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

Hello and welcome to the T-Mobile Analyst Day. I'm Jud Henry, Senior Vice President and Head of Investor Relations. We have a very exciting agenda today. But first, let me get a few administrative things out of the way. During this presentation, we will make forward-looking statements, which involve a number of risks and uncertainties that may cause actual results to differ materially from our forward-looking statements. We provide a comprehensive list of risk factors in our SEC filings, which I encourage you to review. A replay of today's event, along with the presentation materials and a press release recapping today's event will be available on the company's Investor Relations website at the conclusion of the event as well as reconciliations between GAAP and the non-GAAP items we discuss today. All right. On with the show. Today's event will consist of 4 sections. Each one will be followed by a Q&A session. That way, we can keep it interactive as we go along. Our event will, of course, be kicked off by Mike Sievert, and then we'll dive into a discussion of our network and spectrum advantages, why they are durable and how we will translate those into brand fame and business results led by Neville Ray and Matt Staneff. Second, we'll dive into our 4 consumer growth opportunities, showcasing how our customer-first formula has legs that will fuel our growth for years to come, especially as we focus on underpenetrated segments. That section will be headlined by Jon Freier and Callie Field. Third, a discussion on our big growth adjacencies, business and broadband, led by Mike Katz and Dow Draper. And finally, a discussion on value creation, including synergies, mid and long-term financials and shareholder return aspirations, led by Peter Osvaldik. We have a lot to cover. So without further ado, let me turn it over to Mike.

Thanks, Jud. Hi, everyone. Thanks for tuning in. Welcome to our first ever T-Mobile Analyst Day. I've been looking forward to this event for a while now, and I'm excited to share more details on our simple and straightforward business plan and our vision for growth and value creation. We're coming to you virtually this afternoon in our socially distant setup here in our Bellevue headquarters, where as Jud said, I'll be joined by a few of our senior leaders to share our plans for T-Mobile's future. Now let me just start by saying that as we approach a year since closing the merger, I am really proud of how our employees have united as one combined company to serve our customers and deliver outstanding business results, often under very difficult circumstances. This success just simply reinforces that we've assembled the best team of leaders and employees in the industry. Our first year of progress says a ton about our people and about our culture because this is when many mergers really struggle. We've persevered through a pandemic, an economic crisis and of course, difficult times socially and politically. I am so proud to see our team rally together around our love for our customers, something which will always set T-Mobile apart. As I stand here today, our entire wireless industry is embarking on the 5G era, an era that's been a long time coming and one that T-Mobile is poised to lead for the next decade, if not beyond. Now even though we'll allow Neville to do a little bragging, we're really not here today to tell you about our head start in 5G. What we're here to tell you is, why our advantage will last for the entirety of the 5G era and translate into business results, and we believe, extraordinary shareholder returns. Listen, it's no secret that wireless has changed the way we all live and work. And this year has made clear that more than ever, connectivity is central to nearly every aspect of our daily lives. In this work-from-anywhere, connect-from-anywhere world, the Internet is going mobile and 5G is the catalyst. When we look ahead as the country's leading pure-play mobile internet company, there are opportunities for innovation and growth that most of us can't even imagine. The innovation that came from 4G has been transformative. The innovation that 5G is bringing will again be life changing from gigabit speeds, ultrafast network response times and true mobile broadband coverage that reaches Americans across the entire country. T-Mobile's 5G will power everything from connected cars to connected farms from everyday health care to emergency response solutions, let alone next-level mobile speeds that will free consumers to download movies in seconds and deliver AI and AR-fueled experiences we've only ever seen in the movies. As the supercharged Un-carrier, with our huge lead and superior assets, our newfound scale, our strong balance sheet and this customer-loving team, we have the opportunity to lead in the 5G era and we are taking it. We're setting our sights higher and taking on new growth ambitions like never before. Our mission is to be the best in the world at connecting customers to their world. And our strategy to get there isn't complicated, but it is differentiated. We plan to deliver both the best network and the best value. No company in our industry has ever been able to do that before. We've always made businesses and consumers choose. Only T-Mobile is positioned to do this with our superior assets and resulting cost structure. Couple that with the best experiences from the best team, and you have a formula that allows us to chase our vision to be #1 in customer choice and #1 in customers' hearts. We'll get there by focusing on these 3 core pillars. First, building the world's best 5G network and delivering product leadership by turning our combined network and spectrum assets into a truly superior wireless experience, an experience that T-Mobile becomes famous for and one that's here to stay. Second, unlocking the potential of our scale and the superior cost structure that results from our network assets to deliver ongoing value leadership across both postpaid and prepaid wireless and in new categories such as home broadband. Merger synergies and scale will allow us to simultaneously lead in value while also expanding margins. And third, delivering the best experiences from the best team as we build on our Un-carrier strategy to make customers happy in both telecom and broadband. I can't wait to free customers from the long-standing trade-off of having to choose between a better network and a better value. Only T-Mobile has the assets, the team and the brand to offer both. As we deliver on these strategic pillars, we're focusing on some simple ambitions that showcase our balanced approach to long-term value creation. It's not lost on us that we're now stewards of a massively important and valuable category, and we understand our role within it as a leading company. Our ambitions are simple. First, our goal is to continue to consistently and profitably lead the industry in growth, particularly once the major elements of our integration are behind us. We expect to continue to outpace the industry in total customer growth while simultaneously focusing on growing revenue per account through deepening customer relationships as we ultimately seek to lead in service revenue growth year after year. Second, translate that growth into an increasingly valuable business, focusing on synergies, scale economies and cost transformation. We're on track to not only unlock the value of our merger synergies faster than originally anticipated, but we'll also exceed our original plans while transforming the business to provide the best customer experiences and maximize operating efficiency. And third, we'll do all of this without borrowing from tomorrow. We'll continue to make the right decisions and investments to position T-Mobile for long-term success. And it all starts with sustaining and expanding on our established 5G leadership for the duration of the 5G era and further strengthening our customer-loving T-Mobile brand and its fame for delivering the best experiences and serving the happiest customers. We've already delivered on some of these ambitions in the first year since the merger closed. And we're truly just hitting our stride as we now begin to progress through the most important phases of our integration and transformation efforts across the company. Okay. We have a lot of important information to share with you today, and I'm particularly looking forward to some great Q&A throughout the event. To help frame up the priorities we're going to focus on through the day, we'll be taking you through 4 core areas. First, our industry-leading 5G network, which is already miles ahead of the competition. Most of you already know that we're well ahead in the 5G race, but you want to know 2 things: will we be able to stay ahead, especially on the heels of this massive auction? And will the public give us credit for it? Will we be able to translate our network leadership into a stronger brand that customers prefer to an even greater extent? This is the bedrock that opens up so many new opportunities for our business and complements our already industry-best value proposition. So we'll share where we are in the 5G race: how far we are ahead, why we're positioned to stay that way for years to come and why customers will notice and care, rewarding T-Mobile with their business as a result. Second, we are significantly expanding our addressable markets and deepening customer relationships in a number of ways that will consistently and profitably grow our business. Today, we'll share how we intend to expand on our winning playbook into new and underpenetrated markets and segments to deliver that growth both in terms of customers and service revenue. And third, we are delivering on our commitment to unlock our merger synergies faster and bigger than planned. Our progress here is exciting, and these synergies are what continue to power the record-breaking build-out of our 5G network. I look forward to sharing our updated expectations today. And fourth, and probably most important to all of you, this planned growth and execution will deliver even greater financial results than the ambitious numbers that we put in front of you nearly 3 years ago when we announced the merger. These growth, transformation and synergy plans set up the potential for significantly larger shareholder returns and earlier than previously anticipated. In addition, we'll outline areas of upside that we see and are ambitiously pursuing, upside that's not yet factored materially into today's numbers nor into the already highly attractive value creation that the plan we're sharing today delivers. Value creation that we now forecast will exceed the original midterm and long-term merger goals that we shared with you in 2018. This is a plan that unlocks greater benefits for customers and greater value for shareholders. We built strong momentum in each of these areas in 2020, and now we have the foundation in place to continue that momentum in 2021 and beyond. Now let's take a closer look at each of these points. First, I think it's important to start with the clear success that we had in the recent C-band spectrum auction. Now that the results are out, what we knew all along should be plainly evident to all that we are well positioned to maintain our 5G leadership for the duration of the 5G era, not just for a year or 2. Our position and advantage here will be long-standing. We came out of the auction with the best mid-band spectrum assets by far, while our competitors spent unprecedented amounts trying to catch up. As you know, we had a strong hand going in. That's not because we had and still have more mid-band spectrum, it's because our mid-band spectrum is mostly comprised of frequencies with superior propagation to C-band, which means they're superior not just in reach but also in deployment costs. We focused on acquiring C-band spectrum in the areas that it is well suited for. That's why we concentrated on major urban and suburban areas, securing 40 megahertz of spectrum in top markets where it will have the most impact. We accomplished exactly what we set out to in this auction, and consumers and businesses will be the big winners as we bring even more capacity to market where the demand is the greatest. We came out with the superior asset base while also having a strong balance sheet and a capital plan that's fully funded with current capital run rates more than sufficient to deliver and sustain our network superiority. That's a big differentiator. People keep quoting the prediction I made back in September that AT&T and Verizon would absolutely kill each other in this auction, spending tens of billions of dollars that they didn't have to try to catch up to our spectrum position, and that's before they invest tens of billions more for deployment. And as we all saw, that's exactly what happened. As you know, the big numbers being quoted don't even take into account the massive deployment costs that will be necessary if they were to densify their networks to the extent that would be required to monetize their spectrum spending. In short, we won this one. We were able to effectively accomplish our objectives while others fell short of their aspirations to close the mid-band spectrum gap despite massive spending. While others will be looking for the benefits of this auction 3 years and tens of billions of dollars from now, we've been heads down, rapidly deploying our spectrum for the benefit of the American consumer and businesses already 2 years into a 5G build that's rapidly becoming a big differentiator for T-Mobile. One of the main takeaways I want you to understand from today is that this spectrum and network lead isn't just a head start. We're well positioned to keep the 5G advantage that will last the entirety of the 5G era. Post auction, we have the most mid-band spectrum, which will result in the most 5G capacity, but we don't just have more. We have better spectrum with superior propagation, and that results in superior deployment costs to deliver a competitive outcome and by a lot. Because of our prudent approach to C-band, we'll remain ahead in this race with low cost and a strong and flexible balance sheet, so we're able to defend our leading position if we choose to. Our capital plans are funded by synergies and the dollars are already in our plans. And the vast bulk of our spectrum is rapidly being deployed now after 2 years of ramping and preparing the engines to run at this space. So yes, we're a few years ahead, considering that the bulk of C-band doesn't become available until 2023. But we're also positioned to stay ahead for all of these reasons and others that Neville will expand on. Of course, the C-band spectrum is just one piece of the much broader 5G network strategy we started rolling out at scale 2 years ago. As a business, all of our short- and long-term goals start with building the best 5G network. It's the underpinning of virtually everything we will talk about today. The country has never seen anything like this network build, which is tracking well ahead of schedule and is clearly differentiating T-Mobile as the undisputed network leader of the 5G era. Frankly, so far, it's not even close. We're building on a great LTE foundation as well and not being forced to borrow from LTE capacity, something our customers strongly appreciate. One place you can see this is in churn, and our T-Mobile branded postpaid phone churn was the lowest of all national carriers in 2020. We all know that Verizon led this industry into the 4G era back in 2010, and it served them very well and for many years. And in 2020, as you know, T-Mobile led this industry into the 5G era. T-Mobile is now America's 5G leader. And only T-Mobile offers the fastest, biggest and most available 5G network in America. We're already delivering 5G across more geographic coverage than AT&T and Verizon combined. And our Ultra Capacity 5G, utilizing our depth of mid-band 2.5 gigahertz and millimeter wave spectrum has been rapidly expanding on our way to cover 200 million people by the end of this year. This year, the other guys are scrambling, and it's nice to be in the front of the pack this time around. While Verizon's 4G legacy may have helped them over the last decade, T-Mobile is positioned to be famous for our network and solidly take that crown. That's a perception shift that we're laser focused on, and we're already starting to see the tide turn. Matt will outline how we plan to take that momentum to the next level shortly. And thanks to our merger, which was ideally timed at the dawn of the 5G era, we're essentially funding this entire build through merger synergies as the process of integrating gives us 2 for the price of 1, since we have to touch nearly all of these sites anyway in order to integrate and unlock those huge synergies. So now let's talk about the opportunities that our industry-leading 5G network and spectrum portfolio can deliver for the business. We see a great opportunity to grow consumer wireless with our expansion into smaller markets and rural areas across the country. Our network has expanded significantly in the last few years, delivering LTE coverage on par with the other national carriers, and our 5G coverage is miles ahead of the competition, like 1 million square miles ahead, as I mentioned earlier. And when we categorize and say smaller markets and rural areas, that represents 50 million U.S. households, almost 40% of all households in America, and where our market share is in the low teens today compared to our national average market share of roughly 30%. With our significant expansion of distribution into smaller markets and rural areas across the country, we will finally bring real competition to these areas. And our plan has us increasing to close to a 20% share over the next 5 years. You've seen T-Mobile execute this retail expansion playbook very successfully before. So with our network and added distribution, I know we have a license to win, and our assumptions here could prove to be modest. Jon Freier will provide more details on this in a little while. Another space that's ready for real competition and disruption is enterprise and government. For example, remember shared data plans that were so common in consumer postpaid until we forced AT&T and Verizon into unlimited about 4 years ago? Well, guess what, they're still doing that to business customers. After having successfully redefined consumer wireless for good over the past 8 years, it's time that we bring that freedom to businesses as well. Our Un-carrier value proposition has performed well with small businesses in recent years. And of course, we'll look to continue to grow and support that part of the market. However, our share in the large enterprise and government space is less than 10%, and it's a space where we're winning. There are over 50 million corporate liable lines today and growing. That is a big opportunity. We like our game plan here, building on strong 2020 performance. With our 5G leadership, businesses no longer have to make the trade-off between the price they pay and the quality of the network. They can have both. We see room to run here with a market share over the next 5 years reaching about 20%, still quite under-indexed versus fair share. Mike Katz will share more on our plans with you for enterprise and government in a bit. These are just 2 of the big growth opportunities that we see ahead, and our team is mobilized and energized to realize them. And our plan doesn't even require us to get these underpenetrated segments up to anywhere near fair share nor our approach to benchmark that we've already said in urban markets where our market share is 35% to 40% today. Now let's look beyond traditional mobile wireless. One of the immediate opportunities is the home broadband market, where we'll bring real competition to an estimated $90 billion market that's either monopolized or underserved across so much of this country. We grew our 4G LTE home internet pilot throughout 2020 with great feedback from customers. You might be surprised to know that we ended last year with over 100,000 home broadband customers in our limited pilot. The demand greatly exceeded our expectations, and we had to turn so many away. So it's time to move beyond pilots. You may have heard Mike Katz and me last week when we announced T-Mobile's new home broadband solutions for business users. And later this month, we will share our launch plans for the immediate, much wider availability of our consumer high-speed home broadband service, including launch markets, service levels, price points and a lot more. These are all steps in our plan to take home broadband nationwide as quickly as possible and capture what we see as an opportunity that goes far beyond rural America. As Dow Draper will share later, we're targeting 7 million to 8 million home broadband customers over the next 5 years, taking advantage of our differentiated 5G network asset, which is ready right now. Our focus is going to be on great service at attainable prices because remember, our business plan isn't burdened with significant capital costs given that the network is funded by the mobile plan. Our competitors don't have the same upside here because in various ways, they are all already in the broadband market. We're excited for everything that's ahead here. At the end of the day, real customer growth is about both establishing and growing household relationships, usually reflected as accounts and ARPA when you look at KPIs. And these household relationships still generally start with the smartphone as the primary purchase decision. So our compelling value proposition, coupled with the reach and capacity of our 5G network, will allow us to expand our addressable market by establishing new account relationships with prime consumers who value network quality and who might not have considered us previously due to legacy perceptions. And we have upside to our plan. When we tap into customers who switch to us purely because they're looking for the best network, they represent even more opportunity. Our network also earns us the opportunity to deepen our relationships with our customers through enhanced or additional services or devices over time. Those may be additional phones or might be increasing growth in data devices that have practical utility to the customer's daily lives like wearables, tablets and emerging categories or our home broadband offering. 5G is rapidly bringing new revenue opportunities and expansion of this category. These are all value-accretive opportunities that Matt Staneff will dive into a little deeper in a few minutes. T-Mobile continues to win customers because of how our company creates experiences. We love our customers, and they can tell. With our customer-centric Un-carrier moves and our completely unique approach to customer care, it'd be easy for us to rest on our laurels. But that's just not who we are, and we're relentlessly looking for ways to simplify and optimize the customer experience. Callie Field will talk more about our plans here because we have a different take on digitalization, building on our already differentiated approach to service. For us, it's about serving the customer how they want to be served. We believe that when you provide customers with the best network, with the best value and the best experiences, they will become loyal ambassadors for our brand. That's one reason we have Net Promoter Scores that are up 68% since 2016, putting us in the top 5% of industry benchmarks and leading to recognition from J.D. Power again as the best customer care. Okay. Now let's talk about merger synergies, which I know is a big part of why many of you have joined us today. I'm incredibly proud of the team here for being able to execute and perform in a highly competitive marketplace while simultaneously driving integration faster and better-than-expected to capture our merger synergies and deliver value for both customers and shareholders. We delivered $1.3 billion of run rate synergies in 2020 and expect to realize $2.7 billion to $3 billion in 2021. Looking ahead, we now expect our total run rate synergies to reach approximately $7.5 billion per year, up 25% from the original merger case of $6 billion. About 2/3 of the increased synergies, our run rate P&L savings from better execution, and there's some incremental cost avoidance in there as well. Our team has been incredibly adaptive and creative in finding ways to go faster in areas like retail rationalization, marketing and organizational design while positioning at the same time to go bigger and faster in areas like network, customer migration and IT. This faster paced and increased run rate culminates in a new net present value of an extraordinary $70 billion or more than 60% higher than the original $43 billion NPV in the merger case when you consider the incremental synergy combined with our lower than expected cost of capital. The markets helped us here. But even controlling for that, our finance team has achieved fundraising beyond all expectations on the strength of this company's assets and opportunities, and the result has a big impact on NPV. But even with the same cost of capital assumption from 2018 for the sake of operational comparison, we're delivering over $60 billion for shareholders, an increase of more than 40%. This is multiples higher than the $3 billion of incremental NPV we delivered in the Metro PCS merger that was such a huge success. Peter will take you through more details on these synergies later. But needless to say, the team is pushing hard to execute our integration playbook, and we're all so excited about the opportunities ahead. And remember, at the same time, we're continuously looking at business transformation opportunities as we build this new company to maximize our capabilities and margins. This is much more than just a synergy story when it comes to how we look at the margin and free cash flow opportunities for the business over the long term. Okay. Now let's move on to the financial performance that will flow from these business plans. I am pleased to tell you that after a year of overperforming against our goals and seeing the strength of our hand and our team's execution, we are now improving our financial targets such that they now exceed the midterm and long-term targets that we shared in the original merger plan. We're raising our midterm and long-term guidance across the board with higher service revenue, higher core adjusted EBITDA and higher free cash flow, including raising our midterm free cash flow guidance by $3 billion or 30% more than the original expectations. This plan is expected to deliver cumulative free cash flow through 2025 of up to $65 billion, up nearly 20% from the original plan. Peter will give you the full rundown later, but I'll give you the mic drop right now. With our increased cash flow generation, this sets up the flexibility for substantial shareholder return options and potentially up to $60 billion in buybacks from 2023 through 2025. And that still leaves upside for us in a number of the opportunity areas that I highlighted earlier as well as so many unforeseen 5G opportunities that we can only imagine. This industry is working to unlock new 5G use cases every day, and T-Mobile is right there. Things like consumer and commercial IoT, mobile edge compute driven solutions, innovative enterprise networking solutions and many other projects that we're working on. Today's guidance doesn't include any material benefit from these areas because they're still developing. Now I recognize that others may take a different approach, and they may be counting on these nascent opportunities to justify massive spending on spectrum purchases and the required densification to realize all of the opportunities. For us, these opportunities represent upside, and we're pursuing them ambitiously. Now before I hand it to the team to go deeper into these things, I do want to briefly shift gears and give you an insight into another important focus area here at T-Mobile, making an impact that matters for our team and for all of our stakeholders and on the communities that we serve. Throughout the merger, we talked about how we'd not only become a bigger company but also a better one using our unique high-capacity network, our scale and our resources for good. Our marquee initiative is Project 10Million, focused on the audacious goal of helping to connect every single student and eradicate the homework gap in the United States so kids can get the access they need and the education and equal opportunity that they deserve. We launched this unprecedented $10.7 billion project last year and then actually enhanced the program to address the more pronounced inequities that have arrived in the wake of the COVID-19 pandemic. This is really critical work, and to date, we've delivered free or highly subsidized connectivity to over 2 million students, and we're just getting started. At the same time, we're also continuing to make connectivity affordable by providing low-cost wireless services through T-Mobile Connect and Lifeline, and our work is far from done. We've also focused heavily on our people over the past year because we believe only the best team working together and inclusively can deliver the best experiences. Our strong commitment to diversity, equity and inclusion plays an integral role in our culture. In this past year, we launched our 5-year Equity in Action plan, which includes a $25 million investment in our community over the next 5 years. And we continue to build diverse talent in our leadership ranks to reflect our highly diverse employee group and the communities we serve with more ambitious programs in this space than ever before. Simultaneously, we continue to follow-through on our long-standing enterprise sustainability commitments. T-Mobile was the first major U.S. telecom to commit to 100% renewable energy back in 2018, a goal which we expect to achieve later this year. In recognition of our efforts, we were recently named to global environmental organization CDP's A List for climate change, the only U.S. wireless provider to achieve that distinction. All right. I'm excited for you to hear from our senior leadership team on how we plan to go execute and win on all the things I talked about. At the end of the day, I want you to leave with a clear understanding of 4 important facts around the future of T-Mobile. First, our industry-leading 5G network, which is miles ahead of the competition today. It's going to be the network leader for the 5G era. Customers will notice and value this, and our differentiation will be a catalyst for ongoing profitable T-Mobile growth. We're taking our 5G network to a level that others simply can't follow. Second, we are significantly expanding our addressable market and deepening customer relationships in multiple ways to consistently and profitably grow our core business and exciting new businesses. We're a pure-play wireless company with the best assets, strong execution and with lots of room to run. Third, we're delivering on our commitment to unlock our merger synergies bigger and faster than planned, executing the complex business of merging these companies with bigger impact than expected. Fourth, and most importantly, this growth and execution will deliver even greater financial results than the ambitious numbers that we put in front of you nearly 3 years ago when we announced the merger, setting up the potential for significant shareholder returns and earlier than we anticipated. We're significantly overdelivering on our synergies and on our mid- and long-term financial targets with higher service revenue than we originally guided from the growth initiatives I spoke about earlier, more synergies than we expected and more free cash flow generation from the business. We will create greater opportunities for the business and for our shareholders. For me, this is a once in a career value-creating opportunity. We have an excellent hand. And to me, that means the industry's best assets, a clear and incredibly simple business strategy that's already proven, lots of room to run, exciting new businesses where we have permission to win and a team with a demonstrated track record of delivering. Add to that a strong balance sheet and a compelling financial plan, and the result is a business with massive cash flow potential. And on top of it all, we have the opportunity to change and improve this industry yet again as the Un-carrier to the benefit of customers and businesses everywhere to be the best in the world at connecting customers to their world and to earn their hearts in the process. I am tremendously excited about our future. Now let me turn it over to Neville to tell you how T-Mobile's 5G network is leading this industry into the 5G era.

