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

Here we go. Now with T-Mobile, and that's very exciting. So obviously, Mike and Peter, we welcome them today. We are grateful for them to come for this occasion. And we're obviously very grateful also to them what they are contributing to the success of Deutsche Telekom. And you've heard them at their Capital Markets Day about 1 month ago, great messages. Today because they have already had their Capital Markets Day, we want to give more room to Q&A. So their presentation will be compact and a bit tighter, but I'm sure that's in your interest. So with that, I welcome Mike and Peter. Great to have you here.

Okay. Well, Peter and I are well aware that we're what stands between you and your bratwurst and beer or whatever it is that is going to go down in the after party later that Hannes has prepared for us. It's an honor to be invited here to participate in DT Capital Markets Day. And let me just start by asking a question to pick up on something Hannes said. How many of you viewed at least part of the TMUS Capital Markets Day, just a show of hands. Okay. All right, nearly everyone. So what I thought would be the best use of time is just to slowly clear every slide and say the exact same things over again. No, in fact, what I thought we would do is slide over some of the key messages. And as Hannes said, Peter and I just want to get to your questions and really have a discussion, there were probably things that were left unsaid you'd like to get to. But I do want to start with just a reiteration of the key messages that we communicated 3 weeks ago. And it really starts with this one #5. We aspire in our Challenger to Champion business plan to outgrow everyone. But we aspire to do that now as a scaled operator, one of the biggest and most successful in the world. And that's the trick. How do you outgrow everyone when you're already big because that's different from the prior eras where we were a challenger punching up at the mouths of giants. And so that's what this plan is about. It's about double-clicking on the things that are working, but also further extending our lead in things like network and technology. And it's about adding a new layer to our customer-first ethos that has always made the Un-carrier special. In this era of AI, customer love at scale looks different. And we spent a lot of our time really focusing on how T-Mobile is transforming left to right into a deeply data-informed, AI-enabled, digital-first company so that we can demonstrate what the Un-carrier customer love looks like at scale by creating bespoke experiences for every customer. And that's a huge part of our future. Outsized growth runway. When we laid out our Capital Markets Day aspirations a few years ago, we talked about underpenetrated segments, but there was no evidence for you that we could do it. Now 3 years later, we've got the points on the scoreboard. So we can drag write these strategies with underpenetrated segments now with the backing of the evidence behind us that our strategies work. Technology leadership. We intend to not just defend our world-leading 5G network and our advantage versus competitors in the U.S. We intend to further extend it, and we'll talk to you about that today. And hopefully, what you'll take away and hopefully, what you took away from our Capital Markets Day is one of the reasons we can do this is our team and our culture and our focus on reliable performance for you quarter after quarter, year after year. Now if you look back at the 2021 commitments that we made in the very beginning of 2021, just as we were beginning our integration work for the historic merger of T-Mobile and Sprint that created this version of our company. We said then when there wasn't a lot of evidence that we could do it, that we would build the world's best 5G network, that we would leapfrog everyone from dead last in the 4G LTE era to first and best in the 5G era, and translate that into commercial success. And I'm pleased to say we've done it. Second, we said that we would establish -- thanks to that leading 5G broadband, that leading broadband -- 5G network, we would establish a leading broadband business with millions of customers at a time when we had approximately 0 5G home broadband customers. Now approximately 6 million customers and recently extended our goal to 12 million customers. We said we'd get after smaller markets in rural areas where T-Mobile has never effectively competed, and as well as enterprise customers and other important underpenetrated segments, and we've done it. The evidence is in. We've not only done those things, but translated them into outsized growth with 2020 to 2023 EBITDA growth, 32%, 4x our nearest competitor. So the flywheel for us looks pretty simple. Investments at TMUS are about investments in customers, putting them first, treating them