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

Our next speaker today is Neville Ray, the President of Technology at T-Mobile. Neville, thanks for being here. .

Thanks, John. Great to be here. Excited. Thanks for making time for us today.

Absolutely. So Batya and I have questions for about 45 minutes. And if anybody has any question -- is there anybody to ask questions from the webcast?

No.

Okay. That's probably -- we're probably better off with that. And maybe we could start with just sort of update on the current state of the network. You reached 225 million POPs of 2.5 gigahertz coverage ahead of the target. What's the plan as you look forward?

Yes, absolutely. Before we do that, though, Jud informs me that I have to do the disclosure thing. So I just want to note that I may make some forward-looking statements that involve risks and uncertainties and encourage you to review the risk factors set forth in our SEC filings. The other thing I'd note is that we're in the quiet period for the next FCC auction, want to wait. So I won't be able to talk about that today. Okay. So -- but yes, delighted to update everybody on where we are with the network. And I think the progress the team has made over the last 2 years -- it's just over 2 years since we closed the combination of T-Mobile and Sprint together, and we celebrated that a couple of months ago. And if you look at what we said we would get done, John, in that period, actually in that first 3 years, and then the 6-year tranche of activity, as we've reported and said many times before, we're ahead of plan. And I've always looked at the combination of T-Mobile and Sprint and these 2 networks coming together the powerhouse story we can deliver, there's 3 major steps. One is building this great 5G network. And I'll come back to that in a second. The second phase has been about migrating customers onto that end-state network, and we've made great progress there. Almost all of the traffic today sits on the resident network, the final network for T-Mobile. And then the third stage was driving into decommissioning and generating all of the synergies, which really transform the balance sheet for T-Mobile on an ongoing basis. So all of those things, those 3 steps we've made material progress on all 3. We've been through -- goodness, we've all been through a hell over a couple of years, right, with the global pandemic. Now we've got war in Europe. But I'm just delighted with the progress the business and the team has been able to make. The network performance has been strong, and you guys know overall financial performance; whichever dimension of growth you look at for the company, we've been doing very, very well. So if you look at the network overall and where we are, you referenced the 225 million POPs on mid-band, but if I could, just for a minute, talk about kind of that core architecture in terms of the radio, John. And we started our mission on building out a very broad 5G network across the country, actually before we combined with Sprint. And that footprint today reaches 315 million people.

And that's with the 600...?

That's the 600 megahertz low band. We call that our extended range 5G. That covers 95% of Americans today. So -- and if you look at stats across the globe, and that's an FDD network, right? I don't want to get into too many technicals with this team. We can go as deep as you like, but that's a frequency division network. So that's what everybody did prior to TDD. And that's the largest FDD 5G network in the world, just to give a sense of the scale and size of that 5G footprint. So it's a huge network. We built it with dedicated spectrum. So we didn't force 5G cars on to the same old LTE freeway, which is kind of the dynamic spectrum sharing approach our competition was forced to do. We benefited from fallow 600-megahertz spectrum. And so we've been able to bolt on new lanes, new 5G lanes on to the freeway. And so our performance in that layer is really good. There's a real differentiation between LTE and 5G performance in our low-band footprint. And we're delighted with that reach. And that's the foundation. And just to put that in terms of competitive scale, the geographic reach of that 5G network today is about 4x that of Verizon. So I mean, it's multiples in terms of 5G reaching capability. So that's kind of the leadership position we put in place on 5G to start. Then what we've been focused on the last 2 years -- finally gets to your question, John, where are we on this mid-band rollout? And it's mid-band spectrum that is really delivering the truly transformative 5G experience that we've all been excited about. We've been talking about it for several years. And that's at 225 million as of last earnings report and not updating today. We'll update with Q2 results. But 260 million is our plan for the end of this year. And we are well on plan to execute and make that happen. Delighted with our progress against that goal and objective and then 300 million POPs by the end of next year. Quick stat and update for you. 100 megahertz of spectrum across the nation averaged is now dedicated to 5G in mid-band. So that's more than the 60 and 40 of AT&T and Verizon combined in C-band that's available today. So 100 megahertz there, and the plan is by the end of next year to double that number.

So the 300 million will be by 200 megahertz?

That's the plan. And we moved from just having mid-band TDD in the 2.5 GHz band. We will also have FDD 5G in other mid-bands, such as PCS, and that's going to be the big push, will be PCS on top of --.

There is 1.9.

The 1.9.

Okay. Just to make sure I understand that. So by year-end '23, you have the 300 million POPs of the 2.5 GHz at 200 megahertz. And then you'll also have the PCS or that's subsequent to that?

So across that, we'll have 300 million POPs covered with mid-band. Not all of that is going to be -- all of that will have TDD. And then the intent is to add on top of that PCS. And so...

And how much is that? How much spectrum?

