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

Good afternoon, and welcome back to Citi's App Economy Conference. For those of you I haven't met, I'm Mike Rollins, and I cover the communications services and infrastructure stocks for Citi. Just before we get started, I'd like to mention that we have disclosures available to the right of the video player as well as under the Citi Disclosures tab if you're viewing this via Velocity. [Operator Instructions]. With that, I'd like to welcome Peter Osvaldik, Executive Vice President and Chief Financial Officer of T-Mobile. Peter, welcome back to the conference.

Well, thank you so much for having us again. It's always a pleasure. Always fun to kick off the year with this conference.

It is. And I just saw that you have some news that's hitting the tape, so we'll get to that. And maybe it just helps. Given it is a new year, we just turned the calendar. Maybe it's a great place to start just sharing the strategic and operating priorities and then we can get into the fourth quarter results that you've just disclosed.

Yes, absolutely. And before we jump in, let me just do the legalese and of course, I can -- I may make some forward-looking statements that can involve a number of risks and uncertainties. So I encourage everybody to review the risk factors in our filings. And of course, we're still in the quiet period for Auction 110, so I can't be discussing that at the moment. So yes, before we get into those great Q4 subscriber results and the ongoing Magenta story rolling on, let's talk a little bit about '22 because it really tailors in. And as we embark on '22, I've got to tell you, we've got a tremendous amount of confidence in keeping this machine going. And it continues to be centered around 3 main priorities. One is, of course, to continue just this unprecedented pace of network deployment. And we just announced in a press release that we now surpassed this year-end, and just hit 210 million covered POPs on ultra capacity. So surpassed our 200 million nationwide goal and hit 210 million, and we can definitely get into a little bit later around contextualizing that and just how much of a tremendous advantage that is relative to our competitors. And we also have now hit 310 million covered POPs with our extended range 5G. So this machine that Neville and team have going, it's absolutely going to be something that we're tremendously focused on and accelerating the pace as much as possible in 2022 given the competitive advantage that it creates for us. The second is, of course, Sprint churn. And we've talked about the importance for us and our focus on accelerating the integration of Sprint customers in 2022 because of the tailwinds that, that brings for us from a churn perspective. We always knew, this was a base, when we acquired them from a postpaid phone perspective that was churning over 2%. And the goal in what we laid out at Analyst Day was to close the gap between Magenta and Sprint churn by half. And the more we get into it, the more optimistic we are in accelerating this because of the underlying performance of Magenta and what we're seeing there with the network and everything else that the value proposition brings, it's important for us to accelerate as much as possible Sprint integration. Because that becomes, instead of a headwind for us with the heightened churn, which is right now a tailwind to a certain degree for AT&T and Verizon, it becomes a full tailwind for us, and we'll talk about underlying Magenta performance a little bit later. And then, of course, the third is to continue on these differentiated growth opportunities that we have and that you've heard us talk about now for a couple of years, first being enterprise and government, and tremendous traction and success and continuing to feed that machine with everything that the 5G capabilities that we're building in this network bring to bear, an underpenetrated market for us. The other is smaller markets in rural areas. Another area where under penetration, which now, not only the combination of Sprint and T-Mobile and those spectrum assets and the deployment of this network brings us the opportunity to bring the T-Mobile value proposition in the network that was once reserved for top markets only into smaller markets in a rural area. And the third is high-speed broadband, where I'll give a little bit of a sneak peek on Q4, we just announced that we absolutely shattered our ending 500,000 customer goal in Q4. And just did a tremendous job there. So we continue to see great progression and great demand and looking forward into 2022 as that breaks. So that's really the 3 main things we're going to be focused on as a team.