right, changing the rules of the industry in their favor as the Un-carrier, but also investments in a truly differentiated network. Because the success we've created with this network is the realization of an ambition that we could become the first company ever in the history of our industry to simultaneously be able to offer the best value and the best network. That's never been done before. And that results in outsized customer growth. The customers come to us, 12 million customers on postpaid phones during this planning time horizon. And if we run the company well, that translates into outsized financial performance, some of which we do what with, we plow right back into the customer differentiation that got us here in the first place. As it relates to 2024, we remain on track for all of the ambitions that we expressed to you after beating the high end of our guidance for 2023. And I think if you look at U.S. competitors, we're the only ones still talking about and being willing to be held accountable in 2024 to 2021 Capital Markets Day aspirations. So let's look forward. As I mentioned, we call this next business plan Challenger to Champion. And the reason we do that is because, as I said, our aspiration is to outgrow everyone, by being the customer champion, but we understand that the circumstances of that have changed. What challengers do is change the rules made by other people. What challengers do is disrupt other people's businesses to try and gain. We understand that now with our scale in order to continue outperforming everyone, we have to be willing to disrupt our own. And in this era of data and AI, we have the perfect tools in our hands to be able to do that faster and better than our competitors. And one of the principal places we expect to do that is in further extending our network lead, the source of so much of our success. Now we continue to have the best assets in the space, and that's very important, not only the most and the best 5G spectrum dedicated to 5G nationwide, but also the densest grid on which that spectrum is deployed as well as the only true multilayer 5G spectrum strategy in the country. We also, at pace, roll out new technologies faster than our competitors, implementing advanced things like nationwide standalone 5G core, which allows multiple carrier aggregation, massive MIMO, the kinds of things, nationwide 5G new radio, Voice over New Radio technologies. Those are the kinds of things that allow us essentially to squeeze more performance out of every band of spectrum and out of every capital dollar. And we align with the industry's leaders as to where the technology is going. We've called the ball correctly on how 5G would unfold. And because of that, we're farther and farther ahead of our competitors. People wondered when Verizon and AT&T, after being sort of forced to spend so much on C-band to catch up with us, once they rolled out that C-band, would we lose our advantage. And in fact, now that they've rolled it all out, our advantage is further ahead than it's ever been. In fact, the 2.5x performance relative to them that the average T-Mobile customer experiences nationwide is the widest margin of performance superiority we've ever had versus our benchmark competitors, even though they've rolled out their spectrum nationally. And then finally, purpose built for customers. And this is one of the areas where data and AI is a difference maker for us. At our Capital Markets Day, I unveiled to you what customer-driven coverage is all about. We've been talking about it for over a year, but we unveiled what it is, which is an advanced AI algorithm that for the first time at scale allows our teams and our engineers to simultaneously train AI on network data and customer data to be able to maximize the performance for customers. And this informs now the capital choices that we make to build new network, to upgrade the network so that we can understand how every action we take affects customer success. Now I'll give you an example of this. This is just about long-term builds. We're just in the hurricane season. As you saw, Helene came through a couple of weeks ago. Right now, as we speak, Milton is raging across Florida. In North Carolina, in the immediate aftermath of Helene, we had about 4% of our towers out of commission after rushing in with 1,000 generators and getting it down to 4%. And during that time, those remaining 4%, just unreachable by roads, knocked out bridges, building tops, can't take generators, other issues that take a little longer to resolve. During that time, only 1% of our customers didn't have good signal, but 4% of our towers were out. Because, again, customer-driven coverage, looking at these 165-meter wide hex bins in real time allows us the telemetry to see who's connected and who's not. And our advanced self-configuring network capabilities allow us to do automated tilting