Well, the PCS -- if you add our PCS and AWS assets together, that's 110 megahertz that's FDD spectrum, right? But if you look at our spectrum position across the mid-band, it's very strong and puts us in a great place. So if you want to kind of set the end game for -- just draw the line at the end of next year and the challenging gap in front of AT&T and Verizon to match where we are, it's massive build, massive spectrum. I mean that leadership gap cannot be closed in that time frame. And I'm not fully aware of everything that's been discussed this morning from our competitors. But the great story for us, for our customers, for investors in T-Mobile business is that we have a very powerful material lead, and we are the first company that is really delivering a cohesive 5G set of services and capabilities. We announced this morning -- we just started commercial launch on voice on 5G, so VONR, Voice Over New Radio. We can talk more about architecture going forward. But we have an SA core. We're moving into a level of delivery of 5G capability and services that our competition just can't match at this point in time. So I'm super excited to talk about what we're already doing with 5G. But when you think about the innovation and development activity that's ongoing, what will come as we move into the next 2, 3, 4, 5 years, this build and this push that we've made over the last 2 years is just tremendous. And I'd just add, I mean, it's everything we said we would do. We went in front of almost every state and federal agency and regulatory body to get this deal approved. And we have come through and we have delivered time and time again against the commitments, and we're actually ahead of delivering on the vast majority of those commitments at this point in time, let alone a 3-year milestone, which will come up next year. And we said that you put these 2 companies together, you can create a powerhouse 5G network that will lead the U.S. into the 5G era, and that is exactly what T-Mobile is going through.

Before we move off the sort of the spectrum deployment, what your competitors did focus on is C-band and 3.45 GHz. In the conversations we've been having, you haven't even mentioned it. You've got so much to work with. When you did, you have filled the coffers with C-band and 3.45 GHz. So when does that come to into play? Is that after the refarming of the PCS? Or when does this...

Well, many of those things will work in parallel. I mean we haven't started on deployment activity on 3.45 GHz and the DoD and the C-band spectrum.

Because you get that later, right?

C-band comes later. The DoD spectrum is available in many areas now, right? the problem there as I'm sure you heard from AT&T is the DoD spectrum is a little stranded on electronics right now, right? C-band's clearly there. Verizon's busy starting their deployment. But for us, I mean, we want to be able to leverage because of the spectrum position, the strong position we're in, we want to leverage the ecosystem, and we'll wait until there's a truly one single combined radio, not two integrated radios bolted together. And the U.S. kind of strayed with the insertion of CBRS between those 2 bands in the first place. [indiscernible]in the world is 1 band. So it should have always been 1 radio. But Verizon, obviously, didn't buy any DoD spectrum, but AT&T is today trying to -- they have to deploy effectively 2 radios in what is -- band 77 is a common band across the world, but because of CBRS in the middle. So the technology is advancing, there'll be a combined radio, fully combined ratio available next year. And then the opportunity for us is where do we need it? Where do we need to add that capacity? Where does it make sense for us? Right now, as we're upgrading these sites, we still have 600 megahertz upgrades. Big, big focus has been the 2.5 GHz, but we're also upgrading that FDD mid-band radio as we go. So the first thing in line, John, for the next light up is really PCS.

Beyond what you're doing in 2.5 GHz.

We purchased those assets. I think we were very disciplined in both of those auctions. We stayed within kind of the core metro footprint. DoD is really only where we bought C-band, so we can leverage that benefit of single economics. And it's really to protect us on capacity as we go into the outer years.

Could you provide a bit of maybe numbers around what does that 225 million POPs imply in terms of how many towers have been upgraded and what the next level is?

Yes. We've never disclosed -- I should disclose specific numbers because then It would -- you get the full scale of our network versus what Verizon has built on C-band, but I'm not going to do it today. I'll tell you this. So if you look at the target network and where we want to bring 5G across that target network base at the end of all of this integration activity we're approaching, 75% of those sites were already upgraded. And so we've been clipping along over weeks we've been hitting 1,000 radio upgrades are getting executed in a week. Now we're not building towers. I think sometimes folks get confused as to what we're doing. We're adding radio to existing infrastructure. And that might be with ATC, it might be with Crown, it might be with SBA. Obviously, there's a whole host of networks in urban environments that live on rooftops with private landlords. But that adding of mid-band spectrum, not to say it's not -- it's a huge task because these radios support massive bandwidth. There's a lot of electronics that hit the towers, the power upgrades, all the things that we have to do. It's almost like rebuilding the site when you go into this thing with this powerful mid-band layer. And so all of that work is really ahead of our competition, which is the tough piece that they've got to take on. We've been able to execute and deliver tens upon tens of thousands of sites upgraded during a pandemic with a challenged supply chain, businesses trying to figure out how do we even execute work, jurisdictions trying to figure out how to issue permits. I mean, the degree and volume of challenges that the team took on and knocked down over the last 2 years is remarkable. And I've never seen, I think there's really -- if you went to the Chinese market, you would see rollout at an incredible pace because of the jurisdiction upon zoning and environment that exist there, but there's nothing that's been achieved like this in the U.S., and I've been doing this in the U.S. multiple decades. So we've really leveraged the opportunity that was put in front of us. And that's the exciting piece.

