyday experience. And people are going to see, across these tens of millions of people, they're going to see an experience that's not a little bit better than 4G LTE, but a transformation. So 7, 8, 9, 10x faster, 300, 400 megabits per second peak speeds over a gigabit. And this isn't just the little smatterings of certain street corners and when the leaves aren't out. This is across vast swaths of the country. So that's really game-changing. And it's probably the place where we lead the most. And it's going to be what millions of people see. It's going to be FOMO. It's going to be bragging rights. And everybody is going to be able to see this difference that T-Mobile is able to give you across massive swaths of the country, 100 million as we exit this year, into the first part of 2021, and then 200 million as we exit next year. And so this is game-changing. And it was a huge part of why we worked so hard to get this merger done because we knew how it would benefit tens of millions of people and, by extension, benefit our business.

Got you. And what percentage of the base can use the 2.5 spectrum?

Well, it's -- again, right now, for the 5G portion, it's only single-digit millions.

Right. Exactly. That's right.

Yes, because we're building all this out, the 2.5 gigahertz on the destination network. Now on the Sprint legacy network, we have some 4G LTE in 2.5 gigahertz. But the destination is all 5G. And so that's single-digit millions and rapidly growing.

Got you. So this lead that you're creating with the 2.5 spectrum. How sustainable do you believe it is over the next sort of 3 to 5 years? I mean, obviously, there's a lot changing. You have the C-band auctions that just kicked off. Obviously, you can't talk about that, but presumably, all that spectrum will get into the market and get built out. As you said, Verizon is continuing to build out its millimeter wave. Does this lead that you're creating with the 2.5? How does it look over the next several years? Is it something that you will be able to maintain?

Yes. Well, this is a good opportunity for me to make my lawyers happy by saying, yes, I'm not going to be able to talk about the auction nor predict post-auction market dynamics. And I will make other forward-looking statements in this conversation, which are subject to all kinds of risks and uncertainties, which can be found in our filings.

Yes. Of course. Understood.

See, what didn't I do well on that?

That was great. You kept them happy.

But listen, I can't -- because of that, you're right, I can't get too much into post-auction dynamics. I can just tell you that as we've said all along, and as I said very clearly as recently as the most recent quarterly announcement, we believe this company is positioned to lead for the entire 5G era. And if we're honest with ourselves, that was Verizon's era in 4G. They got out first, they got out best, and they stayed ahead on network through the entirety of the 4G era. We've worked really hard to catch up, kind of caught them as the era was ending, not in square miles, but in overall pops and coverage and capacity. In 5G, that's our opportunity. We're starting out way ahead, and we intend to lead for the entire era and not just be the best 5G network in terms of speed and capacity, but to be the best network. And this -- we're a pure-play wireless company. And we know that in order to win, we have to have the best and the leading network in this country. And we have to become famous for it, which, frankly, is even harder because brands are stubborn, brands are powerful. That helps us on some fronts because simultaneous to being the best network in this country, we're the best value. And consumers and businesses already give us credit for that. We can't lose that. We build behind it and lead through the entirety of the 5G era on network. And then the third leg of the stool is experiences. Our company believes in delivering the best experiences. We have the highest Net Promoter Scores in the history of this industry. We've won 5 years in a row on J.D. Power for both consumers and businesses. Customers love us because we hire the best people and we have a culture of treating customers with respect and love. And so when you have the best value, the best network and the best experiences, that's a winning formula. And we intend to lead with that formula through the entire 5G decade.

Got you. One of the things that I think both of your competitors talk about -- we talked a little bit about the competitive market. One of the things that they've talked about is migrating customers to unlimited. And there's a big effort there, really for both, Verizon and Sprint talked -- or AT&T talked about it today. Can you talk about how the T-Mobile base is positioned now? What percent are on unlimited? It's not something you really hear about a lot with T-Mobile. But is there an opportunity to migrate customers up to sort of higher-value plans, and if not stabilized, maybe you can grow ARPU from here?

There are opportunities. And I love this whole dynamic. The Un-carrier, as you've been following the story for so long, John, you know the Un-carrier has always been about making big structural changes in how the market works and then watching while the competitors, usually kicking and screaming because it hurts them, kind of come along. And unlimited was one of those. When we came out with T-Mobile ONE in early 2017, which was getting to be a long time ago now, we declared that the era of the data bucket was over and that the world was unlimited. And so we led in that, and Sprint was right on our heels. And so together, the new T-Mobile have been leaders in unlimited for a long time. Now over at our competitors, unlimited doesn't always mean unlimited. You've got somewhat unlimited and better unlimited and get more unlimited and super-duper unlimited, which kind of begs the question of, "Okay. Well, wait, what?" And so -- and customers are a little confused by all that. And so now you can mix and match your unlimited. It's like your unlimited is not the same as your unlimited and even in your family. So we look at all this with a little bit of a smile. And while we're planning the next big structural change and conversation changer, you can bet we'll be doing that.