and automated powering up of low-band capabilities from further away towers to reach each customer with lighter signal than they would have had without the storm, but with signal. So they can get those essential messages out, receive the phone calls, tell their loved ones they're okay or get help if they're not. That's the kind of thing that customer-driven coverage and the era of AI can accomplish. Now this is also about building a digital relationship because creating customer love at scale means graduating from the era of the Un-carrier that was all about treating everybody the same. Because now there's so much that we have to offer. We've delivered 25 or so Un-carrier moves over the past 12 years. There's so much that differentiates T-Mobile. And our job is to make sure to connect every customer with the exact success journey that will maximize their happiness with T-Mobile service. And the centerpiece of this is T Life, our new flagship app that will eventually replace every single consumer-facing app we have. It will reach 40 million active users this calendar year. It's currently well past 30 million. And it allows us to do so much more than simply serve their account needs. T Life is becoming a lifestyle brand for people to manage their Magenta Status benefits to check in on their T-Mobile Tuesdays to track their family and be able to keep their kids safe to prevent scams and unwanted spam calls and so many other things that make digital life better. And we're seeing already the results of this -- having T Life in customers' hands. We expressed at Capital Markets Day an aspiration that we would achieve 100% of customer upgrades digitally in this planning horizon as well as the majority of activations coming in digitally. Now earlier, somebody asked, aren't we as an industry laggards in this space? And the answer, as Tim said, is yes, we are. And you should view that as the good news. There's a tailwind on our business that when we lead this industry worldwide in digital adoption, we'll only be doing some things that other industries have already done. And there's a reason for our laggardness. It's not that we haven't paid attention to this. It's that there's aspects of our offers that are too -- in the opinion of customers that are too complicated for digital. And that's why the era of AI makes a difference. If there's one thing that AI is great at, as we all know, it's making the complicated simple and helping you understand vast amounts of complicated information and putting it right in front of you in 3 or 4 bullet points. This is a catalyst for us to be able to use T Life with customer-facing AI tools to unlock digital transactions, starting with 100% of upgrades and an aspiration for half or more of all activations. Now we also expressed an aspiration for you that we would reduce human-to-human customer service interactions in our retail stores and our customer experience centers by 75% from 2022 through our planning period. We're well on our way, by the way. And this is, again, not by just putting bots up to solve problems and take away your interaction with people, but to prevent your problems in the first place, to use real-time AI-driven data to make sure that those problems don't happen. A huge part of customer-driven coverage is to figure out what problems might happen and to prevent them so that network issues don't crop up or if network issues do crop up to be able to give you real-time information about why, so that you go away happy. I mean if the government tears out your street and it's pothole filled street and it's got no curbs and the new one is shiny and it's beautiful and it has curbs, that's a good deal for you. But not if they forgot to tell you it was going to happen, and you can't get home for 2 weeks while they're working on it. And so a big piece of this is just arming our people to give the right information to customers. If they call and say, "Look, my signal is weak, it used to be strong, what's going on?" And we can, in real time, interrogate the network with advanced AI capabilities and say, "What's happening is you're served by three sites. One of them is undergoing an upgrade. That will be done a week from Thursday. And when it's done, not only will your service be as strong as before, it will be much higher capacity, week from Thursday. Any other questions?" No. That customer will go away happy because of the AI tools that have transformed how we interact. Now a huge piece of this plan is not only taking these AI tools to make our network more advanced as well as to transform how we deliver customer love at scale, but it's also to help us continue to double down on the advantages that have gotten us this far, best network, best value and the best customer experience, so that we can drag right the growth in all of these underpenetrated segments, and that's what Peter will talk about.