Thanks, Mike. Great to be with you all today and excited to update you on our network journey and the exciting progress we continue to make. As many of you know, I have been personally invested for many years in creating a leading network here at T-Mobile. But there has never been a more exciting time in the growth of our network than now. We are set to take a commanding lead in this new 5G era. We are uniquely positioned to become famous for network as we continue to combine our superior assets and execution to deliver a demonstrable and sustainable 5G and overall network advantage. Our team has thrived for years as the scrappy competitor, leveraging strong execution and innovation to go from being the last national carrier to launch LTE to reaching parity on covered LTE population and having the fastest LTE network throughout most of the 4G LTE era. This history of innovation fostered our 5G strategy and a path to 5G leadership that is now showing its full potential. While our competition was focused on the deployment of millimeter wave spectrum, we started our 5G journey in a very different place. We were America's first nationwide 5G network in December of 2019, the first with 5G in all 50 states and Puerto Rico in June of 2020 and the first nationwide stand-alone 5G network in July of 2020. And we are the only carrier to make the game-changing speeds of Ultra Capacity 5G broadly available with extensive coverage, performance and mobility. This vision and speed of execution has culminated in the cold, hard fact that only T-Mobile offers America's largest, fastest and most available 5G network. Let's talk first about that 5G coverage. Our Extended Range 5G provides reliable coverage where customers live, work and play. And just less than a year ago, after reaching nationwide 5G, we now cover 287 million people with 5G, delivering average speeds twice as fast as our LTE. Our competition is barely out of the starting blocks on coverage and some only by sharing spectrum with 4G, resulting in slower 5G speeds and limiting precious 5G capacity. Our Extended Range 5G covers over 1.6 million square miles today, nearly 4x more than Verizon and nearly 2.5x more than AT&T. Delivering broad 5G availability was a critical first step in this 5G journey, while others have seemingly made a conscious decision even with dynamic spectrum sharing to not provide meaningful 5G coverage to their customers. I guess we'll see how that will turn out. At the same time, our Ultra Capacity 5G delivers game-changing speeds across the country when others are nowhere to be found literally. We are the only operator to have deployed dedicated low-band and mid-band spectrum for 5G and deliver on the promise of 5G by making ultrafast speeds averaging 300 megabits per second widely available, reaching 106 million people at the end of 2020 and 125 million people already in 2021. [ Others, T's customers were ] the smattering of millimeter wave small cells that they can only find less than 1% of the time. Their strategies have struggled to deliver any real impact or customer benefit at all. But we all know there is no faking it when it comes to customers' actual experiences and third parties that rigorously test the networks. Sure, a carrier could probably find a third party for hire that would agree to only test the network a very specific way to make them look good, but real customer usage doesn't lie. New independent data from OpenSignal based on billions of handset measurements from real customers proves T-Mobile customers get the fastest 5G download speeds, the fastest 5G upload speeds and they get a 5G signal more often than anyone else. Likewise, Ookla Speedtest data for the year-to-date is showing T-Mobile has the fastest median download speeds. It appears AT&T's only 5G claim has been short lived. Additionally, extensive mobile testing from research firm umlaut, formerly P3, across multiple major markets, including New York, Chicago, Houston, Tampa, Atlanta, Washington, D.C. and many more also shows T-Mobile leading in 5G speeds. Seems to be a pretty consistent theme here. T-Mobile is the undisputed 5G leader today, period. Next, I want to walk you through the 5 major and compelling reasons why that 5G leadership position today will be a durable advantage into the future and post the utilization of the spectrum from the recent C-band auction. First, we have the 5G leadership position today that I have just outlined, validated through our deployed 5G coverage and third-party benchmarking. And we have massive momentum on deployment of equipment and spectrum, and the vast majority of our spectrum is free and clear for use today. Second, our network upgrade program is fueled by synergies from our network integration. Third, we maintain a meaningful spectrum advantage post the C-band auction. Fourth, through this synergy funded deployment, we have the financial capability to smartly invest and maintain this network advantage, as Peter will describe in his comments later today. And fifth, but by no means least, we have the most technically advanced network and a clear leadership edge on 5G innovation. And to think we're just hitting our stride. Our 5G network is moving at an incredible pace and will be substantially complete by the end of 2023. We're putting our multilayer spectrum portfolio to work across approximately 85,000 macro sites compared to peer networks at around 70,000 sites today and complemented by approximately 50,000 small cells to create the densest and broadest network to end the digital divide. Our network enhancement is running at a truly unprecedented pace and efficiency with some 1,000 radio upgrades underway each and every week, a process that we have worked tirelessly to develop and execute and that took much of the last 2 years to fully implement. This is a material competitive advantage that others will struggle to match as it takes material time to build these capabilities. This fast and efficient 5G site rollout creates a multiyear lead over the competition. It will be tough for them to catch up to the 5G coverage and capacity we deliver today, let alone where we will be in the future. We are expanding our Extended Range 5G to cover 300 million people by the end of this year and expect to cover 97% of Americans by the end of next year. We are the only carrier currently on track to bring 5G to every corner of this country. After a remarkable ramp to bring Ultra Capacity 5G to 106 million people by the end of 2020, we are on track to bring those game-changing speeds to 200 million people by the end of this year, expanding to approximately 250 million by the end of next year and on our way to bringing Ultra Capacity to nearly 90% of Americans by the end of 2023. A plan that brings unprecedented speeds and capabilities to businesses and consumers alike, from urban centers to smaller markets and rural areas, enabling a differentiated experience for mobile wireless and home broadband across this country, and all within a time frame ahead of the release of the majority of C-band spectrum. And keep in mind, the game-changing speeds we see today on Ultra Capacity 5G, that's approximately 300 megabits per second on average with 1 gigabit peak speeds, they're generated utilizing only 60 megahertz of our average nationwide 160 megahertz of 2.5-gigahertz spectrum. We expect to increase that to 80 to 100 megahertz over the course of this year, delivering an anticipated 400 megabits per second with higher speeds to come as we increase to greater than 100-megahertz channels upon completion of our network integration. Perhaps, most impressively, we are delivering faster on this deployment and a broader rollout of the 2.5 gigahertz for less total capital than originally planned in the merger announcement. This is a result of material procurement savings from new agreements with key partners and working with our radio vendors to develop products with higher supported bandwidths to reduce overall radio counts. We are also realizing significant savings from an efficient deployment engine, including adding multiple spectrum bands on a single site at the same time as well as more effective controls via a lean deployment model, effectively reducing the time to deploy. This network rollout is powered by synergies that will also be substantially delivered by the end of 2023. That's right. Our 5G build is essentially a 2-for-1 as we upgrade and add spectrum to all of these sites to support integration of the legacy Sprint and T-Mobile networks. Our competitors, on the other hand, have to foot the bill for their 5G build out of their cash flows, which may explain why they still have so much to do. Our deployment delivers both LTE and 5G capacity as we upgrade the network. This is a direct result of deploying dual technology radios for 2.5 gigahertz and 600 megahertz to support both LTE and 5G. And in addition, we are already transitioning PCS spectrum from the Sprint network to the new T-Mobile LTE network to provide capability and faster speeds to all of our customers. We expect to decommission approximately 35,000 macro sites by the end of 2022, a full year ahead of schedule with 7,000 to 8,000 expected to be decommissioned by the end of this year. This network integration is expected to deliver approximately $3 billion of hard cost run rate synergies by 2024, with more than 80% of that realized by 2023. We are also upgrading thousands of retained Sprint sites with 5G-capable radios for 600 megahertz, PCS, AWS and 2.5 gigahertz, which will be completed by the end of next year. This combined network also allows for approximately 16,000 avoided macro sites and 50,000 avoided small cells compared to the sum of the stand-alone pre-merger plans, and it's fully consistent with what we shared with you nearly 3 years ago. These avoided sites are expected to deliver approximately $2 billion of additional synergies to our shareholders by 2025. So let's now discuss the C-band auction. The $94 billion question was recently answered. And you saw that we acquired 40 megahertz across the top markets with a very prudent spend to complement our multilayer spectrum portfolio, solidifying our mid-band leadership and further enriching our broadband and enterprise opportunities. We invested smartly in C-band. To add to our Ultra Capacity 5G in urban and suburban areas where our site density is high and can readily support ubiquitous outdoor coverage using the spectrum, and the deployment is included in the capital envelope we are sharing today. Let me repeat that for you. The capital required to deploy the C-band spectrum is already included in the financial plan we are presenting today. And looking at the overall results from the auction, it's clear that T-Mobile's spectrum leadership is maintained, both in the early years and the longer-term time frame. While there is 100 megahertz of the C-band expected to be cleared by the end of this year, that spectrum was split between 2 operators. And it's only available in a subset of markets, meaning that it's not going to provide meaningful nationwide capacity or coverage for either carrier. In December of 2023, more of the C-band spectrum will be available, but for both T-Mobile as well as our competitors. Considering all of that spend by AT&T and Verizon, T-Mobile still has more mid-band spectrum than Verizon and AT&T, even after all of the C-band spectrum is available for use. Mid-band spectrum is clearly the global sweet spot for 5G. But we felt that C-band specifically didn't make sense for us to use on a nationwide basis due to the necessary site densification, which is difficult to achieve outside of urban areas. I've seen several sell-side analyst reports in the last several months analyzing the propagation differences of various spectrum bands. And I would say that in general, they are spot on. By our estimates, to provide ubiquitous coverage, C-band would require a full 1.5x more sites than 2.5 gigahertz and 2x more sites than PCS and AWS spectrum that most carrier networks are engineered to today. And even then, there are in-building coverage concerns. Bottom line, deploying C-band in nonurban areas is going to be a very expensive proposition for our competition to address. It's also important to remember that with our Layer Cake strategy, we have already deployed extensive 5G spectrum in lower spectrum bands. To secure the great benefits of 5G carrier aggregation extended coverage, which we estimate on average at 30% for T-Mobile, our competition will also have to modernize their low or mid-band radios to be 5G capable. And it's clear from their limited geographic 5G footprints today that little of this work has been completed, yet more cost to carry if they help to secure carrier aggregation coverage benefits, benefits they can ill afford to lose in nonurban areas. At the end of the day, our plan is to bring Ultra Capacity 5G to nearly 90% of Americans. And while we're super excited to add new C-band assets to our powerful existing spectrum position in urban and suburban markets, there is no practical path for others to follow us with meaningful mid-band coverage with C-band alone outside of massively expensive network densification coupled with extensive 5G upgrades to all of their sites. While I'm not entirely surprised that AT&T and Verizon spent a combined $80 billion in the auction and a hefty premium because they really had no choice, I do scratch my head about how much it will cost them to deliver meaningful coverage across the nation utilizing that C-band spectrum. I would estimate that T-Mobile's cost per gigabyte may be half of that of Verizon and AT&T in 5 years, if they attempt to deploy meaningful coverage breadth because of the costs of required site densification. This leaves others with the unfortunate dilemma of permanently depressing their margins and cash flows to only still have an inferior network, a stark contrast indeed. Not only are we building the densest, deepest and broadest network, we are also building on our history of 5G firsts and embracing technological evolutions as they are ready to improve customer experience, lower costs and unlock new revenue opportunities. One of the immediate tools that we are using with our 2.5-gigahertz spectrum is taking advantage of the TDD nature of that band to dynamically allocate 80% to downlink given asymmetric traffic. When coupled with 5G capabilities of 100-megahertz channels, we can provide tremendous capacity and fast speeds, something not possible today in any lower bands or FDD mid-bands. In addition, we are deploying massive MIMO-integrated radio and antenna in a 64x64 configuration, which allows better cell edge performance and increase capacity. As previously referenced, we are leveraging 5G NR carrier aggregation for better utilization of spectrum assets and extending that range of 2.5 gigahertz by pairing it with 600 megahertz for uplink, allowing ultrafast to go ultra far. And we are planning to roll out VoNR or voice over new radio, which has the benefit of moving to an all 5G architecture with no dependence on the legacy LTE network, allowing us to drive faster to rich 5G user experiences. Being the first in the industry to capture these capabilities enables us to realize the true benefits of 5G, supporting future applications like massive connectivity, ultra-low latency apps and AR/VR use cases. Through our T-Mobile ventures, innovation lab and accelerator program, we are working to foster new innovative capabilities in the 5G ecosystem with both developers and innovators. T-Mobile is uniquely positioned to realize these benefits on a large scale with its extensive 5G network and coverage. In addition, this network expansion creates a huge opportunity in home broadband from our accelerated deployment and expanded mid-band coverage, providing deep mid-band 5G capacity. It also provides T-Mobile the network leadership to expand our addressable switcher pool as we can increasingly win share with prime families and enterprises. And we are the only carrier bringing 5G to rural America to end the digital divide as customers in these geographies are already benefiting from access to much faster speeds for both mobile and home broadband services. In summary, I am so excited that T-Mobile is leading what I expect will be a 5G revolution. We have all the tools to succeed, a robust plan and a powerful team to go execute it. Let me now pass the mic to Matt Staneff to tell you how we plan to be famous for network and how we're using network integration to quickly migrate and improve the experience for our Sprint customers. Matt?