Got it. So let's shift to margins. Based on our estimates, you're going to have core service EBITDA margins right in the sort of 40% range for the year. You've got AT&T at 55%, Verizon at more than 60%. Obviously, as you guys have pointed out, you actually are slightly larger than AT&T. How do -- how close can you get to AT&T over the next 3 years? And sort of what does the slope of that look like, of that curve look like as you start realizing these synergies?

Yes. Wonderful question. It's one of the most exciting parts of the story. By the way, I don't think we've caught AT&T on revenues yet. So we surpassed them on customers. That's always hard to tell, what these comparisons -- our competitors can always provide the same exact transparency that we do. But we think we're right behind them on revenues. And so there's a few differences between our model and the others. One is we have a denser network grid, which is going to convey some of that advantage that I talked about that's so important for growth. So we intend to be a share taker and a grower through the time period, and there's always some cost to near-term margins to that, very small. We also intend to continue being the best value, and there's a small cost to that on margins. But both of those accrue to terminal value and growth rates and enterprise value-creation potential. And so there are things that are deliberate and we're proud of and plan to keep. Beyond that, there aren't that big of differences. And so you'll see synergy attainment close the gap. And there will be differences, as I just said. But between synergies and cost transformation of bringing these companies together, you'll see that margin gap start to close. And we'll talk more about it when we lay out more of our plans. But everything we talked about in 2018 when we announced this merger in terms of long-term potential, we still see. And in fact, in some cases, we see it unfolding better than we had anticipated back in 2018. So I'm excited to talk to you about all that in more detail. But again, we see solid revenue CAGRs on the top line and then EBITDA margins in the mid-50s over time. And that's -- there's no reason we can't get there. And I wouldn't be surprised if Verizon are trying to battle us back if they lose a little ground on that at the same time.

Got you. Maybe another question on competition. You've got a bit of an emerging set of competitors that I would love to get your take on. First of all, more immediately, the cable industry is entering the market. Actually, small subscriber share, but a fairly large flow share these days, bought some spectrum, may end up with some more spectrum with the C-band auctions. How do you see them as a competitive threat over the next few years? And then relatedly, beyond -- behind them is DISH, big spectrum portfolio. As you know, they've got a prepaid business now and starting to build out and have to hit their buildout requirements over the next 5 years. How do you see them as a competitor in the future as well?

So I think they're all here to stay. And cable has done really nicely in this market and probably differently than we would have predicted. We pride ourselves on our ability to predict what's going to happen. And I'd say, other than the first year, where cable's performance caught us by surprise back when they got started, when was that, 2018 or so, since then, we've been predicting their performance very accurately. And they've generally -- things have generally unfolded to how we expected. I think not having owner economics is ultimately going to be -- strategically, for them, is going to limit what they can do in the space, and certainly, it will make wireless a bit of a tool for their broader corporate ambitions as opposed to something that they're going to mine massive amounts of money out of directly. So it's a little bit about protecting their castle. And they're -- so far, it's going pretty well. Nothing there is surprising me too much. Now what you're not seeing is a lot of growth in their top line customer growth. And what that means is you've got this nominal amount of activation flow that's happening, that's fairly predictable, that, right now, is being aided by flow for their core. There's lots of attention being paid to home broadband right now because of the COVID crisis, which is actually helping them a little bit on the wireless side. So that could get a little harder for them in the future. We'll have to see. But either way, that run rate of activations isn't really growing that much. And so as your base grows, unfortunately, so do your deac flows, and, therefore, the nets get harder and harder for them mathematically over time. And right now, they're not really making money even with the kind of tailwinds of not having to face many deactivations. So it gets harder from here. But they're here to stay, and I think they're really doing a nice job. DISH. So DISH is -- as you know, DISH is mostly or entirely prepaid right now because they started with the Boost business. And we don't have to see where that all goes. They are going to have some form of owner economics. They're investing pretty heavily, but not heavily compared to what it takes to be a player like AT&T, Verizon and T-Mobile. And so obviously, they're going to talk a book of, oh, things are different now, and you don't have to invest and we'll be competitive. But they're going to be their own -- when it comes to their own network, they're going to be their own kind of player, and they will do their own kinds of things. And time will tell whether those are big revenue things or not. What I love about our business is that we are a pure-play company in a proven part of the market, that people, their love affair with smartphones and related technologies, whether it's businesses or consumers, is only growing. And we're positioned to be the leaders in that space. And we're doing well, really well, despite these competitive threats that are not new. They've been around a couple of years now. They're well in the run rate. And if anything, it gets a little harder on those guys from here on out.

