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

Okay. Thanks, everyone, for joining us for our next session. Really pleased to introduce Peter Osvaldik, who's the Chief Financial Officer of T-Mobile. Peter, welcome.

Thank you so much for being here. Always a pleasure.

Why don't we just maybe start out, 2022 was a very successful year for T-Mobile. Can you just reflect maybe on some of the company's major accomplishments and looking ahead, discuss some of the goals and priorities for next year -- for this year, I should say.

Yes, absolutely. Let me start with the obligatory disclosure statement, so I will make some forward-looking statements subject to risks and uncertainties. And of course, please look at our SEC filings for those as well as any recons to non-GAAP metrics, which I'll use. So yes, thank you so much. And again, always a pleasure being here. But 2022 is just a fabulous year for T-Mobile. It's a record growth year on both from a customer perspective as well as most importantly, and we'll get into that in the context of '23 and the competitive environment is on a profitable growth basis. So not only did we have from a customer perspective, achieve 3.1 million postpaid phone net additions, but also 1.4 million postpaid account net additions, which is really the true barometer for what's happening from a switching perspective in the industry, record year for us there. Achieved just fabulous churn results, of course, broke the back of the network integration as Neville would say, and just saw amazing work there on the part of the team, both simultaneously decommissioning all the Sprint cell sites faster than anticipated, but also being able to do it while reducing churn. So that was always a big concern for everybody. And we took the opportunity to increase CapEx and deliver on the aspiration that we always had and knew that this merger could bring. And that is to ultimately transition to becoming the best network in America, and we'll come and talk about that a little bit more. And so when I shift to 2023, it's really a lot more of the same with kind of the turnover to the next chapter. Of course, from a merger integration perspective, we anticipate we'll conclude and finalize all the integration activity and achieve the recently updated synergy number of $8 billion in run rate in 2024 and be set up fully for that. From a customer growth perspective, it continues to be the story of now that we have the best network and we jealously guard our famous for value proposition, how do we take that and couple it with the underpenetrated segments that we've been talking about so long and actually continue to see very, very profitable growth. We'll continue to leverage and really build upon this network advantage. And we've said over the course of a couple of years that our 5G network advantage would turn into an overall network advantage that is now recognized by all the major third parties out there. And our job now is to continue to make sure consumers understand that, right? Businesses understand that. They buy a lot differently, but how do we -- in the consumer mindset where perception is stubborn. We've done a fabulous job over the last couple of years, but how do we continue that trajectory of making sure consumers understand this is the best network. How do we make sure that we continue to invest in it in the smartest way possible to continue that advantage growing. So that's going to be a core focus of this. And then profitable growth. That's what we're always talking about. And we delivered a guide with earnings that actually increased core adjusted EBITDA over what we thought at Analyst Day and are now delivering from a free cash flow perspective, which is really the barometer of value creation. It gives you all the opportunities, whether it's shareholder returns, whether it's investment in the business, our free cash flow growth in 2023 is now projected to be 75% up year-over-year and further growth into '24 and beyond. And that's just -- that's really the power that we knew that this merger could bring with the scale of profitable growth as well as the synergies that to finally see that coming to fruition. It is just a fabulous thing. And that's where '23, it's going to be another springboard year for T-Mobile.

Okay. Great. Since T-Mobile completed the Sprint acquisition, you've outperformed the guidance pretty consistently. What are the major factors underlying that success? And as you look forward, do you see that same opportunity for outperformance? Or is there maybe less room for that in the current environment?

Is this, hey, it's been 3 weeks since you gave guidance. Can you please update? Or look at me already question.

Okay.

Yes. Fundamentally, what it is at the highest level, this is a team that's hyper focused on looking around corners, seeing what the opportunities are and then rallying like nobody else to go capture those. And so when I look back the last couple of years in terms of overperformance against the guide, whether it's on a top line growth perspective or whether it's the financial aspects of it, it really was taking category by category and applying that kind of principle, synergies from the network shutdown. We saw an opportunity to go faster on the network shutdown while jealously guarding the churn profile of this former Sprint customer and we went faster on that as a company. We saw the ability to grow a little bit faster from the smaller markets and rural area perspective, if we put some capital, enhanced capital pull forward into 2022 from a network piece, we went after that and delivered. And at the same time, again, as I said, delivered what is now recognized as the best network out there. So it's always whether it's churn, whether it's synergies, whether it's growth, it's always this team rallying together unlike any other, looking around the corner and seeing what we can capitalize on from an opportunity perspective. And that's much the same philosophy, of course, will apply to 2023 and beyond. And the opportunities look different than what we thought 3 years ago. The world looks different. The competitive environment and the industry looks different, manifesting itself differently. But you have to see what the opportunity set is in front of you and get after it. And that's what this team is just fabulous about.