Good afternoon, everyone. I'm Matt Staneff, Chief Marketing Officer at T-Mobile. As you heard from Neville, his team is not only building the nation's best 5G network but one that is positioned to be the best 5G network for the entire 5G era. In tandem, my team is hard at work, correcting outdated network misperceptions with the clear message that T-Mobile is now and always will be the undisputed leader in 5G. As I share how we're going to do this, I'd like you to keep one thing in mind about our brand and how we operate. We mean what we say, and we have everything in place to back it up in a big way. Unlike our competitors, we have a clear path forward to simultaneously deliver an unparalleled 5G network, amazing value and the industry-defining customer experience that's made the Un-carrier the success it is today, and we also have the marketing strategy to support it all. Let's start with how we're moving the needle on network perception. Over the past year, T-Mobile has already been positioned as the clear 5G leader, both in the media and among those who follow our industry closely. I think we all know that. We've also made unprecedented gains across all network perception categories, most notably on reliability and speed. Over the past year alone, we've cut the gap with the market leader on network perception by 1/4, proof that we're moving fast and in the right direction. These key metrics had been essentially flat for a decade until now. As we look to accelerate progress and amplify our message, rolling into third-party network study wins, coverage maps, new and more meaningful network comparison points and trusted brand endorsements to demonstrate that T-Mobile is the undisputed leader in 5G. One area where we'll see an immediate impact is with our own customer base. We have a huge opportunity to shift the focus of our customers' passion and advocacy toward T-Mobile's 5G leadership. How do we know this? Because our customers love and boast about their amazing Un-carrier benefits. We know they actively recommend T-Mobile's network less than 20% of the time, yet network satisfaction among our base ranks among the highest in the industry. So as we continue to expand our Ultra Capacity 5G network, we'll hit a tipping point when our customers not only recommend our brand for amazing benefits but also for the 5G experience. We'll close those perception gaps and finally put to rest any remaining doubts about our network with a multidimensional approach, focusing on real-world value and network experiences we're delivering. Of course, we'll continue offering the most robust portfolio of 5G devices from low-priced options to top-tier super phones. But we'll also add new services, tapping to real-world use cases, starting with tangible experiences like better video calls and evolving those into exciting new uses in business, AR/VR, gaming, connected life and so on. At the same time, our customers will see the impacts of our 5G advantage, experiencing firsthand a growing relevance of 5G to their daily lives. I want to be clear, closing the network perception gap is going to be the icing on the cake. It's just one part in delivering our growth plan. Network quality drives roughly 1/3 of switcher decisions. Total value generally drives choice, and T-Mobile already wins on value. So becoming famous for 5G will be the moment we pull away from the pack for good. We've delivered remarkable success without consumers meaningfully seeking us out for our network, which means we still have another gear to go as we offer both industry-leading value and network together. As this happens, we'll accelerate gains in some of our underpenetrated markets like prime consumers and businesses as customers increasingly specifically come to us for the best 5G experience. Speaking of value, we sure shook things up 8 years ago when we launched the Un-carrier, didn't we? It's been a highlight in my career and a deep source of pride to have played a pivotal role in launching every one of our Un-carrier moves, and I don't plan to change this winning approach. Our overall value proposition will remain the mainstay of our growth story, and we will continue to drive future share gains. What's good for customers is good for business. It's that simple, and it works. Some of our best Un-carrier moves fundamentally changed what customers expect from a network. We were the first to make unlimited actually unlimited. We partnered with dozens of carriers to provide coverage in Canada, Mexico and around the globe so you can stay connected while traveling without having to pay more. We pioneered in-flight messaging and free connectivity so you could stay connected while flying. There was Binge On and Music Freedom, putting our network capacity to work to deliver customers more of what they want. We developed industry-leading scam and robocall protection for customers at a time when they needed it most. These are all now industry norms, and they provide a taste of how we'll lead the industry through the 5G era, serving and connecting customers in these new and innovative ways. It's this kind of unconventional thinking that led the T-Mobile brand to the industry-leading churn rate in Q4 of 2020. It's this kind of thinking that led to J.D. Power dominance across customer care, mobile purchase experience and business. And it's this kind of thinking that took an industry once labeled as a utility and turned it on its head, creating customers for life and having fun along the way. And because we are the Un-carrier, you know we won't stop. So let's talk about the next chapter and how we're going to go about deepening and expanding our customer relationships. First, keep in mind, 5G is going to be the technology powering the next decade of innovation. And nobody is better positioned than T-Mobile to build out massive new capacity and new capabilities on 5G. We are too far ahead, and we will have ubiquitous coverage. This is why customers, businesses and innovators will choose us. One way we'll create value with this capacity is by deepening our existing customer relationships to grow our ARPA. T-Mobile will no longer be just a wireless phone company, but one that sells connectivity through a platform. We'll use a multipronged approach to win new accounts and introduce them to our family of mobile offerings. From smartphones to data devices to entertainment to home broadband and other new services, there is a rich opportunity, emerging from our 5G network to unlock new relationships today. We're still in pilot mode, but already 35% of our pilot home broadband customers are new to T-Mobile. This is just one example of how developing compelling new products off of our network will enable us to win new accounts as we move beyond just smartphones to drive margin-accretive service revenue growth. We see another opportunity to grow beyond the smartphone by expanding into a rapidly growing set of data devices and services that have real practical utility to customers. Today, only 25% of smartphone accounts also have a non-smartphone device. This represents a big opportunity for ARPA growth. We've seen continued growth across the industry over the last couple of years with the advent of the connected watch, and I expect more growth with new products that will come with 5G. This includes all the things you've heard about for what seems like years now from gaming to AR and VR, wearables, smart cities, industrial applications and other products that take advantage of ultra-low latency, edge computing 5G capabilities and ultra-high data speeds. We're going to be a major player in all 5G applications. And with our lead in 5G today and throughout the 5G era, no one is better positioned to deliver more scale, drive faster time to market for these and other products to launch into the marketplace. We are the natural destination as the network leader for the 5G era. These data devices and services referred to as postpaid other are a great way to profitably expand our customer relationships. In consumer, this category tends to have ARPU similar to adding a fourth or fifth line on a family plan, yet the devices are only a fraction of the cost of high-end super phones and the operating costs are low. Additionally, offerings like our new Magenta MAX premium unlimited plan will attract new types of customers. And this is just one example of how we'll drive incremental revenue from the network at essentially zero marginal cost. We've constructed our offerings to allow most of the incremental revenue of each tier to be accretive to our own margins. Others may load content into the high-end plans that allow them to gross up service revenue, but that provides significantly less margin benefit when you pass most of that back to the content provider. Our mid- and long-term plans conservatively assume the same playbook you've seen from T-Mobile in the past with generally stable ARPU declining about 1% per year through 2023 before leveling off. However, our plan is built on consistent ARPA growth. Additionally, if our premium offerings end up more successful than planned, this will be upside to our plan and even more accretive to ARPA and service revenues. Delivering on the promise of the merger means successfully transitioning the Sprint customer base to the T-Mobile network, value proposition and customer experience model. We've made huge progress on this already with more work to follow this year and beyond. In Q4 of 2020, we enabled cross provisioning of the Sprint customers to the T-Mobile network while maintaining separate billing systems. As we expect to continue to ramp and scale and having over 60% of the Sprint base migrated by the end of this year, the exciting news is that we now expect full network migration by mid-2022, way ahead of our original plans. At the same time, we're gearing up to fully transition our Sprint-based customers to the T-Mobile value proposition and customer service experience. The beauty of our plan is that it keeps some of the most difficult system changes out of the customer's way. This summer, we'll begin our full back-end billing conversion process, and again, we expect to beat our original time lines for completion. By Q2, we expect to migrate 100% of Legacy Sprint customer plans to go forward T-Mobile rate plans. We expect to have about a 1% sequential headwind to ARPU in Q1 as we err on the side of the customer when matching them to the best plan. However, we expect ARPU to be stable in the second half of 2021 to keep us within the 1% range for the full year. This is an important step for a smooth billing conversion. Delivering the full Un-carrier experience to legacy Sprint customers also means addressing irritants that detract from the customer experience like device step-ups, exploding promotions and unexpected fees. When we combine a radically improved network, the best value prop in the industry and award-winning service, the real prize here is within reach, that is driving down Sprint churn on an accelerated schedule. This churn, mind you, was roughly 100 basis points higher than T-Mobile in 2019. We'll follow the same worst to first playbook that delivered the lowest postpaid phone churn in the industry in 2020 for our T-Mobile brand customers, network improvement, the Un-carrier value proposition and our team of experts' level of care. We're very encouraged by the early numbers from the initial cohort of Sprint customers that's completed a full transition. Legacy Sprint customers that have migrated to the T-Mobile system have a Net Promoter Score that's nearly 100% higher than their counterparts who have not yet migrated. This success story will evolve over time as more and more Legacy Sprint customers get the full T-Mobile experience. A few years from now, there is no reason churn among those Legacy Sprint customers cannot reach T-Mobile levels. Although I will tell you that our plan for the next 2 to 3 years conservatively assumes we only cut the gap between Sprint and T-Mobile churn in half, meaning there could be further upside to come. And lastly, there remain solid growth opportunities with the Sprint base as it had the fewest lines per account among national carriers when we completed the merger. In addition, we have the potential to roughly double the pool of T-Mobile network ambassadors as the Legacy Sprint customers migrate to the T-Mobile network and then join our value proposition. As I step back and we put this all together, we are in an incredible position as a company. We are positioned to be the 5G network leader for the entire 5G era. We have a heritage of innovation and creating unmatched value and a winning worst to first approach by taking care of our customers, deepening their relationships and creating brand ambassadors. It's going to be an amazing ride, and I can't wait to get started. So with that, let's get to your questions.

All right. Welcome again, everybody. We're here for our first of 4 Q&A sessions. And listen, let me just start out by saying thank you to everybody who's joined on a couple of fronts. First of all, thanks for your patience with us on our prepared remarks. Prepared remarks aren't really our thing. We all feel like robots when we share prepared remarks with you. But I've got to tell you, this story and this future for our company is so powerful. We wanted to be very precise with you today. And we also wanted to manage the time because that gets me to my second thank you. Thank you for your patience with a long and substantial meeting. We were waiting to do this for a long time. It's not a quick check-in after the end of the C-band auction. It's a comprehensive look, a year into our merger and the creation of our new company as to our future and the huge opportunity that's ahead. And we just really appreciate you, and we appreciate you diving in deep with us. So let's get right to it. I'll hand it over to Jud Henry, and he'll tell us how it works.

Thanks, Mike. All right. We've got some questions queuing up here. It looks like -- let's take our first question from Craig Moffett with MoffettNathanson. Go ahead, Craig.

First, thank you for doing this. My first question is for Neville. I don't want to dig into this issue of the propagation advantage of 2.5. Maybe you could cast it in terms of the percentage of time that you think a customer will be on the network experience of what might be the highest speed with millimeter wave, but then kind of the workhorse, which is going to be your 2.5 or mid-band, and then the time that they'll roll off onto LTE. And how that might compare in your expectation to what you think Verizon and AT&T will be offering along those same lines?

Yes. Thanks, Craig. And happy to dive straight into what's happening with 2.5 gigahertz. As I outlined in my comments and Mike mentioned, too, that's the power horse behind our 5G story and this 5G leadership position that we have today, and we continue and will extend as we go through this 5G era. And that 2.5-gigahertz spectrum, I heard some stuff yesterday, which I think shook us all a little bit. I don't think anybody really understands some of the statements that came out from one of our competitors. We are going to put out 2.5 gigahertz broadly across the country in the U.S. We've already got 125 million people covered, Craig, 200 million by the end of this year. And that's not where we stop. We take that footprint to 90% of Americans. That's 2.5 gigahertz. Underneath all of that is our low-band footprint, already -- our Extended Range LTE already at 287 million people. So it's your question about how much of the time are you living and working and enjoying our network on 2.5 gigahertz, the vast majority. Now after that, maybe you're going to be moving to some extended range, low-band 5G experience. But our goal is all-in on 5G, not hanging around on some shared network like Verizon's doing with DSS and LTE. Our whole story is about massive rollout on 2.5 gigahertz, and we are way out in front. I heard some stuff yesterday. I think Verizon said they were kind of happy to be in last place through 2024. At some point in time, they're going to try and catch up with the material lead that we've established, and we will continue to extend as we go through the next 18 to 24 months.

Craig, one of the things I think is interesting here is that -- and I think we made this clear in some of our prepared remarks. It's that we don't really just think this is about the quantity of spectrum that we have, which is, of course, still the greatest in the mid-band arena. And we have the balance sheet to defend that position, if we choose to. But it's about the strength of our spectrum. I actually was really interested in a couple of key things when it comes to the difference in our positions. First of all, we heard Verizon say that they plan to spend about $10 billion incrementally on capital. And as Neville is just saying, that to us is fantastic news because it basically indicates that they have no plans to densify their network to a material degree. And what that means is rather than spending tens of billions of dollars to chase a competitive position, they're going to be satisfied with a network that's not properly densified for the asset that they have. And that's why Neville is quipped, which is, it sounds like they're pretty satisfied being behind because we know physics are physics. It would take a great deal of densification in order to make that work. Now our grid is already at the appropriate density for 2.5 gigahertz. We were already the densest grid. And in urban areas, it's dense enough for C-band, which is why we spent $9.x billion for 40 megahertz, right where it works best, but also where our network is already appropriately densified to get the most out of it. And that's why what we told you today is we have every capital dollar we need already in our plan, including the capital -- increasing capital efficiency of our plan and the turndown of capital in the out years that we'll get to in a little while. So it's -- we have every dollar we need to deploy what we have and we're way ahead. So it's an exciting point of comparison, which is -- really, it boils down to 2 things: either our competitors will pour in tens of billions of dollars to densify and compete or they won't. And if they don't, then they won't be able to catch us when it comes to the breadth and the performance of our network.

All right. Let's take our next question from Jonathan Chaplin with New Street.

A quick one for Neville. So I appreciate the phenomenal spectrum advantage that you've got in the balance sheet, the balance sheet capacity you've got to defend that advantage. You're going to have a chance to extend that advantage later this year with a 2.5-gigahertz auction and a 3.45-gigahertz auction. And I'd love to get some insight into how you're thinking about those 2 opportunities to improve the advantage that you've got today even further.

Yes. Thanks, Jonathan. I mean, I'll share this. I'll ask Peter to comment, too. We can't obviously comment on what we're going to do in future auctions, but you know us. Look at this recent auction. We're disciplined, very disciplined in how we invest in spectrum and have been for years. And so there are future opportunities coming. We will be opportunistic around those opportunities. Peter has talked through and Peter will talk through the cash flow generation opportunity that exists in this business. So we have capabilities if we want to commit and we decide that's the best use of our funds to secure more spectrum. But I do want to come back to -- Jonathan, we're in an incredibly strong position. After all of that spend, $80 billion worth of spend from Verizon and AT&T, you just have to look at the chart where we've just shared with you and look at the quality and depth of the spectrum assets that we have. So we have a very strong position that we can leverage. If opportunities are ripe for us to increase and improve, so be it, but we will always be very disciplined in our investment around future opportunities. Peter?

Yes. I'd just say, Jonathan, you heard Neville say 2 things there that are really important: disciplined and opportunistic. Those are the things you heard him say. The reason why we can't say more than that, obvious reasons about competitiveness and rules, but also the rules for the auction themselves are still being worked out. As you know, Congress just mandated that the FCC act this calendar year. And for one thing, our colleagues at the FCC, Chairwoman Rosenworcel and the rest of the team, they're doing a fantastic job moving this very quickly and efficiently to market, and they're still determining the rules. And so we'll wait and see how it's structured. But what you can expect from us is a lot of what you saw on how we've always behaved: disciplined and opportunistic. And with this hand of cards, we can afford to be that way.

All right. Let's take our last question for this segment from Simon Flannery with Morgan Stanley. Simon, we can't hear you quite yet.

Can't hear you.

Let's see. Maybe it's the mute button, circa 2021 problem. Maybe it's on our side. How about now? No, we don't have you yet. No, we want to hear from you. We'll get you in the next question session, if we can't hear you. Say something else. All right. No?

Can't hear you, Simon.

All right. Simon, sorry about that. We're going to try you again in the next session. That's why we've got 4 of these things. So don't worry. We'll get back to you. Listen, thanks to everybody for your participation in this. As you know, we've got 4 of these, and we're going to give you lots of opportunities to dive in. But right now, what we're going to do since we've been at this for a little while is, we're going to give you a 5-minute comfort break, and then we're going to be right back for an exciting session, where Jon Freier and Callie Field are going to dive into our core consumer business, our differentiated customer experiences and our ability to dive into underpenetrated segments where we have an incredible opportunity. So up next, after a 5-minute break, Jon Freier. See you, everybody. [Break]

