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

Great. Welcome to the final keynote and the final session of the 23rd Annual Credit Suisse Communications Conference. I'm Doug Mitchelson, our media and cable satellite and telecom analyst. In case you're mapping to any II categories, certainly, we appreciate the vote if you found our conference to be productive for you and don't forget the team, Meghan Durkin and Grant Joslin. Very pleased for our last session to have Peter Osvaldik, Chief Financial Officer of T-Mobile. Some over there might say I saved the best for last.

Peter, thanks so much for being with us today. It's been a busy 6 months for T-Mobile, ongoing merger integration work, 2 Analyst Days and more. As you look out the rest of the year, what are your key priorities?

Absolutely. And Doug, thank you for having us. And I'm probably the only one that would say you're saving the best for last, but I'll go with that. So let me start with our legal disclaimer. So before we jump in, just want to note today, I'll make some forward-looking statements that involve a number of significant risks and uncertainties and encourage you to review the risk factors set forth in our SEC filings. All right. So thanks a lot. Let me just start by saying, as you do look back through history, since the merger happened, I'm just so proud of this team, really how they've been able to execute, particularly in the macro environment backdrop that's been happening, to be able to deliver what we've delivered on a quarterly basis, from an integration progress basis, just extremely proud of the team. And so starting at the top, and you heard us say a lot of this at Analyst Day, it's just -- our mission is to be the best in the world at connecting customers to their world. And our strategy to get there, well, it doesn't seem complicated. It's definitely differentiated, and we plan to simultaneously deliver the best network and the best customer value and experiences. So that's how we're going to get there. And we're going to focus on really 3 strategic pillars to achieve that. First is building the world's best 5G network, and I know we'll get into that a little bit later today. I think you have some questions around that. But really taking the assets that we have and deploying them because it's really the combination of the 2, to get to a product leadership basis. We're already there from a 5G perspective. We'll be there throughout the duration of the 5G era, but ultimately, the network is the product that we then sell. Second, of course, is unlocking the potential of scale that this merger gave us the opportunity and affords us the opportunity to do, to be able to scale and achieve the cost synergies and, of course, the free cash flow production that arises from there. And third is, as we've always said, is delivering the best experiences to our customers. That's something that we're truly about. So those are the ambitions. And as we laid out on Analyst Day, really, the focus for the remainder of this year is centered around those things. Of course, integration is a top priority, and we can dive a little bit deeper into that a little bit later, but it's something that we're heavily focused on. But aside from that, 2021 is a big investment year for us to really set up those long-term trajectory changes that we've showed you, and that is -- underpins the guidance that we provided from a mid- and a long-term perspective and the ambitions that we have. So it starts with the network, right, where we're going to continue to upgrade thousands of sites on a monthly basis to not only continue the lead but really enhance the lead from a 5G perspective and the network, and we'll get into that a little bit deeper. And then it's focused around many of the growth adjacencies that we have, certainly smaller markets and rural areas where we're heavily underpenetrated historically. And we're starting investments not only from a network perspective as that continues to build out, but certainly, from a distribution perspective, from both, company-owned stores as well as innovative programs like hometown agents that we recently announced, and we can talk a little bit about that. Large enterprise and government, that's another growth opportunity for us. So investments there from a sales force perspective to really start growing that funnel as the network provides us opportunities that we may not have had 3, 4, 5 years ago. And certainly, focusing on what makes us great from a customer care perspective, our team of experts, that award-winning model and expanding that into the Sprint base to help continue to drive churn down. So that's a lot of what we're focused on from an investment perspective and, of course, continuing to execute on a day in, day out perspective. That's a lot of what we're doing. So very busy year. But I got to tell you, I'm really excited of how it's going here, almost at the halfway point.

Yes. I think we are going to dig into almost all of that. And I want to start with integration, which you mentioned. And I have to say, I'm sure there's a lot happening beneath the surface, but the premerger execution has been remarkably smooth. And now that I've buttered you up, I'm curious what supplies you -- what heavy lifting is left to do to deliver on the promise and efficiencies of the merger?

