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

Hey, everyone. I'm here today with some really exciting news to share because today, we're unveiling a set of important moves the Un-carrier is making to help businesses and organizations. And frankly, today's news could not be more timely or more urgent because it's all about equipping businesses to succeed in a time of seismic shifts in the way we all work. In 2020, we saw a decade of change packed into a single year, and here's the thing. The world is not going back. The workplace has been transformed forever. In a post-pandemic world, 87% of U.S. business leaders expect to see some of their employees working from home 3 or more days a week. Even for those who physically work at offices, the future of the workplace will be more flexible and more virtual. The good news is that new technologies, like 5G, have arrived just when we need them most. And T-Mobile is uniquely equipped to deliver in this moment. And here's why. Because with Sprint now part of T-Mobile, we truly have the scale and unmatched network assets to go big for big business and government organizations. T-Mobile now has the nation's largest, fastest and most available 5G network with over 1.6 million square miles covered, nearly 2.5x more than AT&T and nearly 4x more than Verizon. As the Un-carrier, we're putting this network to work, solving the very real and very urgent problems facing businesses and their employees today. Putting customers first and using our 5G network for good is one of the very things that sets T-Mobile apart as the Un-carrier. We're using our network to solve real problems, like closing the homework gap for millions of kids with free or highly subsidized broadband service, working closely with school districts nationwide to reach kids with a remarkable $10 billion service commitment or launching breakthrough new 5G plans, so you can't be slowed down or just improving something we've all experienced, like glitchy video calls. So today, we're taking the next step, unveiling a comprehensive set of T-Mobile for Business solutions unlocked by our 5G network to solve real problems and empower businesses to do business wherever and whenever they need to. And we're calling it T-Mobile WFX, and it includes 3 key solutions to help businesses work from anywhere. First, T-Mobile Enterprise Unlimited, a set of business mobile plans that truly unleash what's possible with 5G at an unprecedented value. We're launching new plans with unlimited 4G and 5G data at the same price as the carriers' limited, pooled and shared plans with a fraction of the 5G access, truly unlimited for the price the other guys charge for limited data you have to share. So no more archaic data limited, pooled or shared plans, no more tracking data, no more overage penalties, that's how 5G was meant to be, and the Un-carrier is here for it. Second, T-Mobile Home Office Internet, a solution that provides your workforce with secure office connectivity even when working from home. We're delivering Home Office Internet to give your employees an enterprise-grade broadband connection so they can dedicate a reliable, high-security connection to your enterprise network without fighting over bandwidth at home. And finally, T-Mobile Collaborate, a mobile-first, cloud-based communication and collaboration suite, powered by our close partner, Dialpad, a leader in this space. This solution unites 5G connectivity and a suite of AI-powered communication tools all in one cloud-based platform. Now that's a lot of buzzwords. So let me just say this: your teams can call, message and conference across their preferred devices for effortless collaboration just as if they were at the office. But now they can do it from everywhere with in office-like features that are important to businesses and employees, such as call transfers, one-touch conferencing, full integration with all the major productivity suites and a lot more. This combination of solutions will enable businesses to easily embrace the current and future hybrid working models and support their workforces with less overhead, streamlined connectivity and seamless collaboration, all thanks to the best 5G network in the country. So that's our news: whole new unlimited plans that bring enterprise mobility into the 5G era called T-Mobile Enterprise Unlimited; a new secure and dedicated home office 5G broadband service for work from home called T-Mobile Home Office Internet; and T-Mobile Collaborate, an exciting suite of solutions that give employees the advanced communications tools they thought they could only get at the office and then some. So now to break it all down for you, here's Mike Katz, our Executive Vice President of T-Mobile for Business.