Are you seeing any change to that right now, just given the environment a little bit more delays in terms of supply chain or getting [ tower ]...

Yes. I mean I think our supply chain -- for us right now, '22 is a year where we're actually accelerating. We've talked about our guide and our plan for the year. We actually poured capital into '22 to leverage the momentum that we have. And so our suppliers are in a very strong place. We started with building resource commitments 2 years ago. And this industry has had horrible like sign wave resource requirements. And for the GC community that's very, very hard to manage. We've been able to put this constant wave of activity into the hands of our partners. We negotiated many of those deals going back 2 years ago. And that's been super helpful for us. So we have a very loyal resource base. Inflation risks have been very limited for us to date. I got to give a shout out to Mike Simpson and his team. Mike leads our procurement for the company and the work that team did on supply chain. We are in a strong supply chain situation because of all that work. If you don't do all that work, I think supply chain could be a real problem for you. I mean we've worked with not just the headline OEMs, but often way down the stack in terms of component and chipset suppliers, almost all daily calls, shipping and logistics, we found ways to get around all the freight problems that were existing, not going to give away our trade secrets on that. But we found ways to keep our costs at the levels we anticipated and maintain our delivery flow. And this machine that feeds up to 1,000 sites a week is enormous. I mean the logistics involved in that in terms of just trucking, warehousing, shipping, it's a sight to behold. And honestly, I've never done anything like this in my career. And I'm glad we're -- it's an incredible position to be in, but our competition faces all of that to ramp up. One more dimension I'd give you just on that mid-band footprint. So we tripled the geographic coverage of our mid-band network in 2021. We will triple it again in 2022. So that gives you a sense of the volume and commitment of sites that have to go in. It's not -- I'll give you a multiple on sites. I'm just giving you the geographic reach. But obviously, the further geography you have, there's a lot of sites you need. And then in '23, that number will double again. And so that mid-band footprint is becoming very, very, very broad. And as I keep saying, that work's ahead of our competition. So...

And then what about going from -- so that's a good summary of the reach of the 2.5 GHz. Talk about the sort of the depth. So going from 100 megahertz to 200 megahertz. What has to happen -- I mean, I would imagine you won't need to time the towers again to do that or would you or -- and then so what sort of effort will that take? And then should users see a difference? Or does it just create more -- is it faster speeds? Does it allow for greater capacity in your business? Or how should we think...

All of the above, right? And so to actually upgrade to those higher bandwidths is really a function of LTE migration. And so as that spectrum frees up from the LTE base...

And this was -- I guess, Sprint did deploy some 2.5 GHz?

They did. Although that was all rebuilt and replaced obviously. But if you look at LTE penetration, right, so 45% of our postpaid [ phone ] base carries a 5G phone already. A quick update on a stat. So 55% of the entire network traffic is generated off 5G devices today. And so this wave of 5G consumption and traffic creation is incredible inside the timeframes that we're talking about. But the radio we're deploying today can scale bandwidth. So the 2.5 GHz radio can now span 200 megahertz, which is -- we'll talk maybe about fixed wireless access later and what that means. But I go back to early days in this industry, and we'd be lucky if we had a radio that could support 10 megahertz. So there's just orders of magnitude of improvement and increase. So that affords us the opportunity as we can free up spectrum from legacy technology and move it into 5G. Another news breaking point for you. I'll bring some news to you, John. So I got your phone off this morning, right? We talked about that. The CDMA network is shut down. And so that finally happened as of the early hours of this morning. So why do I reference that there? Because that frees up spectrum, right? Frees up sites that allows DCOM to move all those different pieces. But -- so long story short, the spectrum story, we want to be -- the way me and my team think about our network is we want to be a 5G-only business. Obviously, there's legacy 2G, 3G stuff that's ongoing, everybody is working through some of those pieces. But even LTE to me now, even though there's still a large number of customers using and enjoying a great LTE network, that's kind of history. Everything has to be now about how do you move forward into 5G, into a stand-alone pure 5G world because then you can really open up these networks with all of this capacity and capability. And then what does 200 megahertz mean on a mid-band wireless network. It means tremendous speeds. But more importantly, I think as you look at some of the use cases evolving, especially fixed wireless access, it means massive capacity. And no, not to repeat statements from feel advocacy, but I will. Because I like to say we're doing what we said we do just to give folks a sense of the scale of the capacity increase that is happening on this network and where we get to with like 200 megahertz on mid-band 5G. If you look at stand-alone T-Mobile and its projected capacity, offered capacity on the network through 2025, and so that's one. And then you compare that to what the offered capacity is with the combined Sprint and T-Mobile with the denser network, way more spectrum and all of the spectral efficiency and benefits of 5G, that multiple is 14. And we've seen nothing that changes that. Actually, by '25, I'm hoping we can push that one up. And so that light just rolls off the time, 14x. It's enormous. I mean think about -- I know everybody's got a favorite freeway that chokes on and commute somewhere, and it's, call it, 3 lanes. And just imagine that freeway added dozens of lanes. I mean, a 14x multiple. And so the volume of capacity that we can spin off this network to do so many great things, there's also -- I see a lot of this commentary about when nobody needs 700 megabit speeds or whatever or multi-gig speed I get it, right? I mean, as engineers and as engineering teams, we're driving speed as often a great proxy for capacity. But the most exciting thing that's emerging now, great speeds, hundreds of megabits coming out into folks' smartphones, we can talk about how they're enjoying those and what we're seeing and the engagement levels we're seeing on smart phones because that's real today, believe me, there's a big difference between LTE and a 5G smartphone in a good -- on a good 5G network. But the secondary piece is the capacity. And there has never been anything like this. I've done all the Gs. But if you just look at 3G into 4G even, the volume of capacity that we could generate on LTE networks compared to 3G, maybe a small multiple. But an order of magnitude plus, that's game changing. And so that's happening. I mean, we're not all that way to that multiple yet, but we are. As we move through the next 18 months, we will realize a lot of that incremental capacity and performance of this network.