Yes. So again, one of the things I'm very proud of this team is just how incredibly quickly we've been able to deliver on this, again, especially considering what's happened. Some of the macro environment actually helped a little bit, and some of it hurt. And yet all those things taken together, we've been able to overachieve from both a pace and, of course, what we expect from a run rate synergy perspective. So not only are we ahead of schedule relative to the original schedule that we put out there on unlocking synergies, but also the run rate is significantly higher, right, where we said we now expect to achieve $7.5 billion of P&L run rate savings, which is 25% higher than the original plan, but equally, because we're also bringing that earlier as well as the benefits that we've seen from a cost of capital perspective, and we could chat a little bit more about market activity later. The NPV of those synergies is 60% higher than the original case. So tremendous, I think, progress there. And on balance, the surprises have been mainly positive. Of course, yes, higher and faster P&L synergies. One of the things that we've chatted about here and there throughout the course of this quarter but really haven't given, I think, due credence is just the capital synergies that we've been able to achieve. And from a procurement perspective, the scale that we have as well as Neville and his team's running at a rapid pace and being first out the door to get significant OEM arrangements have allowed us to get CapEx spend synergies that have been just significant. And that's how we're able to achieve what we're achieving from a pace of the network build-out perspective at the CapEx numbers that we're giving you. And you know how we live. We always meet or exceed the guidance that we give. So that's been a significant surprise. In terms of the heavy lifting, the heavy lifting is definitely underway. And as we went into this, one of the silver linings, if you -- you always have to look at silver linings. But one of the silver linings of the delay in the merger is the ability to come in with not only a more significantly developed plan, but we did some work that was at risk, particularly on the network side as you start thinking through actually procuring, permitting those kinds of things that can be long cycle times, maybe not large dollars, but large cycle times. We started down that path even before the merger closed. Some at-risk work but allowed us to really hit the ground running. Then you hit the pandemic, and one of the things that allowed is an acceleration of the retail store consolidation. With everything shut down and then opened but traffic being significantly subdued, that allowed us to accelerate there. So on balance, it's very positive. And we're running hard and fast. And at this point, you know how this really plays out. The vast majority of the synergies come from the network. And the model there again is quite simple but -- and differentiated. And simple to say and simple to see being executed when you have a team like Neville and his team running it. But first is to deploy the Sprint spectrum on the T-Mobile anchor network, right? Then it's to migrate the Sprint customer traffic and migrate the Sprint customers onto the T-Mobile network, and then it's simply decommissioning the cell sites. And that has been an area where we've done tremendous work in the pace. And by the end of this year, we expect now to have 60% of the Sprint customer traffic migrated onto the T-Mobile network, and 100% of that traffic migrated by mid-2022. So a full year ahead of the original schedule. That pace has been just tremendous. Beyond the network, as we said, there's also other areas where, of course, we have store consolidation that happened, particularly at summertime, fall time last year that we accelerated as well as other spend, marketing spend consolidation, back-office systems things. So off and running, but it's also based off of a playbook that we did so well with MetroPCS, but a playbook that has been amended in a very unique way in that for this merger, we've been able to separate network migration of traffic from the billing migration for customers, right? And that is such a significant thing for us because what it allowed us to do with all of the compatible handsets, which was another benefit of the delay because more and more of the Sprint base had handsets that were compatible with the T-Mobile network. So from day 1, when the merger happened, we effectively opened up, you can think about it as a roaming arrangement between the 2 networks, and give Sprint customers with compatible handsets, which was the vast majority of them, the benefit of also utilizing the T-Mobile network. And that also allowed us to start flowing the traffic as we continue to build the T-Mobile network up, continue to migrate the traffic over. And so that's been a great experience for customers, but we've detached this billing migration experience because we want to make this as seamless from a customer perspective and as painless from a customer perspective as possible to, of course, minimize any churn events. So that's been a unique aspect that was over and above what we were able to accomplish in the MetroPCS merger, but it's definitely a similar playbook. So super, super pleased, honestly, with how it's going, Doug.

Well, that was a great list and helpful. And if I could just follow up, does the decommissionings follow very closely behind that Sprint traffic moving over? In other words, if you're at 100% in mid-'22, do the decommissionings then happen around the same time?

Yes. It's -- they follow closely behind, right? I won't give you the exact time, but we're certainly planning to be starting -- a good portion of decommissioning, 7,000 to 8,000 cell sites in the latter half of this year are already starting decommissioning on the way to the full 35,000 that we'll ultimately get to. But yes, it's -- to your point, it's very exciting.

Appreciate that. So let's point out to a sector view, AT&T reconfiguring as a pure-play telecom company, an eye-popping $24 billion CapEx budget starting mid-'22. Their free upgrade to the base promotion is a core part of their marketing campaign. They were just here earlier today. They noted that we should expect that to continue. Comcast has decided that your lower price points for consumers are the right ones. Verizon has amped up its device subsidies to new customers, keeps adding more services for its unlimited customers. DISH is launching in Las Vegas soon. Is there a point where you say, "All right, competition keeps getting tougher. Maybe I shouldn't have given that long-term guidance?"