Great. That gives us a lot to dig into. And we'll take a moment and as we're getting into the fourth quarter results, we'll introduce our first live survey of our discussion, which is what the industry postpaid phone net adds for 2022 are going to look like, if you don't see it immediately on your screen, just hit the -- scroll down by the disclosures, and you should see the question come up, and we're not tracking individual responses. So it's confidential, respond as you like. And the choices, just so Peter knows because he can't see the survey live, you have a choice for an industry phone that adds 2022 over 2 million to 4 million and over 4 million to 6 million, over 6 million to 8 million, over 8 million to 10 million and over 10 million. And I already see the responses starting to come in. So we'll get to that in a moment. But Peter, talk to us about what happened in the fourth quarter, the net add performance and what created the performance that you delivered today.

Yes, absolutely. Well, again, it's just the health of the Magenta brand and all the opportunities of growth that we've been talking about as we continue to further into it is what allowed us to deliver these results. Now 315,000 postpaid account net additions, our highest Q4 in the last 4 years, 1.8 million total postpaid net customer additions. That's our highest Q4 in company history ever. In that, that includes 844,000 postpaid phone net customer additions, which increased year-over-year. And of course, I mentioned that we just shattered our goals for high-speed Internet and added 224,000 customers to end at 646,000 for the year. And so what you really see there is, again, that the underlying Magenta value proposition, is you continue to see this network rollout and finally breaking down that barrier of customers having to choose between the best network and the best value in the past is resonating tremendously. And remember, this is all being delivered in a period of a compressed integration, which means heightened Sprint churn, and again, we're focused on and believe we will have fewer total DX on the Sprint side from the customer migration period. But because we've compressed it, those will be compressed into the next few quarters at least, very heightened profile. And so to deliver 844,000 postpaid phone nets, plus the 1.8 million total postpaid net customer additions in light of that heightened Sprint churn is amazing. In fact, I'll tell you, had the Sprint churn been equivalent to Magenta churn in Q4, postpaid phone net customer additions would have been 1.4 million, which would have been the highest in company history. So you see the health and the strength of the underlying Magenta brand. And that's why we're so focused on getting that Sprint network integration done as quickly as possible. So yes, I couldn't be more proud of the team and what we've delivered and how we continue to march on with everything that we say we're going to do.

Great. And so let me share some quick results of the survey. So from an industry perspective for 2022, 59% expect it to be basically between 4 million and 6 million, 38%, 6 million to 8 million. and 3%, 8 million to 10 million. And we're on track this year or this past year in '21 to be about 9.5 million. So to kind of put that into perspective, so the audience thinks there could be a significant slowdown coming in postpaid phone net adds. How does T-Mobile look at that?

Yes. Well, as we think about '22 relative to '21, I mean, at some point, this heightened amount will normalize more down. And we can all hypothesize around what the factors were, not everybody discloses everything as transparently as we do in terms of accounts and churn and all of that. But what I can tell you is you have to ask yourself who is best positioned to capture the majority of the growth. Even if it goes down, what's the best positioned company? And we are uniquely positioned in that perspective from a number of fronts. First and foremost, and again, we'll get into the network a little bit more. We can probably talk an hour on just the network progress, but it's building a completely differentiated 5G network, just as it is every single day being more and more important in the minds of consumers and businesses and enabling other growth adjacencies such as high-speed Internet for us. So that's one. You have a foundation of the product that you sell is differentiated. And then you have a combination of -- and we are uniquely positioned to have growth in areas that we touched on just a little bit earlier. Smaller markets in rural areas where we have a mid-teen share. And right now, when you fast forward to what this network deployment is going to be, now we're really going to be the only ones who are covering what we call smaller markets in rural areas with mid-band ultra-capacity 5G, really game changing. So a tremendous competitive advantage there to continue to take share. Enterprise and government. I mean, you've seen the results. We talked about Q3 and previously just what we've seen relative to the competition. We obviously don't have Verizon's numbers for Q4 yet. But we tremendously continue to accelerate there. And Mike Katz and his team are doing just a great job both from just the core connectivity perspective of phone, but also these highly accretive other net phone connections that we're doing a tremendous job on. And I think, again, we're best positioned given the network capabilities that we're building, the only ones with a stand-alone core at the moment, to really showcase for companies what these advanced network services that we all talk about, mobile edge compute, private networks. We are best positioned in the best partnership to be able to deliver those. And again, that's not -- those aren't even in our Analyst Day forecast of what we gave. That's all upside to us. So it's a matter of who do you believe is best positioned to take share. And of course, we've already rolled out this 5G network, and that 210 million covered POPs that I talked about is over 80% of our current T-Mobile customers. So there's no way that we're going to lose in the markets where we're dominant. And yet we have all this differentiated opportunity in the markets where we have low share. So that's the way T-Mobile looks at it. and we're more than excited to get into 2020 and continue competing.

