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

Welcome back. I'm Brett Feldman, Goldman's U.S. telecom, cable and media analyst. It is my great pleasure to welcome to our 30th Communacopia, Mike Sievert, the President and CEO of T-Mobile US. Mike, thanks for being with us.

You bet, Brett. Good to see you.

All right. Let's just jump right into it. So we have a lot we have to discuss today about how you're positioning the company to remain a growth leader in the wireless sector. But before we get into that, I do want to get an update on the cyber attack that you suffered about a month ago. What steps have you taken to improve data security? And should investors expect any adverse impact to your subscriber or financial performance this quarter as a result of the breach?

Yes. Thanks, Brett. That's a great place to start. Well, the first thing I'll point out is we just take this very, very seriously. No company like ours is immune to these kinds of criminal attacks against us and our customers. But at the same time, it's our obligation to keep our customers' data protected. And we need to do better. So when something like this happens, we take it very, very seriously. The first thing we do, obviously, is take decisive action to make sure that everything we can do to close down the vector of the attack and protect our customers' data is done, whether that's resetting data on behalf of our customers, et cetera. And we did that immediately. The second thing is to go down 2 parallel paths of getting under the root cause, but also transparently and openly communicating with everybody. And you saw us do that. And we think that's very, very important when something like this comes about. But getting after the root cause is critically important because these kinds of things cannot be allowed to happen. And for us, what we felt we needed to do was really undertake a long-term strategic investment in this area. I'm not going to be satisfied until we are second to none globally when it comes to cybersecurity. And we knew we needed help. So we brought in Mandiant, we brought in KPMG and some of the world's experts, not only in cybersecurity, but on KPMG side and processes and procedures because this is a holistic situation. And I just want to make sure everybody knows we're taking this, and I'm taking this very, very seriously. We're going to make sure that we learn from this. As it relates to the business, look, there was an impact. We're finishing the quarter strong. And I think -- and this is unfortunate. I think customers realize that these attacks are an ongoing series of events from companies in every industry and that their data is already out there. And they, of course, are concerned. But on the other hand, I think the evidence appears that most customers, I think, unfortunately, because of how common these attacks are, are willing to look forward. And we're seeing that in our results as the quarter comes to an end with nice momentum into Q4. So look, we're taking it seriously, and it's something that definitely was an issue in the quarter, but really like how the momentum is building as we enter Q4.

All right. Thank you for that update. It's been almost 18 months since the Sprint deal closed. And despite a unprecedented challenging environment to pursue a merger integration, the process is actually ahead of plan, and you have materially boosted your synergy targets. Can you give us an update on the key integration milestones that you've achieved this quarter? And what are some of the key milestones that you expect to achieve during the remainder of the year so that you're positioned to remain on or ahead of plan with the integration as you go into 2022?

I'm so pleased with how this is going. I'm just so proud of the team. And investors have probably noticed that every time we come talk to you over the last 1.5 years, we've told you we're going faster than we expected. And that's just terrific. And not just for synergy achievement because that's very, very important, but also for the customer experience. We're pressing ourselves to move quickly and decisively here for a reason. We need to get those Sprint customers over to the other side. And one of the things we've noticed, I don't think we've talked about this yet, is that when a Sprint customer comes across and has the right 5G device, and the taxes and fees included Magenta rate plans and Magenta customer service and loyalty programs, and they're riding on the T-Mobile network 100% of the time, their churn profile so far looks just like Magenta, the industry's best. And so it's really important we get there quickly. And the other side is also true. During the integration, we always knew there'd be a period where we're constructing this network, taking resources from one side, putting it on the other, touching thousands and thousands of towers. And our Sprint customers have shown a lot of patience with us through that process. But for me, getting it done quickly and putting it behind us and getting them to the T-Mobile network, which is the best 5G network in the country, that's critically important for their experience because Sprint churn is elevated. It came into the merger elevated. It remains elevated for these reasons. And we know from what we're observing that when we get them to the other side, there's a fantastic tailwind ahead for our company and our investors.

That's great because this is really the follow-up question that I had. So as of the second quarter, you had moved 1/3 of the Sprint base and about 80% of the Sprint customer traffic onto the T-Mobile network. When do you expect to have the majority of Sprint customers on the T-Mobile network? And could we see this accelerate now that we have some new iconic 5G devices in the market?

