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

All right, everybody, thank you very much. Batting cleanup for our C-Suite TMT Conference today is T-Mobile. We have with us Peter Osvaldik, the Chief Financial Officer of T-Mobile. Thank you all for joining us. I know we're competing with cocktails, so I promise we'll get through this quickly and then start drinking. So -- that's what we all do here at the end of day. I'm Dave Barden. I cover telecommunication services and comm infrastructure [ from ] the bank based in New York. Thank you, Peter.

Well, thanks a lot, Dave. What an enviable position between you and drinks to be.

I know that you'll be running me over to get there.

So do you have any -- do you have to make any kind of safe harbor?

Yes, sure, of course. Yes, as we always do in these things, I might talk about sort of significant estimates, forward-looking statements and just refer you to SEC filings for all the risk factors associated with that. And I'll certainly make commentary around non-GAAP, and the reconciliations are in the same SEC filings. So thank you very much.

So obviously, sitting in Europe, there's -- we're looking from Europe into the U.S., I think a good place to start is to just kind of get a level set. There's been rising rates and rising unemployment and fears of recession, but everyone is traveling like mad and you can't get a hotel room to save your life. And -- so I guess it would be great to kind of get a level set from your perspective, is what's the kind of economic reality of the wireless business in the U.S. right now?

Yes. Well, it continues to be a very, very healthy business. As we think about where everybody is focused on, postpaid phone net adds, postpaid phone net adds, postpaid phone net adds and as...

We're going to talk about postpaid phone net adds.

Yes. I think we'll be a little bit normalized relative to last year. But overarchingly, it remains a very, very robust industry. And in fact, what was interesting is in all of these times, whether it's recessionary environments, inflationary environments or even during the pendency of the pandemic, I think what became more and more clear is just how critical connectivity is to consumers and how it's moved up in the order of wallet significantly. And you see that in bad debt levels. For us, we saw significant benefits in bad debts. In fact, Q1 was better than AT&T and Verizon, which just speaks again to the type of consumer we're attracting now, but it is a very robust and healthy industry.

Great. It is robust and healthy. But at the same time, we're -- coming off of a 2021 and 2022, where we had 9 million postpaid phone net adds, assuming you take cables reporting for granted at face value, so we are -- everyone seems to be expecting this normalization, it's begun. You guys did about 3 million -- 3.1 million postpaid phone nets in 2022, and you're actually still guiding to a healthy, roughly, 2.5 million-ish for 2023. How is it possible?

Well, it's two things. So one, yes, I think we do see slight industry normalization from what we saw in the elevated 2022 levels. But remember, it's still significant growth in the U.S. that we're seeing on a postpaid phone basis. And I think if you step back, one of the things that people don't ascribe enough attention to is beyond the postpaid phone, just what's happening from a connectivity perspective. A lot of this is buried in the postpaid other line, but a lot of those connections have become higher and higher CLV connections. For us, one of the things there is fixed wireless. But you see the industry grow in regards to other connectivity, so a great kind of TAM expansion from a service revenue and profitability perspective. With regards to postpaid phone, I mean, for us, really the optimism and why we didn't specifically guide to postpaid phone, but overall postpaid, and I said nearly half will come from a -- phone. And then we did have, Mike, a couple of weeks ago now, express optimism around Q2 in particular, on the back of some of the Un-carrier moves and continued switching activity we see, and that will be at or above last year's Q2. So even in this normalization environment, which we saw in the latter half of 2022 already and in Q1, really, for us, we have a unique set of assets. I know we talk about them quite a bit. But remember, this is the first time with the merger integration roughly complete that you have in the U.S. a carrier that has both product leadership in the form of the network and in fact, overall, I'd say, worldwide 5G leadership from a network perspective; and value leadership, which we've always had value leadership, and we're going to jealously guard that and maintain it. And so the combination of the best product at the best price, combined with all the underpenetrated market segments that we've talked about that are unique to us, things like smaller markets and rural areas, now the way we categorize them, that's roughly everything outside of the top 100 markets in the U.S., are 40% of the population, where historically, we've had a low double-digit share and we've started increasing that. Jon Freier just gave an update at Q1 that said we're about 16.5% now and on our way to a goal by the end of 2025 of 20% and of course, room to run beyond that. You have top 100 markets where we have a great share in a lot of the top 100 markets in the U.S., and that was, one, on the back of that customer value leadership proposition. What we're seeing more and more now and what creates more opportunity in those marketplaces is network seekers, that's what we are calling them, because of where we sit now with not only 5G network leadership, but translating that into overall network leadership, we're starting to see prime network seekers in the top 100. The other area is what we call the T-Mobile Business Group, but enterprise and government, where we continue to rack up more and more success. And one of the recent deals that was very exciting was the VA. And the VA went through an extensive RFP process that looked at a number of factors, most important to them was really network. What can you do within building coverage? What can you do with other connected solutions, fixed wireless in some of the regional centers for them? And they went through the extensive RFP, and T-Mobile came out on top on really network quality and what we could deliver there, and the incumbent came in third. So they lost all of the business, and we announced that. It's about 50,000 net adds that will come through in the enterprise and government space for us. Now that will also come over the course of numerous quarters as they kind of ramp up and do the transition, probably only about 20,000 of those will hit in Q2. But we're already seeing other connected-device opportunities there as well. So it just speaks to -- again, it's not just about phone. It's on the back of the quality of what this network can provide that we're able to win in spaces like enterprise and government that historically have been a single-digit share for us. And then fixed wireless is an amazing opportunity. I know we'll probably talk a little bit more about it a little later. So it's really, again, for us, the combination of the best product, the best value and these under-penetrated market segments that we're getting more and more traction in, and that gives us optimism around '22 and '23 and '24 and beyond.