Well, let's see what the buy side thinks of what '22 could look like from a phone add perspective. You just did 2.9 million, I think, for the year in terms of postpaid phone net adds. And we're going to give our audience a choice of 1.5 million or less, 1.6 million to 2.0 million, 2.1 million to 2.5 million. I'm actually going to edit this real time because we're missing a slice here. So while I do this, let me get the survey up, so we have 2.5 million to 3.0 million and more than 3.0 million. Let me ask you this, Peter, what about the quality of the adds? How did these adds come in, in terms of getting to the ARPU goals and the profitability goals that T-Mobile has been aspiring to hit for this year -- or this past year, I should say?

Yes. Absolutely. And our results that we've released every quarter, I think, speak for themselves in terms of our mantra and our goal has been profitable growth, and that's what we've been delivering. In terms of the customer additions, we're very, very pleased with what we're seeing, both from a -- you can look at it in a number of ways in terms of how we're driving new customers in. For example, the network, right? And the network is driving a tremendous amount of customers in the door. The Magenta MAX adoption we've talked about previously, our true unlimited plan that showcases the power of this network, the adoption was over half for new customers coming in. And so that is really bringing in prime consumers. In fact, when we look at credit applications and the prime mix of credit applications, that's up year-over-year, several percentage points. When we look at enterprise and government, I mean, what we're bringing in, tremendously high-quality customers with significant CLVs. And again, as I mentioned before, that goes beyond just postpaid phone, but this other connected category that is starting to grow, and I think we'll grow tremendously during the era of 5G is another one where we're bringing in just really, really top quality customers. So we're very pleased with what we're seeing in terms of profitable adds and how we approach every quarter, which you've heard us talk about is, we're not there chasing the necessarily -- the leadership position on phone, right? We're there to integrate Sprint as quickly as possible to give that tailwind of churn behind us, and allowing us to grow even further and then bringing on customers in a very profitable centric way, and that's what we're executing on.

And can you give us an update on where you are with the integration?

Yes. So there's a number of factors around the integration that you talked -- you've heard us talk about. First is network integration. So as this build is happening, of course, at the same time now, we're in the period of decommissioning. So network integration, moving all of the traffic over onto the anchor T-Mobile network, which is rapidly being built as well and expanding. And we're well on pace there with what we previously said in Q3, which is to really have substantially all of the towers decommissioned by the end of '22 and the traffic moved over by mid-2022. So that's the goal. That helps us and allows us to free up all of that spectrum, get it over onto the T-Mobile anchor network as well as decommission the sites and start realizing what is the largest portion of synergy savings here coming from the network. The other part is the handset compatibility. And we talked at the close of the merger, there was a significant amount of handsets that were compatible. But right now, during this period, there's still a lot of Sprint customers that we're looking at in, for example, ensuring that they have a 600 megahertz compatible device, right, to take full advantage of the network architecture in both extended range which is built on that low band, but then also the ultra capacity mid-band 5G network that we're building. So really making sure and seeding the right handsets for compatibility purposes to bring them in. We talked about rate plan migration, and we did the vast majority of rate plan migrations beginning in the first half of 2021. There's a few more left to go here in Q1 and Q2 of this year, in particular, as we groom that base for what is then, and you've heard us talk about this, a very seamless billing migration. Because we're able to disconnect that network migration, the brand migration and the billing migration, that is going to be a very low touch and very frictionless customer experience. And that will continue beyond the network shutdown to make it a very easy, friendly, very churn-reducing type of events, but it's going to be a low touch -- that's going to continue into 2023. The other thing that we've talked about is how do you bring the rest of the value proposition? For example, the Team of Experts care model, an award winning model, which we're continuing to roll out to the Sprint customer base, and that will continue throughout this year. But as it relates to the network itself, no change in the plans. From a CDMA perspective. We are focused on getting that network shut down on March 31 to enable everybody there to benefit from the newest technologies. And then from a Sprint LTE perspective, as we said, sunsetting in the middle of 2022. So great progress on integration and hyper focused on it as a team.