One of the opportunities that DISH actually talks about quite a bit is, as it relates to 5G, is the enterprise market. Is that a potential growth area to you -- for you? I mean T-Mobile is, obviously, for the most part, focused on the consumer aspects of the business. It's a very strong consumer brand. But do you think that it translates especially with 5G into some revenue opportunities in the business market?

Big time. One of our biggest growth engines right now is enterprise. And we're very focused, not just on the here and now, but what enterprise is 1, 2 and 3 and 4 years from now. And again, we've got this big network capacity, including the spectrum that backs up the network. And ultimately, that gives us tools to be able to work with enterprises around the kinds of solutions that they may want in the future, for dedicated networks, very low-latency, high-capacity dedicated networks with advanced dedicated spectrum capabilities. And there's really exciting opportunities there. Some of them are more 2 and 3 years out before they contribute in a very big way. But they're real. And ultimately, we're so well positioned for that part of the market. Right now, what we're doing is selling our macro capabilities. And enterprises, unlike consumers, where we have a bit of a brand deficit we've got to overcome on network, meaning we're not famous yet as the best network in the space, enterprises don't care about any of that because they check out 100 phones and test them for a few weeks. And then they come back and pick us. And so that's a tailwind on our business. You're seeing it in our present performance. In Q3, we had an all-time record on enterprise sales, and you're going to see it continue. It's something that we're really, really focused on, a big growth engine for the company. 90-plus percent of the customers out there are with somebody else.

That's right. That makes sense. And then maybe I'll just quickly -- touching on the sort of other end of the sort of market, the prepaid market. Obviously, in the past, it's been a big growth area for T-Mobile, and it's been under some pressure a bit this year. Has it become -- the prepaid market become very competitive? And with Verizon's acquisition of TracFone and DISH entering the market with Boost, do you expect that to continue to accelerate? Or just your outlook on the prepaid market would be great.

Yes. I haven't seen a lot of big changes in the prepaid market. Although you're right, TracFone in Verizon is something to watch. I will say I'm really proud of our team and how we've executed on prepaid. We are, by far, the leader, with nearly 21 million customers in the space. And yet as the leader, we keep growing, not just the top line, but also the quality of that customer base. So we grew in '19. We've grown year-to-date in '20. And as the leader, that's hard to do. If AT&T and Verizon hadn't been able to pull that off on the postpaid front to grow postpaid phones so reliably, that would have been great. Instead, we came in and took all kinds of share. As the leader in prepaid, we're not just holding on to our customers, we're growing, and you've seen churn decline and ARPUs flat to up. So really, really proud of what's happening there. We participate in a higher, more engaged customer subsegment of prepaid, monthly longitudinal relationships. And so that's always been the sweet spot of Metro by T-Mobile, and it's a source of strength. We control the channels, we control the offers, we have long-term relationships with customers, and yet, we have incredible values that are attainable to any consumer. Now what you see with TracFone is a big portfolio of brands and a lot of complexity. And Verizon, I don't think, was attracted to any kind of fantastic growth profile there. They were attracted to synergies, and they should be able to -- I don't see any reason why they shouldn't be able to grab the synergies that they've promised. But in terms of some big, big onslaught of growth, I'd wait and see on that front because it's a complex mess. But they should be able to grab the synergies. That should be a pretty straightforward enterprise for them.

Got you. Maybe pivoting to the fixed wireless product, talk a little bit about how big of an opportunity this is. Is it more suburban or is it more rural? Talk about the capabilities of the service that you hope to build on the back of this. And when will we start to see you adding subscribers to this service?