So let me -- congrats on the VA contract win.

Thank you.

Let me fact check some things that we heard earlier today. One was that ATT walked away from the totality of that contract, which was 75,000, sounds like you won 2/3 of it, customers. And they said that it was just uneconomic and they weren't going to -- whoever -- presumably then whoever did win it, did something uneconomic. Can you explain why this was a good thing for T-Mobile?

Well, I certainly can't speak to how they model their economics. I can speak to the fact that they definitely didn't win on the basis of network and other quality. So it may be easier to walk away when you actually don't win the business, you're forced to walk away. But I can tell you that we don't. And in the past, T-Mobile was definitely, in enterprise and government space, a price stalking horse. There's no doubt about it. In fact, we couldn't gain business. As we built -- post the merger, as we built this network, we're actually winning business. And in a lot of cases, in enterprise and government deals, we're actually not the low-cost provider, but it's the network capabilities that give you there. And I can tell you, the VA contract, this definitely has positive CLVs for us, in fact, quite attractive CLVs when you look at it. And as I said, the things that we also thought might come, but weren't calculated in the case, is other connected devices that we're already starting to be able to provide solutions to the VA such as with fixed wireless and some of their regional clinics. So yes, it's interesting. But again, I'm not going to speak to other people's calculations or overhead burdens or things like that.

Yes. Okay. Interesting. Yes, fixed wireless access, you could -- that's something you're doing, they're not doing that could change economics for you in a positive way that...

Yes. That wasn't the economic analysis. It's just another opportunity that we gave that actually makes the deal overall more and more attractive.

Another thing that happened during the quarter, you guys announced the latest Un-carrier program. ATT flagged it as a roughly month-long increase in churn, and it's all back to normal now. So apparently, you didn't create as many ways as you were hoping for as a function of this?

Well, again, I'm not going to speak to what they see or not, but I can definitely tell you, there was a couple of things that really motivated us for this latest Un-carrier move. The first was just the propensity of Verizon and AT&T to try to lock customers in and then unilaterally raise prices on them. And you've seen that happen over and over again with 3-year contracts. The other thing that really was a big part of this is the market was telling us with the mix that we saw in our highest-tiered rate plan, that consumers really wanted what this network and the overall value proposition could bring. And so we saw mix loading for new customers coming on to T-Mobile at roughly 60% at our highest-tiered rate plan. And when the market is telling you that, you should definitely do something with it. That kind of gave us the confidence to release Go5G Plus. And we still have the Magenta plans available to consumers, but to pack even more features and more of the network into an even higher-tiered rate plan. And it kind of gives you the dichotomy of how we approach things versus how the other carriers approach things, and that is give customers the choice. And in fact, for us, it's led to industry-leading service revenue grow from a postpaid perspective, profitability growth, of course, combined with synergy unlocks as well. And so it's working for us. The formula works when you treat customers well. In terms of how we've seen the quarter progress, now the momentum has continued with Phone Freedom, and that's what gave us the optimism and Mike the optimism to come out and tell you, even to your point, in a year, that's going to be normalizing relative to the peak levels of 2022, we're still going to be at or above what we delivered in Q2 of last year.