Well, you've opened up with a lot of great questions there. And frankly, no, because you know how we provide guidance and how we report, the transparency we provide. It's about making sure that we put guidance out there that we believe is achievable or beatable. It's how we operate it as T-Mobile since 2013. It's certainly how we intend to operate as a management team. And we have a different set of cards than if we look at AT&T and Verizon where not only do we have a superior asset base that we're going to deploy in a superior way, and I'll talk about the network in a little bit, but we have addressable markets and the growth opportunities that they don't have, and one of those being smaller markets of rural America -- rural areas, sorry, and the other one being large enterprise and government, which we'll touch on a little bit deeper later as well, I'm sure. So it's a unique set of cards that we are holding, and it begins with the network, and it moves into addressable areas. But we've long said, you've heard Mike and everybody say is for a tremendous amount of time, all content and entertainment, right, are leaving their prior digital forms, and they're landing on the Internet, and Internet is going mobile. So we have long been positioned as a pure wireless play company, and it seems like everybody else is kind of waking up to that being the right play. But unfortunately, for them, what they don't have is not only the 5G lead that we have, but the ability to have a durable lead throughout the 5G era from a network perspective. That will afford us opportunities that they just don't have, and I'll dive a little bit deeper into that. But specifically, when you look at what the competition is doing, I think you're nicely saying AT&T is dumping media assets at a huge discount to -- in order to focus on wireless. And I'm sorry, my lights just went out in this room. Hopefully, this comes back up. So -- but I'm sure they're doing that because they saw what's happening. These are -- there are smart people at Verizon, AT&T, Comcast, and they see what's happening. They won't talk about it, but they see what's happening with this network and the set of assets that we have and how we're deploying in them, and I'm sure they're very afraid about what's about to hit them as more and more consumers see 5G as a reason to switch and also see T-Mobile as really being the dominant 5G network and businesses as well. From a competition perspective and promotions, I mean, AT&T has been running these rich promotions for about 3 quarters now, and that's in the run rate. And we still lead the industry from a profitable growth perspective and net adds. And also, despite the fact that they poured billions of dollars into this, much of which hasn't flowed through the P&L, as you know. On their balance sheet, I think they have hung up now over $3.5 billion of discounts that they've given that will flow through the P&L in the future, but are sitting in the balance sheet now. It's not an attack on a strategy that we take. But despite pouring all those billions of dollars that have yet to be recognized through the P&L at this, we still delivered the industry best churn on the Magenta base and the only ones that sequentially decreased churn. So it's -- when you look at it from that perspective, I'm not sure that those investments are tremendously wise. But if you also know what's happening from a 5G network perspective as it's becoming more and more dominant in people's minds, I guess it's one of the only levers they have to pull. When you think about their CapEx, I don't know -- I read the same reports that you publish and others publish. And some of the questions out there, I think, is it more of a geography change than a true increase in total CapEx if you look at what they do with vendor financing and other things? But I don't know. That's for them. But ultimately, it shows, I think, that they recognize they have a tremendous amount of catching up to do. Verizon. When you look at Verizon, seemingly, what's happened is that they reacted to AT&T's deep and rich promotions after being the only national carrier to lose customers in what was a record Q1. So I'm sure they opened their eyes, and they obviously opened their offers to their base in an effort, I'm sure, to address that unique phenomenon that happened in Q1. When you look at Comcast and their promos, again, I think both Comcast, Xfinity, Spectrum, both of them have been very successful in getting into this marketplace and having growth on their base. Obviously, they have a very small base, so they don't have organic churn to deal with. And when you look at actual total gross add flows, it's a small portion of the industry. But because of those phenomenons, they've been able to grow. And when I look at what their pricing moves are, I step back and think about it from a macro perspective. And they know that, again, they're going to be riding on the inferior 5G network for the duration of the 5G era. So you're going to have an inferior product. I guess they're the first maybe to realize that you can't charge a premium price for that. So that's going to be interesting. But at T-Mobile, our whole strategy is clear and very consistent on the one we've been delivering on, and that is to deliver profitable growth -- sustained, profitable growth and doing things that are right from a customer perspective to drive churn that are financially prudent to do and really focusing on our investments, not on billions of dollars we're going to hang up on the balance sheet and hope that it reduces churn and still not be as low as Magenta was in Q1, but we're also putting investments where the core issues around churn that generate churn are, right, which is network and customer service and the price and the value equation. That's what really drives customers in the long run, not trying to buy down churn for, I'm sure, just a short period from a handset promotion by handcuffing customers into contracts. So when you step back, what we're selling is the network. And I think we do it with a better value equation and a better customer experience equation than anybody else. But what we are selling is the network. And in 5G, not only is it already differentiated, but it's being differentiated more by the moment. So if we look at just the current status, right? We have 295 million POPs covered by what we call extended range 5G, low band -- this effectively low-band 5G. Yet already having twice the average speeds of the LTE network. And a lot of people step back and say, "Well, that's not very interesting. Twice the speed, is that really a game-changing experience?" But remember, that took years and years in the LTE era just to double speeds. But a fair point, then maybe you step back and say, when you look at Ultra Capacity, which is truly the mid-band layer that is game-changing from a speed perspective, we're at 140 million POPs already, on our way to 200 million POPs by the end of this year. And on our way by the end of 2023, the 300 million POPs covered with Ultra Capacity mid-band game-changing 5G. AT&T and Verizon laid out very different plans. I think Verizon is going to get to 175 million POPs by 2023 and AT&T said 200 million POPs. Well, when you think from a geographic perspective, that incremental 100 million POPs is very, very difficult to achieve. It's a lot more rollout than the first 200 million POPs. And equally as interesting is it's not just the POP coverage, right? But just how much spectrum you're devoting to that POP coverage in the network where we're already going to have 100 megahertz of mid-band by the end of this year, covering those 200 million POPs. But by the end of '23, we're going to have 200 megahertz of mid-band spectrum across 300 million POPs, and that is just so significantly different in terms of if you think about a 2-lane country road versus a multilane highway, so not only covering more, but also a lot more throughput in there. And what's interesting is that last 100 million where you're going to have effectively an Ultra Capacity experience from T-Mobile versus almost effectively a current state experience from AT&T or Verizon, that 100 million correlates really well with small markets and rural areas where we have a significantly underpenetrated position currently and are making investments along with the network to grow. And we've said that's an area, right, where we plan to grow to roughly 20% market share relative to our 30% overall currently in the plan that we laid out. But when you think about the experience for those customers in that area, that's a current 4G experience versus a game-changing Ultra Capacity experience is just -- I'm really tremendously excited about that, but it also shows that at T-Mobile, because of our customer-centric concession, we're taking the assets that we have, and we're rolling them out to really cover everybody and give everybody the experience that's necessary, bridging the digital divide in a way that AT&T and Verizon are not. And that's good for customers and, ultimately, good for us. So -- and finally, I'd say the approach, as we said, to giving guidance is -- you know how we play it. I mentioned it at the top of that. A very long answer now, but you opened up such a lot of surface area for me, which is that we're prudent, and we're going to meet or achieve the guidance that we give you. We don't put guidance out there that actually embeds a unicorn happening like perhaps Verizon does, right? And we don't state figures, for example, $20 billion in free cash flow, and nobody seems to be able to get to. In fact, it seems to be one of the biggest mysteries on Wall Street is how do you get the AT&T's guided $20 billion free cash flow figures? That's not who we are and that's not how we play this. So there's a bit of a philosophy difference in terms of interaction and transparency. So sorry for the long answer, but you opened up a lot. So I just wanted to address it all. And at T-Mo, we just can't help ourselves. If you're going to ask about the competition, we're going to answer you about the competition.