And is there a risk at this point that those dates could slip or based on the plans that you have and the discussions with some of the regulators that were involved, does it feel pretty firm now that those are going to be the dates for the shutdowns?

Yes. It's certainly the plan that we're working towards and what we believe will be the case at this point.

And so let's see what our survey results are for T-Mobile postpaid phone net adds in 2022. So the results are 4%, 1.5 million or less, 13%, 1.6 million to 2.0 million, 48%, 2.1 million to 2.5 million, 26%, 2.6 million to 3.0 million and 9% over 3 million. Any reaction to our audience?

Excellent. I love hearing certainly what everybody's opinions are, and I can't wait to get to year-end and be able to give a holistic financial story as well as issue guidance.

Peter, you mentioned that there's heightened Sprint churn right now and you're comparing what some of the performance could have been if you didn't have that. What's the risk that this heightened churn actually gets a little tougher in the first half of the year as you get towards that full Sprint LTE shutdown? And how should just investors be mindful of the flow of performance for T-Mobile during the course of 2022.

Yes. As I mentioned, Mike, given that we're so hyper-focused on getting this done as quickly as possible in bringing customers over to a full value proposition as quickly as possible, this will be the period, as we're thinking through 2022, of heightened churn. And again, the benefit there is we still believe we're going to have fewer total DX than what was in our plan that underpinned Analyst Day, but it will be during the compressed period. So 2022, we'll continue to see heightened Sprint churn, which is completely part of the plan. But that light at the end of the tunnel and that benefit is just so worth it to us. And yet, despite what you've seen, which that absolutely existed in Q4. You saw postpaid phone churn of 1.10. And that's a tale of 2 stories, much like we've been dissecting for you before. And yet, despite that heightened period, we still delivered what we did in terms of 844,000 postpaid phone net adds on the strength of that Magenta brand. So 2022, that's the focus point. This will be a period of heightened churn for us, exactly what was part of the plan.

And in terms of -- you mentioned earlier about the Magenta churn performance being obviously much more favorable when you talked earlier, how does that Magenta churn compare to other periods, whereas I think if you look at the aggregate postpaid phone churn number, it might have been up a little bit.

Yes. No, we're very pleased with that. I mean, I don't always dissect them and can't give you every single number, but it continues to be right there with the industry participants and industry-leading certain quarters and right there with others. So very, very pleased with what we're seeing in the Magenta churn performance as well as Magenta partying and how NPI went for us. All of those things really give us reason to believe in the strength of this brand.

You mentioned the progress with the network. And today, you also disclosed the deal with Crown Castle for both the towers and the small cells. Can you talk about the benefits for T-Mobile. And also how to think about the cost that may impact T-Mobile's financials in '22?