Are you seeing any effects on the business as a result of the softer macro environment, whether it's consumer business volumes, tier mix, collections, I think on the cost side related to inflation.

Yes. Let's start with the consumer side. Probably a couple of things we look at. One is, what are the take rates of our highest tiered rate plans, on the Magenta MAX, as we call it. And in Q4, that continued at a very strong pace. Over 60% of new customers coming in, take our top tier rate plan and the base is now about 20% penetrated. And we continue to see about the same rate in Q1 of that. So no degradation there from that perspective. On the bad debt side, much as we had forecast in Q2 of last year, we saw Q3 and Q4 go down from Q2 and stayed about those moderate levels about pre-pandemic levels. And now as we worked into Q1 and gave guidance, we anticipated that might improve even a little bit from what we saw as a percentage of total revenue in Q3 and Q4, and that's playing out. So we're seeing a little bit of the improved trend sequentially, which is what we expected. So looking good from that perspective. On the cost side of the equation, I know we've talked many times about how early on in the merger story when rates were at historic lows, inflation was very low. We had to, from a necessity perspective and did strike long-term agreements with many of our large cost categories, whether that was the hardware OEMs on the network side as we are about to go through a massive network expansion, whether it was the tower companies for the same reasons. There, we also had the incremental leverage that the industry has never seen from the ability to say, hey, we're actually shrinking our portfolio of A+B, T-Mobile and Sprint. So we're able to secure really, really strategic long-term arrangements there. And so the very large parts of our cost categories were locked down. Of course, we're seeing inflation pressures on the edges, everybody is seeing that. From a labor perspective, we're seeing those from some of those other cost categories, whether it's cabling or all those things, but we're well insulated from the largest impacts. And we saw that play out in '22 and that's what we anticipated in '23 as well. So so far, so good. But as we've many times said, we're certainly looking around the corner side-eyeing the future, but we're not seeing it. And probably a big part of that as well is this category is so much more important to consumers' lives than it was 5 years ago or 10 years ago, that it really has moved up in terms of priority of wallet as well at the same time, so, yes.

Obviously, there's a lot of discussion around industry volumes. I think your '23 postpaid phone net add guidance is 2.5 million to 2.75 million, that's about a 15% decrease versus last year. Industry net adds were about 9.3 million last year. Should we interpret the guidance as an indication you expect industry net adds to decrease about that same 15% to about 7.9 million? Or are you assuming that maybe your share is going to increase of net adds and industry net adds actually declined by more?

Yes. Again, when we project out what the industry is going to do, and we saw some of this play out in the second half of 2022. We saw year-over-year declines in the industry those 2 quarters happen to be our best quarters from a post-merger T-Mobile perspective. And looking into '23, we continue that trend. We are seeing that. We anticipated on a probability weighted average perspective, somewhere between 7 million to 8 million total net adds for the industry. So that implies in and of itself, even in our initial guide, a little bit larger share taking of the total. But the one thing to remind you of is always we are the company that meets or exceeds our guidance. And so what we put out is a postpaid net add guidance in '23 actually happened to coincide with what we put out in '22 as well. So despite anticipating the industry to go down, we do believe we're going to continue to take a bigger share of the pie with the value proposition, the network and again, really leveraging these underpenetrated markets.

What are you seeing in the consumer market today in terms of promotional intensity and competition?

Really continuing the way it was, I'd say, the last couple of quarters. Of course, there are seasonal ebbs and flows, more promotionality in the holiday season. But we continue to see about the same dynamics play out, whether it's cable, whether it's the competitive MNOs. But we're a little bit different. Again, when you have this significant value prop and this continually increasing network equities, we don't need to be as dependent on, say, device promotions as others. And you see us be much more prudent, for example, from an upgrade retention strategy because once customers come to T-Mobile, they really, really understand the value proposition. They really understand what this network is now versus what it was 5 years ago, and we can see the continually improving churn profiles. And so we have a lot, I think, more tools to play with than just throwing massive device promotions out there for everybody or in the case of cable, giving away free lines.