That's okay. You schooled me to keep my questions narrow. So I appreciate the lesson. But let's stay with the country roads because I like sort of the corollary of having 100 million POPs covered with 200 megahertz of 5G that perhaps your competitors won't have at that point in time. But can we start with -- you sort of gave the guidance where you're hoping to get to. What stopped you from getting to normal penetrations of roll so far? And what else are you doing to drive that? And how quickly does that happen?

Yes. Absolutely. So -- and again, from a big level, it's a tremendous area of opportunity for us, again, one of the strategic growth areas. And that's 50 million households that we categorize in smaller markets and rural areas, so 40% of the U.S. population. And there's a number of things that are happening. One is the network rollout at the furious pace, not only like we said, where we're already 295 million POPs on the extended range, but the significant delta that you'll see over the next couple of years in 5G mid-band, which is truly what people experience was game-changing 5G. Also then distribution where we said we're going to have significant investment in distribution. We're going to open a couple hundred new stores this year already and also innovative programs. So certainly national retailers that we'll be partnering with -- Walmart, particularly in rural areas, our broader partnership there as well, but a rural area is, almost 1,000 doors with Walmart. We're also bringing in Metro by T-Mobile into T-Mobile stores and a unified place to go in a smaller market in a rural area to get either product that you need. And then we introduced this idea of hometown experts. So another innovative idea. And when you think about hometown experts, it's like a T-Mobile representative in the community, right? Think of it as a one person store without a full store front. So a much more efficient and effective way and probably one that's unique in terms of reaching rural areas. And that's something that we put out there. We have 1,000 open positions, already filling those for this year for the hometown agent program. So it's really the multipronged, build a network and build a distribution in unique ways behind it approach that's going to allow us to get there. And the ambitions that we laid out at our Analyst Day is to reach about that 20% market share in 5 years. So as you think about what I just laid out from a network differential opportunity, one could question whether that's ambitious or not, but it's certainly what's embedded in the plan.