Absolutely. And we hope to get it done in '22, and that's a year faster than we had planned, 1.5 years faster, in fact. And listen, even those customers we've moved across, they don't have the whole stack. Not all of them have the full stack yet. So we spoke about them being across on the T-Mobile network. But you got to have the plan. You have to have a compatible device, and you have to have the T-Mobile network. And when you have all those pieces, the customer experience is fantastic. I mean, we're way ahead on 5G, and there's just so much momentum right now around new handsets, as you've seen. All of our competitors are focused on it. And I can't really explain what they're up to. But I can tell you what we're doing. We're getting customers moved to the 5G handsets as quickly as possible because we know that -- how strategically important it is, given the huge lead that we have in 5G.

All right. So your guidance this year is that you're going to add between 5 million and 5.3 million postpaid customers, of which we estimate 3 million of them are going to be postpaid phones. That's our number. This would once again lead the industry. Despite a low switching environment, which has historically worked to your advantage. So can you give us an update on activity levels as we come into the end of the third quarter? To what extent do volumes and in particular, switching volumes seem to be returning to normal?

Well, a couple of things. First of all, you're speaking about our growth leadership, and that's certainly our goal. It's -- look, last quarter, we led in overall postpaid net subscribers. We led in postpaid accounts. We led in service revenue growth. We led the industry in EBITDA growth, cash flow growth. So we were the growth leader. And it's important for us that that's the case, even during this tricky period of the height of the integration, which we're now in. Honestly, when we wrote the plan back in 2017, we didn't expect that we would be a grower during the 3 or 4 critical quarters of integration. And now we do. We expect to be growing and leading the industry in various aspects of growth throughout the period. And that's just a huge testament to the rate and pace of this integration and its efficacy and the way this team is performing. As it relates to the macro environment that we're seeing, it's really competitive right now. And our competitors are focused on handset promotions, which, as I said, we're focused on handset promotions for a reason because 5G is our strategic advantage. We're way ahead, and I hope we get a chance to talk about that. That's why we want everybody to have a 5G handset, so we can showcase this lead. Why are our competitors doing it, and then coming to conferences like this saying it's a genius move? I actually -- I can't figure that out. Because what they're doing, in effect, is spending -- get this. I mean, $1,000. Verizon is spending and AT&T, it's $1,000 to get you to move from a phone that works about the same on T-Mobile and Verizon to a 5G phone that works way better on T-Mobile. That's what they're spending $1,000 to do. And then coming to a conference like this thing, it's economic. We'll see if it turns out to be economic or not. But it definitely plays to our advantages, the more our competitors focus on 5G phones because they know, whether they'll tell you or not, and we know we are way ahead in 5G and positioned to stay ahead for years to come.

Maybe just to follow-up on that comment you made about how it's really competitive. I mean, that's really what you've always wanted. You've wanted a competitive landscape. And so I guess, I'll come back and say, do you see that the switching environment is starting to look a little bit more like what you would expect in a competitive market, not a pandemic market? And are you noticing that you are indeed, once again, winning more than your fair share of those switchers as they come to market?

Switching is picking up versus the pandemic period, that's for sure. But it's also a seasonally higher switching period, Q3 and Q4. So it's hard to separate those 2 things. Underlying it on the Magenta brand, we were by far the postpaid phone net add leader on the Magenta brand. We have the lowest churn in the industry on the Magenta brand. Our overall brand performance in terms of whether people give us attributes as the network leader is rising rapidly. So the health of that is just fantastic. What's different in our business, of course, is that we're managing through a Sprint base that's much higher churning and enduring an integration. And so you net it all out, our performance is very good. But you look underneath the covers at Magenta, it's stellar.

I do want to ask one more question here around just the promotional environment because as you noted, sort of everyone rolled out their iPhone 13 promos. You are offering up to $1,000, and in some cases, up to $800 of trade-in value. What is it -- just recap, what is it that you're uniquely trying to accomplish? And you sort of alluded to getting away from this. What are the conditions where you would be comfortable moving away from sort of handset-driven marketing, which is typical around this time of the year, to something that is more consistently based on your network advantage?