And it's not it's a function of one chunky contract win, it's just better execution?

Again, the -- I think the aforementioned chunky contract was the VA, which, for us, is going to come in over multi-quarters, and that's maybe up to 20,000 in Q2.

That's important. Okay. So again, the European perspective on telecom has been informed by brutal competition, encouraged by maybe regulators that had something other than investment as their optimized function in the business. And so when they look over at the U.S., I think, especially in the last few weeks, we've seen T-Mobile stock price come down on a lot of different things. I'm going to throw 3 of them out there, and we'll talk about them. But the first one is Verizon is changing prices, you changing prices. Change doesn't make people feel good. It seems to had risk. It must be because everyone is getting more competitive, people think, "Oh, it's the most competitive it's ever been." The second was this whole DISH Amazon nonsense, talk about that. And the third is cable, the existential question of convergence, and does it have to be like that? Will it always be like that? So starting with number one, yes, you wanted to win market share or maybe win mind share. Do you believe that with the latest in carrier, you've disrupted the pricing equation in the U.S. marketplace and around the precipice of something bad happening?

No, absolutely not. In fact, when you look at it, it's, again, our way of creating a win-win, where consumers are telling us with the mix loading, both from current customers that are upgrading as well as new customer flow coming in, that they want what this network has to offer. And really, it is a big part of this, is the network story and the 5G leadership, worldwide 5G leadership perspective and what's that delivering for consumers in the U.S. and putting the spectrum to work and technology leadership to work. But what that allowed us to do is actually increase the top-tier rate plan price and put more value features into it. And again, this lives together with our Magenta products as well as Magenta MAX, so it's customer choice. And they are loading up and moving up the rate plan. It's a different philosophy than perhaps Verizon, which effectively strip features out but left the pricing the same and then lets you get to higher pricing. But I don't see any of that as disruption of the pricing dynamics in a negative way. In fact, it's perhaps a disruption of the pricing dynamics in a positive way.

Someone's saying like, "Is the U.S. the most competitive it's ever been?" And I'm like, "Well, we've had prices going up for 18 months in the U.S." The first time I've ever covered it, so it's pretty interesting. Okay. Second topic, the M word, if you're European, the MVNO that Amazon might have been negotiating. I think all the carriers came out, but I'll just ask, did you have conversations with Amazon about helping them get into the U.S. wireless market?

No, not in terms of including it in Prime, not in terms of an MVNO deal. In fact, Amazon itself, in that article, said they have no plans to do this. And I think all the carriers are out...

At present?

At present. Well, if you know Amazon, they typically don't comment on anything. So I think actually commenting on that would give you quite a bit. And all 3 carriers came out and said, "This isn't happening." And I think there was some residual questions around DISH. And well, what if they partner with DISH? And of course, I leave that to Charlie. But I will say, certainly, our arrangement with DISH doesn't allow for resale of our network to a different brand -- under a different branding construct. So why Amazon would do that then with a DISH relationship that really has a network that's quite different than what a T-Mobile network is? I don't know, nor really what the benefits for Amazon would be. So that's -- there's really, I think, nothing to this other than an article with a rumor.

And so you kind of discount the Amazon DISH partnership also?

Yes.

What do you think happens to DISH?

I would never put anything past Charlie. I think he's a fierce competitor. We certainly have a good working relationship, and we're here to support them. I know they've recently filed that they achieved a 70% milestone. So in our calculus of how the industry unfolds, we always had DISH is becoming a competitor in the postpaid space. So that's how we continue to see it play out and what actually happens, of course, probably Charlie is better placed to speak to that than I am.

So just for the sake of argument, in your longer-term guidance, there's an assumption that Charlie's wireless business is relevant to that outlook?

Yes. And cable continues to be relevant in that outlook as well.