So just one question on that. So to double the megahertz spectrum led, you don't need to put up new radios. But when you layer in that FDD spectrum, PCS, is that when you put up new antennas?

Well, a lot of the PCS radios are already going up. So we've been adding those as we hit a site now, 2.5 GHz, PCS is at 600, may be we try and do all of that. The piece that's coming later will be the DoD spectrum and the C-band. And so there will be some deployments of that radio in '23, but I don't anticipate they'll be formative because they'll be capacity-driven. And the volume of capacity not to repeat myself, but the volume of capacity that we can generate of the deployed FDD and TDD asset base is enormous. And so this network really hits its stride. You think about 300 million people covered massive geography with this huge dense layer of 5G capability, that's going to be super exciting for -- that's a consumer story. That's an enterprise story. That's an everybody story. That's a fixed wireless story. It's all of the above.

We'll get to some of those use cases, but I'm going to take a minute just to drill down on your 2 announcements today. So first on the 3G shutdown, can you remind us again what spectrum that frees up? What width bands? And how much of this?

Okay. PCS mainly. I mean that's the main stuff that we're focused on. There wasn't a huge volume there, but every ounce of spectrum is super valuable. And that PCS FDD is a great spectrum because it's got strong coverage, stronger than what everybody else is going to tell you, but you're going to stack a PCS wave form up against anything, including 2.5 GHz. And anything above 2.5 GHz, that's going to always win.

And you're saying so it's decommissioned now? Or now is when you start taking the equipment off...

Radio is off.

Radio is gone. [indiscernible] turned off then.

Not gone, yet. And so that's another discussion -- but it's an important one because a big part of what we've done is negotiate a path to DCOM. And sometimes we -- with the landlord who wants us to remove the radio, sometimes we pay them sum of money and get [ complete the ] radio when we leave the equipment. We try and harvest the radios if they're usable or reusable, I should say. But obviously, when we were doing our deals with like ATC and Crown, right? Yes, it was incredibly exciting to lock in our ability to continue to build at the pace that we're sustaining it on 5G on mid band and low band. But a big part of those arrangements was agreeing on a path to churn out locations and decommission sites and remove equipment. And so to be in a position finally where we can say, okay, all of that radio gear on all of those towers, and there's a lot of them is no longer required to service our customer base because we've migrated them. That's a great place to be. So that's another -- just when you're looking -- I'm sure everybody is looking for these indicators, these milestones of momentum on our path to integration and synergies and talk about that one today because that's just another great example of the progress that we're making.

Great. And then just the -- if you want to touch on the significance of the Voice Over New Radio and we have a phone call anatomies. I mean is that -- I remember with Voice over LTE and then now, is that basically the logical evolution of how voice services will work on a 5G network? And as is the experience, everything seems to be better on 5G. I mean does it create like HD voice? I mean what are the..

Yes -- when we talk on the phone, it's going to be way, way better, John. This is right, so.

So you think you can talk...