Well, for us, we're doing it because we're in a moment in time where people need to move from 4G to 5G. And so I know you've had discussions with some of the others around, hey, are they doing this to kind of bide time to some other future when they catch up to us, et cetera. That future is not going to come. We can talk about that. But right now, we're moving from what was 0% 1.5 years ago to 20% and better of customers that have 5G. We need that to be everybody because we're way ahead on 5G, and it's important that people have the handsets that showcase that. Similarly, we're moving through an integration, and we have lots of Sprint customers that don't have fully compatible devices with our stack. They need 600 megahertz low-band, where we have the nation's only stand-alone 5G network dedicated to 5G and the low-band frequencies. Sprint customers need that as well in order to have the best total Magenta experience that's resulting in the industry's lowest churn and happiest customers. And so for us, it's about the strategic once-in-a-decade move from 4G to 5G. And we'll move through that at pace. It's moving very quickly now that all the handsets are in. Even N minus 1 handsets that Apple and Samsung are now in, which means the flow is in. So it will move very quickly. Why our competitors are doing it, I think is -- and they had several euphemisms for how to talk about it. It's a band-aid to, hopefully, a better future when they have more economic ways to compete. And we'll see how all that unfolds.

I want to touch quickly on prepaid before we start talking about some of the growth vectors that you had outlined at your analyst meeting. You have the largest prepaid business among the major wireless carriers as well as the lowest churn rate, but Verizon is looking to complete an acquisition of TracFone. And the prepaid category in aggregate has decelerated as consumers more recently seem to be favoring postpaid devices. What is your outlook for the prepaid market? And why do you believe that T-Mobile remains well positioned in that category?

One thing I'll point out is we are today the leader in prepaid with not only the biggest brand, but the best brand. We command terrific ARPUs from customers that stay, lowest churn. So we're so proud of Metro by T-Mobile. And unlike leaders that you've seen in the postpaid businesses in the past that have struggled to continue to grow reliably, we reliably and consistently grow that leading brand. And I'm just really proud of the team there. I will say, and this is interesting, T-Mobile, writ large, really only competes in 1 of 2 important subsegments in prepaid. And so we've got a lot of room to run. As TracFone leaves and moves to Verizon, and they talk about maybe repositioning and all the stuff they hope to do there, we have an opportunity in the more transactional pay as you go subsegment of prepaid. It's a very important category. It's 1/3 or better of the industry, and we're not really players. So not only are we the leader with the best brand in the space, incredibly well-managed customers that love the experience, 5G at an incredible price. But we're not even players in an important segment. We used to partner with TracFone in that area. Of course, we still do momentarily, and that's a big room to run area for us.

Well, that's a great transition because there's a bunch of other segments where you see an opportunity to be a much bigger player than you historically have been. And I think one of the great places to start is the business market. You have a plan to double your enterprise market share over the next 5 years from less than 10% to nearly 20%. Why do you believe that T-Mobile is better positioned to win in this segment now and in particular, at the higher end of the business market?