And then the other in growth here, you've been mentioning business services, government. And you've talked about upside to that at the Analyst Day. What's the fair share you think you can earn there? And what's the execution path and investment path that you need to undertake to more business customers?

Yes. So if you look at the current state there, about 50 million -- we estimate 50 million corporate liable lines and about a $27 billion revenue opportunity in the total business segment. Now of that in the large enterprise and government space, we have about 9% to 10%. So less than 10% share. And that's another area -- and these numbers just coincidentally happened to both get to 20%, just like small markets and rural areas. In large enterprise and government, we also have aspirations to get to about a 20% share throughout that plan horizon area. And so it's a few things. First, there's already momentum coming into this year. You saw what happened in 2020 from a connected devices perspective, primarily in the educational space, but a lot of inroads into government entities when you saw that, that's an area that we fully dominated with our ability to be agile and bring solutions to what they needed at a very fast pace. It's also been very interesting from a phone perspective. Q1 was one of our best quarters from a phone adds perspective in large enterprise. And we're doing business already with a significant portion of the Fortune companies as an initial way in. And as we said, large enterprises and government tend to buy differently. They don't buy on sentiment like consumers do or what perception is. They tend to go through pretty exhaustive selection processes, technical specs, along with testing to make sure that the network works for them, where they need it and how they need it. And because of where we are on a network positioning perspective, that's giving us a lot of opportunity now that we didn't have before. Before we were, yes, stalking horse effectively in RFPs, probably to drive down pricing. Now we're winning a lot more of those opportunities as businesses come in and test. And not only that, so that's kind of core wireless connectivity. But there's also a lot of -- of course, all the buzzwords today around mobile edge compute, virtual networks, that is all enabled by the 5G network that we're building. And again, if you're going to have the dominant 5G network, that's the one you want to be on to get into some of these great things that will definitely come to fruition, and there are going to be revenue and use cases around it. We know all of that. And again, our ambitions there, while not included in the plan because we know those things are coming, but we didn't believe that it's prudent for us to include large revenue placeholders in our long-range plan that underpin the guidance that we put out there for you, for things that we don't know exactly what shape they'll take. We know they're coming. We know this 5G network we're building will afford us the best opportunity to win those, but we don't know quite yet what they look like. So they're not included in the plan. That's an opportunity to outperform the plan. But that said, we have many trials underway because, again, businesses look and test, and they know the 5G network that we have, the stand-alone architecture that already underpins it that allows for a lot of these use cases to start getting tested. So we're already working with a lot of clients, testing things, seeing things. And I've got to tell you, I'm really excited about this space over the course of the next few years and certainly being in the space we are with the dominant 5G network to be able to win a lot of those opportunities that are coming.

All right. That's interesting. I wanted to move on to ARPU. And I have sort of 2 questions, so I'll get it to you both at once against my better advice that I've learned my lesson. I think one is, I think there is still occasionally a question coming in from investor on sort of quality of net adds because ARPU was down quarter-over-quarter in 1Q, and you've addressed that, but then it moves up, growing into 2Q. Can you just help us understand the drivers between why ARPU sort of deteriorated and then reaccelerated, but also curious what the long-term opportunity is for ARPU up to your end-customers and other opportunities that you have?