My kids don't, right? I call my kids, they text me back, "What do you want?" It's -- but no, just so not to consume too much time on voice on 5G. It's a horrible acronym, again, isn't it voice over new radio. And everybody says it different ways, VONR. Anyway, it's voice services on 5G. And so the announcement today, we've started the light up of those services, and we lit up in Salt Lake City and Portland, parts of those cities. And we've been working on this thing for many, many months. So many of the folks listening in or here in the room, you probably look at this and say, "Well, how can that be," right? I mean, because we have any been doing voice services like since the first cellular phone. And it's one of these things. We -- every time we go through a generational shift and change, we kind of leave voice behind because everybody gets excited about the capacity and the data and all those things. And then voice drags its awry rear end ultimately. So LTE was out for years, and then VoLTE took a ton of work to get maturity. Because it's IP voice, and you've got muting, you've got all sorts of issues that were very different from the circuit switch Vo. VoLTE was a huge challenge. VONR is another big challenge. It's not as hard because we learned from some of the lessons on VoLTE. But to your point on voice quality, voice quality is on par with VoLTE. The one benefit it does bring is setup times are faster because of just better latency going on a pure 5G lane. But the important thing that is there in those voice services is now we can move all of our traffic for a customer on to a pure 5G lane. So I mentioned the stand-alone, non-stand-alone architecture before. So we're the only company in the U.S. with a stand-alone core that's a true 5G core to match our 5G radio. We still use NSA in many areas for spectrum needs and other pieces. But now you're in a position where all of that customer traffic, both voice, data, whatever it may be, can live on the 5G lane, and it never has to drop down to LTE. And so why is that important? Because if you think about stand-alone benefits for the overall network, now you've got material latency benefits. So a whole series of use cases on ultra-reliable, low-latency, right, that's a very -- that's a big swim lane in 5G future. You can now do that. If you think about massive connectivity, you need a stand-alone architecture, you need to be on that 5G lane to do that. You think about services like XR and gaming, they are going to work so much better when you just live on a 5G lane, and you never have to put your foot back down into that LTE universe because it's just slower, and it drags everything back with it. And so the industry like really struggled with this. How do you get the industry moving into this 5G lane? Everybody wanted to keep their LTE staff and make it work together. We're driving hard for that 5G vision, all 5G vision. And getting our voice services onto that 5G lane was a big important milestone for us. And we've made a start. And nobody of our size and scale has really moved on there. I think in China, they're doing some VONR activity. But it's another example of how we're really pushing the 5G envelope. And I said nothing. I mean, there's very little in terms of stand-alone architecture announcements from our competition here in the U.S., let alone voice on 5G. And those things, they will drag customer adoption for our competition on to future use cases in 5G.

And do the current -- it sounds like you got the network architecture set for Voice Over New Radio, but do existing 5G phones have the capabilities? Or do...

So it does depend. I mean -- so Samsung is that in front given the applause. But yes, it's on a limited phone base at this point in time. But as phones get forward, we're working very hard with the ecosystem. We did that announcement today jointly with Ericsson Nokia, Qualcomm and Samsung. And I think they're all excited to see the 5G world moving into a true real 5G state with voice services on VONR. And it's not been easy, John. So I know there's a lot of chatter about VONR in one of our up-and-coming competitors. And VONR is tough. It's tough for us with a single-threaded radio to make this work with all the experience and knowledge and maturity of network that we have in place. So anyway, it's going to be a tough road to some folks.

And that's a good segue.

How long will it take for you to deploy it across your footprint?

Well, we're trying to accelerate now. We want to get it as much done as we can this year. I think it will be -- a lot will get done this year, but some will move into '23 for sure. And that's because, I mean, we're here talking about voice straight, but voice is still a very important service to wireless customers. And we need to make sure that we don't take anything approaching a step backwards that all that happens with 5G voices more delight and more excited about 5G.

So now you mentioned an upcoming competitor. If you -- all the conversations we've had thus far in terms of the 2.5 GHz deployment and the move to 200 megahertz and then PCS, and it doesn't -- at least it doesn't sound like you're going to be using O-RAN architecture to support that. Why is that the case? And when do you think that becomes part of your deployment strategy and just sort of pluses and minus or maybe you mentioned some difficulties in getting all this to work together, but just sort of your view on the current state of our O-RAN technology?

Yes. I always want to be cautious on this because every time I open my mouth on O-RAN, media jumps down my throat like I'm this huge O-RAN slayer or something. And I'm not. I try to be pragmatic. And I think folks have to take comments I would make on O-RAN in the context of T-Mobile, right, I mean the second largest wireless provider in the United States with over 100 million customers and massive revenues and massive commitments. And I mean -- so my comments are based on our business, and I can give you some quick context on challenges for others. But I mean when we started this journey that I've been talking about 2 years ago, massively rolled out this 5G capability, mid-band, massive MIMO across our mid-band portfolio and TDD, all those things. And we went everywhere, John. I mean we have to raise our diligence from a procurement perspective, major OEMs in existence, new players, folks. The O-RAN [ guys ] were nowhere near. I mean, 2 years ago, incredible lack of maturity in the O-RAN space. Now it's got better. But we would never have achieved all that we've achieved and we've been talking about for the last 30 minutes if we selected O-RAN players 2 years ago. They just weren't in a place to deliver the feature set, capabilities, and the technology was still immature and the ecosystem was still formulating and agitating. So 2 years on, it's better, right? I mean I think -- now there's an ecosystem. We're all for open standards. And that's what O-RAN is. I don't want folks to get confused between you'll hear these terms like cloudification, virtualization, automation. All those things are happening in our network. That's not O-RAN. O-RAN is Open Radio Access Network. It's about the radio. So -- and I think folks muddle all these things together as if the guys not doing O-RAN are luddites somehow and their networks are inferior and behind; the reverse is true, they are way ahead at this point in time. And so if you look at that radio and how it gets broken up, the challenges that folks have had to face is now you may have 4 or 5 suppliers in that space. Whereas we have traditionally -- we've used 1 and we're staying on 1 at this point in time. We want to open up in the faces, so there's more competition in the areas of the O-RAN ecosystem that makes sense. But when you're trying to pull together new services with a set of, let's be honest, they are very subscale vendors compared to the big OEMs. That's a challenge. The volume of resources and support and capability you have that can be brought to the table is a challenge. The ability for those smaller vendors to invest at the pace of necessary R&D in this industry. So they cannot just make a network work, but they can deliver future capabilities that are required over the next 12, 24, 36 months. I mean the big guys are starting to talk on 6G. I didn't think that would leave my mouth today. But there are some of the challenges, right? And so this is a scale game and has been for a long time. So for me, I think some of the ecosystem questions are still out there on scale, on R&D., and then I think the big multimillion dollar, billion dollar question is, does it save you money? And I think jury's out. I mean...