So then let's talk about that. Especially in Europe, there's been a movement towards convergence between wireless broadband, wireline broadband. And there's a sense that -- there's definitely different views about what cable's longer-term opportunities are. But if I'm a [ cable ] bull, I believe that they've got a relatively ubiquitous wireline broadband capability. They've got a very attractively priced MVNO with Verizon. They're putting that together at very strong discounts. They've been taking some very strong share. They've been lowering prices every year. Does that worry you?

No. It really doesn't. First off, and I understand the mentality and the mindset certainly from a European investor base, but there's a lot of structural differences between how Europe played out and what the U.S. is that doesn't ultimately mean the way convergence played out in Europe is the way it will play out in the U.S. And some of those are, one, geography, right? I mean, when you think about U.S. geography, it is the size of Europe, slightly smaller than the size of Europe, Continental U.S. And there is no incumbent nationwide wireline or cable operator that doesn't exist. There's 2 kind of regional players. And there's a whole host of also the U.S. that actually doesn't have broadband, which is a great opportunity that 5G can help fix in the form of fixed wireless and we're working on it. There's also, as you said, kind of structural differences in terms of how the U.S. investment plays out, and there's a lot more investment in networks, and the consumer benefits from that in terms of speeds, et cetera, et cetera. So that really -- we don't see anything that would, to us, indicate that there's convergence from a long-term perspective in the U.S. could be anything more than discounting. We don't see kind of a product enhancement, right? There's no utility enhancement to customers from a bundled cable, wireless product. We have, really, as we've said, customer value leadership and the perception around customer value leadership. And I think more in the U.S., what's top of mind for consumers is that wireless is a very considered purchase. And what's really important there is what kind of network offering, what kind of mobility offering and all this geographic space can you provide. And that's where we feel very comfortable. We have, far and away, the best 5G network in terms of geography, speeds, technology, we're able to monetize that. We're seeing consumers self-select our rate tier plans just to get at the best level of that network. And so we don't really see it. Now we see, as we said, cable has been in the run rate for a significant portion of time. We continue to see them be meaningful players. But we like anytime there's competition. The U.S. has always been a competitive marketplace in the wireless space. And we love that because anytime consumers actually start thinking about the category, unlike you and I, they don't think about the category day in, day out. But when they do, they start shopping around. They've asked their friends, they asked family members. And we love that because we are winning the switching relationships. You saw us in Q1 deliver yet another fabulous quarter, pure account switchers, which is really the best measure of what's happening from a switching perspective. And what we saw with cable, as we've said, is kind of the step-change in growth that we saw at the end of last year from Charter, in particular, all seems to be coming from non ports. And that could be coming from the prepaid space. But it's also given that you're giving away exploding first-line -- lines and dropping them into the bag, the question becomes how much utility are consumers really getting from that versus just a free line in the bag. And what happens when that typical cable pricing explosion actually occurs? And at that moment, one, is it a real used line? Is a drop or two? Does it create a consideration moment? And we're comfortable in any of those moments when consumers really look at the network and what it has to offer and the value and the combination of the two.

A lot of people won't remember this, you probably do, but there was a time when Marcelo and crew at Sprint were trying to chin up postpaid phone subs, and they would give you a $10 or $15 discount for a year or 2 years, then it would explode at the end, and the churn went hyperbolic.

Absolutely. I think [ it has ] been your left really considering what is the network? What am I paying for at that moment in time? And yes, mean Sprint did first-line [ frees ], right, what was kind of a very similar concept.

Bunch of stuff, yes.

Yes, a bunch of stuff, but certainly service contracts that were free for a year. And you're absolutely right, with the impending churn profile when consumers were hit with that exploding bill, was significant.

So there might be a big switcher overhang in a year, could be in 2023 even?

It could be.

Okay, cool. So -- all right. So let's talk a little bit about maybe why cable has been trying to move more aggressively into the mobile space is in part because the wireless industry has been moving more aggressively into the wireline space with a fixed-wireless-access substitute. So we've talked a lot about this. But I guess there's kind of two or three big questions. Even Mike, I think, has acknowledged that look, there's a limit to what we're going to do in fixed wireless access because we got to kind of conserve our spectrum resources. So, a, there's a limit; b, there's a concern that 100 megabits probably isn't really the right answer for the vast majority of that limit. And then the third piece is that the AT&Ts of the world argue that the notion it's a very high incremental margin product are misplaced because there's all the marketing, the branding, the installation and the care and the billing and whatnot. And it's is not as great as it's chalked up to be. So let's kind of knock those out. Spectral capacity, am I worried about that?