Well, let me just -- let me -- I'm going to answer that, but since you're asking about growth vectors, I want to just summarize them, and business is one of them. But it's important to understand strategically how we differ from other stories in this category right now. We've seen our competitors focusing on these handset promotions to try to figure out a way to drive growth and feeding off elevated churn at Sprint that we know is highly temporary. And just a couple -- next year, we're going to get everybody over, remember. So very short term driving that -- switching is driving some of their growth. And their math is making it look like they're saying "Hey, we're geniuses, our promotions are working," when really, they're just feeding off temporary Sprint churn. So listen, unlike their stories, we have big growth vectors that are totally untapped. We're a 10% share in enterprise that you just asked about and rapidly growing. We outgrew Verizon for 3 quarters in a row, 5 quarters in total postpaid, the last 2 or 3 quarters in postpaid phones. We're outgrowing the big guys, but we're only a 10% share. 90% of the customers, as we speak, are with somebody else. Huge room to run. Small markets and rural areas. This is 40% of the country, not tiny little towns here and there. 40% of the country where we have a share in the low teens and rapidly growing. And when you look underneath the network story, Brett, in small markets and rural areas, you're going to see that our competitors have basically admitted they have no plans to bring ultra capacity mid-band 5G to those areas. They have -- the C-band they bought doesn't do it anytime soon. And even after that, they have no construction plans to go past 200 million POPs. So this is -- and there's a reason. It's not economic for them to do. Their networks aren't dense enough to put C-band in those areas, and they've said they're not going to do it. At least they don't have plans yet. This is a place where we will have room to run with a dramatically superior network in small markets and rural areas, where we're only a 13% share. Then you take the top 100 markets where we're already #1 in many of them. We got there without being the network leader, without having the best network. We got to #1. What happens when we now in the top 100 markets have the best 5G network? All of a sudden, another potential room to run in the place where we're already showing signs of incredible strength and that got us to this position. So -- and it's just different. It's a different thesis than what you see from the other guys that just don't have these kinds of untapped potentials. And so that's something that makes me really, really excited. As to enterprise, I'll give you a short answer since I filled a bus with you on this one. It's network -- listen, unlike consumers that go on reputation, enterprises study it. They check out 100 phones from us and our competitors, and they take a hard look, and we're winning because they look at the reality of what happens. A network that can deliver an average of 350 megabits per second on ultra capacity 5G, ultra capacity 5G that now reaches more than half the U.S. population. And they want 5G handsets that are going to bring the promise of 5G because they don't want to swap out carriers and technologies all that often. And they know we're ahead for the next few years, and they're picking us.

Are you going to have to make a significant investment in either enterprise sales forces or maybe form significant new partnerships like the one you've done with Lumen, who we just had on, in order to really tap into that market segment?

Yes and yes. And they're both in the plan, funded in our plans that we've disclosed with you. But we are investing in our own organic team. Across small, medium and large, we have thousands of people already, a great team. And in the enterprise space specifically, we see room. We're actively hiring. But your -- the premise of your question is terrific. We do see a lot of room to partner in this area. And strategic partners, who do they want? They -- their eye is on the future. Strategic partners want somebody who can add value in the 5G space and who has a highly distributed network and can really get after things like advanced 5G services. Remember, we have today, still the nation's only stand-alone 5G network. That means it's 5G from the handsets to the radios and all the way into the core. And that means we can begin working with partners on advanced 5G services. We're in active trials today with 12 of Fortune 50 in potential 5G services. And this is something that we can do outside of a lab because we're already deployed nationwide, 305 million people with Extended Range 5G that unlike our competitors, a lot like 4G. It's even kind of sort of talked about in the press, it's all the same. It's -- yes, it is the same over there because they're just splitting up their spectrum between 4G and 5G. Over here, it's dedicated. Low-band spectrum dedicated to 5G with a 5G stand-alone core means it's at least twice as fast as LTE and has advanced capabilities. And so of course, that's what partners are looking for.

All right. We touched on rural very briefly, but I want to come back to that. You have a low teens share in rural and smaller markets. It's well below your approximate 30% share that you have on a nationwide basis and also just well below the 20% that you're targeting in that market. By our math, that's 9 million potential customers you could get over time. But consumers in these markets can be pretty loyal, particularly to brands that have a long presence in those communities. How do you expect to win over these consumers? What level of investment is this going to take in distribution? And where are you in that process?

Well, we're really focused on it because of the size of the prize. And we're seeing the most rapid movements in our brand reputation right now in smaller markets and rural areas. I mean, it's amazing. If you look at, for example, who is known as the 5G company? In the top 100 markets, we've grown. That figure, the number of people who say that's T-Mobile has grown 44% in the last year to now we've matched Verizon. The people who say we're the 5G company in the top 100 markets, same as Verizon, growth 44%. But in small markets and rural areas, we are up 52% from just a year ago in terms of the reputation of people saying, "Hey, that company is the 5G company." And that's just an example of how our brand is evolving. It's going to take partnerships. It's going to take distribution. We've gone back to the kinds of distribution like Walmart that are really important in these areas. It's going to take investments of our own distribution, innovative distribution like we're doing with hometown experts, and strategic partnerships of people who consumers rely on and trust who can speak for us. And all that stuff is happening, and we're really excited about the potential here. Remember, when C-band comes, which is what our competitors keep talking about, this first tranche of C-band, there's the same amount of C-band coming for AT&T plus Verizon as T-Mobile will have already deployed by the end of this year itself in 2.5 gigahertz ultra capacity, all by ourselves. And not just a promise of deployment, but already deployed. And there's none of that coming in smaller markets and rural areas. Where we're going, we will have 300 million people covered by the end of 2023 with ultra capacity 5G. And that's 400 megabits per second, transformational speeds and capacities. They're not even going there. And it's -- there's a reason. It's really hard to do. Do you know that getting from 200 million people to 300 million people is 5x the land mass you've got to go cover? And that's in our funded plan and the capital plans we've already showed you. We're going there, and we're going there right now. By the end of '23, we'll be at 300 million people. They have no disclosed plans to go there ever. And that means we've got room to run with this 40% of America where we're significantly underpenetrated.