Thanks, Mike. Today's news could not come at a more crucial time for American businesses. At a time when it is absolutely critical to adapt to historic changes in the way we work, most businesses and government organizations are being held back. The carriers have a 91% market share within large enterprises, 91%. And they use that stranglehold to keep big businesses and government locked into old technologies, old plans and all the old carrier penalties and gotchas. Today, almost 50% of enterprise employees are on limited, pooled or shared data plans. Every one of those organizations has to try and predict how much data they're going to use each month. And that's virtually impossible when you consider that these organizations have thousands or tens of thousands of employees. To manage all this, businesses and agencies are forced to spend huge sums of money on data cops to oversee plans and police data usage. This is one of the wireless industry's dirty little secrets, and there is an entire cottage industry of consultants that exists just to help businesses manage the mess caused by the carriers' shared and pooled data plans. Enterprises spend millions of dollars in the unending battle to police wireless data plans, and that's on top of paying for the plans themselves. Of course, it's up to those same businesses to carry the risk and pay the overage penalties when they get it wrong. And it's becoming a bigger problem by the day. With 5G, mobile data usage will surge nearly 38% a year over the next 5 years. If customers did nothing, organizations would pay an estimated $2.5 billion in overage charges just over the next 5 years alone. In the never-ending effort to avoid that cost uncertainty of monthly data management, most businesses will end up paying Verizon and AT&T for increasingly expensive plans. And of course, there is an even bigger cost of stifling collaboration and innovation. 5G will introduce new breakthrough innovations, many of which we can't even imagine right now, just the way that 4G did. And businesses trapped on old limited carrier plans are businesses who can't seize first-mover advantage on these new 5G innovations. All of this means that simply put, most enterprises today aren't set up for success in our 5G future. Today, we're changing all of that. We're breaking the carrier's death grip on government and business. With work-from-anywhere solutions, we're launching new plans with unlimited 4 and 5G data at the same price of the carriers' limited, pooled and shared plans, plans that don't usually even include access to the carriers' real 5G networks. That's unlimited data with 5G access on the nation's largest and fastest 5G network at no extra cost. Your teams can work without fear, without worrying about working too much. Plus, your teams can truly work from virtually anywhere because Enterprise Unlimited comes with plenty of smartphone mobile hotspot data. And you can now eliminate the cost uncertainty because with the Un-carrier, there are no overages. We will match or beat that pooled plan price and upgrade you to fully unlimited plans, including 5G. Altogether, that's billions of dollars enterprises can invest instead into their people, products and services. Smart businesses are already doing that, businesses like Nordstrom. This is a company that I've always admired for their incredible commitment to customer experience. And now I've seen them emerge as one of the leaders in digital retail and how they're adapting to this new reality. Nordstrom is one of our first customers to move from old pooled, shared plans with AT&T to fully unlimited 5G with T-Mobile, all to set them up to accelerate their digital strategy.

We started our digital evolution at Nordstrom years ago. And like so many businesses, we've accelerated that evolution during the pandemic. And our track record is strong. Now over half of Nordstrom's revenue comes from our digital channels. That's up from 33% in 2019 and just single digits a few years ago, and we expect that growth to continue into 2021 and beyond. It's vital to our business and brand that as we shift to digital, we keep our focus on delivering that incredible customer experience Nordstrom is famous for and that we use digital to stay more closely connected with our customers than ever before. That means meeting customers where they are, and where they are is mobile. That's why we've partnered with T-Mobile to transition to unlimited 5G smartphone plans from pooled, shared 4G data plans with limits. This gives our mobile workers more flexibility and freedom, saves us costs. And it sets Nordstrom up to more rapidly adopt new 5G innovations that we expect to arise in coming years to drive this digital transformation and evolve the retail experience Nordstrom is famous for.

It's so rewarding to hear how customers are benefiting from the work our teams are doing, but this is just one of the challenges organizations and employees are facing today. Right now, most workplaces require people to be able to connect from home. And as Mike said, that's not going away anytime soon. Sadly, the truth is that home broadband in America was in a sorry state even before the pandemic. 1 in 4 Americans, that's over 80 million people, have only one broadband option in their area. And in rural America, 28% have no access at all. That lack of real competition is the major reason ISP customers are among the most dissatisfied. Until now, that lack of competition has meant you have nowhere to turn. If your Comcast connection keeps dropping video, you can't fix it with more Comcast. Now the shift to remote work has pushed the situation to the breaking point. [Presentation]

With everyone working, learning, gaming and streaming from home, every family is caught in the battle for bandwidth. About 60% of people say they have had issues with simple voice and video streaming for work or school in the last 6 months. We've all experienced it, the buffering, the jittering, the dropping. These technology challenges are estimated to cost businesses millions in lost productivity every month. This is also a massive security issue. Employees working from home are putting company info at risk when using unsecured personal Wi-Fi. And until now, organizations couldn't solve this problem for their employees either because the complexity of having to manage a patchwork of ISPs to serve their diverse and distributed workforce or because simply a viable option doesn't exist for some or all of their team. Here's the good news. T-Mobile's new 5G network is so powerful, it can replace broadband in the home for millions. Now with T-Mobile's Home Office Internet, your employees get a protected, enterprise-grade broadband connection dedicated for work. You get 4 and 5G broadband to keep remote workers connected and productive at home. Our solution prioritizes access to the organization's work apps and sites. T-Mobile's Home Office Internet does not replace or compete with your personal home broadband Wi-Fi. So when the parent is using Home Office Internet to get work done, the family can use their existing personal Wi-Fi to binge, stream and game without disrupting work. And Home Office Internet is super simple. First, this is designed as a single nationwide solution, which means no more patchwork procurement to piece together multiple regional services to cover your employees. That's right, a partner with a real nationwide scope. And we direct-ship a router to your employees. Self-install takes a few minutes max. Just plug it into a power source and give it a name, and you're ready to go. So you save on IT costs. Home Office Internet will launch with availability to 60 million households and expand throughout the year as we continue to expand our nationwide network. And of course, you get our award-winning dedicated support for your company and your people available 24/7 if needed from the company that's ranked #1 in customer satisfaction 4 straight years for business, all sizes, small, midsized and large enterprise. Home Office Internet is something only T-Mobile can do, thanks to the unmatched capacity, breadth and speed of our 5G network. Now I'm going to introduce you to Mishka Dehghan, our Senior Vice President of Strategy, Product and Solution Engineering. And Mishka is going to tell you all about our final piece of our T-Mobile work-from-anywhere solutions, Collaborate.