How about on the business side, can you talk about the competitive environment you see in the business market?

Well, the beauty of the competitive environment there is we are finally able to bring it. It was such a stale marketplace. Even 2 years ago, we started talking about this at Analyst Day that were still data buckets and massive either outsourced customer elements or within these large enterprises, they were actually departments devoted to try and to manage the complexity of the wireless plans of data buckets, and minute buckets. And so now with this network, which again, as you mentioned, consumers and businesses buy a lot differently. And businesses, large enterprises, governments take out phones, they go test the network, make sure it works, where they need it, how they need it, with the reliability that they need. And that's where we've just begun to shine. And you see the T-Mobile for business success continues to grow quarter after quarter. Phone net adds grew every quarter in 2022. You saw Verizon, the dominant, historically dominant player in this space continue to see their churn and their postpaid phone go the other way. So it's fun to finally be in this marketplace where we can bring the network quality that's so necessary for enterprise and government with the customer care and value props. And so we're -- again, with a small underpenetrated base, it allows us to be really, really hyper competitive there and great economics for us.

You mentioned that a lot of those large enterprise customers will do a lot of testing before switching providers. Can you talk more about how you're scoring these tests as compared to a few years ago and also relative to the competition.

Yes. Well, it's -- everyone comes with their own set of criteria, right? And so the scoring is going to be based upon that. I think the true measure of success is, are you winning the business? And this is one where we continue to grow and win the business a lot more and in industries that you can just tell have very, very high standards and needs for the network. I think in the airline industry, we've got now 9 out of the 10 majors in the U.S. and think about a torture test for networks. I'm going into all these cities as the major airline set, and I need the reliability to work for me. And I don't mean just postpaid phones for the attendance to help. I mean, underwing operations in the case of some of these airlines where we've displaced WiFi and can give them a really, really great solution. So we're scoring fabulously well, and that's what's allowing the growth in T-Mobile for business to continue. And there's a lot of runway ahead of us on this.

Yes. Can you talk about the brand perception today among higher-end consumers? How much work do you think is left to deal in convincing the high-end consumer that T-Mobile can deliver that experience that they're looking for?

Yes, it's really a great story and a great opportunity set ahead of us on this one as well. We continue to see -- whether you're thinking about consumers and maybe as you say, high-quality consumer in 2 different ways. One could be just a measure of prime credit worthiness. We'll continue to see more and more prime customers walking to T-Mobile. And our percentage of the prime mix as a percentage of our total is higher than it's ever been. The other metric that we look at is what are the subset of consumers that place value on network above all else. They will trade network quality about price every chance they can. And that subset of consumers, particularly in this top 100 market demographic that we talked about are coming in at more and more of a share to T-Mobile. That said, there's a lot more opportunity. If we look at network equities and value equities, we clearly are the leader in customer value perception. And that's even grown. Our NPS score has grown. No surprise there when you take 2 different tacks in an inflationary environment where consumers are worried about how they're going to protect their wallet and their savings, you have T-Mobile here with a price lock guarantee, and then you have AT&T and Verizon that laterally increase prices on you. So that's how you maintain that fame for value. On the network side, as I said, in the consumer space, we've seen -- I mean, Verizon erode this tailwind from 3G to 4G, where they have the best 4G network as you shifted over from 3 to 4G along with the iPhone relative to T-Mobile at that time, they were able to convince consumers what was true at that time. They had the best network and consumer sentiment is stuber. Now we've arrived at the place, much like we forecast that this 5G network advantage would turn into the overall network advantage. It's here, we've declared it, all the third parties really stay the same, and we're starting to see the network brand equities. Verizon's still above us, but we've cut that lead in half. And of course, our trend line is like this, their trend line is like that. So they're in lines that opportunity for us in the next few years as well to continue to attract network seekers, and especially in the top 100 markets. So that's something we're looking forward to capitalizing on. Talking about that, how does the team look around corners and capitalize on opportunities. This is one you'll hear us really work a lot more about.

And your guidance for ARPA, I think growth this year is about 1% and generally stable ARPU, but with potential for growth later in the year. Can you just talk about some of the moving pieces that are underlying that guidance?