You're saying now or even long term once the ecosystem and...

I think the financial benefit can come stimulating some competition in the vendor ecosystem for some folks. I mean, we signed large multibillion-dollar deals with our OEMs, and we're very comfortable with what we put in place. Now other folks may not be. And they need to do different things to secure a different financial future for them. They may not have the balance sheet that we do, so they have to do things very differently. They may be a very small operator. I mean so there's places for all this stuff to live. But back to the top of the comments, T-Mobile today, all for open standards working in O-RAN. We have O-RAN equipment we test and we look at. But we are working very, very hard to complete all of the things we committed to do in a single vendor environment on the radio across different geographies today.

What about -- you mentioned that there's this muddling of O-RAN and say, cloud RAN or cloud [indiscernible] -- maybe talk about that. I mean is that -- is Cloud RAN -- does that come sooner than O-RAN for T-Mobile? Or are they too sort of technology paths that are running in parallel with each other or...

I mean you don't. So you don't need O-RAN to do Cloud RAN, right? I mean we can cloudify elements of the RAN with our major OEMs, and we work on those things already. We can do that. In virtualization, you can do all of that. And the big guys are actually doing those things. So we're chasing all those benefits. Now they get trumpeted as kind of all-around benefits, but it's not exclusive to O-RAN. Now some of the architecture that's being rolled out from an O-RAN perspective, it takes you down those paths, right? I mean it really does. But I think ultimately, John, you just have to -- it's going to take some time. I think the ecosystem is maturing another 2, 3 years down the road. Is it mainstream? Our big major operators operating large O-RAN capable networks maybe, but it's not going to change that much in the midterm.

Maybe going back to some of the usage or sort of business cases that we [indiscernible] Talked about this. But first of all, talk to just a little bit about what you're seeing in terms of usage patterns on 5G and how you expect that to evolve, especially as you start bringing more and more capacity and go from 100 megahertz to 200 megahertz. And what are you seeing now? And do you expect -- and then really -- and this is another sort of thing. I mean, from a consumer standpoint, we don't really have 5G apps yet. There's not 5G use cases that are meaningfully different than what we're doing in the 4G world. As that evolves, do you expect the usage you're seeing to accelerate? Or just talk about 5G sort of usage on it?

Yes. I mean there's a lot to unpack in your question there, John. So sorry if I talked on how we're doing for time, we want to consume. We're already moving and we accelerate a little bit. So I mean we've been -- first 5G use case,[indiscernible]. And to your point, are we seeing like new major 5G apps right landing on smartphones, not yet. But what we are seeing is massive new levels of engagement on the apps that already exist. So gaming, 5x. Video, 2x. 2x? I don't know how people find the time. It's hours, right? If you look at social networking, 2.5x. I thought everybody lived on social media all the time. So how they managed to [ lock ] 250% increase, I don't know. But that's what we're seeing. We're already seeing in our 5G smartphone base averages in that 35 gig per month. So it's more than double, almost more than triple average LTE consumption rates if you look at historical data for the industry in the U.S. So folks are really engaging on the side. Why are they doing that? Because the phone works way better, right? I mean they don't see the clock wheel. They may be in an edge of cell environment where now they've just got much better service. So the whole thing just works just way better. That's a great thing. That's why people are coming on to our network while they're buying into great plans like Magenta MAX. We've built that for 5G, huge engagement and consumption of plans like that out of the gate. So that's like job one. Now to your point about what happens in that consumer space over the next 2 to 3 years, I think a ton of things are going to happen. Those apps are coming, right? I mean if we were sat here, I know whatever year it would be, at year 3 of LTE, and I've been smart enough to say Uber is coming. It's going to transform how people move around cities across the globe, but it's going to start in the U.S. I wish I did mean -- but that whole service just works on -- without a smartphone, it doesn't exist, right? And it needed a smartphone with performance and GPS and capability that never could have supported in 3G. So how many of those things are coming in 5G when you've got speeds and capacity latency and all those things, that's coming. Now we're trying to stimulate all of that. We have a lot of development activity ongoing in KC, in Kansas City, in Bellevue, we have a lot of engagement with developers. We're looking at driverless cars, wearables, all those things. The one thing I would say, and I think I talked about it last time we talked, I do believe in consumer wearables. And I think that's going to be a big wave of activity. Will it start in '23? I think it will. We see material investments, small and large coming of that space. I think great things will happen in the enterprise space with that technology, XR capability, [ not real for me ]. I think that's more of a fixed case rate. We can do stuff there too with 5G. But I'm thinking about mobile, really leveraging that mobility capability of the network in a mixed reality of the environment.