Yes. Well, let me start with the network and what this Crown Castle agreement as well as the previous ones enable for us. And when you future look into what are we building versus what the competition has announced. And it's really fun to finally see Verizon and AT&T come to the party, right, after saying that band wasn't the strategy and going millimeter wave for Verizon, finally getting on to the party. Now of course, it's 2 years too late, and we're going to continue to be 2 years ahead of the game. When you think about what we just announced was 210 million ultra capacity mid-band covered POPs and over nationwide what Verizon has announced is they're going to light up 100 million covered POPs. And by the way, we've done our 210 with already 100 megahertz depth of mid-band spectrum. They're going to be stuck on a 60 megahertz sliver of C-band until sometime at the end of 2023, most likely. So a tremendous disparity there in what already exists, yet we're on our way to covering 300 million POPs with mid-band capacity by the end of 2023. And that's with 200 megahertz of depth of mid-band spectrum. So just the breadth and depth of what Neville and his team are building here from a network perspective, just is miles ahead of what Verizon is announcing. And AT&T, it seems like they've announced 75 million as a goal by the end of 2022. So it feels to me like they decided their customers just don't deserve 5G. So we're here to help. We're building the network that can definitely cover everybody and has the capacity. But another way to look at it is we believe we've deployed 3 to 4x the number of mid-band sites, then Verizon will have to light up that 100 million covered POPs. Because when you think about geographic density, the 200 million to 300 million covered POPs, as we've talked about, is 5x the geographic land mass. So we're very excited about how this competitive differentiator for us is going to continue for the next couple of years. And so, with that, what we focused on with Neville at, Mike, is how do we accelerate this network build. And our goal is really to try to bring in as much from 2023 into 2022. And I believe CapEx will likely be higher year-over-year as we race to implement and really create this network even faster than we planned. So pulling forward from '23 into '22 CapEx. And then, we talked about Crown Castle, and that's just such a great win-win story and a great partnership with Crown Castle. And with this agreement and the previously announced American Tower agreement, it really gives us everything we need to go deploy this network as quickly as we are. So a 12-year agreement, tremendously excited about where we landed from both an ability to access Crown's entire portfolio on a macro site that absolutely lines up where we're trying to build incremental sites and get coverage, very excited about that. The escalators that we are able to achieve, I'm just tremendously pleased with -- everything that we laid out at Analyst Day in terms of our assumption sets for what we would have to get in this deal have been met and in fact, probably a little bit better than what I anticipated in the guidance that underpinned Analyst Day. The other thing to note is we've talked about 35,000 small cell nodes. I think it's important just to clarify for people. For us, those small cell nodes, the 35,000 is primarily upgrades to existing locations to add additional spectrum such as our mid-band 5G spectrum. So it's not new locations, it's primarily upgrades for us. And again, tremendously pleased, 12-year deal gives us everything we need from a certainty, pricing, ability to go hang all the technology that we want up on the sites. And of course, that longer term duration from an accounting perspective means, yes, you're going to have higher operating lease liabilities and financial lease liabilities as a result of that extended term. We think that will roughly be in the mid-$5 billion range for U.S. GAAP, that is going to increase the liability. And that's the straight-line impact that you mentioned. But for us, that was all contemplated, as I said, in what we gave to you at Analyst Day and even slightly better. So very, very pleased with what we were able to achieve. It's a win-win, but a tremendous win for us.

And does that influence the ability to hit your 2023 EBITDA -- core EBITDA guidance range that you previously established?

Absolutely, it gives us everything we need to hit the synergies that underpins that 2023 EBITDA guidance that we gave you. Yes, so again, everything we need from a lease perspective with this deal, is set and done. So very, very pleased to have gotten this done.

So I'm going introduce our third survey, which is going to preview that we're going to get to the fixed wireless discussion. We'll interject a couple of other questions in between so we don't bias the audience of what they think. But how many fixed wireless broadband subscribers will T-Mobile add in 2022? Under 0.5 million, 0.5 million to 1 million, 1 million to 1.5 million or over 1.5 million. And you just did -- was it 546,000 net adds to end the year with 646,000?

Right. Exactly. So always...

So get to that...

I'm going to give you some thoughts.

Exactly. So we'll wait for the answers. And in the meantime, any update on the timing of DISH or Tracfone revenues potentially rolling off in 2022 and 2023?