Yes. When you think about ARPU, it's very much a mix-driven metric versus an overall pricing dynamic metric. And what I mean by that is, so let's just say you have more success in one quarter in enterprise. So our first responders, which is another place we're seeing fantastic success for. When you have large enterprise or government customers, they pay lower than consumer rack-rate of ARPUs. That's okay. They're very highly accretive customers from an ARPA perspective. So it makes a lot of sense. So that's one dynamic that's factoring in there. And then you have other things you have, of course, again, Q4 tends to be a seasonally higher promotional environment. So you have some of those impacts flowing through. You have the fabulous success we've seen with high-speed Internet paired with Magenta MAX and other plans. And so you see that discount get allocated between the 2. We're seeing a lot of success in BYOD devices. So customers that recognize again what this network is and just their astute customers, they'll bring their own device in, you tend to see a slightly lower percentage of value-add service attached to those insurance products, those kinds of things. Another opportunity to make sure we develop a product that meets the needs of that specific consumer set. But those are some headwinds that you'll see a mix-driven things in ARPU, but there's a lot of opportunity for growth again, particularly with the continued customer self-selection into our highest tier rate plans. I mean the market is telling us something when you have 60% of new customers select your highest tier rate plan. That's telling you something. So -- and then when I flip over to ARPA, which is exactly what we've been focused on. I mean, to us, it's how do you get true switchers to come to T-Mobile and 1.4 million record high, industry high in 2022? And then how do you expand that relationship with high-speed Internet products with other connected device products. And that's really what the focus for T-Mobile is on. And they're 1% year-over-year growth with, again, the opportunity to continue to see the opportunities, seize them and potentially move on that a little bit later.

Prepaid is, I think, kind of an overlooked part of the industry, but a market segment where T-Mobile has been a leader and has grown as a business. What's the outlook for this part of your business from here? Do you see it as an important growth driver going forward?

Yes. We're very proud of the Metro brand and what we've been able to do that. One of the largest brands from a total customer perspective. And obviously, the overall industry dynamics are such that there's a lot of prepaid to postpaid movement. And a lot of that is cable. And I know we have some interest in my views on cable, so we'll have to get to that. But despite what's happening there, we grew our prepaid category in 2022, having one of the largest bases. We have industry-leading ARPUs in that space. We just delivered our lowest churn year in prepaid in company history. So that's -- those are just great results and speak to, again, the network quality, the value proposition -- despite this massive flight from prepaid to postpaid in the industry, we continue to be able to grow the base, and we're very proud of that, and we see this as a continued tailwind.

Have you seen any change in the trend recently on prepaid and postpaid migration? Or has it been fairly consistent?

I would say it continues to be fairly consistent. You see a lot of customers qualifying for postpaid plans and a lot of customers being attracted to these very device rich postpaid offers.

So the time to ask you about cable since you mentioned it. So net adds for cable increased pretty significantly in the fourth quarter and captured about 35% of industry nets. That was up from 23% in 4Q '22 -- or '21, excuse me, are you seeing any competitive impact from cable? And if not, where do you think your customers are actually being sourced from?

Yes. I mean this has been really one of those fundamental questions I think that investors have had is where is all this growth in cable coming from. And we've said we definitely see a lot of it coming from prepaid to postpaid transference. We see a lot of it coming from Verizon itself. And that can work for them given that they get the service revenues from the MVNO arrangement but then what you fundamentally see and this is kind of disparity between T-Mobile and the cable and the competitive play out as it stands today. We project -- I mean, year-over-year, we anticipate Q1 industry postpaid phone net adds will be down. And we anticipate in that context that cable will actually have more of a share of net adds in as a percentage of the total than they did in Q4. But that's not coming at a profitable growth strategy. And when you're dropping free lines into everybody's bags as they walk out the door, on an exploding promotion, that's not customer love. That's quite different than what the T-Mobile strategy is in and of itself. So yes, you can generate large customer headline growth numbers. But you're doing it at the expense of one, a future churn event for the customer, and we've seen this play out in the industry before. And two, it's not profitable. So it's not sustainable in the long run. I mean that Q4, I think Charter's ARPU was down 12% year-over-year. I mean, can you imagine what this industry would be like if everybody decided to do 12% declines in ARPU on a year-over-year basis. So in the same quarter, that we'll continue to see them have a fabulous headline net add number again, you can do that when you drop free lines into every bag on the way out. We're meeting all of our profitable growth goals, which is what we go after. I know we've talked about this before. We're always saying, this is the growth that we want to see in the prepaid segment in the postpaid segment total, including this postpaid phone and we can go chase more net adds every single quarter, but you do those at very degrading economics. And so that's not the strategy. We set -- here's the target number we're going for, so that we can grow customers come on in at this high-tier rate plan mix that we're seeing and actually drop it down into core EBITDA and free cash flow. That's kind of the dynamic I see there. So very pleased with what we're seeing kind of fun to watch, and we'll be very interested in these future customers coming to us when this exploding promo hits them, and they realize they're riding on an inferior network and paying too much.