Welcome back, everyone. I'm Jon Freier, Executive Vice President of Consumer Markets. My team and I have the responsibility for growing the business across all of T-Mobile's consumer, postpaid and prepaid products and services. I'm here today to discuss the unique opportunity that we have to drive sustained consumer momentum by further accelerating our winning formula into new growth areas to create shareholder value. What is our winning formula? Well, I'll explain that in just a few moments. But first, let me set the stage that outlines our opportunities. Across the entire wireless market, the consumer segment remains the largest with approximately 310 million postpaid and prepaid customers in America. Thanks to years of industry best growth, T-Mobile now serves just over 30% of these customers. While that's impressive growth, we also see a future where we have a huge opportunity to further grow the business. Our growth formula is simple: build the world's best 5G network, paired with high-quality distribution, supported by a strong value proposition and marketing efforts that unlock consideration and then providing the very best consumer experiences, delivered by the best team in the entire industry. T-Mobile has a deep and broad 5G network with a sustainable and durable advantage that will persist for the duration of the entire 5G era. And with a full product portfolio, that will allow us to reach the entire spectrum of consumers from prime suburban families to the most budget-conscious. We've never been more capable to accelerate our business over the next few years. To do this, we're focused on driving new account growth across postpaid and prepaid products, deepening relationships with our existing customers, delivering operational transformation that fuels our continued growth and being famous for the customer experience. All right. Let's get into our opportunities. In prepaid specifically, we've grown Metro by T-Mobile into a customer loving brand that provides T-Mobile's world-class 5G network at an incredible value, all with an award-winning customer experience. We operate Metro by T-Mobile in some of the most economically challenged communities in the United States, where the T-Mobile connection is oftentimes people's only connection. We're so proud to be an indispensable service to the communities that we serve, helping them stay connected to their world. We see even more growth potential ahead for metro by T-Mobile as well. And speaking of potential, let's talk more about an even bigger potential for our company. We have a significant growth opportunity in smaller markets and rural areas throughout the United States. Many people don't realize how sizable this geographic segment is, so allow me to share some details. Smaller markets and rural communities are the largest geographic segment of the consumer market. And as Mike highlighted, this segment represents about 50 million consumer households or around 130 million people. It's massive. T-Mobile has made progress in this market since 2017, and as we've expanded our distributed POPs and more than doubled our total customers in rural America. But even with that impressive expansion, we are still under-indexed to our addressable market size. We estimate that our rural market share is in the low teens relative to an overall market share of just over 30% nationally. Historically, Verizon and AT&T have dominated these rural markets, largely due to their scale, distribution and networks. To put it simply, we have not had the network capabilities or distribution resources to truly beat out the competition. But let me tell you, the advantage that Verizon and AT&T have enjoyed for decades will now be their melting ice cube, as we bring our winning formula to smaller markets and rural communities. As I said earlier, our winning formula is made up of 4 success factors. We have the world's best 5G network with a sustainable advantage for the duration of the 5G era. Deliver high-quality distribution, supported by a strong value proposition with local marketing and community engagement efforts that unlock consideration. And last, but not least, provide the very best consumer experiences delivered by the very best team. We're ready to disrupt the competition in true and carrier fashion by bringing real choice from America's largest cities to America smallest towns. Our strategy to unlock this 50 million household opportunity will require growth in areas where we already have both the network and distribution assets today, as well as growth in areas that will receive network investment in line with what Neville just outlined. Building the best 5G network throughout rural America is foundational to unlock consumer switching. We will look to expand our physical footprint by building hundreds of new stores in small towns and rural communities over the next 5 years, including over 200 stores this year. Across our existing stores as well as our new stores in rural America, we plan to introduce Metro by T-Mobile products and our own T-Mobile stores. This move allows us to expand our prepaid reach, and doing so in a way that's even better for our customers. After all, why should customers in smaller markets have to visit multiple stores for both postpaid and prepaid products. They shouldn't have to. When you walk into a T-Mobile store in rural America, you'll be able to get everything that T-Mobile has to offer. And with our strategic Metro PCS transition to Metro by T-Mobile and unifying our T-Mobile and Sprint distribution fully behind T-Mobile, we've been working hard to unify all of our products behind a master T-Mobile brand, driving simplicity and scale that our competitors can't replicate. That will translate into operational efficiency, avoiding unnecessary costs of duplicative distribution in smaller communities. In addition to our own stores, we will bring T-Mobile to nearly 1,000 Walmart stores in rural America. Walmart is 1 of the most highly trusted brands and serves as a central shopping hub in smaller markets and rural communities throughout the country. We will bring a compelling value proposition to the most underserved areas by evolving from a phone-only player in the market to becoming the company that can increasingly serve customers with mobile, home broadband and emerging 5G products. We are in a unique position to win hearts and minds with a differentiated message of network superiority, community engagement and investment and personalized consumer offers that expand the switching pool. And we've more than doubled word-of-mouth advertising with the acquisition of Sprint, as Sprint's base of rural customers was actually higher than T-Mobile's prior to the merger. The word-of-mouth advertising effect in smaller markets is incredibly powerful. And soon, we will be launching new, innovative distribution programs to expand our reach even further. Now I can't give away all of the ingredients to our secret sauce just yet, so you'll have to keep your ear to the ground for more to come here and, by the way, coming very soon. By delivering on this plan, we expect to increase our market share in smaller markets and rural areas from the low teens today to nearly 20% by the end of 2025. In our larger markets, when we bring the full power of our network, our distribution reach, unbeatable value proposition and unleashing the best team to create the best experiences, we command an outsized market share. As we bring that same winning formula to smaller markets and rural areas, we're confident that we can achieve the same overall share. And perhaps, we can overachieve. And if we can, that creates upside to our plan. Even with our growth focus on smaller markets and rural communities, we will continue to transform our existing distribution across all geographies and all channels to achieve our growth aspirations and deliver on merger synergies. Last year, we executed the largest retail integration in wireless history and the largest physical integration in the history of retail, all during the global pandemic. And we did so faster than any other prior merger in the wireless industry. At closing, our combined retail store count was approximately 8,800 stores. And we quickly accelerated the rationalization of hundreds of stores beyond our original plan. We currently have approximately 7,500 T-Mobile branded stores and expect to continue to optimize where it makes sense, primarily in urban and suburban areas. And we'll do all of this while increasing the number of consumers we can reach with new, cost-effective distribution channels and through digital avenues that Callie will talk about in just a few moments. Additionally, we plan to bring T-Mobile to nearly 1,000 Best Buy stores throughout the country. As one of the premier consumer electronics retailers in America, bringing T-Mobile to Best Buy will further solidify our ability to appeal to prime wireless consumers and fuel the switching environment. We also plan to bring T-Mobile to more than 2,200 Walmart stores, including nearly 1,000 stores in rural America that I mentioned earlier. And finally, we plan to open about 500 new Metro by T-Mobile branded and multi-carrier stores, and we're consistently evaluating new distribution opportunities that expand our ability to cost effectively reach consumers and create value to our business. I'll now turn it over to Callie Field to tell you about how we're serving our customers with our award-winning customer experience.

Thanks, Jon. Hi there, I'm Callie Field, EVP and Chief Customer Experience Officer. I'm excited today to talk about how we will deliver the best experiences from the best team, to share how our team of experts model for care was a big bet and investment in our amazing frontline, supporting our story from the worst to the first in customer churn and providing us with a massive, hard to replicate advantage for our Sprint customer base. The best experience ever at the lowest cost to serve, and we're not stopping there either. We see tremendous upside as customers are increasingly more interested in digital shopping and service interactions and can further extend our lead in customer love with radically simplified experiences. We do love our customers, and Team of Experts is an innovative way to listen and serve them with energy and empathy. When we launched Team of Experts in 2018, after more than 2 years of pilots, we rewrote the rules of customer service and put customers at the center of our business model. This unique and groundbreaking way of serving customers has 6 patents and has been studied by more than 100 companies around the world. What are these new rules you might ask? Well, number one, we make it easy for you to connect with us. Number two, you don't ever have to repeat yourself, not ever. Three, you have a team of experts who are empowered to get it right the first time. And four, if you'd rather fix it and never call us, we'll show you how. Traditional customer service models champion average handle time as their critical currency. However, our success is determined by 4 key measurements. The first is happiness because we are out to create happy customers. Our Net Promoter Score has improved 68% since 2016 and is in the top 5% of industry benchmarks, with 50% fewer detractors. We've been at the top of J.D. Power Ratings 7x in a row, and we've led the industry in customer service satisfaction every quarter for the last 4 years in Harris Ex polling. In 2021, Metro was at the top of J.D. Power for the third time in a row, while TFE was top-ranked across all business sizes for the fourth year running. Second, we want customers to stay longer. From 2015 to 2019, we brought postpaid phone churn down from 1.39% to 0.89%. And in 2020, our Magenta base had the lowest churn of anyone in the industry. Third, we want to deepen our relationship with customers. We've seen activations through customer care increased by 4x since the launch of Team of Experts. And the fact that our frontline gets it right the first time, customers are buying more and calling less. And fourth, we want to make it as effortless as possible for customers to find resolution. Since the introduction of Team of Experts, we have cut calls per account in half and reduced our cost to serve per customer by more than 1/3. We believe that when you put the customer first, care doesn't have to be a cost center, it can be a profit driver. Each Team of Experts manager owns a market-specific customer base. And when their customers contact us, they're always routed first to their assigned team of experts. We've baked P&L accountability into our Team of Experts model. Half of an expert incentives are determined by team performance, 60% of which depend on the team's P&L metrics. Our experts operate as business owners and are empowered to make decisions that benefit both the customer and our bottom line. In 2021, we are building on these successes and bringing the full Team of Experts experience to millions of Sprint customers. It takes considerable time to train and develop our teams to support this model. But we're already underway. In the interim, our retail and care teams are working together to improve the experience for these customers and get them over onto the T-Mobile network. These changes have increased Sprint's Net Promoter score 50% after interactions with our experts. Meanwhile, we're also engaging in one of the industry's largest market events with service partners from around the world who are competing just to have a shot at working with us to deliver Team of Experts. This solidifies our partnership with the best of the best. Customers flock to T-Mobile, in part because of the human touch of our mobile experts at retail and care. And yet COVID-19 is finally opening the door for customers to consider new ways of working with us, expectations that will outlast COVID. They want our personal touch. But now they want it increasingly delivered digitally, and that's a huge opportunity for us to pioneer new ways to differentiate with the customer and their happiness as our North Star. And potentially, some really big efficiency benefits to T-Mobile as well. Over the next 5 years, we will use simplified digital capabilities to make it easy for customers to get help or find the product that they need, however, wherever and whenever they need it. We'll continue to provide world-class experiences, creating additional value by reducing complexity and investing in our digital capabilities to drive even better outcomes in several areas. We are enabling effortless purchasing of products and services by reducing switching friction to increase digital sales. As I mentioned earlier, we see an opening very informed by COVID to engage with customers digitally. We can know their preferences for device setup and financing, help them set appointments at their favorite store with their favorite expert and have their order ready to pick up or even deliver concierge service right to their homes. We are accelerating self-service and network migration efforts, and we'll deliver on an aggressive goal of moving at least 60% of Sprint customers on to T-Mobile's network by the end of the year. Additionally, we're driving revenue growth powered by data and technology to scale our home Internet and e-commerce, tripling activation volume while reducing cost acquisition through enhanced digital tools, like next best action and expert assist. And finally, we are unshackling our front-line in stores and in care to be supercharged customer advocates by automating simple transactions, creating personalized customer experiences and supporting our industry low, postpaid churn efforts. Instead of putting bots between our customers and our frontline, we're investing in digital tools that turn our experts into superheroes, creating the ultimate profoundly distinctive customer experience. Now let's get to some of your questions. It's time for Q&A.

Okay. Welcome back, everybody. Well, you just heard John and Callie take us through the big upside we see in our core consumer business, from getting after underpenetrated segments, going into smaller markets, a very different take that's much more customer-centric to digitalization and so many other opportunities. We want to get into that stuff with you right now. And whatever else is on your mind. So Jud, how do we get started?

All right. We're going to give this another shot, Simon.

Yes. My question was on broadband. You put out some aggressive targets there, $7 million to $8 million in 5 years. Is that a fairly linear transition there? And I think one of the questions we got a lot is about usage and speeds and can the network compete with what the fiber and cable providers are doing. So maybe Neville could talk to that, if he's out on the panel.

And Simon, if it's okay with you, what Neville and I can do -- he's not here, but what I can do is give you just a snippet, but we're going to have Dow Draper here in a few minutes. He's going to actually share with some prepared remarks, all that. And then we'll be available to talk about home broadband in a minute. But this is just such an exciting opportunity for us. And it's very differentiated relative to how -- as you heard us talk about in some of my upfront remarks, relative to how our competitors are thinking about it. And one of the pieces is, we are ready now. So last week, Mike Katz and I announced our business for home Internet users, fantastic offer that we're off to the races. It's available nationwide. And then we also sort of signaled that later this month, we'll be unveiling our plans for immediate commercial availability of our consumer offering in big parts of the country, and we'll be announcing markets we'll be announcing price points, strategies, et cetera, coming right up a little bit later this month. But look, this $7 million to $8 million I think you'll listen to Dow about how we're getting after the market. And I wonder if what you'll take away is, is it a little conservative. Because there's a difference -- it really boils down to miles, not meters. We are going to be able to serve vast swaths of this country with hundreds of gigs per month, a terabyte or more per month. Hundreds of megabits per second, huge capacity. And we can do it without extra capital dollars, with the capital dollars that are fully funded from our mobile plan. So if it's okay with you, I'll leave it at that because we do have a whole session planned on this. And we'll welcome you back for a little bit more of a deep dive in a few minutes. Yes? And I'm glad we can hear you.

Let's take our next question from Dave Barden with Bank of America.

I appreciate the day. I guess two, if I could. The first was, Mike, you kind of called out a couple of open opportunities in smaller rural markets, in corporate. There's other things that you guys have talked about: First responders, 65 and over. I was wondering if you can kind of give us some of the details around maybe what the opportunity is there from the sales standpoint. And then maybe a question for Callie. The marketing team seems to be budgeting for 1.5% churn rate as a base case from the legacy Sprint base. Obviously, network is a part of that. Neville talked about what he thinks we can do there. What can you do on the care side to get that number to be closer to where T-Mobile has been on the legacy T-Mobile side?

Dave, thanks. Welcome. Those are great questions. Let's start with Jon. And by the way, don't cut me out of this. It's 55 plus. 55 plus. What was there? Right. So Jon, why don't we talk about those opportunities? Because you're right, in our prepared remarks, we probably didn't give them as much how much oxygen as they deserve.

Yes, you bet. So, Dave, you're right, like on the 55 plus, that's been a segment that we've been addressing for the last couple of years, but we're still under-indexed in that particular segment. And that segment is disproportionately in smaller markets and rural communities. But just think about smaller markets and rural communities for a second. What we talked about is that we have a market share nationally of about 30%. And in smaller markets and rural communities, it's in the low teens. And when you think about a lot of places, we just have gotten there in the last few years. I mean, just last year, we opened our first store in the state of Vermont. We've never operated in all of Vermont. I know all of Vermont, probably a little, but we never operated in Vermont before. And just in the last few years, we've introduced T-Mobile to Montana, North Dakota, South Dakota, Nebraska, Wyoming. Just in the last few years, this company has existed for 2.5 decades and we've never really operated in those states. So in so many places, even though our overall market share that we estimate in smaller markets and rural communities, is around the low teens, so many places are in the single digits. So we have a lot of runway to go. And 55-plus is one of those examples. There could be other segment opportunities that we're going to explore. And the great news is that we can get -- perhaps we can get aggressive in those places. We don't have an intrinsic base, so we can get aggressive, but we can go take share if we need to. And so we're really excited about this opportunity. This is a huge base like we talked about just a few moments ago, out of 310 million postpaid and prepaid customers throughout the United States, almost 130 million people, 40% of the entire market, is in smaller markets and rural communities. And this is a place, too, like when you think about some of those states that I rattled off just a few moments ago, it's 2 competitors, like it's really kind of a trip back to the 1990s in some of these places where you have carrier A and carrier B. And for us to be able to come in there and disrupt competition and to not have this position where customers have to choose the best price or the best network for the first time ever in rural communities, they're going to not have to make that choice. Because T-Mobile is going to bring the very best 5G network and the very best value with that unbelievable award-winning customer experience that we're famous for.

Dave, I think the denominator there is important. What you just heard John say was 130 million POPs, 50 million households, 40% of the country. We're not talking about just those states he rattled off. We're talking about vast swaths of the country, where our market share is in the low teens. And where we're already demonstrating that the formula we've already got works and will get us to probably eventually fair share. But in our plan, with all those billions in cash flows that Peter is about to tell you about, we only contemplate 20%. And that, to me, feels like, wow, what an opportunity. And one of the things you got to take away from today, I think is really important is -- and this is across everything, broadband, which we just talked about briefly; business we're going to talk about; all these underpenetrated consumer segments. We don't need any unicorns in order to achieve every dollar of aspiration that we're sharing with you today. We don't need to demonstrate things we've never demonstrated. And that's remarkable. And it's in stark contrast to what you see from some of the other alternatives that our investors have in this sector. So with that -- with that, we'll -- that's some good. We'll take it to the next question. Actually, you had Callie question too.

Okay. Great. And by the way, I'm sorry, I forgot about that. And the other question, I see your picture there, Mike, we're going to get to you in a second, because I forgot the other part of the question was Sprint churn. That's really important. And the fact that in our plan, we said we'd cut the gap between Sprint and T-Mobile and half that Matt talked about. And obviously, that represents some upside that Dave was also asking about. So Callie, you want to tell us a little bit about that before we hand it to Mike.

Yes. Dave, you mentioned some of the un-carrier moves that we made that were really important to lowering our churn and creating this incredible relationship with our customers with happier customers. And when we created Team of Experts as a key un-carrier move and a very different way to change the customer service industry we saw a couple of things: Our customers were happier; they were staying longer; we were able to deepen our relationships with customers; and also help them do anything that they want to do with far less effort. And that's something that we're bringing to life with our Sprint customer base. We've been working on it now over the past year, and you'll start to see the effects of that overall. Just as a reminder, when we brought Team of Experts to our Magenta customer base, our overall postpaid churn went from 1.39% down to just under 0.89%. We saw that our detractors were cut in half. And we know that detractors, customers that aren't happy, they're 4x more likely to churn and they call us twice as much. And so we're bringing that same experience to life for our Sprint customers and have very high expectations for what we'll be able to do to get our customers to stay longer and really just love T-Mobile, love Magenta.

And back to my theme of there's nothing that we're saying that we haven't done before. You heard Callie talk about worst to first, we did it. That's the journey for the T-Mobile brand. We are now the lowest churning major brand in the market with postpaid T-Mobile. And we were for the entirety of 2020, and we unveiled that regarding fourth quarter. And we know what it takes. This plan gets Sprint customers that leading network, that innovative customer experience that Callie just talked about, the same rate plans, the same overall value proposition and an accelerated 5G that nobody can touch. And we only say we'll cut the gap in half. So that's an exciting opportunity.

Okay. I just -- I think our last question for this segment is from Mike Rollins.

Two, if I could. So first, to reach your growth aspirations, how important is the size of the Switcher pool and if you could provide some context of the size of the Switcher pool today versus maybe where it's been over the last few years. And then secondly, to Callie and the broader team, I'm curious if you could further unpack what you were describing in terms of the experiences of selling to customers during the pandemic that you're currently seeing actual changes to the way customers want to buy new devices or switch providers or receive changes to their service plans.

I love it. Well, let's start with the Switcher pool and what it takes to win switchers. I'd say that -- I'll hand it to Jon here in a second. But I'd say Mike, that basically, the assumption we're making is pretty similar to what you see analysts as well as our competitors are making, which is that this muted environment will start to give away. And then we're going to start to see a more normalized traffic flow and switching pool as 2021 proceeds. That's generally what I think most have as consensus. And look, we don't know. One thing you've seen from us is we've demonstrated that in many respects, it doesn't matter. If the pool is more switch, more muted, we have found ways to navigate and concentrate on our base and deepen relationships. But obviously, as the share taker, we would sure like to see that return. And that's the general assumption that we're making. And maybe, Jon, you have to talk about what it takes to win those switchers, and then we'll hand it to Callie.

And that really kind of goes to -- Mike, that goes to the point that we were talking about just a few moments ago on smaller markets and rural communities. Because really, when you think about it, that switching pool, in large part, hasn't been really available to us as a company until most recently. And we're going to be expanding the network, as Neville talked about, we're going to be expanding distribution. We're going to be bringing T-Mobile and Metro by T-Mobile into Walmart and rural communities, 2,200 stores across the country, but 1,000 specifically in small town and rural markets. That's a huge opportunity for us to be able to expand the switching pool from what we have today. So we're really excited about that.