Thanks, Mike, and hello, everyone. The pandemic has really accelerated digital strategies at a rapid pace. And Collaborate was built with those changes in mind to help businesses improve productivity, mobility and flexibility while saving money. Because the truth is, enterprise and government organizations today are paying billions to maintain legacy telecoms infrastructure, old PBXs, old on-premise collaboration technologies and old desk phones, and all of that in vacant offices no one is using right now. In 2019, businesses spent nearly $6 billion on legacy telephony infrastructure. What a waste. All for employees who'd rather use the more capable smartphone in their pockets. The pandemic has shown us that employees can and will use their personal devices to do business. Smart organizations are embracing this, but they also need visibility, control and security. With Collaborate, we can do all of that. Collaborate is a mobile-first, cloud-based communication and collaboration suite powered by Dialpad, a leader in this space. It's a full enterprise-grade phone system with all the flexibility of the cloud and all the functionality of that old expensive PBX, like auto attendant, hunt groups, dashboard and so much more, all in the palm of your hand on your mobile device. You get voice and videoconferencing that allows you to host effective meetings from anywhere with no annoying PINs and high-quality, high-def video and audio. Collaborate also includes built-in, real-time artificial intelligence to make everyone more productive. My favorite thing about this is that the AI assistant can take meeting notes for you automatically while you are on a voice or video conference call. And not only you can get a transcript, but the AI-powered voice intelligence is smart enough to identify action items for you. Plus, Collaborate comes with built-in integration with Microsoft 365 and other key cloud-based workplace apps. One of our goals with Collaborate was not only to deliver robust functionality, but we wanted to deliver something that sets a new bar for simplicity. And it's easy to use. That's why Collaborate can be installed remotely easily from virtually anywhere in a matter of minutes, saving IT time and money. Of course, because it's from the Un-carrier, Collaborate is both unbeatable quality and an unbeatable value. Collaborate, together with the T-Mobile for Business line of unlimited talk, text and data, including 5G access, starts at $37 per line per month. And that includes 10 gig of smartphone mobile hotspot data so that you can tether your laptop to your phone to get work done from virtually anywhere. At $37 per line, that's closer to what the competition charges for this level of unified communications and collaboration software or for the line of service by itself. With Collaborate, you get both. And it's important to note that T-Mobile Home Office Internet and Collaborate have been designed to work together so we're making them available together. We partnered with Dialpad for Collaborate after an extensive evaluation. We then explored building our own tech, but ultimately, we chose Dialpad due to their mobile-first technology and innovation track record. And this is more than just any partnership; it's a very strategic one. We made a multimillion-dollar equity investment in Dialpad through T-Mobile Ventures. With Collaborate, we have customized a unique solution for T-Mobile customers, bringing together the most used Dialpad features and an unbeatable price point. Today, Collaborate is already in trials with both enterprise and government customers. And I'm pleased to welcome one of them, Ted Ross, the CIO of the City of Los Angeles, to tell us why the city chose Collaborate as part of their mobile-first strategy.

Over the past year, cities all over the country have faced unprecedented challenges responding to the COVID-19 pandemic. Our first priority is the health and safety of 4 million people who call Los Angeles home. This isn't our first crisis, and it certainly won't be our last. As we use technology infrastructure to manage today's challenges, we also keep one eye looking ahead for new challenges down the road. Our city government delivers critical services from 911 to trash collection to children's classes at parks. Keeping city employees connected anytime anywhere is essential to L.A. city operations. Partners like T-Mobile help us stay connected and productive especially in times of a crisis. T-Mobile's products have helped us deliver cost-effective solutions to meet current communication demands and expansion for the future.

Thanks, Ted. L.A. has been a technology leader among America's big cities, and it's a great use case for T-Mobile's Collaborate. The fact is, our new world of work requires more than better connectivity. It requires a whole new way of thinking about communications and collaboration technology all up, and that's what we're delivering with T-Mobile work-from-anywhere solutions. Now back to you, Mike.

Thank you, Mishka. I am so proud of everything T-Mobile is doing to stand up for businesses especially at a time when our economy needs it most. And the nature of work itself is so rapidly changing. And to be a part of the amazing work organizations like Nordstrom and the city of L.A. are doing, with T-Mobile's WFX solutions announced today, we're going big for business and government, and we're bringing that same disruptive Un-carrier approach that puts customers first. And you know what, it's made T-Mobile the fastest-growing wireless company for the past 8 years and counting. Because unconventional times require unconventional thinking and unprecedented solutions. And nobody, I mean nobody, does unconventional like the Un-carrier. With the new T-Mobile, we now have the resources and unmatched network, not just to be in the game but to change the game for good. Serving businesses and organizations is a massive growth opportunity for T-Mobile, and this moment of change is also an opportunity for businesses. When businesses adapt quickly, we can emerge even stronger and more agile and more competitive. And that's exactly what the T-Mobile WFX solutions announced today aim to help businesses do. And together, there is no stopping us.