Let's talk about fixed wireless though T-Mobile added 2 million fixed wireless broadband customers last year, a little more than half of industry broadband net adds. How long is the runway for growth with this product? And why do you think it's resonating so well with consumers?

Yes. It was just a great success again in 2022. 2 million of those 2.6 million customers came in 2022. And a little bit of a difference, I think, to what perhaps other players in the industry are doing, we said that with the merger and as we roll out this massive capacity on the network that you would have fallow capacity. And when you have fallow capacity that you've already burdened the mobile build with all of the CapEx to get this rollout this fabulous network, it makes a tremendous amount of sense to fill up some of this massive highway traffic that's unused with high-speed Internet. And for us, it became the first killer use case of 5G. We're now we're riding about 2.6 million customers that have fabulous economics, again, because the network is already there, but it's follow capacity. It's a very targeted approach to where the capacity exists on a by sector basis, that's where we sell. That's where we qualify houses. That's if you come in, that's where we'll qualify you. And it's now available to over 50 million households in terms of available households. And again, the economics work very, very well when you have fallow capacity model. You also see it in the customer NPS scores I mean that's kind of the true measure we can all talk about why do we think that customers will tell you exactly what they think. And when you look at, for example, the latest stat scores from an NPS perspective, we're far above cable operators, over 30 points about cable operators. What was interesting is you're even above fiber operators. And I think what really resonates with customers is the same thing that don't carry our strategy brought to mobile which is simplicity, right? Simplicity of pricing, great customer service and a great product. When you look at advertised cable speeds versus actual cable speeds as reported by third parties, it's very similar to what our 5G network is bringing. So you can bring a really, really differentiated product from a customer value proposition simplicity, and that's what's resonating with customers. And in a lot of spaces in smaller markets and rural areas, remember this is a very large country with a very disaggregated availability of broadband and you can bring this into an area, which is another potential tailwind for us as we continue to grow the ultra capacity network to cover 300 million POPs by the end of this year. You're bringing this capacity and this network performance into areas that don't have fiber as a product, right? They might have DSL or other low-quality products that we're competing against. And so that's why you continue to see the run rate into T-Mobile. So this 500,000 roughly plus or minus net adds perspective is what we're anticipating for the balance 2023. We think the runway is strong for our 7 million to 8 million target, which again, you're going for a mid-single-digit penetration rate of this industry. This product is very competitive for mid-single-digit penetration and it's going to be durable.

Can ask you maybe just 1 follow-up on that. You mentioned that your speeds are basically matching what cable is delivering. Obviously, we see cable advertising that is questioning maybe the consistency and the reliability that not necessarily your fixed wireless, but the fixed wireless industry is providing. I mean, I don't know is there any merit to that in your product? Or how would you respond to that?

It's -- well, one, it's so funny to have watched how that developed over time, right? Fixed wireless doesn't exist. Fixed wireless don't fit. It's nothing. It haven't. They're getting net adds. Okay, fixed wireless is not -- we're not feeling it. Now we're feeling it, but it's a transitory product. So it's kind of funny to watch that arc. And you know that when they're spending hard earned dollars on advertising is this product that is really biting them. And again, where I go back to is customer NPS, Customers will tell you. We can all point to speed and all of that customers will tell you whether the product is working for them. And the NPS scores don't lie.

Yes. And I know you've talked about the rural suburban urban mix of your base in that product. But can you just talk about the demographics a bit? For example, the number of people for households, MDUs versus single-family homes, household income? I mean anything there? Any other color.