In Apple, there's obviously a lot of speculation. I think maybe you talked about that they're working on a wearable...

I don't know. They don't tell me. They ask a lot of questions about the network. But I mean -- and those things are important, again, back to what I was talking about earlier on about where we are from a 5G perspective, I mean many of those services are going to require very low latencies. So you need a stand-alone architecture. You need a lot of mid-band and never going to work on an AT&T LTE like 5G network. It's just not going to work. So you have to do all those things. You want a slice, maybe you want a slice of network there, right? A guaranteed slice that is a premium slice for those customers. Those things we can now do on our network in a way our competition can't do. They can't do fully slicing yet. That's coming as we move through this year and into next. But a lot of these promises on 5G and that's why these things aren't happening yet because the networks aren't fully there yet. But we will be on front end. We will be the tip of the spear. We have huge and inbounded engagement from folks on those pieces. They're very interested in what we're doing because of that 5G leadership and performance story.

And if those devices and those apps do come, you'll be able to leverage. I mean, I look at the space over the years, I mean when the 4G iPhone came out, guys were in a very good position because they...

Well, AT&T originally.

Well, AT&T didn't have the 3G phone and then the 4G phone -- or got the 4G network. So -- but you guys will be in the best position to capitalize on the 5G ecosystem evolving.

We absolutely believe so. And then if I could, because I know we're running out of time, but -- and this thing like 5G is not real. Look at fixed wireless access.

That's why I was going to go next in the remaining time.

Well, ask your question.

Yes. So as we talk about all that -- I would start by saying obviously, very strong growth over the last couple of quarters in terms of net adds and certainly beating our numbers. And there's, I guess, now the expectation that, that trend is going to continue. But we always get pushed back that the fixed wireless just can't keep up with where the demands are going for the consumer. But what -- I'd love to get your view on that. And given the amount of spectrum that you guys can bring on, and it would suggest that, and like you said, the improvement in spectral efficiency, how much sort of runway do you think you have with that product?

Yes. Well, we love that story. I mean, just -- so we call it Internet Freedom, right? Because we'd like freeing people up now, they can get broadband at good rates with good service and good speed and performance that they could never get before from many of the providers or no providers, right? So just to recap for folks, I mean, we're a million-plus customers. We're the fastest-growing home Internet provider for the last 2 quarters in the United States. T-Mobile from nowhere.

And you're moving in a certain direction, and the big broadband guys are moving in the other direction in terms of network.

I mean -- and the thing is there's just a huge demand on this product, right? So it's one thing to sit there and say, "I've got the big pipe, and I'm going to choke customers and charge them lots of money and everything else." They love what we're doing. I mean we have so much inbound demand on this product. But to your point about how do we manage capacity on this thing, we open up that service based on intense activity and diligence on the network side to make sure that we are future-proofing that service. And so we are looking at -- the term we use, I'd like to use Freeboard, but I mean fallow capacity. And one of the things -- trying to give a simple example of that, John. We deploy a 200 megahertz radio on a rooftop next to UBS here. There's a lot of wireless traffic. And we'll look at that and we'll look at the growth and what happens from a capacity generation perspective and what do we see with wearables and all this other stuff. And we may say, you know that sector. We are doing the home broadband there. It's not like we open up the whole country. We want to do 7 million to 8 million homes over the next 3 years, right? So it's a big country, right, with lots of people. But we said 7 million to 8 million, that's a great business for T-Mobile. So we look at that site in Manhattan and we may say that one don't pass it yet, not today, not tomorrow, not ever, right? It's not going to happen. But then we go into, I don't know, small town up in Long Island, bigger. Maybe Long Island is not the best choice, but anyway, we go to Long Island because I flew [indiscernible] or close to. And then we go in and we're putting out that same radio, that's saying 200 megahertz, but we've got a lot of assets, same cost to put that thing up. It's not like we cut it in half and we halve the capacity. And then you say, well, how many people use that wireless network compared to the middle of Manhattan? Highly none. So there's this massive Freeboard that you create with the same economics. So why on earth wouldn't you go and monetize that? That is sitting there. It's massive utility because of the capabilities of 5G. Three -- we can support our median speeds, average speeds that in like 140, 150 range. It's way better. I am a Comcast customer. I'm a gazillion dollars every freaking month, and my speed is under 40 MIPS. And I pay that top tier and whatever else, I don't get it because of that cable strand that's going over poles to my neighborhood, right. So there's so much opportunity for us to go in and exploit and find these areas with great networking capacity where folks are just begging for the service.