Great. And then the last question, I think you were asking was how is what customers expect of us and the human touch we give them, both at retail and through the rest of our customer experiences, how is that changing? How did covenant and how does that inform our plans. We'll hand it to Callie.

Well, we've always -- every 1 of our interactions with our customers are at some point, digital. But what we found during COVID is customers' willingness and interest in a more digital experience. And we're always going to say, hey, let's put the customer in their experience at the heart, at the center of what we build, not about efficiencies or deflection. But instead, what's going to really make it effortless easy and just wow for our customers. And that's something that we're really building with the digital experience in mind, both in our stores, in our care centers. We have the opportunity to take our incredible frontline experts teams, whether they're working in retail or working in care turning them into like superheroes, with Jarvis to be able to give customers the very best offer at the very best moment. So we have a lot of really exciting things over the next 5 years. So we think customers will just love.

Mike, since we're customer-driven here, I'll tell you, we could have pushed digitalization way faster, but we've been guided by the customer. And our customers -- our industry's customers, by the way, wireless in general, but especially T-Mobile's customers who really appreciate our human touch as a differentiator, and it's one of the reasons they came to us, they've been kind of stubborn. We're guided by the customer around here, and the customer hasn't really wanted a full digitalization. But they're open to it now. And that's something that's changed over the past year. And our category, which has always been something customers have said, no, I want to see the whites in your eyes. That's -- they're open to that now more. And what Callie's talking about is what we're doing to get after, we're not going to do it the way other industries have done it. We're going to infuse our people into that digital experience. So the humanity of our brand keeps coming through, and I'm so excited about the fact that this window is now open. And I think that takes us to the end of this section already. We have 4 sections. We have another one of this length and then a longer one at the end. And up next, we're going to talk about the big growth adjacencies. We're going to hear from Dow Draper about home broadband. I know so many of you are excited about that. And the big push we're already winning in, which is getting after enterprises and governments. And so up next, after a quick transition, will be Mike Katz, Executive Vice President of T-Mobile for business.

Hi, everyone, I'm really excited to be here today. I'm Mike Katz. I lead our business markets team, which includes the work that we do with enterprise, public sector, small and medium business as well as our wholesale and wireline businesses. And I want to talk today about how T-Mobile for business is uniquely positioned for market-leading growth. As Mike highlighted earlier, the opportunity in this market is tremendous. The corporate liable, enterprise, public sector and small business markets are sized at around $27 billion for core wireless connectivity and adjacent services, with over 50 million connections in 2020. And the market is expected to grow to over $40 billion, with around 60 million connections by 2025. While adjacent services are rapidly growing, core wireless connectivity will continue to represent the majority of revenues in this space. Historically, T-Mobile had been a low share player across the business market relative to AT&T and Verizon. Our historic share was a reflection of many years where the carriers use their prior network advantages as a moat to keep us and other competitors out. Just a few years ago, when we started this journey, T-Mobile's market share in enterprise was around 3%, while Sprint share had been rapidly declining for quite some time. Since then, we've aggressively grown our share in the legacy T-Mobile business more than offsetting the declines in Sprint to approaching 10% share in enterprise. And this growth over the last few years was achieved in an environment where we were still playing catch up on network with AT&T and Verizon. This includes 2020, which was a record year for us. We more than tripled our net customer additions and drove double-digit percentage service revenue growth while working through our midyear merger with Sprint. We also made massive inroads into large enterprise accounts and are now doing business with more than 3/4 of the Fortune 500. And not only are we getting in the door in places where we weren't before, but we expanded our relationships with a number of these large customers in 2020, making T-Mobile, their primary wireless communications provider. We're working side-by-side with our customers in a number of key industries, such as airlines, oil and gas and retail to help them innovate and address their most important challenges in their organizations. This real-world experience gives us a platform for expansion moving forward as we build out new 5G-based services and capabilities. And in public sector, thousands of local, state and federal agencies chose T-Mobile as their mobile partner in 2020. And now they are seeing innovation and benefits that we can bring to them as we make good on our promise of 5G for good. Over the past 12 months, we helped schools meet the challenges of COVID by connecting over 2 million students, enabling remote learning with the paid versions of Project 10 million, which helped us rapidly develop relationships with hundreds of cities and states, including New York, Los Angeles, Chicago, Detroit and Texas. In addition, we expanded our support for first responder organizations with our Connecting Heroes program. Looking forward to the next 5 years, we are no longer playing network catch up, we will be the leader in the 5G era. And this combined with the momentum that we've already been able to achieve, give me confidence that we can more than double our existing share in enterprise with plenty of room for overperformance. To achieve our growth objectives and to continue our momentum, we have 4 key areas of focus: first, leverage our 5G network advantage; second, disrupt enterprise and public sector with value and simplicity; third, close the awareness gap with our competitors; and fourth, win with the best team, including expanded and specialized sales and dedicated care. I'll touch on some examples of how we are bringing these to life in just a moment. Today, and over the next few years, we're focused on 1 goal: to become the #1 choice for enterprise and public sector customers and leverage the fact that for the first time in years, there's not just a viable, but in this 5G era, a superior alternative to AT&T and Verizon. So how are we continuing our journey towards becoming the #1 choice for enterprise and public sector customers? Let me start with how we're going to leverage our 5G network advantage. You heard earlier from Neville, we have the broadest and deepest 5G network in the country by far. And the #1 prerequisite for success amongst the customers we serve is network, so our 5G network leadership will be a total game changer. Our 4G LTE network already goes toe to toe with our competition, and we know they won't be able to touch us in terms of 5G. And that is a huge benefit for us in a category where the buying approach puts wireless companies through rigorous head-to-head testing versus the incumbent before a company will consider switching. Our differentiated and rapidly improving network capabilities open up a much wider part of the market that we weren't able to access before. Having been a part of T-Mobile for 20 years, it will be kind of fun to lead the pack in network and see our competition try and play catch up, both today and over the course of the next decade. We want to leverage our 5G network advantage and bring disruptive, compelling innovations to market today that matter most to organizations. In fact, just this last week, we announced some of the first real-world 5G services that solve real contemporary problems for enterprise and public sector organizations. Our T-Mobile home office Internet product helps enterprises embrace the new world of work. With everyone working, learning, gaming and streaming from home, we are all caught in a battle for bandwidth. T-Mobile Home Office Internet allows organizations to provide their employees with in office connectivity out of the office, with a dedicated secure enterprise-grade broadband connection that enables work from home without competing with or replacing their current in-home broadband connection. This product is designed as a single nationwide solution to cover all employees in an organization. And this is something only T-Mobile can do, thanks to the unmatched capacity, breadth and speed of our 5G network. We will start by launching to 60 million households, more than any other ISP and will grow throughout the year as we continue to expand our 5G network. And we are not stopping there. Our 5G network creates a platform for growth beyond core wireless, and we're focused on helping our enterprise and public sector customers realize value from these emerging technologies at scale. We have many trials underway, from helping one of the largest global banks build better security experiences into their consumer mobile applications by leveraging mobile edge compute, to innovative applications of private networks in the automotive industry, helping a global car OEM validate new use cases in their manufacturing and testing facilities. We're working side-by-side with customers to help them solve real-world problems and these are solutions that are being built today. The second big focus area for us is to disrupt enterprise and public sector with value and simplicity. Our advantage over the competition is we're nimble, we're agile, and we know how to solve real pain points using uncarrier principles to differentiate ourselves. And unlike AT&T and Verizon, we don't have castles to defend with large legacy businesses. Last week, we also announced an example of how we plan to help enterprises simplify and reduce costs in their wireless category with T-Mobile enterprise Unlimited. The incumbents have no motivation to innovate and business customers have been stuck in structures holding them back from modern capabilities and especially from the 5G era. Many of the planned structures in the market today look like they were designed in the early 2000s. They're complex. They're loaded with extra costs, and they require entire departments to manage or worse paid third parties. With just under half the enterprise employees on limited pooled or shared data plans organizations have to try to predict how much data they're going to use each month across thousands of employees. Enterprise have spent millions of dollars just in the unending battle to police wireless data plans on top of paying for the plans themselves. And with mobile data usage expected to grow by 38% a year over the next 5 years, these legacy pooled and shared data plan constructs are going to cost more, and they're going to hold organizations back from reaping the benefits of 5G. Take Verizon, for example, their pooled plans don't even get you onto their real 5G network. Customers get a version of 5G that runs slower than their 4G network. With Enterprise Unlimited, we're helping organizations future-proof their wireless investment by enabling them to easily move to unlimited 5G by matching the price point that they are paying today for pooled and shared plans, allowing them to pocket the savings from all the extra costs spent on managing the complexity. Remember, core wireless connectivity, like what is delivered in these pooled and shared plans, is and will continue to be going forward, the most lucrative part of this business. With AT&T and Verizon controlling around 90% of the market, nearly every win in this space is incremental to T-Mobile and a loss for them, which makes helping enterprises simplify their operations and realize more value in this category, both really exciting and highly accretive. We've been able to achieve some impressive growth over the last few years in an environment where many enterprises don't even know we compete in this space, and we still have a large awareness deficit relative to the consumer business. As we work to close the awareness gap with our competitors, you'll see us show up in more places, including in national advertising. Now that we will have the best network in a winning strategy, we will invest in making sure that T-Mobile is not just on the map, but we're on the top of mind for every CIO across America, opening up more of the market to us. And like I mentioned, we plan to win with the best team, including expanded and specialized sales in dedicated care. We expect that growth will accelerate as we expand our sales teams while also advancing our specialist model targeted at key industry verticals, key segments and technologies. Our specialists are trusted advisers to our customers who know and deeply understand their business. And of course, we will continue to differentiate ourselves with dedicated, best-in-class customer care, just like we do for consumers. We have implemented a similar team of experts model for our business customers so that we can address issues quickly and allow our partners to focus on what's important, achieving their goals, not talking to us. Putting this all together, we have everything we need to be the share taker in this market. We will be laser-focused on leveraging our 5G network advantage, disrupting enterprise and public sector with value and simplicity, closing the awareness gap with our competitors and winning with the best team, including expanded and specialized sales as well as dedicated care. Our ambitions today and over the next 5 years are big ones. We plan to more than double our nearly 10% market share in enterprise and build on our success in public sector where we've made significant strides in 2020. This will drive solid double-digit percentage CAGRs in service revenues in enterprise and public sector over that same time horizon. As you can tell, I am really fired up about the future for T-Mobile for business, and I look forward to taking your questions in just a bit. But first, let me turn it over to Dow Draper, who will tell you about the exciting growth opportunities in emerging businesses. Over to you, Dow.

Thank you, Mike. I'm Dow Draper, and I lead the Emerging products Group. I'm very excited to be here today to discuss how the merger with Sprint has created new opportunities for us to improve the home broadband experience for millions of Americans. This is a growing industry with about $90 billion of annual revenues and the pandemic has certainly heightened the importance of having fast, reliable home broadband service. There are really 2 key factors that make this such an attractive opportunity for us: Our deep ultra capacity 5G network; and the deep dissatisfaction consumers have with their Internet providers, whether that is due to lack of choice, lack of quality, sky-high prices or all of the above. With our spectrum portfolio and network assets, Neville and team are building a 5G network with a massive amount of capacity. While the build strategy is centered around mobility, there are neighborhoods all over the country where we predict that no normal amount of mobile usage will take up all the available capacity. Therefore, we are going to leverage that capacity to provide millions of Americans a better home broadband alternative. As we look at the market dynamics, we think there is a huge opportunity to disrupt this space. As high-speed options are limited, customer satisfaction is very low based on average Net Promoter Scores. And pricing structures are too complex. Many Americans have only one option for high speed broadband. And in rural America, it's even worse, as 28% of rural households can't get access to home broadband at all. For those who can, there's no competition. For nearly 40% of the rural households that do have access to broadband, there's only 1 option at their home. So how will we attack this market? The Un-carrier way, of course. We'll offer a reliable and high-speed Internet product with simple pricing that doesn't include exploding promotions. We won't charge equipment rentals or fees. There will be no annual service contracts. And what we think will be a huge relief to consumers, there is no need to schedule and wait for the cable guy. Our service is a simple self-install, plug-in your router, download the app and go. And all of this is backed by our award-winning customer service. It's all the things big cable isn't. Now we know a lot of people think this is just a rural play for us, but that is definitely not the case. We think we have tremendous opportunity across what we see as 3 main types of markets. And while we'll have a mix of marketing that may include combining home broadband, with content and/or our wireless products, the emphasis in each market will be slightly different. First, about 5% to 10% of households are in left-behind markets, located mostly in smaller markets and rural areas where customers have no options or very poor ones. Here, we'll be focused on the availability of higher speed Internet, and we'll have the fastest speeds on our nationwide 5G network. This is also one step further in closing the digital divide as we bring critical and reliable connectivity to people that haven't experienced that basic freedom that many of us take for granted. Next, about 50% to 60% of households are in limited competition markets, located mostly in smaller markets and rural and suburban areas where customers have some choices, but generally only one high-speed option. The key here will be offering an alternate, high-speed choice at a competitive price that's simple and transparent for customers with no contracts, hidden fees or cable guys that need to come into one's home. And finally, about 35% to 40% of households are in well-served markets, located mostly in suburban and urban areas where customers have multiple high-speed options today. If our competitors think we won't be attacking these markets, they are sorely mistaken. While we have all the benefits of an excellent product to compete here, this is also where we plan to leverage the strength of our T-Mobile brand, our strong retail presence, amazing customer experiences and our ability to offer double and triple plays. We have plenty of options to be a meaningful player here. The great news is that in all these markets, we'll be able to leverage existing and growing distribution channels across retail, care, telesales and digital. Thus far, we've been marketing our home broadband service as a pilot, primarily on our LTE network. And we've learned a lot. First and foremost, customer satisfaction is very high. So we know we're delivering a high-quality service that is creating incredibly sticky customers. We've accepted just over 100,000 customers in our pilot. And quite frankly, we've experienced demand that far exceeds that number. And I guess we should have planned for a bigger pilot. But a key premise of our testing over the past year was to hone our skills at direct to localized marketing. And ensure we were aligning customer acquisition with the ever-evolving growth of our network capacity. We're seeing average customer usage in the hundreds of gigabytes per month, including about 20% of customers using more than 500 gigabytes, and all of this has been on our LTE network, which is delivering great results, giving us even more confidence in our ability to meet customer usage demands with our 5G product as we deploy additional spectrum and capacity. Now as Mike mentioned, we move out of our pilot phase later this month. And we're expecting over 0.5 million customers by the end of this year, followed by a significant ramp in 2022 and 2023 as more capacity becomes available. And ultimately, we'll reach 7 million to 8 million customers by 2025 in our financial plan, which would still only represent a mid-single-digit percentage of total U.S. households. This presents such a great opportunity for us. Unlike traditional cable, we won't have any incremental costs associated with passing homes, last mile installations or truck rolls. We'll be able to leverage our existing wireless cost structure and therefore, limit incremental network, distribution and servicing costs. Plus, 5G router prices are rapidly declining. Overall, we think it's really an attractive model for us as you potentially have the same ARPU in turn potential of a postpaid phone customer with much lower equipment costs and little incremental investment required. I do think it's important to highlight that moving away from cable and satellite is new for most Americans, and we believe providing streaming services from T-Mobile and/or our partners at attractive price points will make switching that much more exciting. This is already embedded in how we approach wireless. And we plan to carry this philosophy into how we help get people motivated to switch from their current broadband provider. We just have so many ways to win here, including our phenomenal brand, ultra capacity 5G, national distribution and the option for double or triple plays across the country. We've even been pleasantly surprised to learn that 35% of our pilot applicants are new to T-Mobile customers. This means our home broadband product can also act as another front door into our wireless business. If someone is getting great home Internet service from us, and it's a strong bet, they're also going to have amazing mobile service in and around their home. We'll use our home internet relationship to market our wireless services in the future, just as we're doing the opposite today. All of this enables us to deepen our relationship with both existing and new customers. With that, let's get to your questions, and welcome Mike and Peter to join Mike Katz and I for Q&A's.

Okay. We're ready for our third of four discussion sessions, and we'll get right into it. You might have noticed that in each of these, Peter and Jud and I all attend because where your host today, but this session, is focused on broadband and on our business and government opportunities, which are both huge adjacencies. We're excited to talk about so we have both Mike and Dow, who you just heard from here. And let's get right to it. Jud, how do we get started?

Mike, we're going to kick this one-off with Peter Supino from Bernstein. Peter, go ahead.

Glad we finally got to today. So on FWA, with the broadband home consuming like perhaps 15 wireless accounts in terms of gigabytes per month. I'd like to know more about how the company can have long-term visibility on excess capacity in these well served markets, where the company's cells are presumably already highly utilized. And then if I could squeeze in a second question. I'm sure a lot of people would love to know the balance of rural and urban subscribers assumed within that 7 million to 8 million FWA customers in 2025.

Sounds great. I'll start and then toss it to Dow. Thanks for joining, Peter. Yes, it's very interesting. I mean the whole premise here is that -- and this is very different than what you see from some of the other wireless broadband initiatives is that this network has massive capacity in all kinds of pockets around the country. And what we're able to do is forecast multiples of current usage in mobile. Multiples, not percentages, multiples versus current usage in the future. And then forecast all of our share gains implied in the plan and then some, in case our plan is a little conservative. And then basically, you're able to look at it and say, you know what, with the assets we have today and the capital plan we're already fully funded for, there's massive capacity remaining, already fully funded. And that's where right here, right now, we will begin approving applications from consumers for home broadband service. And it's a fantastic opportunity because it allows us to be no regrets. We know they're going to use -- and Dow can talk to what we're already seeing even on LTE, it's massive usage, it's going to get a lot bigger, and we can support it. And that's what's kind of exciting. That's without even getting into things like the extra capacity we can add. We've hardly said a word today about millimeter wave spectrum, of which we have the second most in the country. And where -- with the right business model, if we need to, we'll go in and light up opportunistically millimeter wave spectrum just to support this business plan. Differently from our competitors, though, we don't need to. That'd be upside. And I really hope we have upside beyond the 7 million or 8 million subscribers. As Dow mentioned a minute ago, that's a mid-single digit. Now Dow, what do you want to say to add to that?