Yes. It's kind of in a base of 2.6 million, you'll see it kind of all across the board. I will say, and it continues to be about 2/3 from our top 100 markets and about 1/3 from our smaller markets and rural areas, which makes sense because remember, the network build is progressing into smaller markets and rural areas. So that will shift more into that space. It continues to be a majority from cable. I think what's really interesting is that the majority of the customers coming in are prime customers. So again, the product is resonating with them. They're looking for value. They understand and need reliability and a great experience. But otherwise, you kind of see it segmented all over the board with respect to family income. MDU versus households predominantly single-family households. But a lot of prime consumers as a great attractant to T-Mobile maybe those consumers that again, we have the opportunity to convince from a sentiment perspective, the network is there, you can come in with a product like fixed wireless and really change perception dramatically.

You leave the industry today with your mid-band 5G deployment, I think you're now at 265 million POPs. How do you stay ahead of your competitors as they complete their large-scale C-band deployments and the other mid-band spectrum that they're rolling out.

It's fundamentally, I think, at the highest level, again, what we always said was 2 years ago, we're going to build a 5G network that gets us to an overall network leadership position, and we're going to stay or ahead. And you can see that dynamic playing out, whether it's in the breadth of coverage, where we now cover 265 million POPs with our mid-band ultra-capacity layer, which is more than AT&T or Verizon plan to cover in 2 years from now, and we're on our way to 300 million, whether it's the quality of the spectrum. I mean, ultimately, what we have are the spectrum assets that we deploy for the benefit of consumers on the most dense macro network with the most technologically advanced core capabilities. And Neville will share some more news on just more things coming with respect to technology advancements in a couple of days. But so you have the densest network, the best spectrum assets, put to work for consumers very data-informed driven in terms of where the next sell side and the next coverage is going so that it's there for the moment of truth for customers when they need it. And the best technology and the best team, and that's just what's going to continue. And that's what allows us to get to now the most CapEx efficient in the industry in 2023. And as we roll off this massive CapEx investment year. Q1, our total CapEx guide, I anticipate Q1 will be roughly 30% of the total as we are coming off of that peak. And now we've achieved network leadership and continued network leadership at the best capital intensity in the industry.

Can I ask you about just free cash flow and your free cash flow conversion rate of EBITDA is higher than your competitors, which means basically at the same free cash flow yield, you trade at higher EV, EBITDA. What are the factors that contribute to that difference in that capital efficiency?

Well, I would say it's a number of things again. We've said that we're going to be able to create the most efficient network because it's very data informed. You have the best spectrum assets. You have the most advancement so you can really, really, really get the efficiency on a bit transmission basis. But it's also the ability to continue to profitably grow and scale the core operations of the company. And I think when investors look ahead, what you have is a company that delivers service revenue to free cash flow conversion or EBITDA into free cash flow conversion, we look at it as service revenue because really, how can you convert what's coming in, in the most important aspect, service revenues, equipment revenues is kind of the net neutral of the industry generally and convert them into what is actually value creating. That's the free cash flow is what allows you to -- if you want to enhance investment in your company, if you want to do inorganic things, if you want to do shareholder returns, it's the true value creation of the company ultimately in the long run and we've arrived in 2023, where we're going to be industry-leading by multiple, multiple percentage points in that regard. And if you remember from our Analyst Day guidance, that free cash flow figure just continues to grow. And in '26, we're at $18-plus billion on an annual basis. So once you get through this massive potential shareholder return of $60 billion, you still have a company that's throwing off $18-plus billion of free cash flow on an annual basis. And when you look at more importantly, I think to us, the EBITDA EV multiples are free cash flow, EV multiple suddenly look and investors and analysts know this, if you look at '23, '24, you don't look expensive at all. So you've got this company that's generating industry-leading profitable growth and throwing off a tremendous amount of free cash flow with more free cash flow coming in the midst of a massive shareholder return already and things don't look expensive. And so that's -- I think that's why you get excitement around what the target prices can look like and where T-Mobile can go. And one thing we're very excited about as well.

Yes. One thing that investors ask often is owning fiber backhaul an advantage or a differentiator for a mobile network operator or is fiber backhaul really just a commodity and you can just rent it and get all the same benefits or essentially all of them is ownership. I mean what's -- as someone who doesn't own as much fiber as the other 2 MNOs. What do you think about that issue?