No. No real update there. I think, again, as we said, with the AT&T DISH deal, that could result in a slightly faster roll off of DISH revenues. But with the capacity we're building in this 5G network, it also opens up opportunities for other wholesale partners. And of course, we're also, to date, over delivering against what we anticipated for 2021 and in terms of customers and through Q3, you saw what we said around ARPU and what we delivered there. While we thought there would be dilution with the adoption of Magenta MAX and what this product offering allows for consumers and the adoption from new consumers, we were able to keep ARPU guidance flat versus being down. So there's a lot of upside potential there. We've talked about a lot of these advanced network services that we have coming down the pipeline, mobile edge compute, private networks, that remember, were not included in the guidance that we gave that underpinned our Analyst Day guidance. We know they're coming. We believe we're best positioned given the network capabilities and the breadth to go capture those, but they weren't included. Those are all upside opportunities as well as if we can overachieve our penetration goals in smaller markets and rural areas as well as enterprise and government. So very, very confident in the service revenue ranges that we gave for Analyst Day as well as the EBITDA that we gave for Analyst Day. And if DISH rolls off faster than anticipated in that, we have a lot of capacity to go fill.

Let's see what the results are. So our results from the survey, we have 7% under 0.5 million, 31% between 0.5 million and 1 million, 59% 1 million to 1.5 million and 3% over 1.5 million.

Well, excellent. I've got to tell you '21 was just a great year, as you said, ending with 646,000 high-speed Internet adds. And the quality of customers and what we're seeing come in, both from a usage perspective, the average customer is using in the hundreds of gigabytes per month. So more like 10x what a 5G smartphone consumer on Magenta MAX is using, perfectly capable of handling that with the network that we're building. NPS scores are multiples higher than previous -- of what those customers' previous providers were. So very, very great there. You saw third-party recognition come in, which is PC Mag Readers' Choice for our high-speed internet product. So I think everything is going great there. We expect a little bit more supplier diversity on the router side in 2022, which will help fill that supply need. And I expect 2022 to be bigger than 2021, absolutely. And then 2023 to be bigger than 2022 in terms of net adds. So very optimistic about what we're seeing there from a demand perspective. And of course, as you build the network and another reason why accelerating the build from '23 into '22 is important, you create more capacity for these net additions. So very pleased there.

Are a greater percentage of these adds coming from existing broadband competitors? Or are they coming from markets that are generally underserved with broadband?

Yes, we're seeing both. It's very unique what we've seen with the customer acquisition profile here. First off, just new to T-Mobile relationships, a significant percentage of these net adds are new to T-Mobile relationships. And my definition, especially when you're seeing the usage and the NPS scores the network is working really well for those customers where they live. And that, I think, provides a tremendous opportunity for us to cross-sell the mobile wireless side of the house. So that's a unique proposition for us that I don't think we anticipated to the degree that it's happened. And in terms of geographic distribution and provider. Yes, we're definitely seeing adds come from smaller markets in rural areas where perhaps the quality of a different product may not exist or may be very limited, but we're also seeing it come from cable territory, rural and suburban. So it's -- the demand is there across all the geographies and segments as well as I said, new to T-Mobile customers that allow us then to establish that household relationship and then grow it and grow ARPU over time. So yes, I couldn't be happier with what we're seeing to date.

So T-Mobile has been part of some pivots in the industry with the way services have been priced. It led a pivot in the industry, for example, with the unbundling of phones from rate plans a few years back. Are we at the beginning of another pivot where there's going to be a bigger focus on bundling fixed wireless broadband or just broadband, I should say, in the home, with mobile subscriptions? And how do you see that playing out for T-Mobile?

Yes. Well, you're right. This industry is always competitive and makes pivots. Most of those are driven by us in the name of giving customers more value in what they want. And it's always promotional, and we've always played tremendously well in that. Now as you think about this question of converged offerings, the U.S. has been and continues to predominantly be I think a market where consumers look at the mobile wireless and the fixed home broadband as 2 separate purchasing decisions. They absolutely do. However, in the -- for those that are looking at converged offerings, we believe we're tremendously well positioned. First off, just the network itself, again, and building, as I've said, a completely differentiated 5G network with both coverage depth and capabilities, but also then taking away that age old consumer trade-off of best network or value. So you have the best wireless network to go right on. And then for those that want it, we have this high-speed Internet offering that we've talked about the results, is doing tremendously well and resonating tremendously well with consumers as well as bringing new consumers in. So I think we're very well positioned to compete, much as we always have as well as innovate in areas of perhaps convergence. But I see the U.S. market continuing on with -- for a significant period of time with distinct purchasing decisions in the minds of most consumers here.