Well, this is the flip side of what we were talking about before, when I said, if anything, the first year of cable's entry into wireless caught us by surprise. After that, we've been able to predict them really well. And it showed that the American consumer has more of an appetite for consolidation and sort of bundling than we had given -- this industry in the U.S. market had given credit to. And that plays to our advantage in home broadband. And so we're going in big, and we're really focused on it. And again, our mid-band heavy strategy is a winner because we don't have to focus on tiny neighborhood deployments and wondering whether people will be able to self-install and they have to stick it on the proper side of the house or get a suction cup or window or something like that. This is something that's a known technology. It's proven, it penetrates walls, it can transmit for miles. And so we're going to be able to open up big, big swaths of the country with home broadband offers. And there's a number of ways we'll do it, but one of the ways that we'll do it is what we call a fallow capacity model. And what that means is there are neighborhoods all over the country where we predict that no normal amount of mobile usage will take up all of the available capacity that we can build with our spectrum portfolio and network assets. And that assumes that mobile usage skyrockets. It assumes that we continue to take share, it assumes a lot of very positive things, and then you look out into the future and say, and yet, there's still capacity. Those are the neighborhoods where we will be approving a 5G Home Internet. And they're not isolated neighborhoods. There's not just a few massive parts of the country where we can reliably offer terabytes of usage, massive unlimited capability at a great value because the capital has been paid for. The capital is funded by the mobile business. And so we're going to be able to come in and undercut the competitors, offer a highly profitable product that really meets customer needs. And what cables look at is they say, "Oh, you know what, that's not much of a threat because our fiber will be better." I'm like, "All right, let's see. Let's see what customers are really looking for." And if -- it's true that a Ferrari is the fastest car out there, but the speed limit is 65. And so if you can, with our service, fire up all the TVs in your house with 4K video and have 2 people zooming at one time, why is it that you want to pay a lot more for some other service that purports to be faster? And that's where we're arriving when it comes to Home Internet usage. And so I'm really excited about this. We have a great team focused on it. We've put some of our best people in charge of this area. And it's something that our business plan is very focused on, both in suburban and rural areas. I can't parse that one for you. The opportunity is really regardless of urbanicity. There will be places in urban markets where we play as well.

Got you. So Verizon has some, with its 5G home service, some targets out there. I don't think they've put a bookend in them, but sort of 30 million homes passed, maybe 20% penetration. I mean how does that 30 million homes pass? It sounds like given the 2.5, the fact that you'll hit 200 million home -- or pops, at least, by the end of next year, I mean, could the -- at least the sort of footprint or the opportunity set for T-Mobile will be far larger than that 30 million homes that Verizon is looking at, at the outset?

Of course. And by the way, remember, all of that is before we even start talking about millimeter wave. Despite how we critique Verizon's overreliance on millimeter wave and their strategy, it plays a role. It's the top layer of our layer cake, and we see it augmenting capacity in certain places to make home broadband and smartphones even better. The difference between our approach and Verizon's is that we, in no way, rely on it and nor do we think that it should be bare and that a user should have to get either their home broadband or their mobile service from just millimeter wave. But before we ever deploy, we have a big tranche of millimeter wave, before we ever deploy it, we can reach more homes just through the massive capacity of our mid-band-fired 5G network. And that's so exciting because people will be able to do the kind -- 2020 has shown what people want to do from their Home Internet connections. We'll be able to support that with mid-band 5G technology. And that's game-changing.

And so when should we expect to see this product debut?

Right away. We'll get into it next time, but we've been talking all along that it would be an early '21 kind of a thing. So we've been marketing 4G LTE as a pilot all through 2020, really learning a lot. We're trying to soak in the knowledge of how to perform in a market that's tangential, very familiar to us, but different than our core market. And we've learned a tremendous amount about how to delight customers and serve them and make them happy and solve their problems so that when the CPEs arrive for 5G, we're going to start to scale it up. We're not going to go super fast because, remember, in the early going, our capacity is -- it's really important that we use our capacity to migrate Sprint mobile customers over, right? So we're going to be -- while we're refarming spectrum and building the destination network, that's our priority. So you'll see us go at pace for the first couple of years on broadband because the bigger prize for our shareholders is synergy attainment.

Right. You guys got a lot going on. All right. Last question for me. Putting it all together and given the expected EBITDA growth that you should attain over the next couple of years as you realize these synergies and all these initiatives play out, the company is going to delever pretty quickly. First of all, what have you guys said about -- if you could remind us what you've said about sort of target leverage. And then what should we think of in terms of uses of excess cash flow as you retain those target leverage ratios?

Yes. We didn't really lay out a lot on that front. We did say we expect to be corporate-family investment grade, and that's an important aspiration that we achieve and maintain. And -- but it does look like this business plan supports a lot more cash than the amount of delevering that would make sure that, that gets maintained. And so then that does raise a really fascinating question, which is -- and this isn't someday, by the way, this is coming up pretty quickly in this business plan. And so we're going to talk more about that next time. But one of the things we've always said is that in the early going, we would rather have the flexibility around shareholder remuneration through share buybacks than through alternate strategies. And that allows us to put the cash back to shareholders in a way that doesn't create some limits to our optionality to add value to shareholders in other ways. So we'll talk more about that. But I got to say, the cash flow production of this business plan and what we think we can achieve with the assets we've already got and the execution we've already demonstrated, it's enormous, and it's maybe the most exciting part of this whole story for investors.

Agreed. All right, Mike, that's all we have time for. Really appreciate your time today. Very informative.

I really appreciate you having me.

Okay. We'll talk soon. Thank you, everyone.