Yes. Well, you know that on the head. First off, all 3 of us have a lot of leased fiber and that tells you something in and of itself. In -- at least in the current environment where it's been for years and where it's probably going to be for a long time, it is such a competitive industry that we can get tremendous pricing on very high speed, very great SLA, high-quality fiber backhaul. And so when you think about where am I going to put capital deployment of this company when I understand the rates that we're able to pay and the quality that we're getting. It's not a place I would do it. The returns just aren't there. Of course, you have slightly better owners' economics than lease economics that makes sense. But the delta between the 2 just doesn't make sense, not in the environment, we're very, very pleased with what we've been able to do with the backhaul fiber proposition. And I don't see that changing anytime soon.

Yes. I think the other thing a lot of people wonder about is you mentioned the decline in capital intensity as we get into next year, in particular. what could cause increase -- an increase in CapEx to higher levels over the next few years? I mean is there anything that could potentially cause it to go back up again or?

No, we don't see anything. I mean, on the run rate of what we laid out at Analyst Day, where we're landing this year in that $9 billion to $10 billion annual run rate, that's what we anticipate. Of course, there's always as any prudent management team. We should look at the opportunities to deploy more capital somewhere else and enhance value for shareholders. Maybe we haven't landed on anything. But if that comes, again, that would have to come with results that are accretive to what we gave you at Analyst Day in and of itself. So right now to deliver on everything that we've laid out there, we see this is exactly the right measure on an annual basis.

You mentioned the share repurchase program. You started doing that in the latter part of last year. I think you've got another $11 billion left through September of this year. Do you expect that to sort of be a regular cadence of buybacks? Or are you going to be more opportunistic with respect to the share price?

Well, for obvious reasons, I'm not going to get into how much are we going to buy, when and at what share price. But the most important thing is that the theory and the cash flow production of this company is intact. And so everything that we thought would be in place to be able to deliver on that potential up to $60 billion only through 2025, right? And again, as we said, this free cash flow machine just keeps going into '26 and beyond which at our Analyst Day, it was a long way away, and now it's almost here. Everything is intact. In fact, the progression of where we were on integration and growth was such that it allowed us to begin early. And so what we'll see, of course, everything beyond this first tranche is subject to Board approval, but everything fundamentally in the business is going fabulously well, and we see the potential for that full $60 billion.

At that March 2021 Analyst Day, you provided 2026 targets for revenue, EBITDA, CapEx and free cash flow. And as you mentioned, since then, the integration and the financial performance has gone better than expected. Are these long-term targets still a good indicator of what to expect? Or is there upside to those numbers as we think about that?

Yes. Well, there's so much, as you said, that have changed since the Analyst Day guidance. Just if you think about inflation. Of course, we're very immune inflation given our earlier discussion. If you think about the competitive dynamics and intensity, AT&T brought back this massive amount of device subsidy. Now for us, because of the differentiated value prop, we're actually seeing our equipment upgrade rate be quite lower than the industry because of everything else we have from a value prop. And we see that playing into 2023. I think equipment revenue could be even lower than it was in 2022. And that -- again, that's a net neutral to net negative flow for the company. So that's fine. But we continue to see upgrade rates be quite different. But we've also achieved higher synergies than what we thought at Analyst Day. We'll achieve those earlier. We're achieving a $7.5 billion this year that we thought ultimately was going to be 2024. We've arrived at the station with the best network. Our job is to continue to educate consumers around that. And so I think there's a lot of growth opportunity. Of course, that was embedded in there. So we're very comfortable with what we gave and being able to achieve it despite how the world has changed and when you think about how the competitive environment has changed and what competitors have done with their original Analyst Day guidance for us to sit here and say everything is intact for that plan. And there's perhaps opportunity. Again, as we said, if everything goes right, there's opportunity to have upside. One of the things I always point to is others in the industry are surprised that advanced network services haven't delivered $1 billion in 2023. We said at our Analyst Day, it's coming. And if you have the best network with the most technologically advanced core and the most distributed network, and it will come to you. You'll get your fair share, if not more, of the opportunity, but that wasn't in any of our Analyst Day guide because we said we don't know when it's coming. It's going to be a little bit later. Our job is to build and capitalize on it. So that's just 1 example of something that could really take the trend line in a different direction.

Right. We're about out of time here. So why don't we wrap up. Thanks, Peter. Appreciate it. Thank you so much.

Thank you. Bye-bye.