Yes. Absolutely. I mean, much like we guided at Analyst Day, we saw exactly what we expected, which is about a 1% sequential decline in ARPU from Q4 to Q1. And that was primarily driven by Sprint rate plan migrations. And again, as I said before, we kind of disconnected the ability to steer network traffic, rate plan and billing migrations. And what we did for customers in Q1, for the vast majority of them, there's still more to be done throughout the course of the year, is actually move Sprint customers into their target rate plans, tax inclusive, unlimited rate plans. When we did that, we, of course, tend to err on the side of the customer, right? Where there's a net net mapping, we err on the side of the customer, that caused the majority of the decline sequentially in ARPU. But what it did is put those customers in a target rate plan where that ultimate billing migration will now be seamless for them. So again, a churn reduction as we go ultimately to billing migration later on in the process. So that was a lot of what drove the sequential decline. The upside opportunity and why we guided what we did at Q1 earnings, which is not only do we now expect Q1 to be the low watermark for 2021 from a postpaid phone ARPU perspective when we see growth throughout the rest of the year, but also that will actually wind up with less than 1% dilution on a year-over-year basis are things such as Magenta MAX, which is an offering we put out there in late Q1 that really showcases the power of the 5G network that we've already built because nobody can offer a truly unlimited plan that doesn't throttle you. And the uptake in what we're seeing there are quite interesting. From customers that are taking Magenta MAX, they have about 40% higher usage levels than other 5G customers and 40% higher than LTE and a lot more engagement with video, social media, all those things. So what it shows is that this premium network can attract premium customers, and they see a value in an offering like a Magenta MAX. And that's being -- we've seen a very, very positive attach rate with new customers coming in on Magenta MAX and attracting a premium customer set that really takes value in having the best network. And that's been one of the drivers of potential growth. And I think that's something that we could certainly and will certainly continue to push and see how the rest of the year develops. And the unique thing about it, it's an up tier product that gives you a premium experience, but it's also a little bit different than our competitors do. They might be driving customers into premium service offerings and rate plans that include content. And the way we account for content and their structure -- there are structural differences in the contracts. For example, Netflix, our Netflix offering, which will be part of Magenta MAX, the net cost is actually a reduction of service revenue to us versus some of our competition that accounts for their content on a gross step basis. So you might move customers to rate plans that include content, and you're growing your service revenue, but you're also growing your expense by a very similar amount. So that's not the way that we've approached the service revenue growth that we're guiding to. So very, very excited about Magenta MAX and the initial power of the 5G network coming through, and that's kind of where we sit.

Any thoughts on trajectory?

Yes. I'm trying to get...

Any thoughts on churn trajectory? Sorry I'm getting back here.

Interesting because there's no doubt that the industry as a whole saw churn suppression certainly throughout 2020, but even in 2021 and Q1. And our expectation is that there will be a return to more of a normal switching environment in the second half, particularly as urban and suburban centers also have more opening. But the unique aspect is beyond that whole muted environment that everybody in the industry saw is that, again, we were the only ones that sequentially decreased churn on both our Sprint base as we brought more of that goodness to them but also on the legacy Magenta base. So that was a very interesting phenomenon, and Q1 speaks to the power of the value proposition of the network that we give. But we are expecting that in the second half of the year, there's a return to a more normal switching environment, which is great for us as the net share taker in the industry.

So 2 questions on home broadband, 5G. First, how is it doing in a few months into the full-service launch? And then the second part of that is you talked a lot about having enough capacity to really serve a lot of customers. Obviously a guide out there of 7 plus million subscribers when you look out a few years. And why is $60 the right price point?

Yes. Well, I won't give you the intra quarter play by play. We'd certainly tell you how many customers we saw on the pilots, and I think Dow laid out at Analyst Day the ramping. I mean, we are expecting to see more significant ramping in '22, '23 all the way to our 7 million to 8 million target by the end of 2025. From a capacity perspective, it all goes back to what I was laying out from a nationwide 300 million covered POPs with Ultra Capacity mid-band spectrum where we're applying 200 megahertz of that mid-band spectrum to it. It's creating tremendous capacity, 14x more capacity than stand-alone T-Mobile. And in more dense areas, remember, we supplemented it with our C-band purchases that we bought strategically in areas where it makes sense to deploy and supplement our mid-band holdings with C-band. So very confident in what we laid out from a 7 million to 8 million perspective that, that is completely within the capacity bounds of this network. I mean there is so much capacity that Neville and his team are being built. The model for home broadband predominantly is a fallow capacity model, right? You're already building that network, to your point, creating that capacity, capacity that can't by any imagination or estimates that we have, been filled up by mobile traffic. And hence, that is the tremendous opportunity for home broadband. From a how is it performing perspective, I would say customers are tremendously happy as they switch over. We see significant 100-point difference in NPS scores between previous providers and T-Mobile from these customers that are coming on board. And it's not just us, so not just customers and not just us touting it because we love to tout things. But recently, PC Magazine also had their Readers Choice Awards. And we had significant, significantly high scores there relative to the cable incumbent. So you're seeing third parties much like you're seeing third parties in the network space more and more realize the 5G power of this network and are putting out more and more third-party reports around the network, whether it's open signal, Ookla, umlaut root metrics these days despite who they're best friends with, give the network more and more credence. The same thing is happening from a home broadband perspective. We feel the price point is very good.