We often get the question just about the competitive landscape broadly and just whether you see it shifting, getting more difficult. And then there's another side of this, which we've gotten some questions on today into our site which is if there's a way to quantify the forward progress T-Mobile is making at improving the brand perception, getting credit for the 5G work that you're doing. So I guess it's a 2-sided question. One, just in terms of how you view the pace and cost of the competitive landscape and the progress that T-Mobile is trying to make with its brand within that context.

Yes. Well, let me start maybe with the brand perception because we've seen a lot of goodness there. And as I said, as 5G becomes more and more relevant and more and more of a factor in consumer purchasing decisions as well as enterprise purchasing decisions, you see our brand metrics just are doing phenomenally well. I mean year-over-year, if you look at the last 2 years, as you -- as we do, both noncustomer surveys and understand how they view T-Mobile, both from an overall network perspective as well as from a 5G network perspective, we see a lot of growth year-over-year in terms of consumers, both understanding we're the leader as well as what 5G capabilities we're bringing. And that's on the consumer side as well as on the business and government side, where both consideration metrics for T-Mobile as well as seeing us as the 5G leader continue to grow year-over-year. So I think we're doing a great job on the brand perception front. You see third-party reports over now over a dozen independent third-party reports talking about how we're #1 in nationwide 5G speed, availability, reliability, and those are the things that we're going to continue to lean on. From a competitive environment and a promotional environment, said there's always pivots. There's always different forms of how promotions are happening. Certainly, AT&T and Verizon have pushed into the handset promotion space, AT&T, I think, very aggressively so. It's been very interesting to watch where they are seeding handsets into their customer base that will work phenomenally better on the T-Mobile 5G network and with their self-announced 75 million coverage goal by the end of 2022. It doesn't look like they're looking to give those customers 5G. So we're very pleased with how the promotional environment is working out because we always know how to work within it. And that's how we're delivering the results. And that's, again, the underlying Magenta brand and how it's doing is phenomenal.

We're going to go to 1 more survey question, which is when do you expect T-Mobile will initiate share repurchases? And we gave 3 choices for this: 2022, 2023, and 2024 or later. And we'll get back to that topic in a moment. Peter, as you're looking out to 2022, talked about a number of things and realize that you're going to get to a lot more detail in a few weeks when you get to the official fourth quarter results. But are there any other areas that you want investors to be mindful of in terms of integration milestones or other aspects of the way the business strategies and integration strategy is going to evolve over the course of 2022?

Yes. I think it's all back to those 3 priorities we talked about at the onset. How are we executing against what we're committing to, both on the network build, and we'll continually update you on what we're doing in terms of coverage and reliability and perception stats, and you saw what we delivered in 2021, and Neville and team certainly have grand plans for 2022, which is why we're pulling in CapEx from '23, and we'll have actually more CapEx in '22 than '21 on the network. So that's one. The other is Sprint integration. So how are we achieving and meeting these milestones for particularly network traffic migration and decommissioning. And for us, the decommissioning of the cell site or the cease use date is really what triggers the lease liability recognition and what triggers all of the synergies on a go-forward basis. So that is going to be a pivotal year in 2022, where we'll be able to shut all of that down, decommission the sites and realize all of those network synergies. So that's a little bit differentiated than what you heard Crown say in terms of how they recognize revenue as how we recognize the decommissioning. So that's a milestone I would absolutely be looking to. And then how are we progressing against those growth initiatives, right? That's -- which we're doing phenomenally well to date. And how do we continue working against those in 2022? We have great plans against those. Teams are energized. You saw the Q4 results. we're happy to continue executing against those.

From just a logic perspective of what you just outlined, does that mean if you're able to shut everything down, Sprint LTE, CDMA is already shut down by June 30, that there could be a step function decrease in network costs and a step function up in EBITDA because as you -- if you decommission June 30, you get the opportunity to get those savings in EBITDA in the second half of the year?