Yes. No, thanks, Mike. I would say that we're really going to be guided by the customer here in terms of the speeds and service that we deliver. And the reason we can do that is because we have this massive amount of capacity that Mike and Neville have referred to on this network. And what's been great is in our pilot, which we've just been running on our LTE network, which is a very good network, we've been seeing customers with extremely high NPS scores. So we know that we're serving them very well. And they're using hundreds of gigabytes. And as I mentioned in my comments earlier, 20% are using over 500 gigabytes a month, and they're very happy. And so as we take that and roll that to our 5G network, where we'll have more speeds, obviously, much more capacity and we know customers are going to be even happier. And what I love about this is that while we can compete in well served urban markets, and certainly, there's even people who are not well served in those places, but we're going to be able to compete there, we're also -- because of the way that network -- that Neville and his network team have built this network, is we'll be in suburban and rural, small town and rural markets, where most of -- majority of the customers have either one choice or really no choice. So this allows us to provide a really competitive alternative with the capacity that we have and even expand the market, because a lot of those people either aren't getting broadband today or maybe have something that's like 1 or 2 megabits per second. So it's really, really not quality at all. So this allows us to address a much, much broader segment of the market and expand things, and this is something we're really, really enthusiastic about.

And what can you say, Dow, about the relative opportunity in the different market categories that you talked about? You said we're tackling all three. We'll do it very differently. Peter is asking, I don't know if you can give it, but Peter is asking a little bit of color on how you see the opportunity, maybe near-term versus longer term.

Yes. So near term, where I think we're really going to focus is in those rural and small town and some suburban areas, where, quite frankly, as people are underserved, right? That's where the need is most, so that's where we're starting. And again, the way Neville's built this market, this allows us a very different approach than our competitors. So if you think about how, maybe cable or even millimeter wave deployments are, they have to build out blocks, right? When they build out those blocks, they need to sell a certain number of homes within those blocks to make money. Well, for us, kind of the way we look at this is we compete in miles, not in meters. And so we can get those homes across blocks or neighborhoods or even over broad territories in this country. And so we think for us starting in rural and some of the suburban areas is going to be really, really important. And then of course, over time, we'll continue to serve there, continue to expand there, but also compete in the urban markets where I think we have a very, very relevant. We certainly have the speeds. We've got our distribution. We've got our brand. We've got our customer service. And so we're really well positioned to compete in all markets.

All right. We'll take our next question from Colby Synesael from Cowen.

Great. Thank you. When you first came up with your plan in, I think, 2018 to go after the in-home broadband market, it was a bit more nuanced than what I would argue it is today. You're seeing, obviously, Verizon talking about that yesterday, 50 million homes passed the servable goal by 2025. If you look at [indiscernible] and who actually won, there's a lot of fixed wireless providers that actually won there as well, a lot of them going after that real opportunity. And then you even have Starlink on the satellite side, intending to go after certain opportunities. Just given what appears to be a much larger competitive set going after the opportunity than what you might have thought back in 2018, I guess, what's the conviction that you're going to be able to hit the penetration goals to what you have? I mean, your pricing, for example, seems like it could be fairly similar to what Verizon's pricing is. Verizon has a bigger market share in the wireless space, if you're talking about the value of the bundle and so forth. It just seems like it's going to be a lot harder sliding going forward than maybe what is assumed in your expectations.

Thanks. Yes, I'll get started. Yes, we do it differently. First of all, our pricing has never been similar to Verizon's on much, and we're hoping to keep it that way. And one of the differences is how our model is funded. This entire network build is funded by synergies. And as Neville talked about, because if we're getting 2 for 1, we're going and touching all these towers and adding the 5G technology while we're doing the integration work, we're just getting way ahead way faster than the competition. And your question is an interesting one, which is they're coming. Some of these guys are coming. We may be in different places, as Dow just got done explaining, we don't even think about it in terms of homes passed. It's a different model for us because of how widely distributed we will be able to go fishing in the vast portions of this country, eventually substantially all of the country. But it will be certain areas within that. And we're going so fast, that by the time that the others finally get there, we may have soaked up an awful lot of the opportunity. Because the truth is somebody who's been always with one choice, they've had this one choice that Dow just talked about, and somebody arrives in town with hundreds of megabits per second, hundreds of gigs that we can support a lower price than they've ever seen from a national brand with great distribution and fame for loving its customers, they'll either consider switching or they won't. If they do, now they're ours. Let's suppose Verizon arrives later, or one of these small companies nobody's ever heard of arrives later. Okay. That customer has made that decision. What's going to extricate them now from that decision? What will they have to offer that's better? Because that will be the new standard. They have to be able to offer something better. And what we're finding when we start to hear their plans is that not only will they not be in a position to offer something better, except in places with deep millimeter wave capital investments and suction cups on windows and the trees, the leaves shouldn't be on the trees and stuff. Except in those circumstances, they won't have something better to offer. And that will be their problem. It's very much -- I think it's very similar to when we came out as the Un-carrier at the very beginning of the journey and said, we're going to be this value player. And we took up all the oxygen on that. And that left other value players that wanted to be the UN carrier, very little room to maneuver. And so that's kind of what happens a lot of the time. I don't know, Dow do you want to add to any of that?

Yes. Only a couple of things I'd add would be that one is I think that all the things that you -- all the people you mentioned getting into this sort of validates the opportunity for us and why this is so important to us. But as Mike said, the other piece is, we're ready now. Like we're here. You heard Mike Katz and Mike last week talk about offering a work from home solution. It's available to 60 million households. Right now, in a couple of weeks, we're launching our commercial home broadband service is going to be available to millions of customers and will be growing rapidly in 2022 and 2023, especially. And then of all those people you mentioned and even the others out there, there is not one group that has the assets that we have. No one has the brand we have. Nobody has the retail distribution we have. And nobody has the customer service and reputation for providing high-quality customer experience that we have. So when we put all those things together, we think we're in a really great place to win.

We'll take our last question for this segment from Eric at Wells Fargo. Eric, go ahead.

I can't believe it, Eric. It always goes by so fast. But the last of our 4 question sessions is actually a little longer. So that's good. So welcome.

Okay. Curious on the business side, a lot of your peers have kind of bundled wireless with large enterprise and other services, leveraging the wireline footprints, whether that's fixed broadband, managed services, private cloud. So how do you go to improving your share in the enterprise segment, unpacking those bundles from your peers to take share? And then maybe you could talk about at all if you've leveraged the legacy Sprint wireline assets to help you sell into that market.

Something, Mike?

Yes. Thanks for the question. It's actually not something that we're seeing. In fact, when we work with large enterprises, very, very rarely do we see them actually either asking for or bidding together with their wireline assets when they're bidding with wireless. They're typically separate out. Oftentimes, even in enterprise, they're managed by 2 different groups. So we haven't found a problem in competing for wireless when we're not the wireline incumbents. In fact, even our growth is, I think, this last year, helps help demonstrate that 300% year-over-year growth in our enterprise business. So on the Sprint wireline business, one of the things that we've immediately been able to take advantage of is they do have a robust customer portfolio. And very few of it was -- very few of those customers, they had sell-in with their wireless product. And we've been able to immediately take advantage of that, leverage the relationships that were built and start offering T-Mobile wireless inside those customer accounts. So and -- we found that extremely valuable early on. Let me add something that I want to make sure every person listening understands about our whole business plan, but in particular, the plan that Mike took us through a few minutes ago. And that's this, there is absolutely nothing that has to happen in the future that isn't already happening in order for us to hit this aspiration that Mike expressed. He said he's going to take the share from about 10% to about 20% over the next few years, and that implies a certain amount of net adds per quarter, a certain amount of net adds that are already happening and have been happening consistently for a while now. There's literally no catalyst we're seeking. No unicorn we have to catch in order to meet this business plan. And that is so different from what you see or hearing from certain -- alternatives that investors have in this category. And so look, we're going to execute the plan. What investors should be asking is, is there upside? When are those catalysts coming? Because once we move from having a second-to-none network, which is where we are now, let's face it, most people are still on LTE, we're at rough parity, to be demonstrably best network in the 5G era. Could there be upside? Because during that transition, we will continue to have the best value as well. And those are catalysts for potential momentum that are very exciting and are not calculated into any of the financial plans that we're sharing with you today.

Good. So that was the last question for this session, right?

That is.

And we saved, on purpose, Peter Osvaldik for last. And we did that for a reason because we knew you'd stay for him. Because what he has to say is really important and very powerful. And so up next, Peter Osvaldik. And then when we come back, the whole team will be here to take your questions about everything Peter said, who's waiting to take on your questions and anything else on your mind for our last session. So up next, Peter Osvaldik. Take it away, Peter.

There is such an exciting future ahead for T-Mobile, and I hope that you sense that excitement and passion from our senior leaders as they shared insights into their parts of the business. All right, time to get to what you've all been waiting for, starting with an updated look at synergies, our current view on the mid- and long-term potential for this business and how it all translates into the promised unlock of massive free cash flow, creating the flexibility for significant potential shareholder returns. As you already know, we beat our own aggressive synergy targets for 2020, realizing over $1.3 billion or 4x what the original merger plan expected to achieve in the first year. And we also guided an expectation to realize $2.7 billion to $3.0 billion in synergies in 2021, which represents a $550 million year-over-year increase in avoided costs and a $1 billion year-over-year increase in P&L benefits at the midpoint of our 2021 guidance, helping to fund the investments in our network and the growth initiatives this year. And we're not slowing down. Today, the team has shared with you areas where we are moving faster than planned, such as the expected completion of our customer network migration by mid-2022 and network decommissioning by year-end 2022, both are full year ahead of schedule. This strong execution by the team leads to our updated expectations for total run rate cost synergies of approximately $7.5 billion per year by 2024, up 25% from the original merger guidance of $6 billion. While the full original and increased run rate synergies are achieved in the same time frame, primarily due to the time line for avoided costs, we overachieved in each year relative to the original plan. In fact, we now expect to exceed the original $6 billion target in 2023. Breaking the $7.5 billion down a bit more, we expect to achieve approximately $2 billion in avoided network costs and approximately $3 billion in network cost of service savings, a combined $1 billion increase above the original $4 billion target, driven primarily by greater efficiencies and site costs. In addition, we now expect approximately $2.5 billion in SG&A run rate savings, up from $2 billion originally, driven primarily by increased marketing efficiencies and IT savings. As we have said from the beginning, these massive synergies are unlocked with some onetime upfront cost to achieve. We continue to expect approximately $15 billion of total net cost to achieve, delivering more synergies with no incremental costs. Consistent with the original merger guidance, the $15 billion includes approximately $11.5 billion in OpEx, with $3.4 billion of that incurred year-end 2020, which includes costs incurred prior to the merger. From a P&L perspective, we expect to incur materially all of the remaining merger-related OpEx by the end of 2023, with the peak year in 2022. These costs will come through over a longer period on a cash basis as we take advantage of paying certain expenses over time, such as for decommissioning sites. The remaining $3.5 billion of the total $15 billion merger-related costs is CapEx for network, retail, IT and other integration items. We will continue to disclose the merger-related OpEx costs in our reported results, just as we did in 2020, but we'll not plan to break out merger-related CapEx due to lack of materiality relative to our total capital spending over the next several years. This faster pace and increased run rate result in a new net present value of over $60 billion for shareholders, more than 40% higher than the original $43 billion NPV in the merger case. And that is based on the original WACC of 8% used by stand-alone T-Mobile in 2018. However, if we use our current WACC assumption of 7%, which reflects not only lower market rate conditions, but just as importantly, our scale and performance driving a lower cost of capital as demonstrated by our capital markets activity. That takes the total NPV to more than $70 billion, an increase of over 60%. We are even outperforming what we achieved in the incredibly successful MetroPCS integration, where we delivered the same original run rate synergy target, but executed faster to deliver $3 billion in incremental NPV. Here, we are executing faster and raising our run rate expectations by 25%. As exciting as these monster NPVs are, this is likely the last time we will provide an update from an NPV perspective as we focus on integration execution, and I know that you will judge us by our delivery of the run rate synergies and the massive free cash flow generation promised by this merger. Now let's take a look at how we see the medium- and longer-term financial projections for the business compared to what we shared with you in 2018. First, let's discuss some of the key things that have changed since the original merger projections were provided nearly 3 years ago in order to provide additional context around the updated guidance. To begin with, the merger closed about a year later than originally planned, but that was absolutely worth the wait. Perhaps the biggest change was the agreement to sell the Boost prepaid business as part of the condition for merger approval. Recall that business generated approximately $1 billion in service revenue and over $400 million in adjusted EBITDA contribution in Q2 of last year, just prior to us selling the business to DISH, which represents approximately $4 billion in service revenue and over $1.5 billion in contribution to adjusted EBITDA on an annualized basis. And while partially offset by the wholesale agreements in the near term, that wholesale revenue is expected to go away, over time, in our updated guidance as we anticipate DISH to transition those customers on to their own network. In addition, the original merger plan assumed a continued stream of high-margin wholesale revenue from TracFone, which was approximately $750 million of service revenue in 2020 that is now expected go away in the coming years, also reflected in our new guidance. Operationally, the original merger also assumed the continuation of device leasing at roughly $5 billion of annual lease revenues, consistent with levels at the time when the merger closed, and this was implicit in the original adjusted EBITDA guidance. As you know, we deemphasized device leasing quickly post-closing to make our device offers EIP-centric and now expect lease revenues to reach between $1 billion to $1.5 billion in the medium term and less than $1 billion annually in our new long-term guidance. So as you expect, we will focus our discussion on core adjusted EBITDA to reflect the underlying business performance without the distortion of declining lease revenues over the period. The exciting part of the plan we are sharing with you today is the significant growth in service revenue, higher synergies and better capital efficiency, which more than offset the headwinds I mentioned. Our team's strong execution and our strategic plan is now expected to deliver financial results that exceed both the original 3- to 4-year and longer-term targets that we've provided in the merger announcement. For reference, we are using 2023 as the comparable midterm point as it is the third full year following our actual closing date. And as we think about the long-term projections for the business, we are using 2026, which is actually earlier than the original long-term guidance milestones, which assumes 7 to 8 years out. And of course, our ambitions include continued growth in the business beyond 2026, driving a sustainable increase in shareholder value in later periods, too. All right. Jumping into the numbers. Service is now expected to be between $61 billion to $62 billion in 2023, up $1.5 billion at the midpoint from the original guidance, driven by the strong growth in the business, more than offsetting the lost revenues from Boost and TracFone. Long term, we now expect service revenue to be over $70 billion, above the top of the range in the original merger plan, again, with growth in the business offsetting revenue from Boost and TracFone in the original merger plan that is now expected to be largely gone by that point. Core adjusted EBITDA is expected to be between $28 billion and $29 billion in 2023 versus the $25 billion to $27 billion, a $2.5 billion increase at the midpoint, driven by growth in service revenue and higher synergy realization. Long term, we expect core adjusted EBITDA to be more than $36 billion, more than $1 billion above the high end of the original target, driven by higher service revenues and the full run rate synergies by that point in time, along with additional efficiencies highlighted by Jon and Callie, including in the areas of continued distribution transformation and an increasing consumer digital experience. Looking at capital expenditures. We now expect CapEx in 2021 and 2022 to be between $11.7 billion and $12 billion annually as we deliver our network integration milestones earlier and build a nationwide, multi-layer 5G network with better capital efficiency, thanks to both material procurement savings from our improved scale and deployment efficiencies, which Neville highlighted. We expect CapEx in 2023 through 2026 to be between $9 billion and $10 billion per year, reflecting the capacity and network efficiencies we expect after having completed our network integration and be largely done with our nationwide 5G deployment by 2022. And as Neville mentioned earlier, this includes all of our expected costs for C-band deployments. I doubt you'll hear anyone else in the industry lower their expected CapEx intensity while adding C-band deployments. And of course, this all translates into the promised unlock of free cash flow, which is now expected to be between $13 billion to $14 billion in 2023, a massive $3 billion or 30% increase from the original expectation of $10 billion to $11 billion, again, a product of increased growth in service revenue and operating leverage, bigger and faster synergy capture and improved capital efficiency. Long term, we expect free cash flow to be more than $18 billion, above the high end of the original target. And similar to our 2021 guidance, our mid- and long-term free cash flow guidance does not assume any material net inflows from securitizations. And while we have laid out some specific expectations for midterm and long-term milestones that are all above the original merger plan, equally exciting is that this is really a story of cumulative overperformance in every year, delivering cumulative free cash flow through 2025 of up to $65 billion, up nearly 20% from the original plan. And even with that overperformance, we do not expect to be a material cash taxpayer until 2024 under current tax rates, thanks to utilization of our net operating losses. I couldn't be excited about this updated plan. And of course, one of the things we are extremely proud of is our team's ability to consistently meet or exceed the guidance we commit to. We have done that now as T-Mobile since 2013, and we have every intention of continuing to deliver on that front and maintain the trust you place in us. With that in mind, while the plan today represents our best view, there are multiple potential upside opportunities we have also shared, which are not included in the plan but can potentially over deliver faster and bigger against this plan. These include the ability to translate our durable 5G network advantage, combined with our customer experiences and value proposition, into increases in market share over our assumed growth. For example, in smaller markets and rural areas where we are only assuming market share growth from our current low-teens share to near 20%, as Jon shared, or the enterprise markets where we are only assuming to get to roughly 20% share, as Mike has highlighted. We also have the opportunity to increase ARPA or postpaid phone ARPU above our plan assumptions. For instance, by translating the massive capacity of our 5G network into higher adoption of premium wireless plans, such as Magenta MAX, or the ability to expand our household relationships further, including through our home broadband products. We could also see a potential acceleration or reducing Sprint churn where we are only assuming to reduce the churn gap compared to T-Mobile in half over the first 2 to 3 years, even after fully migrating them on to the T-Mobile network, value proposition and customer experience as I highlighted. And of course, there are opportunities in other markets and products not materially included in our plan, products we know will come as 5G continues its evolution, such as massive IoT, mobile edge computing and private networks, but where it is too early to responsibly include material assumptions in our plan. Let me now come back to what I believe is the ultimate value-creation measure for this business and how you, no doubt, will measure our success. In the form of a massive free cash flow generation, this plan rapidly delivers. So to put the slope in context, our plan delivers an expansion in free cash flow of 2.5x from our 2021 guidance to our midterm guidance in 2023, and 3.5x by 2026 to more than $18 billion, an expansion which opens up so many options for the business. I'll walk you through how we think about the capital allocation as this free cash flow expansion unfolds. Our first priority, of course, is funding our rapid 5G network build, along with merger-related costs to facilitate the completion of our merger integration work and synergy unlock as quickly as possible, much of which will be largely completed by the end of 2022 as we discussed earlier, while we are simultaneously investing in growth opportunities to capitalize on our durable 5G network leadership. And secondly, this plan delivers significant and accelerated deleveraging of our balance sheet, with peak leverage to occur this year as we fund both merger-related costs and our C-band purchase. To fund our C-band purchase, we plan to incur a relatively modest additional $2 billion in gross debt and retire the undrawn term loan facility that we put in place ahead of the auction, a no-surprise next step since we have prefunded much of our purchase with record-breaking capital market raises in late 2020 and January of this year. This combination of strong deleveraging and commitment to a conservative leverage target should put us on a path towards an investment-grade Corporate Family Rating in 2023. Achieving an investment-grade Corporate Family Rating has always been our plan as we believe important to position the company for materially lower cost of capital by allowing access to the IG debt markets in the future when the rates are likely to rise. These massive free cash flow numbers in the coming years obviously give us a lot of strategic flexibility and beg the question that we often get from many of you, which is when are we going to begin a shareholder return plan and what would it look like? While I don't have a Board-approved buyback plan to announce today, it is certainly fair to assume that a very significant buyback program could be on the horizon. As Mike highlighted earlier, based on the core adjusted EBITDA and free cash flow that we expect to generate, and assuming a conservative core adjusted EBITDA leverage ratio in the mid-2s, we could see up to $60 billion in potential shareholder buybacks between 2023 and 2025. As you would expect, we will focus on maximizing value creation for shareholders and will assess future spectrum purchases, any M&A options and share repurchase opportunities to create the most shareholder value. But wow, what an amount. And of course, there is massive potential beyond 2025 as well. When you combine a proven team with a leading 5G network for the entire 5G era, executing against the plan that delivers tremendous profitable growth and massive free cash flow, along with the potential for significant shareholder returns, while also having numerous upside opportunities, it is truly exciting days ahead. All right. I can't think of a better high note to end on than that. So let's get to your questions. Please give us a minute as Mike will join me, and we have others from the management team available to throw a question to as well.