Well, it's not just mobile consumers that you think you should be serving with this network anyhow. I mean, you're targeting 7 million to 8 million home broadband customers over the next 5 years. And you think the TAM is huge. I would agree that the market is massive. I believe you estimated at $90 billion. That sounds about right. And by your math, maybe 1/3 of those consumers have choice. So it seems like it's a great place to go, but it's in a competitive market. The telcos are putting more fiber in. Some of your peers see a 5G opportunity. What do you think your competitive advantage is going to be in the residential broadband market? And what do you think is going to make your service stand out in an increasingly competitive field?

Well, first of all, I think investors should be excited about this because if you've ever seen a broadband plan that -- where the success case relies on something like single-digit penetration of homes passed, that's unheard of. And so it's arguably a conservative plan where we say, look, we think we can go get 7 million to 8 million households across this country. And there's a reason for that. The capital is all paid for by the mobile network. We have to have a great mobile network everywhere to be the network leader and to achieve our mobile plan. And that leaves us lots of places where no normal amount of mobile usage is going to take up all that capacity. And so we strategically approved those places for broadband. And look, the competitive advantage is pretty simple. For the 40% of Americans who have no choice today, that means they have one or fewer options like a monopoly, we're going to bring choice and not someday after digging ditches for many, many years, but right now. And today, we're addressing 300 million -- 30 million people, and we see lots of potential over the next 2 or 3 years to bring you a choice at a lower price than your incumbent provider and with all the speed and capacity you need for your family. And here's the thing. You're going to say yes or no to that choice. If you say yes, you'll be in one of these 7 million or 8 million that we're targeting. If you say no, what are AT&T and Verizon going to do when they show up later with their time to market disadvantage in 5G? I mean, once I've given you that choice, and you've said yes or no to an ultra capacity 5G option at a lower price, AT&T and Verizon have to have some totally different story when they show up 1.5 years, 2 years later with the same proposition. And they don't have one. And so time to market is of the essence when you're bringing a 5G home broadband choice to America.

Just one follow-up question on this because you actually launched the Home Internet product earlier this year. And I think your target is to have about 500,000 customers by the end of the year. Are you on pace? And what have you learned about who the early adopters are?

We are on pace. In fact, August was the biggest month in our history on home broadband. And that probably is just because September is not in the books yet. So we're -- it's looking great. We've had more demand than supply. So during some of 2021, we've been somewhat supply-constrained on the home router side. And that seems to be abating now, which is terrific and bodes very well for the next few months. People want this. PCMag did a satisfaction survey and found that customers with T-Mobile 5G home broadband have higher satisfaction than any cable provider. I mean, there were a couple of fiber -- Google Fi always wins this survey. But then any cable provider out there, people are more satisfied with T-Mobile 5G. And that's terrific. So we're excited about it. We have to get better at it. We don't -- this isn't a place we've been. We're learning. We're in a rapid-fire try, learn, pivot, do things. But the short answer to your question is yes, we are very much on track for our targets for 2021.

You also set out some longer-term targets at your Analyst Day, including for service revenue. That would imply something like a 4% pro forma CAGR through that forecasting period. And a lot of the growth vectors that we just touched on are big parts of getting there. Key question we get is, what's the opportunity to outperform? Where do you think you're being conservative? And where could you do maybe much better over time?