So let's switch over to...

Yes. Go ahead. I think we're getting some cutback here. Sorry. We don't have home broadband powering this Webex.

I would prefer you finish. I'm sorry. I thought you were done.

Go ahead. Go ahead. I was there.

So look, you give some pretty clear EBITDA guidance. I still wanted to spend a couple of minutes on each of the cost buckets. Could you talk a little bit about sort of the network expense and the SG&A expense? And the reason I ask is I think you've suggested there's some cross currents. A lot of synergies coming through but also investments for growth. And I'm just trying to make sure I understand as we due diligence your guidance, what the outlook is for network OpEx growth, what the outlook is for SG&A, OpEx in total, in aggregate, including both dynamics?.

Yes. Well, I think between DT's Capital Markets Day and our Analyst Day, we've given you almost every single year of core EBITDA guidance out there. And so I can't give you each element within operating expense as of yet. But I can give you the macro picture. First, the beauty of this rollout is that this network rollout is really fueled by synergies, and we're getting effectively a 2 for 1 rollout here where our 5G build and the upgrades that we're doing are done at the same time as the integration. So we're adding the 2.5 gig spectrum on our build. We're building 600 still, and we're getting a 2 for 1 hit on this. There is for the course of the next few years, as you said, kind of a blending of things. One is we're going to continue to increase the investment in the core anchor network, both from an expansion perspective as well as integration, to bring the capacity from the 2.5 gig spectrum onto the T-Mobile network. So that's going to continue to play out over the course of the next few years. Offsetting that will be the decommissioning, right, where we are expecting 35,000 macro decommissionings by the end of 2022 and roughly 7,000 to 8,000 by the end of this year. So that's going to get you to $3 billion of hard cost run rate savings. You obviously have about $2 billion of avoided costs as well. Won't see that manifest itself in a quarter-to-quarter P&L. But as that process plays out by the end of '23, the majority of the synergies will be achieved by '24. In fact, all of them should be by then. And then what you're going to see and left with from a network cost perspective is really the density, 85 -- 80,000 to 85,000 macro sites, 50,000 small cells giving us the densest macro network with also the best set of spectrum assets deployed on it. That's going to drive the cost of service line item, but that also what really gives us the opportunity for all these growth vectors, right? The best set of assets deployed in the broadest way to the majority of America in the densest macro tower network. So that's what's exciting there. From an SG&A perspective, you're already seeing the synergies. You saw that starting last year with store consolidation. We'll certainly have more store rationalization and optimization. Then when you get ultimately the network traffic moved and the billing migration done, you have that IT stack and those system costs that go away as well. So you'll see that kind of being the continual expansion of synergies in the SG&A line item, offset by some of the things that we spoke about earlier, such as investment in distribution, in large enterprise and government sales forces and bringing team of experts into the Sprint base to drive that churn down as much as possible, as quickly as possible. So those are the things that are going to offset each other. And ultimately, I think you're going to wind up on the other end of this with the deepest macro tower network and the full synergies in the SG&A line item.

Yes, and that takes to CapEx, which is interesting that you've really given long-term guidance in CapEx. And I don't think you're sort of peers and competitors have been quite as comfortable as you have. And so the question becomes, what's in that out-year CapEx number? Is NEC and private networks and densification for small cells is -- I imagine the 80,000 to 85,000 and 50,000 isn't where Neville is going to stop. So I just want to make sure we sort of rightsize what's in and out your CapEx guidance.