And so does the speed improve and that you're at 40 million available homes now, does that number improve as well as you go from 100 megahertz to 200 megahertz?

It improves. And if you think about like that small town example I gave you, and you think about a mid-band footprint that moves from 225 million to 300 million and how many of those small towns in America we will hit with that capacity, that spectrum, so it's a function of the rollout of the network in conjunction with that spectrum. And then you're not done there, right? It's not like this thing is fixed. We're going to be all 5G at some point in time. I'm not going to predict that one for you yet. But as we go through the next 4, 5 years, the vast majority of our traffic will be 5G, and LTE will be an afterthought. And then we can commit more spectrum and we've got more spectrum in the coffer and in the bank. Technologies are improving. We're figuring out ways to enhance what's a point to multi-point service leveraging a mobility network today. There's a lot of rich opportunities there to improve coverage because some of the -- many of the constraints are about coverage, delivering a 100-megabit service into a home doesn't exist all over a network. That's a massive shift and change from the scale and quantity and type of networks that the U.S. has historically had. So we're super excited.

You target to reach 40 million-plus homes and 7 million to 8 million subs. Are you also envisioning bringing the top layer of the cake sort of like build more millimeter wave...

I haven't talked about that, like today, millimeter wave. And so that is the top layer of the cake. Thanks for reminding me. And we have great millimeter wave assets. So today, we're deploying those in venues and locations like that where it makes sense. So we're building stuff, NFL, those types of locations. We have a whole swim lane going on millimeter wave for fixed wireless and macro network and does it make sense and so on. And the piece for us, I mean, I think Verizon went heavy into this, right, because they didn't have any mid-band, and it was going to be -- they have a 5G store, right? So they went down the millimeter wave path. But we still look at that. Right now, I mean, Verizon has built out all those sites, and you think about if that's all they get from that, it's home broadband. That's a tough business case to float. I'm doing home broadband on the back of a massive macro network deployment. It's fallow. There's no incremental CapEx going into our business to support home broadband. Now if we start building our millimeter wave to do that, then the math changes, right? It changes dramatically. And the question for us is, I would rather be supporting that service with a lot of spectrum on a big, bad macro network because those economics win out every single time. But are there going to be places where it makes sense for us to do millimeter wave? Can we do MDU and apartment-type stuff with millimeter wave slightly different application? Sure we can. And they are the things that we're looking at how do you start to crack them up in dense urban environments. And I don't have to list off the companies that are already doing some of that stuff. I think you have one of them here today. And so there are opportunities to do that stuff. And for us, we're investigating and working on those things.

When you think of the fixed wireless, I mean, I think it sounds like from a penetration standpoint, you have a bigger opportunity in rural, right? If you're in a more rural or suburban market, you're still going to nail up the same 200 megahertz. You would think that there's a lot more fallow spectrum in a smaller market than they would be in, say, New York City.

Bigger hunting ground.

Right, bigger hunting ground. But at the same time, there's more customers in the more urban areas, right? So I mean which is a bigger opportunity for you? And if you look out 5 years, like where the majority of your customers be in smaller markets, you think, especially they're also underserved, they don't have as many opportunities.

Well, I mean, the rural opportunity is huge for us, right? And it's not just we have this whole small market, small and rural market program just on traditional wireless. It's an area where we've been underpenetrated. So for us, you go in there with both, right? And sometimes, you're going to bring a wireless customer on board because of home broadband, right? And so you've got that double-headed attack going into those areas, which is tremendous. So I'd love that story. And that's a big growth vector for the company. In terms of fixed wireless access in suburban, still doing really good. And urban environments, it just depends. And so we run this analysis on households on a per sector basis. That's how we look at it. And we look at -- based on our modeling, how much capacity is available to support fixed wireless needs. And so today, I mean, we're drawing from all markets.

And is that your ability to do that, assess the capacity in the sector? I mean is that sort of automated or is there a situation where the order comes in, either from a store or online and you need a guide of punch it in and see where we are at this moment? Or do you have...

Its automated. Somebody is running a sales inquiry, could be a customer on the web, could be somebody in the store against a known and provided a database with opportunity rate, which is on a per-household basis. It's not like just this geography. It's a per-household basis. And there are 2 vectors there. We have to look at coverage to make sure you're getting the coverage in the home as well as the speed performance. And those things vary across the wireless network. The good news is, hopefully, some of you have seen the home router, but we can do a lot more in terms of antenna game in that router than you can ever do in this game. So you can be at home and you say, well, my coverage isn't good enough on my smartphone, and we put that router in, all good things happen. And we're looking now at are there other things we can do, are there external antenna solutions that will open up more homes and so on. That might be a little bit more rural, but we're working all those opportunities. So for a business that's like a year old, there's a ton of exciting in the company about what we can do there. So...

Makes sense.

I think we've run out of time.

You got me talking all those whole day will be...

We appreciate your time, Neville.

Thank you. Batya, thank you so much. Enjoyed it. Thank you.