All right. Thank you so much, Mike. Thank you for the time and allowing us to speak here today. So let me just recap for you what we spoke about at our Capital Markets Day and how we plan to sustain what we've delivered to date in industry-leading postpaid customer growth every year during the pendency of this plan, and it begins with our focus on switching. And not on coincidentally, if you look at the vast majority of things that drive customer switching in the U.S. market are network, value and experiences. And this just happens to coincide with our unique and differentiated strategy of delivering the best network, the best experience and the best value. And there's been a lot of question around, hey, 2021 was a peak year for industry postpaid phone net adds in the U.S., and it's moderated every year since then. But for these highest value switching accounts in postpaid, the inverse is true. They've actually increased every year since that peak of total net adds and now are 8% higher in '23 than they were in '21 and continue to grow. These are the highest value customers. You attract the account and then you expand that relationship via ARPA growth as the relationship grows, it drives significant value. And of course, we're applying this best network, best experience and best value approach, as Mike said, to our segments. And you've heard us speak a lot about in the consumer segment, really initially in our 2021 Capital Markets Day we were focused on smaller markets and rural areas. It was a strategic idea that has now been transformed into a tailwind of durable growth. And in fact, in Q2 2024, just this last completed quarter was our highest win share to date, significantly above our market share while at the same time, also we've grown our Net Promoter Score and are significantly above the competition. So this formula continues to drive durable growth and a long run opportunity there. One thing we didn't talk about in 2021 was our top 100 markets. We had a long established footholds in top 100 markets based primarily on our value leadership. And if you double-click and we gave a little bit more detail into those top 100 markets, and there's durable growth across all three of them. Beginning with our 40% of the top 100 markets where we actually are #1 in terms of share of households built on value leadership, but we've now seen with the network. And what's happened with the network and the subsequent change in consumer network equities, that is continuing to fuel growth even in those areas. Going down to the bottom 30% of these top 100 markets where we're actually #3, they tend to behave very much like those smaller markets and rural areas. And that same investment in network, distribution and the brand is fueling growth there. So we see both of these categories now as long-run sustainable growth areas in the consumer space. Similarly, in T-Mobile for Business, where this was an idea and has also grown into a durable source of growth across large enterprises, across government and across SMB. And this is driven not only by, again, this best network, best value formula, particularly in the smaller side of SMB, but in what we previewed, which is this move from SIMs to solutions, where it's really about taking this network advantage and unique capabilities that we have and unique partnerships that we have. And not going into large enterprises and government and saying, "Hey, I'm trying to get your phone connectivity and I'll just beat the procurement office price of whoever else you got." But as Tim spoke earlier today, actually solving problems for them. Whether that was unique things like TIoT, actually a partnership with DT to provide unique multinational solutions around IoT products. Multiline, which is an offering that we put out there to solve regulatory issues, primarily in the financial space or where we've recently commercialized slicing, network slicing enabled by that 5G core, including just announced at Capital Markets Day around T-Priority for first responders. And when you become a trusted solutions provider, that tailwind brings you that traditional postpaid business in that growth that we've seen. And this is an area we believe we'll continue to have double-digit service revenue CAGRs for us. But it's not all about Mobile, of course, 3 weeks ago at CMD, we talked about now growing our 5G home broadband base to 12 million customers by 2028. And that's fueled primarily by these four elements here, advanced network technologies, which Mike spoke about, our ongoing 5G spectrum deployment, including the ability to put quickly to work things like the incremental 2.5 gigahertz that we received in Auction 108. Precision marketing, continuing to evolve being data-driven and targeting eligible customers under this fallow capacity model to drive incremental conversion of those eligible customers into subscribers. And we spoke about CPE advancements like 8RX routers, which not only drive more speed but also better capacity and better performance as you get further from the cell, yet the cost curves on those have come to the point where they're equal to our prior gen routers, so driving more incremental capacity there. I think what's very interesting about this space is just what you've seen. There were questions around is this a durable product? Well, I can answer that for you. Absolutely. Customers can answer that for you via NPS scores, and what you've seen happen in terms of the actual performance of the product. Our 5G network download speeds are very similar to average cable wire speeds. Since we launched this 5G home broadband product, speeds on it have increased 3x. Even as you heard Mike say, usage is 500 gigs a month and growing 10%, much like we predicted. And while simultaneously, you increase speeds