Well, Neville and his team are amazing in rolling things out, but they're predominantly focused on rolling out that network and getting that lead. And we talked about some of the coverage POPs, right? I mean we're going to be at 300 million covered POPs of mid-band by the end of 2023. So the massive amount of rollout and integration work is happening right now, which is where we give that $11 billion -- $7 billion to $12 billion for the next couple of years. And then as you have done a massive amount of build-out, sure, you still have other things that are happening. C-band rollout will be happening, and C-band deployment is fully embedded in the CapEx guidance that we've given you. From a densification perspective, I mean, we'll be sitting at 80,000 to 85,000, the densest macro tower network even with better propagating spectrum assets with the 2.5 gig portfolio. So I don't see a tremendous amount of densification from the 80,000 to 85,000 going forward. So that leaves us with 9 to 10. And remember, we're building this network at this pace that nobody else can touch with 11.5 -- 11.7 to 12 roughly annually. We'll see if there's opportunities to certainly bring some of that forward as we continue at this pace. But that's really what's embedded in the guidance. And a lot of this, as I say, it comes back to not only the efficiency where we have a lean methodology that has just been tremendously successful at the rapid pace of deployment that we have but also the scale of procurement and the CapEx synergies that we've been able to achieve, which aren't reported on, they're not in the run rate of the P&L, but they certainly make a difference when you think about free cash flow, right? And you take out all this noise -- I know there's been questions around margins and who does what with CapEx? Well, take it all down to what is the ultimate value creator for shareholders, which is free cash flow generation. And when you look at service revenue to free cash flow generation and our mid- and long-term guidance, we are leading the pack. So that takes all the noise out of the equation and shows you the power of the unlock of synergies but also the profitable growth story that we're giving you.

So that takes us sort of to our last topic, which is balance sheets and buybacks. So the 2 Bs. What's a lot like leverage and credit rating for T-Mobile in the long term, not necessarily the short term, but does that change over time? Is there more refinancing opportunities in that balance sheet, which I imagine is sort of near and dear to your heart? But what I really wanted to press you on and not to be sort of overly direct, and I know you've been asked a couple of times, but I'll take a shot. Based on everything that you've put out, free cash flow, EBITDA, sort of leverage targets, you've got clear line of sight on a multiyear basis and an improving balance sheet that goes well beyond the metrics that you've laid out for leverage and credit rating. And so that leaves a lot of us with, why not start to buy back stock a lot earlier than you suggested at the Analyst Day, which is 2023? We have that kind of line of sight. So balance sheet and buyback opportunity.

Yes. Absolutely. I mean, I just couldn't be more proud of our Treasury team and the refinance activity that we've done in the marketplace, setting records from a yield perspective in the high-yield market, being the most active nonfinancial issuer in the IG markets. I mean it's just -- while driving down significantly, not only the cost of debt, but also extending the maturity profile of our debt already. So that's been a tremendous work by the Treasury team. As you said, with the deleveraging story, and I think, again, just to put words in your mouth, I think that you're saying your model shows T-Mobile having a stronger balance sheet and faster free cash flow generation than our peers. So I would agree with you there. But really right now, clear, clear capital allocation strategy. Priority, of course, is funding the network integration and all the merger related costs, the integration cost to get through this, build the network, get through the integration, that is the primary capital allocation priority right now, right? Secondly, as you said, that unlocks the synergies and creates the rapid deleveraging of the balance sheet that gets you to by -- we said this year is going to be the peak leverage year. We'll get into the mid-2x core leverage by the end of next year. And of course, you'd see rapid deleveraging from there. But those 2 things are what give us confidence that we're on a path to a core family IG rating, which is tremendously important for us to get to and have access to the deep liquid IG marketplace and have access to lower cost of capital as well as extend maturity as we further on through the horizon of this plan. In terms of what could we start and could we start it earlier, as I said, I certainly -- if we're running ahead of plan, and we don't see other opportunities that could create larger shareholder value, then we would be open to coming to the board potentially earlier in having a discussion around share buybacks, but it is predicated on -- as we said, the free cash flow generation potential is huge, $65 billion through 2025. And a mid-2x core leverage target gets you to a potential of $60 billion in buybacks. So what we always are measuring against, though, is there another opportunity that we should reallocate some of that against that can create a bigger return for shareholders, and what's the right time? It's all about just looking at the priority set, integration, network build and then getting to that synergy unlock, which allows that deleveraging.

So Peter, what did I miss? Any closing comments for our audience?

I -- just thank you again for the time and appreciate talking to you. And to me, it's just -- the way the team continues to execute on all these fronts, the day-to-day, the making the investments necessary, it all goes back to our competitions where we say, one, is that we're going to lead the industry in profitable growth. That is a mantra for us, and it has to be profitable growth. Second, translating that into tremendous enterprise value, certainly right now focused in on creating synergy unlock as quickly as possible. And third, doing all of this, like we said, without borrowing from tomorrow. So making those investments that we talked about, that unlock those growth areas that are going to fuel the growth and help us achieve the mid and long-range plan that we gave to you. So tremendously excited about the opportunity here, the way the team is executing and the hand of cards that we have and that we're creating.

Peter, thanks so much for closing out our conference on a high note, and thank you, everyone, for listening and look forward to doing this in person with no feedback issues next year.

Yes. Sorry about that, Doug. Thank you.

Thank you.