All right. Well, as Peter just said, he and I are back for questions. And you know what, so is the rest of the team. First of all, we have Neville and Matt here in the front row because we were sort of cut short on that first Q&A session because we thought we might have had audio problems. We didn't really, but it's all good. So they're back, and so is the rest of the team. So we can get into any topic. It's all fair game, but I kind of know you want to get your claws into Peter on this financial plan. So Jud, where do we want to get started?

All right. Let's kick it off with Phil Cusick from JPMorgan. Phil, go ahead.

Peter, up to $60 billion of buybacks, $23 billion to $25 billion, that's a big headline. What are some of the things that go into that up to? And then second, it looks like the revenue CAGR in '24 to '26 is a lot faster than the '21 to '23 run rate. I understand there's some TracFone and Boost drag in there. But is the acceleration mostly an assumption of the new businesses coming on? Or is there something else happening?

Absolutely. Well, thanks a lot. So yes, a lot goes into that $60 billion. But the first and foremost thing to know is that it assumes a conservative mid- to core adjusted EBITDA leverage ratio, right, and leaves us the opportunities to look at other options, where, again, whether it's M&A, whether it's any other spectrum acquisition items that we may be looking at, whether it's other alternative investments that we may look to increase shareholder value. So it's all development off of the plan and the massive free cash flow that we're generating here, the rapid deleveraging of this plan allows us, and you to assume, still a conservative 2.5 core adjusted EBITDA leverage ratio. Without getting into any of the upside opportunities to the plan itself, but obviously, if they increase free cash, could create more opportunity than the $60 billion itself.

And that last piece is kind of interesting here because we chose this up to language. But then maybe it's a little confusing because it's up to -- with the business plan exactly as we laid out. But as we've spent the last couple of hours outlining, we see a lot of upside in this business plan. And we have a pretty good track record around here of figuring out ways to exceed our plans. And so obviously, that could be accretive to overall cash flow generation that would be higher. We also want people to understand that, in this plan, there's only a normal amount of kind of ongoing ordinary course spectrum purchases. So that could be something that we decide to do. There's not any big material inorganic M&A in there. So it's investments that are in this plan to deliver these results are in. And we know, and you know, that as time goes on, we options that are even better than this accelerated return to shareholders. And we might not. But either way, the plan supports it. And it's just -- it's so exciting. So that's why we say up to, could be higher. But I think it's just an extraordinary moment for this company. After all the patience that people have had with us, we're now at a place where we understand with clear line of sight, with a business plan that's so simple, and already demonstrated what -- that we are cusp of massive cash flow generation, and we're making a commitment today that our framework and how we think of it is as long as there's not a better plan, we're going to be talking to you about shareholder buybacks and other shareholder remuneration.

And then, Phil, on your other point around how service revenue development happens. First off, as prudent in the first years, we're going deeper into smaller kind of rule. We're seeing a lot more acceleration and traction in enterprise and business that Mike has highlighted. We talked about the home broadband opportunities, but we're prudent in how long that takes, right? As you build out in smaller kind of rules, it takes a little bit of time to get the brand recognition, to get the distribution built out. That's all happening, and part of the investment thesis that resulted in our '21 guidance. And we promise you that investments would pay off. You're getting to see the other side of the story from the guidance side. And then Matt also highlighted some of the assumptions that we have around Sprint and the base there. And both from a churn perspective, what our assumptions are in the plan, that certainly have opportunity to be beat, but they're built into the plan from a very rational perspective. So then you see as some of those headwinds, we get past. And you did mention, of course, yes, there's Boost 8 as well as TracFone, then we see a further ramp of service revenue and tremendous excitement from the entirety of the team on that front.

Thanks, Peter. All right. We'll take our next question from Brett Feldman from Goldman Sachs.

Can you guys hear me?

Yes, Brett.

Hi. A quick follow, of all question in the question's on the buybacks and then another question about managing churn. So I know it supports decision when you decided to implement a buyback program, but can you give us some context around the conditions in which you're going to be comfortable recommending it? In other words, do you want to be at a certain level of leverage? Do you want to have an investment-grade rating? That would be the first question. And then the second question, Sprint churn, obviously, is still elevated. And you talked about the game plan. You're bringing it down. But even today, why are you still seeing Sprint customers leave the T-Mobile family? They go to Verizon or AT&T or cable, when you obviously know a lot about them. And what do you think is going to be the real inflection point that's creating -- and realize that T-Mobile is really where they want to be?

Terrific, Brett. Well, Peter and then Matt.

Absolutely. Thanks, Brett. So yes, how do I think -- and you heard me lay out how I think and we think about capital allocation. Now first and foremost, right now, the next 2 years are the rapid roll out of this completely differentiated 5G network to get that benefit throughout the duration of the 5G period. We're also funding all the merger-related costs, and we gave you a highlight of how much is left there from an OpEx perspective. But despite all that, this plan gives you tremendously rapid deleveraging. Now funding the C-band purchase and funding the merger-related costs means we anticipate to peak leverage to happen at the end of this year, about a low 3% on a core adjusted EBITDA basis and about a high 2% on an adjusted EBITDA basis. But as you know, we changed our discussion to be core EBITDA base. Then you have rapid deleveraging into the mid-2s. And so bangings By the end of 2022 as that free cash flow, massive generation starts coming in front of us with the business. So that's one. Two, absolutely, wanting to get on the path and achieve Corporate Family IG rating. That's the prudent thing for us to do to get access to the depth of capital as well as the lower cost of capital, right, to be able to invest it more prudently and get even higher shareholder returns. Is it an absolute precursor for us to achieve corp family IG to begin shareholder remuneration or give that recommendation to the Board? No. That's not how I see it. I feel if we've got the free cash flow generation happening as we've got planned, we have the Sprint integration happening as we have planned, and we see the progression with the rating agencies, certainly, I'd be happy and in a position to recommend it ahead of that. But ultimately, reaching corp family IG rating is an absolute goal.

Terrific. And Greg, your second question was Sprint churn. What are the catalysts that are going to bring it down. Let's go to, Matt.

Yes. Thanks. Hey, Brett. So unsure what we talked about today was taking the difference the Sprint- and T-Mobile-branded churn cut in half over the 3-year period on our path from worst to first. The formula is pretty consistent with what we've already done. The timing of it, the first piece of this is we're on the network migration for Sprint customers. We announced that in the end of Q4 that we have transitioned 4 million Sprint customers to the network. Today, we talked about getting that number to 60% by the end of this year, as we go into 2022, getting that complete. So a big element to the churn reduction is going to be following the migration of Sprint customers from that network into the T-Mobile, destination network. The other piece, what Callie talked about, was introduce a team of experts and really upgrading the service experience. That also is not instantaneous. It starts this year and ramps. And it builds, as Callie talked about, is we build these relationships and deepen them as we go. The last piece is on the value proposition. And we're right in the middle, completing by Q2, getting 100% of the Sprint customer base on go-forward rate plans and value proposition. That's important for a couple of reasons. One is it provides certainty for the Sprint customer base. So they know what their plan is. They know what the value proposition is, and what it's like to be a T-Mobile customer as part of that transition. And it also provides an ease of us to go through and do the billing conversion on the back end to where the customer can't see that, starting this summer as we move forward. Part of what you've also seen from us consistently through the plan is we're prudent in what we're laying out expectations from what we hope to achieve. Do I think there's upside in the churn? I hope so because we're doing everything power to accelerate bringing the value and customer experience and network to the Sprint base as soon as we can. So that's kind of detailing out what we're doing and how we expect that to evolve over time.

I'd kind of personalize it a little bit. Brett, I've been doing wireless at the C-level since 2002 when I had Matt's job, CMO, over at AT&T. And I'll tell you one thing I've learned over the years, never get out over your skis on churn. Once you commit to a churn number that you can't make, this is still making it up the P&L, you're going to be stuck. And so that's just kind of my way of telling you I'm not going to allow the team to overcommit. And so I've cut in the Sprint churn gap to T-Mobile in half over the next 3 years sounds a little conservative. Well, that's by design. Because remember, at the end, you're going to have the best 5G network on a predominantly 5G handset base, with the better rate plans that have always made T-Mobile famous. Every single customer migrated and T-Mobile branded and similarly situated to that T-Mobile base by then. So we think we'll cut the rate in half. We'll see what actually happens.

All right. Thanks, Brett. All right. Next question, let's go to Kannan at Barclays.

So I guess, if we could touch on ARPU and some of the comments you guys made, maybe I'm interpreting this too much, so I apologize if that's really the case. But it sounded like the ARPU trajectory you guys are talking about for the next 3 years is a little bit softer than the usual algorithm that you guys use for pricing. And this is despite the fact that you guys are getting into some markets where competition may be a little bit more limited, and you have business and a number of new segments that you guys are targeting. So I just wanted to see if you guys can provide some context. Is that more on account of the Sprint migration having a little bit of an impact versus just being a bit more aggressive in the market when it comes to pricing? And then, I guess, as a follow-up, when you look at fixed wireless and some of these newer opportunities, could you also provide some color around ARPA, right? I mean some broadly, you're opening up new product lines, and it sounds like you're looking beyond even devices inside the house. So how should we think about that cadence going forward?

Yes. Kannan, those are fantastic questions. So we're going to start with Peter and Matt on the ARPU question. I'll tell you that generally, what we're outlooking on ARPU and ARPA is the following. We see ARPA expansion opportunities. And we spent a lot of today, to your premise of your question, talking the things that will not only grow accounts and welcome people to our franchise, but give them opportunity to deepen those relationships with us. But we see ARPU, specifically, which, by the way, refers just to smartphones. Remember, ARPU is of a -- just a subset. It's just the phone nets, the phone base. We see that as generally stable, plus or minus 1%, with the next few quarters being more on the minus because of the integration dynamics that your question premised but then probably not just the stabilization, but perhaps even an opportunity. So I want to let Peter talk about the time frames and ARPU and ARPA. And then the catalyst for those chains, I'll quickly turn to Matt.

Yes. Mike, it's a lot -- Mike said it in regards to churn and the plan with regards to Sprint, right? We anticipated the typical algorithm that we've always said generally stable, plus or minus 1%. Well, now we're going through a catalyst and an integration event. And the work is to get those customer experiences for the Sprint base as best and as quickly on to -- migrate on to the T-Mobile value proposition and all that, that entails from a value customer experience as well as a network perspective. And the first part of that is getting them on to target rate plans, as Matt noted, which will create a very seamless back-end experience for them once we do the network migration, once we do the network decommissioning on the billing side. And of course, as always, a mantra, we err on the side of the customer, right? It helps the entire CLV calculate. It helps the churn reduction. So that's the thesis right now, and you heard Matt talk about that. And there's more opportunity to develop those relationships further. Remember, when we first started talking about the Sprint base, that is really part of the Magenta family here, is that they had lower lines per count. And so there's an opportunity to deepen that relationship, which, by itself is, yes, the phone ARPU dilutive, but tremendously accretive to the CLV of that entire band. So it's just like with churn, we want to be very prudent in what we're thinking about for the next couple of years, 3 years as we go through this cycle. But the premise of your question, is there opportunity for upside, right, in both ARPU as well as ARPA, which we plan to grow, as Mike said. As you see, this amazing network, that Neville is sitting next to me is building, and that is just going to be a tremendous expression of the best 5G network for the duration of the 5G period. Yes. And for that, I think I'll let Matt talk about that.

Yes. Thanks, Peter. You hit a lot of the points there. Just a couple of reinforcements to what Peter talked about in ARPU. This the Sprint-branded customer base did have the lowest lines per account in the industry when we completed the merger. So we see a big opportunity there. It's under-indexed relative to the market and just general households. That's going to help us also achieve these churn rates that Peter talked about. The other thing is that's not on our plan. Again, as Mike said, we're putting things in our plan that we know are real and we can count on. We recently, this quarter, introduced Magenta MAX, right, a higher-end plan. To date, we hadn't had the network capabilities to really sell a service and offering that goes at that high end of the market. We're just getting started on that. We didn't include a bunch of upside and additional revenues that we have to get to achieve these numbers. We've got our playbook. And to the extent that, that plan resonates with consumers in the marketplace and adoption grows, that translates into upside against these metrics and numbers we've laid out there. The other piece I'll say, and I talked about this in my earlier remarks, is that only 25% of our accounts today have something beyond smartphones in their relationship, there are tablets, watches, connected cars, all these other things. And so to a large degree, as we go through the adoption curve of things like connected watches and tablets and such, we're going to get natural upside from that in terms of additional ARPU growth as we go forward. Again, these are products that are known and here today. And as the 5G evolution grows and more and more businesses and products come to market, obviously, we'll go and sell those and distribute them on the heels of this broad network we have. So there's a lot of opportunities there, not even to mention what Dow talked about with home broadband and what we're seeing as opportunities there to win new accounts and grow from there.

5G is kind of a catalyst for all this, not just because of huge new use cases that haven't been invented yet, but because it brings down unit costs as well as network costs. And one of the big barriers to people adding [ nth ] types of accounts to their account relationship has been the marginal cost. Like you're telling me that's an extra $20 a month? I don't know. But now the network costs in our 5G phase will be so much lower. We're going to be able to make that an accretive decision for the consumer, but it drives ARPA for us in a high-margin way. I know we're filibustering you, but the last thing you asked, I think it is worth hitting, was about unit economics in broadband and what we're seeing there and why that might be a high-margin business. It won't necessarily drive ARPA unless it's a multi-play because, by itself, it's one account for the whole family. But it is going to be highly margin-accretive and powerful business. So what do we know about the unit economics after our pilot and what do we anticipate? We'll go quickly to Dow.

Yes. Thanks, Mike. As I mentioned in my earlier comments, the great thing about what we're seeing with broadband is that these customers potentially have the same ARPU and churn profile of our postpaid customers, with much lower cost to actually bring those in. So the equipment cost is much, much less than an expensive smartphone. We don't have to provide incremental network, distribution or really even servicing costs. So we think the value of these customers is actually going to be quite high. And what we're also really excited about is that not only can we sell this product into our base, right, so it expands the account relationship for us. As I mentioned, over 1/3 of our -- the customers that have come into our pilot are new to T-Mobile customers. And so that's really a front door, not only this just generate home broadband revenue, but also, look, if they're getting great service in their home from broadband, then they know, wow, t-Mobile is actually going to be great service for me and my wireless -- for my wireless needs as well. So we'll be able to bring that business in as well and that will be a great front door for John and others to increase their sales for our wireless products.

Thank you. All right. Next question?

All right. Next question, let's go to John Hodulik from UBS.

Great. A couple of them. First, quick clarification. Is the $65 billion in free cash flow, cumulative free cash flow through '25? Just to make sure I got this right. Does that include the $15 billion in integration expense? That's number one. And then, number two, if we could benchmark a couple of the sort of key drivers of the longer-term guidance. First of all, the service margins, 51-ish percent. AT&T's mid-50s rises higher than that. I mean how should we think of the 2? You should -- I mean, obviously, you have greater scale. That 51% just seem a bit low. And then, similarly, on the other side of the ledger, I mean, you can bring Neville in here. CapEx. The CapEx was a little bit lower than we thought. You have competitors there that are spending significantly more than the $9 billion to $10 billion you guys laid out for the outer years. Obviously, they have wireline businesses. But seemingly, an apples-to-apples comparison on the wireless side, that number seems a bit lower than those competitors. So just a clarification and then how should we think of those variables would be great.

Sounds good. Well, let's go to Peter first. So is the cash flow net of cost to achieve, Peter? And also thinking about margins, maybe this is a good chance for you to talk about margins as you think about cash flow per revenue dollar, cash flow per service revenue dollar. Because what's interesting is that all the big companies have different geography, and that might be a great leveler for you to understand our margin story. But Peter, why don't you pick that up?

Yes. Absolutely. First, for clarity, yes, those free cash flow numbers are fully burdened with the merger-related costs that we anticipate. And again, the peak is going to be 2022 and then 2023. A little bit of a tail there from a cash flow perspective as, again, we take advantage of paying over time but the cost to achieve...

The cost to achieve peak, you mean?