Yes. And it will be around that mid-2022 point that we're targeting. So not necessarily exactly June 30 that all the decom of the towers will happen, right? But certainly, as we progress through that in this year, then yes, as you hit that cease use date, we decommission it, it's not dependent on when the lease term ends. That doesn't happen. But it's really that point at which we trigger, and on a go-forward basis, we're going to get all of that synergy capture from the network. Now in cost of services, of course, you have offsetting factors. We talked about the straight-line noncash lease expense from the Crown Castle deal. Of course, we continue to deploy the network, and we'll be building new sites. So you have offsetting factors to some of that. When you look at the cost of service line item, fundamentally, yes, when we hit the cease use date of those towers in 2022, go forward, you're going to start seeing all that synergy realization.

So if we get to the survey question, and this is a question that we get a lot about your buyback opportunity. So 44% 2022, 41% '23 and 15% '24 or later. So I believe the guidance is for '23, is when the share repurchases were supposed to begin. What are the opportunities? And what would be the factors that could cause T-Mobile to bring that forward sometime into 2022?

No, you're absolutely right. The guidance was up to $60 billion of share repurchase opportunity as we see the synergy-backed model and this growth model continue and deliver a conversion of service revenue into free cash flow at a rate much better than the competition in that midterm. And that's what allows the potential for shareholder remuneration. As we think about timing, it's going to be dependent on a number of factors, how quickly can we get through this integration, how are we progressing against the plan? You certainly saw how we're doing 2021, but how does '22 shape up? And if we're progressing and overachieving all of those milestones, then of course, it'd be something that we've discussed with the Board as to whether there's opportunity to bring that forward.

Are you ready for our rapid fire, 3 questions in 3 minutes?

Let's do it.

Great. First question, why should investors buy your equity?

Nobody else is executing a synergy-backed model with clear differentiated and communicated growth opportunities as to why we should capture the share and continue to grow. And that translates, as I said, into the best service revenue into free cash flow conversion. And also, as we guided, an unprecedented free cash flow CAGR from '21 to '24 of 45%. And that is the value unlock for investors that T-Mobile represents.

Second question, is inflation a net opportunity, net neutral or net risk for your business model and financial performance.

Yes. And of course, from a broad perspective, significant inflation would not be great for the economy or consumers. When you think about it from a T-Mobile perspective, I'd say -- I would say at a high level, net neutral. And the reason I say that is because we've had the foresight, Neville and team and others to really lock in rates for what constitutes a significant portion of our cost. When you think about the industry-first and leading with the OEM agreements that we did with Ericsson and Nokia, the fuel that spilled out that lock-in cost. When you think about the tower agreements that we reached from American and now Crown Castle, that allows us to have certainty around cost elements for what are the very significant elements in our P&L. So certainly don't want to see significant inflation from an overall economy perspective, but for us, let's say, generally net neutral.

Final question. since this is the Apps Economy conference, what application can fundamentally change demand for connectivity or data consumption over the next few years?

I think there's a number of fronts that we're seeing, some that you're already seeing manifest that we've talked about. First, the smartphone, right? Data use consumption on our Magenta MAX plan that's fueled by this network is tremendous. And it's not just data usage, but it also means how our customers and consumers are actually interacting, right, the video usage. The music, the gaming, they are expecting and demanding more performance and more throughput from the network. The other is outside of phone. All of the other non-phone connected devices that are starting to proliferate. And I don't mean just tablets and watches, but you see other new devices coming on board that I think 5G will enable tremendously. And again, we're the best capture to use that. The third I'd say is the advanced network services space that we talked about, right? Massive IoT, private networks, mobile edge compute, those are coming and will have a step change. And then things like high-speed Internet for us. And what we're already doing there, that's another fundamental use case that allows us to grow and harness the power of this network. So yes, I'm very excited about what the future holds in this space.

Well, Peter, it's great to see you. Thanks for joining us today.

Thank you so much, Mike, as always, great conference and really appreciate the time to speak to you.

Thank you.