We're not. What we've always said -- and we're unique in this. So I think when others make commentary about fixed wireless, yes, it could be that other players in the space may be facing different constraints. For us, what we've always said is to achieve our target of 7 million to 8 million customers by the end of 2025. We're about a mid-single-digit penetration, is that it is a fallow capacity model. And you have to remember just the amount of capacity that we're creating with this network, we're already devoted to 5G mid-band. We're at 150 megahertz of spectrum, devoted to 5G in the mid-band space, on the way to 200 megahertz by the end of this year, covering 300 million POPs, by the way, with 200 megahertz of bandwidth, add to that technology leadership. And by the way, we have significantly more incremental mid-band that we put to use for consumers as quickly as we can, so there's solutions there. But the way it's approached is in the areas where no amount of mobile traffic, and this is done on a sector-by-sector basis, modeling out growth -- our anticipated growth of subscriber additions being a share taker as well as the anticipated growth in mobile usage growth and where all that modeling, given how much bandwidth we're creating in the network, create still fallow capacity, that's where we go sell fixed wireless. And so it's a very fallow capacity, very high-margin product as a result of that. And the majority of our fixed wireless [ additions ] are actually coming from our mobile phone base. So this notion of whether it's very high incremental marketing and CPGAs isn't really true. You have an embedded base that sees the value of this network, and you're getting a lot of acquisition there. And ARPUs that are similar to postpaid phone, which, by the way, was another structural difference to the U.S. to Europe, right, in terms of where ARPUs hit and consumers are getting for that. But you should have a high-ARPU product with a much lower cost from a subsidy perspective. Really, you're doing a CPE router self-install. So there's just -- I always point to consumers, don't lie in this. Everybody likes to advertise. We have the best, we have the best, we have the best. As of Q1, there were 3.2 million customers. And when you look at what customer satisfaction scores are, you're 30 points above cable. And in fact, you're 10 points above fiber as a category, which is very interesting in and of itself. And that has continued to hold. Our gross adds have gone up sequentially every quarter. Our churn has gone down sequentially every quarter. So consumers are telling you, there's a space for this product. And when you compare it to what's actually happening because cable in the U.S. has this love of advertising speeds that aren't realized. When you look at third-party reports of actual cable speeds on average in the U.S., they're about 200 megabits a second. When you look at our 5G network, by the way, that's roughly where it is and actually has been increasing every single quarter in those third-party reports, which also tells you about the capacity that we're creating, utilizing speed as a pseudoproxy for capacity. And so the reality is, is there a place on a mid-single-digit penetration perspective where this is going to work for consumers in the long haul? We absolutely believe it is. So we're very, very happy with how quickly this product has been adopted by consumers that it is a fallow capacity, high-margin product for us. Again, we're unique in this space in the fallow capacity approach. Sure AT&T probably doesn't have that ability, given what they've rolled out from a network perspective. And so this is one where we continue to see great progress towards that 7 million to 8 million goal.

Did you say that you've been seeing churn come down in the fixed wireless access business?

Yes, which you are going to expect. Remember, this is an early base that started just a couple of years ago, in reality. And so as the base matures, you tend to see early cohort churn. It's very similar to postpaid phone business, where you see the most churn happen at the very onset. The first 3, 6, 9 months, you see -- if [ in-ball ] churn is going to happen, that's typically when it happens. So it's very similar to the postpaid phone business from how the churn curve develops. And so not only as you're creating more capacity, but as that cohort gets more aged, we are seeing churn decrease.

So should we be seeing fixed wireless access adds kind of creeping up through time?

Well, what you do -- remember, this is an increasing base. So every quarter, just to keep that mid -- low to mid-$500,000 range, you've got to increase gross adds. So our focus is every single quarter, how do you get the profitable gross add profile so that we stay in that low to mid-500s?

Before we move on to the other two items real quick, the -- how important or impactful is the 2.5 gig auction to this fallow capacity model, just the capacity in general?