Well, there's a long list. It's kind of how we tend to roll here, I guess. Look, one of them that I'm excited about is revenue per customer. Magenta MAX is a blockbuster success. In fact, we're -- I'll just reguide now on this year that instead of being plus or minus 1%, we'll be within 0.5% of last year's ARPU and sequentially up this quarter versus last quarter. And so that -- we're looking great on ARPU. ARPA will be significantly up year-over-year. So that's a growth area for us. Magenta MAX is the best expression of the best 5G network. We're all over it, and so we see potential there. If what transpires is better than the eventual stabilization of ARPU, which is what our plan is written on, there'd be revenue upside there. If we can do better than 20% in enterprise, where fair share looks more like 35, there's revenue upside. If we can do better than 20% in smaller markets and rural areas with the demonstrable best network in the industry, there's revenue upside. If our overall national network reputation takes hold and we become famous as the best network, that's upside. We didn't write the plan assuming that, that reputation comes around. Advanced 5G services. We have nothing in the plan. We wrote this plan on taking share in smartphones and existing devices. Obviously, there's a big new business there that our competitors believe they can't make their plans without. When advanced 5G services come in the enterprise and consumer spaces, that's things like edge computing, dedicated networks, splicing, service level agreements, et cetera, et cetera, that's upside for us. IoT, device proliferation, upside for us. So upside.

And that's great. And we love new data points. So I want to make sure I get the ARPU one right. Sequential growth in ARPU this quarter is what? And this is postpaid phone ARPU, correct?

Right.

And then -- and I think that the prior guidance was that ARPU would be down by no more than 1% versus last year. I think you're improving that to down by no more than 0.5%. Is that the right way to understand that?

That's correct. On a full year over full year basis with a sequential up in Q3, which is you'll get your normal seasonal thing in Q4. But blend it all together, we'll be down less than 0.5%, we believe, as we sit here today on the strength of our performance against the best expression of the best 5G network, Magenta MAX.

Yes, I was going to say, so it really is MAX. The customer really is favoring the higher price point.

Well, there's 2 dynamics here, Brett. One is MAX and the other is prime. We're seeing terrific success with prime customers. And again, these network metrics are on the move. People are understanding now that we have something different to offer on network. The little old T-Mobile of times past has a level of network leadership today. And we're seeing that is expressed in prime consumers, up significantly from a year ago. And that was up from prior. So the best customers in the industry are picking us, and then they're staying with the lowest churn in the industry on the Magenta side. And like I said, we've got a short-term situation we've got to deal with on Sprint, which is why you see us shortening this integration cycle. So we can get that through, dry up that source of growth for AT&T and Verizon and flip it to a tailwind for us as we move those customers over to T-Mobile.

That was my next question is, how do you really think about price versus volume? Because it's going to become increasingly aware to consumers that your network is better. Your price point is lower. Your marginal cost to put more capacity into your network is presumably lower just because you have so much underutilized spectrum that sits on top of the grid of sites you already operate. And so typically, in that environment, some would say we should probably have the highest prices in the market, not necessarily the lowest. So how are you thinking about the trajectory of ARPU and the right pricing strategy to maximize all of that over time and knowing you have some commitments you've made around pricing to get the deal done?

Well, these things have arrows to them. Right now, in this planning period, this 5-year plan, we see it as an opportunity to take share, which is what T-Mobile has always done over the last decade. And price is a nuanced thing. It's not just what you pay. It's what you get for what you pay. You know our customers, and I don't think we've talked about this before, our customers on 5G devices on Magenta MAX are using 35 gigabytes a month and growing. And our competitors can't offer something like that. And so we have much more permissive usage on things like hotspots, on things like prioritization thresholds. We're attracting high-using customers. Our network -- this is all per plan, by the way. Our network, we saw our way to an average use of 80 gigs in the planning period. So we're right on track with what we expected to see on usage. And we're positioning a network that can support usage that our competitors can't support. And so price isn't just about price. It's about what you get for what you pay. And the people that want 5G are making their way to T-Mobile.

So just thinking about opportunities to leverage this network advantage over time. Your largest competitors have really increasingly focused on forming partnerships. Verizon is aligned with cable companies. They also have a couple of mobile edge compute partnerships they've announced with big tech companies. AT&T is now aligned with DISH, as you know. How do you think about who natural partners in the 5G era would be for T-Mobile?