Yes, the cost to achieve peak. So as it relates to mergers -- or sorry, as it relates to longer-term margins, the way I think about it -- and you're absolutely right. First off, the plan that we just laid out in front of you from a core EBITDA margin perspective actually overachieves what we laid out in 2018 when you do it on an apples-to-apples basis. I think we've talked in earnings in a couple of conferences about, yes, there are some structural differences, right, between us and AT&T or Verizon. And one of the primary ones being the concept of owned versus leased fiber. And it manifests itself differently, for us on the P&L, for them as a CapEx line item. There are other things, of course, which is, hey, our aspirations are not being done with growth, right? So we're going to have always a higher S in that SG&A function even in that '26 period and that outer year because we strive to continue to grow and drive enterprise value creation that way. But -- and of course, then you have another thing, which is power density. We don't know ultimately where, for instance, Verizon will go. But certainly, right now, we have a much denser network and a superior propagating spectrum portfolio, which translates into the massive 5G network advantage that we have. So take all those things aside and to try to look at some of these structural differences. And by the way, AT&T, as you said, typically, I think it was 54% in mobility for 2020, 50% in Q4. Verizon, I know there's hypotheses out there around what they do, but we really don't know. We haven't really known for a while with the way they report as to what their true wireless margin is. But when you try to normalize across all of it, and this is what Mike said, look at the free cash flow generation, which normalizes across those owned or leased fiber thing as well as other things, free cash flow generation as a percentage of service revenue. And if you look at the guide that we put out here, we actually beat both AT&T and Verizon by our midterm guide and significantly exceed them, if you look at it that way, by the long-term guide. So it tells you, despite the fact that we want to grow faster, despite the fact that we're going to have a denser network and despite the fact that, again, we want to continue to grow and have a tremendous amount of upside to this plan, we are more efficient. And that's the proof in the pudding because it normalizes for all this stuff across OpEx or CapEx in generating free cash flow, the ultimate measure of value creation for shareholders as a percentage of service revenue. So I couldn't be more excited about that part of this guide, and that's the way I think about it. Mike?

Yes. These businesses are all so different. They capitalize the ton of their backhaul. Most of ours is OpEx, et cetera, et cetera. And that's why we wanted to answer it. And I think it's very important that every single person listening understands this, that, in our view, with this financial plan, and it's intended conservatism we've been trying to demonstrate today, we deliver already by '23 more cash flow per service revenue dollar than anybody else. And it really shows you, and that's why when we talk about the exciting cash flow potential because that's the great leveler. And I think it's really important that people understand that because, frankly, you don't get a lot of transparency out of our competitors, not because they're not trying to be transparent, but they're in lots of businesses and they slice and dice it differently. You do from us because we're a pure-play mobile Internet company. And what you'll find is that, that business, even before all of our aspirations are met in the longer-term view, is highly productive from a cash flow per revenue dollar. And we think it compares favorably to anybody out there, even by 2023 and even with all the upsides we've been talking about today.

And I'll hand to Neville. I think there's a question around CapEx.

Can you really do it with this CapEx and the intensifying CapEx per revenue dollar in the out years, Neville?

Yes. Hey, John. Good to see you. So the capital story, a couple of things to think about, right? If you look at the 5G rollout from T-Mobile, we've been at this a long time. So if you look at our extended-range and our low-band footprint, we started building that back in 2019. So there's already multiyear expenditure that's gone into the ground. On our mid-band and our ultra-high capacity 5G, we're already at 125 million people covered today. So the next couple of years is where we perfect that footprint, that 5G capability and that 5G leadership. So that's kind of the peak cycle in terms of CapEx. And after that, we start to we start to lower down some. Now if you compare to -- well, we'll hear from AT&T tomorrow, John, I assume, right? But Verizon, Verizon is in this denial phase about densification for C-band. And so they have a huge amount of work left to go do. Yesterday, they talked about, well, C-band alone is going to cost them $10 billion, and that's probably a conservative estimate. They have lot of work to do in terms of densification. And ultimately, they're going to have to upgrade this nationwide footprint, modern nationwide towards 300 million people with low-band. And so is their capital intensity going to be higher than ours? For sure they're way behind, and we started much earlier.

Terrific. And now we're going to go -- I think we have about 15 minutes remaining. So we're going to go into our rapid-fire mode, where I'm going to ask my team to give a quick answer so we can get several more questions, if we can, in these last 15 minutes. So Jud, where are we going to start?

We're going to circle the room quick back to Simon. He had a question earlier for Neville and Matt. And so now we got everybody on set. Let's get that one quick, and then we'll keep moving.

Great. So Neville, I think the question was around the ability of the network to handle the traffic on a home broadband solution. One thing that you showed earlier on the slide was how much mid-band spectrum you have versus your peers, particularly in the early stages. Perhaps you'd help us understand, as you shut down the Sprint network, I think you've only been using 60 to 80 megahertz of the 2.5 for 5G, so how does that translate into 100 megahertz, 120 megahertz and the sort of speeds and performance, both for traditional wireless and for home broadband? And anything on homes passed for home broadband would be great as well.

So thanks, Simon. Good to see you. Sorry, I missed you earlier. I mean, clearly, we've started on 60 to 80 megahertz as we're migrating customers. But as we move through the balance of this year, that's going to start to move to 100 megahertz. And past this year, past the end of '21, it will be even more. And that capacity and scale, I had the slide in the deck that talks to how we can compare to what T-Mobile stand-alone could do. We can increase our capacity at a multiple of 14x. And this is like an old memory to me now, but we litigated this heavily with some of the best engineers in the country from FCC and the DOJ. And that capacity comes from more sites, a lot more spectrum, deeper channels and, of course, the special efficiency of 5G. I mean that's probably printed in the front of my head for the rest of my life. We talked about it so many times. But those capacities and efficiencies are absolutely real. And that's what this combination has always been about, building a much denser network, piling up with very powerful layers of mid-band spectrum. And then using that 5G efficiency to really push these higher capacities and performance. So we're very confident on that capacity profile. And we're even more confident today because of the size and scale of the rollout that we've delivered. As of today, 125 million people on mid-band at speeds approaching and averaging today 300 megabits per second. And really, I said this in the presentation, we're just getting started. This next 12, 18 months is going to be phenomenal for the growth in capacity generation and for our customers.

And that's why we're starting now. We waited until this moment to get going in broadband because as good as Dow and Matt and Jon and the team are, we believe we've hit the point where Neville will be able to outrun them. And so we're going to go build a big broadband base. And there's no way that we can be successful enough to outrun this rapidly coming-on capacity that's now assured in our plan, or as assured as things can be in business world. So that's so exciting because this capacity is rapidly expanding. And so we're going to get going, and we're not going to be able to catch this guy, which is great. So all right. Good. Next question.

All right. Next, let's go to Tim Horan with Oppenheimer. Tim, go ahead.

On the equipment you're deploying is spectrally flexible, does that mean just help you deploy now? Can it handle the C-Band? Can it handle CBRS and MP, maybe other band spectrum rate that might be deployed? And also, are you leveraging any new cloud-based technologies to kind of get some of the efficiencies out there? And then I just have quick follow-up for Mike.

I'd say it's like an opportunity here, too, Neville, to talk about the difference in our low-band deployments, too, and the fact that the radios are already out there and what they can do and how that compares to others in the space as well. But talk about the flexibility of the radios that we're deploying.

Yes. I've missed the very start of your question there, Tim. But in terms of what we're deploying today, I mean, we've been deploying state-of-the-art radio from the get-go. And a big part of the story of the efficiency and capability that we've been able to deliver is everything we've been putting out, 600 megahertz, for example, fresh, virgin spectrum for us, LTE and 5G-capable radio out of the gate. So we're in this great position where we could future-proof the network. And that's exactly what we've been doing with our 2.5-gigahertz radio, too, and other bands that we've been looking to deploy. If you look at that 2.5-gig radio today, I think the question, can that support CBRS or C-band? The answer is no, today. And so it's going to take some time before you can create a multiband radio that can address multiple segments of C-band or the mid-band spectrum base. But by the time we come around to deploying our C-band, again, we purchased in the latter tranche of C-band, which clears at the end of '23, there's time to go work some more radio magic. So I never count anything out. And the opportunity for us, we always seize those opportunities to try and kill multiple birds with one stone. And I think we've got a great track record and history of doing that. The timing of LTE in these 5G moves was perfect for us. And here, we have our competition surrounded with legacy LTE radio across their networks. Otherwise, their 5G footprints would be way, way bigger than they are today. Non-5G compatible radio that they have to go an upgrade at some point in time, but they're stuck doing DSS or LTE-centric radio solutions, very different story from where we've been and the benefits of the very recent deployment that we have.

And Mike, you mentioned mergers a few times on the call. And I know the cable guys may be talking about merging with wireless. And can you talk about what the most logical merger is, with the cable industry or maybe with application company or an industrial company, any thoughts would be helpful.

Yes. Thanks, Tim. I love the question. What we've demonstrated here at T-Mobile is that anything is possible. I think -- and certainly, we've demonstrated that we're creative and flexible. We all wouldn't be here together if we weren't. But it's hard to predict. And I know you know that in asking it. I think that, broadly, what you do see is that if you take the customers' lens -- and I'm not making any predictions for you, I'm just telling you we're a customer-driven company. If you take the customers' lens, they don't increasingly -- they don't view it the way we do it. We name our industries based on capital we all put in the ground years ago, in some cases, decades ago, the cable industry, the broadband industry, the wireless industry. And increasingly, the customers don't view it that way. All communications and content of all kinds have had or are quickly leaving their linear forms and going digital. And the digital world is going mobile. So here we are with this hand of cards as the best pure-play mobile Internet company in a world where all these former separate industries are converging, at least in the customers' eyes, into a digital world that's rapidly going mobile. And that's a great hand of cards. So our job is going to be the best at that, to go see that part of the market, each share, to do the things we just talked about and go get a bunch of broadband customers and delight them and serve them and bring smartphones to them and transform the industry around 5G, take advantage of this, not just head start we've got, but this superior asset base to lead through the 5G era, which is one of the main themes of today. And then you what, we'll see. And we'll be guided by what the customer really -- how the customer really sees the industry and ultimately guided by what is it would maximize long-term shareholder value. But I love this hand of cards. This business plan -- this business plan is so powerful and valuable, which I think you can see in the forecast that we shared today. Thank you. All right. Let's see if we can fit 2 more questions in. To start with, Walt Piecyk from LightShed.

My question is going to be for Neville. Thank you for giving the depth of spectrum for where you're at today, which I guess is 80 megahertz. It looks like the opportunity that you would have in 2.5 is far greater than that. And let's take Verizon as an example. They have 160, maybe 200 in some markets. Let's assume they come to terms, and they do the densification, they build it out. That's -- they will be competitive at some point if they build their self out. So I guess the question is, how soon after getting to this 80 to 100 do you take it 120, 140, 160? And then how much work has to be done with those CBS licenses? What is the true opportunity? I know you guys talk about it's 160 today. You have an auction coming up, and I think the opportunity to get that to 200. So can you talk to us about plans to do that? And how much cost and how quickly you can get to a much higher number than even 100?

Thanks for the Q. We talked earlier on about our position on white space and future 2.5-gigahertz spectrum options. We'll see. And we'll be disciplined and opportunistic. More to come. We can't say too much more than that. To your question about how soon can we get all of that mid-band spectrum, the 2.5-gigahertz LiDAR for 5G, it's really a function of customer migration. And so obviously, I want to put all of it towards 5G as fast as it's humanly possible. And that's our march and that's our goal. We have other great mid-band assets, too, by the way, right? So we did get a wealth of PCS spectrum through the Sprint transaction on top of strong PCS and AWS Holdings. So the goal, and we outlined in the chart, is to get all of their mid-band into a 5G space. Now obviously, that's going to take some time. LTE is going to be here for a while. But the 2.5 gigahertz, which is really our powerhouse engine to drive this 5G experience, 100-megahertz channels by the end of this year, think about where Verizon and AT&T are with what they pulled out of the C-band auction. I mean 60.

60 or 40 if it's going to build, right?

Right. But I only won in -- not even on a nationwide basis, right? They can't even do that.

Neville, you also said you're going to be the first to carry your ag, and that seems to be one of the challenges that Verizon face. What is that? How is that possible? How -- what is it that you're getting first to carrier ag? And what do you know about DSS' ability to get carrier ag? Do they need a new semiconductor in order to get to that point? Or is it something that may happen later this year?

The support for carrier ag with DSS, I'm confused as anybody, made by many of those statements yesterday from Verizon. Carrier ag is going to be available as we go through the balance of this year. We already have handsets that support it, right, out in the market. But '21 is the year of 5G carrier aggregation. And the benefits from that are enormous. I mean, I was shocked yesterday. Verizon couldn't seem to even put a sentence together about 5G carrier aggregation, which is stunning to me, and I think most folks that watched that webcast. So absolutely, carrier ag is a big part of our play. It can extend that mid-band coverage layer by up to 30%. So why wouldn't you take all of that beautiful TDD downlink spectrum and combine it with a more efficient uplink and overcome the mid-band coverage limitations that exist in 2.5? And they certainly exist in...

Hold on. You're saying that for your 2.5, you're considering aggregating it with [ uplink ] in order to upgrade performance?

Absolutely. Absolutely will, right?

Okay.

I mean why would you not take the location and coverages always offered. ..

There's still reference from other engineers.

Yes, yes. You're right. It was From other engineers.

I think you're right. It was yesterday, didn't hear that commentary.

And well, I think more keys to come the Verizon engineering team on that. But...

So what exactly can you guys do?Are you using -- are you going to use some of your existing uplink? Are you going to look maybe to source some incremental uplink somewhere?

No, we don't need a source outside. What we have -- we have a lot of FDD spectrum. And think about that beautiful thing I put it in the chart, if you combine a low-band uplink with a 2.5-gigahertz mid-band share uplink, then you're in a sweet spot with that 30% coverage extension. So I mean that's just -- it's not like we're rocket scientists. That's just good math and good physics and good engineering. And most teams that I talk to are pursuing the same things. I actually believe Verizon is pursuing the same thing. They just didn't want to talk about it yesterday because it implies a lot more capital to upgrade all those underlying radios. I mean that's probably the story. Well, we're not sure...

Have you got before or another spectrum purchase, for instance?

Maybe so.

What's interesting is we've already done that. So our 600-megahertz layer is 5G and R. It's all the future-proofed stuff. And so we can carry our ag with 600 right away as soon as that technology is ready to be deployed widely. When you think about -- one of the charts that we showed, we showed 2 charts that were really interesting. Neville showed a chart that showed how much we have that's TDD. And when you're combining carrier ag with TDD, it's not so much that they can't do it, that DSS prevents it. But when you combine the carrier ag capability with mostly TDD mid-band spectrum, what that means is Neville can dynamically assign a bigger portion of that 2.5-gigahertz mid-band to the downlink. So it's not split in half anymore. He can allocate way more of it, which makes it super valuable because the budget needed for the uplink isn't as high, and we can allocate some of the uplink to that 600-megahertz low-band. The other chart that we showed that was really interesting was how our comparisons to the other guys are on sub-2.5-gigahertz spectrum. Why did we show that? Because the nation's macro cell grids are densified for effectively 2.5 gigahertz and less. I mean ours is the most dense macro network. And ours, with some amount of low-band for the uplink, we'll cover everything we need to do with the densification for 2.5 gigahertz. But we knew we would have to densify for C-band outside the urbans where we bought it. The other guys are faced with that. And so we showed the differences and how much we have and will have even after all of C-band clears in 2.5 gigahertz and below for a reason because that's what this nation's macro cell grids are already densified for. And they're going to have to kind of deal with this at some point if they want a competitive product. Or they won't deal with it, which would be great for capital efficiency, but that will result in a Swiss cheesy experience down the road. So it's going to be fascinating to see what happens. I don't think we got -- we heard much on that yesterday.

Can I sneak one more in for Peter?

All right.

Just on -- just one -- it will be a quick one. The free cash flow comparison with Verizon because I think their margins are like 10 percentage points higher than you on EBITDA. So I don't think their CapEx intensity is going to be 10 percentage points higher. So is it -- are you taxing the free cash flow? How do you just -- if you can go quickly through and just help us understand how you're going to have higher free cash flow margins than Verizon given those simplistic dynamics, I guess?

Yes. Well, all I did -- I only have access to their 10-Ks, too. So it's really hard to look.

You might have the wrong EBITDA margin for 60%.

Maybe go look at it, right? Show me where they have a wireless margin at 60%. It's hard to tell with Verizon, right, because of the way they're reporting their segments. Again, nothing wrong with that. That's the way they've structured their business. You get a company. You get us. You get Verizon. You get AT&T. So I'm looking at it, and the only way to do it, consolidated free cash flow generated as a percentage of consolidated...

Of consolidated. Understood. Okay.

Absolutely. That's what you're buying as an investor, right? And that's what the amazing opportunity here is in front of us is our ability to translate our service revenue growth, which outpaces theirs. And again, we have ambitions to continue to grow even beyond the long term and that ability to weigh more efficiently than anybody else translate that into free cash flow is just -- it makes us. It makes, I guess, us the unicorn.

Well, our investor benefit from being us being a principally pure-play company and as I said earlier a part of the wider telecommunications market, that's a great place to be, and that we're a pure-play in the place where you want to be. So Jud, I know we are already out of time. But usually, we go to one more question at the end. So are we going to do one more?

Rapid Fire. Rick Prentiss for Raymond James, our last question today.

I wanted to go back to one of the first things from today, famous for network. It takes time to change perception. What's baked into the plan as far as you guys getting closer to parity or going to above parity? And what would the upside case look like?

Yes, I'm so glad you asked that because I don't feel that our prepared remarks made this clear enough. We said it, but it went by really fast. Our view is that we have today all of the fame we need to achieve this business plan. And that's remarkable when you think about it. The fact that we've pulled up to parity on LTE, we pulled ahead on 5G, customers are still side eyeing us a little bit on network, wondering if we really have caught up. And with that amount of network fame, we can achieve what we just laid out. What Matt said in his remarks is that we're going to do better than that. We're actually going to cause people to choose us just for network, principally because of our network, and to recommend us principally because they love our network once they're customers. And when that happens, it's upside. Maybe you can unpack that a little bit, Matt.

Yes. Yes, Rick. The only thing I'll talk about, too, as you look at the whole journey, we've been on with the Un-carrier, all the share we've grown and all the value we've delivered. That's been done with a steady gap to the leader, a steady gap the whole time. Up until last year, in a busy marketplace, where there was a lot of noise out there, we've cut that gap by 25% already. That's the journey Mike talked about in terms of where we could go with the potential in the market as we go forward. Our plan doesn't assume that to happen. But when we achieve it, we think this year, there'll be some tipping point moments as Neville rolls up the network to over 200 million pops covered with this ultra-capacity network, we're going to start to see things really change. So that's just a little bit of a taste of where we're headed and the upside we can get from driving network production higher.

All right. Well, you guys are awesome. You've stuck with us for over 3.5 hours. We've told you for months we were going to do this. The government made us wait a little longer than we thought. As I said, today wasn't about a quick check in after a C-band auction. It was about our future and why we think it's so exciting. And I hope we've conveyed to you the major themes. I'm not going to recap them right now because you've been awesome to stick with us. But I hope you sensed from looking at us in the eye and seeing this team's excitement that we're on it. We're after creating enormous value for your company, and we have never been more excited about what's ahead. And we'll see you in a few weeks at earnings. Thanks to everybody. We'll see you later.