Well, our auction went away and really there -- remember, all of this modeling was done before that auctions. So that would be incrementally beneficial to consumers. In fact, at the moment that the authority is created and we actually can turn these on because it is just a roll on, right, there's no actual incremental radios being hung, it's just a flip of switch, and we can create significantly more capacity. About 2.5 million more households that will have availability for fixed wireless that you can sell into that where you have excess capacity as well as the mobile phone business. So yes, it's -- the moment it's there, we can flip the switch, but that is incremental fallow capacity versus what was in the model.

And for those of you sitting at home, you probably know that the FCC, because of government incompetence, lost their spectrum authority and hasn't been able to get it back yet. So we can't have spectrum auctions in the U.S. right now because no one can do it.

And that will be resolved, of course.

Of course. It only took about 2-plus years to get an FCC commissioner done? So -- all right. So then the speed, I guess your point being, you're only looking for low single digit, mid-single digit penetration, there's a spectrum of usage from power gamers towards my dad. Somewhere in there, 100, 200, 300 megabits of speed is plenty.

It is. And we see -- I mean, in terms of users on the network and using the product very successfully, it's everything from low users, like you say, all the way through to actually multi-terabyte users of the product. And we do have gamers. And so yes, there's definitely room for this product.

And the speed will grow through time, presumably?

I don't know if it will grow through time, but remember, it's going to be 100 megabits a second. And again, consumers speak with consumer satisfaction and churn and additions more than all of us talking heads do.

And how about the incremental margin assumption? I guess a lot of people, I guess, myself included, are guilty of just assuming it's pretty high. I guess I just don't know what else there really is, other than maybe some of the smaller issues. I would say, 70%, 80% is kind of [ what's ] out there.

Yes, I'm not going to get to the exact part of the product, but -- because we've never said that, and there's a little -- but what I'm saying is that...

Dave is a good analyst.

Dave is an amazing analyst. All I can tell you is that, like I said, because of the dynamics of how we're selling it, it is a very margin-accretive product.

Okay, great. Here you go. So let's maybe shift gears a little bit. So one of the fallouts from the kind of DISH-Amazon episode was the stock price got impacted. Did -- I guess, I don't exactly how to ask this question. My exact question is, did you take advantage of that to buy back more stock at a more rapid pace? Or is the stock price kind of in a different variable and you're kind of more in the market all the time?

Well, I certainly won't get into the dynamics of how we buy or what the plan is. That's not what would be appropriate for me. But really, the way we look at this capital return program is that it is a long multiyear capital return program. It's quite significant in its potential, as we've said. We are very pleased just to have being able to get started earlier than we initially projected in terms of Analyst Day. And our job with regards to the capital return program is really to create the success that enables it. And all of that is really the profitable growth that we're delivering as T-Mobile. And ultimately, what makes all of this possible is free cash flow generation. You can look at EBITDA and service revenue and all of that, and it's important to be a service revenue growth leader, which we are in the industry, but it's also important to be able to convert that into free cash flow, which we have now, as of Q1, arrived at the best conversion of service revenue into free cash flow. And as you saw in our Analyst Day guide, that continues to expand in 2024 and in 2026 with the guidance ranges that we gave out there. And so that free cash flow generation is what allows all of this potential shareholder return strategy to create. But as to the day-to-day mechanics, I can't really get into that.

We'll find out at the end of the quarter.

You'll find out at the end of the quarter, yes.

I do want to talk about the free cash flow in a second, but just before leaving on the cash flow returns, one thing we've discussed is the idea of a dividend perhaps opening the aperture of the universe of potential investors in T-Mobile, nothing too crazy, but just to try to open that door. Is that a conversation that you have today about next year? Is it a conversation that you're willing to have in some future time? How do you think about diversifying the capital return? And would it come at the expense of share buybacks? Or would it be incremental?

Well, again, I think it's looking at the totality of the program and what that free cash flow unlock allows. Of course, you have to look at what's the right mix, what's the right strategy for shareholder returns. For us, at the moment, it's -- we believe share buybacks are the appropriate strategy. What the future brings, of course, one would be predicated on the Board approving something. And at that point in time, whenever that is, whether it's incremental share buybacks or any other alternative structures or a mix, it would be probably too premature for me to opine on it.