It runs the gamut. This is an area that I'm also very interested. It has to make sense. We have to be able to strategically add value, and it has to go beyond the press release, honestly. I'm not interested in surface-level announcements to feed press releases, which is, frankly, what you see a lot of -- happening in this industry. When we announce something, like we did this spring with Google, it's meaningful. It's a long-term alignment of interest where we're going to get after things together. The thing we did with Lumen was similar. We see a lot of opportunity here, but we're going to be very choiceful so that when we get behind things, we can really get behind them. And listen, our core business is a little different than theirs. We should be more choiceful about partnerships because we have so much room to run in the core. Wireless is a great industry, and we are the best positioned player in that industry. And we have to play this hand of cards organically really well, and that requires a lot of focus. You asked about price and value and value creation. I'm not going to stop until we've got the business that delivers the best cash flow in this industry per revenue dollar because all of us have different geographies. And there's capital-centric plans and OpEx-centric plans and so on, but cash is king. And this plan we wrote gets us past the other guys in cash flow per service revenue dollar and cash flow margin, if you will. And that's going to take some amount of partnering, but it's also going to take stick into the knitting with the best positioned mobile pure play this industry has ever seen.

I do want to quickly ask a follow-up question on DISH. And I know this was already covered to some degree in your earnings call, but they've made this decision to sign AT&T as their primary network partner. And so they're inevitably going to be moving traffic off of your network. They were going to have to move it off the CDMA network anyway because of your plan to shut down, which you revealed a long time ago. Can you give us any update on the financial impact that, that might have? And I think what's not very well understood is how much of an offset you're going to get as you save money by shutting down the CDMA network, where it was primarily supporting DISH.

Well, a couple of things, right. I mean, we are planning to migrate all of the Sprint customers off of CDMA at pace, and that's going very well. Listen, I don't have anything new to say versus what I said at the last quarterly announcement. We're here for DISH. We're here for as much or as little as they need us. We want to be a great partner. Obviously, they're now going to be dividing their activations and their -- and the base between us and AT&T, and that's totally fine. I can tell you that we had already written a plan that assumed they would do what they said they would do, which is build a network and get off ours. And so our plan already had revenues moving down pretty quickly. And there's probably extra pressure in '22 and '23, but not beyond that and not that -- not pressure that we can't absorb with other initiatives in our business. So we're -- as I said in -- at the last earnings announcement, net of that, we reiterate every single piece of guidance we gave at our Analyst Day for both the midterm, inclusive of that critical '23 year as well as for the long term.

I want to touch on balance sheet and some of the comments you've made about returning capital to shareholders. So as of the second quarter, your pro forma net debt to core EBITDA was about 3 turns. And I believe you said that you feel like mid-2s is where the company really should be operating. Based on your outlook for synergy realization and balance sheet delevering, you have committed that you will be buying back $60 billion, or you expect you'll be buying back $60 billion of stock from 2023 to 2025. Based on our estimates, you're going to be at your target leverage actually sooner than that at some point next year. And so what are the general circumstances under which you are comfortable commencing your buyback program?

Well, your question kind of framed it, Brett. I mean, we will commence it when we believe the cash flows are there to support both our debt objectives and the buybacks and assuming that the Board agrees at that time. So that's our philosophy, I'll put it that way. And there are circumstances where that could happen sooner than '23. That seems clear. And your math shows it. I can't comment on spectrum auctions or other investments we may make. And that would potentially compete for those dollars in the very near term, but there are scenarios where we would get going sooner. And our strategy, one of the things about our story and that investors should, I think, feel good about is that our strategy is so clear. We're trying to be extremely transparent. And we've made it clear that our aspiration and it's a priority for us to both achieve investment-grade corporate family as well as to get started as soon as practicable on buybacks in that magnitude of $60 billion. And that's just the beginning in '23 or maybe sooner, '24 and '25. And the enormous annual cash flow potential of this business, '25 and beyond, is very, very exciting. And where we take it from there, we'll have to see.

That's a great place to end. Mike, thanks so much for being with us.

It's great to see you again. Cheers.