So, I have to ask this question. And I ask this question every time, which is when your stock was at $1.48, this was a bigger question about this idea that there's a glass ceiling at $1.50. It's -- that's informed if that's usually the [ crop ] proper word, by this 48.8 million incentive shares that will get issued to SoftBank if and when we get there. . I've asked this before, why don't we just clean it up? You've got the room in the buyback, just put it to bed. And it seems like it would be so much more efficient for all the parties involved than you issue shares to SoftBank and SoftBank dumps them on the market. It seems like a stupid option for everybody. Is it that Marcelo isn't picking up the phone? Or -- why can't we just solve this?

Well, I think we've talked about this a little bit at Q1. Of course, we've had discussions...

Because I have to...

Of course, you did. Well, brilliant question from a brilliant panelist.

70%, 80% incremental margins.

I did not say that, you did. All I said is a really good model fallow capacity. But yes, of course, we've had discussions. And I think would we be open and interested in solving this? Yes, we'd be open and interested in solving it, but it has to be a win-win on both sides of the equation. And so there's nothing here that I have to announce. I think maybe more importantly is to put it in perspective of, yes, it's up 48.8 million shares. There's certainly some restrictions in terms of what they can or can't do with it for a period of time. But more importantly, even as of when we announced and gave the last share buyback figure, we've actually already purchased back more shares than this potential 48.8 million share dilution. So will we continue talking? Yes, we'll continue talking. And if there's a mutually agreeable solution, of course, we'd be open to it. But there's nothing, to date, to announce.

Okay. And then just kind of maybe with the couple of minutes we have left on the free cash flow outlook. So we've kind of seen the CapEx, we think, drift down from that $13 billion range to the $9 billion to $10 billion range. We've seen kind of a jumping-off point for the shutdown of the Sprint network, and it's synergy benefits that will get realized over the course of 2023. As we look ahead, if we're kind of at run rate synergies from the network and we're at run rate CapEx from a business-as-usual standpoint, are the moving parts to free cash flow looking into 4 and 5, really just execution on the top line? Or are there other things like the systems integrations and other things that are going to come that we need to kind of think about that are going to augment what we're going to already see and anticipate as reasonable EBITDA growth at the free cash flow line?

Yes. There's a number of factors playing into there. And you're right. we have arrived at the point where we're also the most capital efficient in the industry. And that $9 billion to $10 billion guide feels right and the longer-term guide feels about right from what we gave to Analyst Day for everything that we need to deliver against those plans. What I'll say is probably a few things. One is, there's still continued synergy unlock on our way to about $8 billion in 2024. From a free cash flow perspective, remember, some of the synergies and those merger-related costs that were accrued earlier in terms of the P&L side actually flow a little bit over time, a lot of the -- especially the decom payments related to the tower decommissioning. And so there's a little bit of that will kind of drag out, and you kind of see, and we've given guidance before on what we think the cash flow incremental impact is for '23 versus, for example, the P&L. Then, you do have the continued profitable growth, the top line service revenue delivery and how that drops into core EBITDA. You might have a little bit of working capital changes here and there, but on the balance, that's not big swings for us. The other big factor, as we get past '24 into '25 and '26, is that will ultimately be a full cash taxpayer as well. So when you gave the Analyst Day guide of the $18-plus billion free cash flow profile in 2026, that was under the assumption that we will actually be a full cash taxpayer in that year. So that gives you a sense of how much unlock there is between the periods, because there, you've arrived at $18-plus billion in a full cash taxpayer status and will be passed basically all of the merger-related costs, the cash flow element of that. So at that point, it will become primarily a story of continued profitable share taking in the industry and converting that into free cash flow at the best ratio.

And just a question on that before we wrap it up, which is because of the bonus tax depreciation, it's going to start to taper off, but you haven't been paying taxes anyway. Have you accumulated a tax shield that could be used to offset those full cash taxes in 2026...

That NOL utilization is assumed throughout between now and then, and that it will be exhausted by the time we reach 2026, given the profitability profile of the company.

So $18 billion, 1.1 billion shares, $17-and-change per share, 10 multiple, $170 -- $130 stock price currently, sounds like a pretty good deal.

Well, and it's 1.1 billion shares current.

Absolutely. Yes. Peter, thank you so much for doing this.

Thank you so much. I appreciate it.

Really appreciate. Thank you so much