there, you saw mobile speeds increase significantly, including, most recently, now 2.5x the download speeds of our competitors. All right. And you know, of course, that we also supplement that with our ambitions around fiber, including our recently announced JVs to acquire Lumos and Metronet. And it's really a few fundamental beliefs here. We can put a great product out there to customers that's very complementary to our 5G home broadband product. We can do it in a very profitable way as we target passing 12 million to 15 million homes by 2030. And we can do it in a way that drives returns that are incremental above what a pure financial investor can do because of the embedded unique advantages that we have, including the brand our customer relationships and the 5G home broadband business itself, that as Mike said, is now over 6 million customers and has over 1 million customers on a waiting list. It's a phenomenal win-win, that we believe will generate IRRs of 20% or above. And all of this taken together, of course, results in very exciting to me, outsized financial growth. We spoke about service revenues and are now ambition to actually accelerate service revenue growth from 4% to 5% CAGRs through 2027, including continued strong postpaid growth of 6%. Our core EBITDA growth CAGR of 7% even as we move past merger synergies. Those are created by, obviously, the incremental service revenue growth on your fixed cost base, the marginal benefit of that as well as tremendous efficiencies, both in the network as well as through customer experience changes, as Mike spoke about in digitalization. And when you couple that profitability growth with core EBITDA with our CapEx of $9 billion to $10 billion, we foresee an adjusted free cash flow in 2027 of now between $18 billion to $19 billion, including the fact that in '27, we will be a full cash taxpayer, so in that $18 billion to $19 billion, you have $5 billion of projected cash federal income taxes that are absorbed in there. And that generates a free cash flow margin of 25% far and away, the best in the industry, and that is the true measure of value creation, your ability to convert service revenue dollars, take out all the noise between competitors of CapEx, OpEx into true free cash flow. And what are we going to do with all of that? Free cash flow creates a compelling envelope. And I think the most important message here is that we're going to approach the allocation like we have very consistently with our capital allocation methodology. We maintain a leverage ratio of around 2.5x net debt core adjusted EBITDA, U.S. GAAP with the flexibility to deliver. We're going to continue to invest fully in the core business to drive and fuel this outsized growth will opportunistically invest in spectrum or accretive M&A, much like we have done in the past and will return the balance to stockholders via a balanced approach of dividends and share buybacks. And we spoke about what our initial allocation view of this $80 billion envelope is, is $10 billion to fund announced strategic investments, inclusive of Spectrum, Lumos, Metronet up to $50 billion in stockholder returns. That's in addition to the $25.1 billion we had done through the date of Capital Markets Day, incremental to that amount. And smartly retaining flexibility in the form of $20 billion to apply anywhere in the capital allocation framework. Looking, of course, first, for potential value-creating investments in the form of spectrum or M&A, potential delevering or potentially additional stockholder returns. I couldn't be honestly more excited about what this plan, what this team creates how we're able to translate these strategies into actual results quarter-by-quarter and what that unlocks for us and you as the shareholders. And so with that, let me turn it back over to Mike to wrap this up.

Okay. So as you heard from Peter, the promises of Challenger to Champion are that we will outgrow everyone every year, that we will accelerate service revenue growth to 5%. Postpaid service revenue growth will continue to be 6%, meaning more nominal growth than ever before on a higher base. EBITDA growth, 7%; cash flow growth, 8%; all by dragging right proven strategies but adding to it advanced technology capabilities that we've demonstrated, we can move faster and better on of course, transforming our customer experience, what it means to be the Un-carrier, what it means to deliver customer love at scale in the era of AI and digitalization. That's the plan. We're confident in it. We're excited about it, and hopefully, you are, too. And Hannes, we'd love to take questions.

Great. Amazing story, amazing ambition. So it's very exciting. So obviously, we have now half an hour for M&A -- Q&A. Okay, no Freudian intentions here, or non-intentions. Okay. So can everybody just please do one question, the first round. And then if we have time, we do another one. So Mathieu.

Yes. Mathieu on behalf from Barclays. Actually, I wanted to dive in on, something on AI since I assume that in the U.S., you probably ahead of us in terms of the development usage, et cetera. You flagged the impact of AI in terms of improving the network efficiency and also improving the customer experience. It's something we never heard, at least in Europe, is whether AI could drive traffic growth because obviously, that could be something that benefits your industry for the core product. I'm not talking about selling other services related to AI. Are you already seeing some of that at this stage? Or do you expect it to happen in the next few years?

It's a great question. And it's a big piece of it. You saw -- Peter very quickly talk about something we call precision marketing. And this is really about applying the most advanced capabilities we know how to do to take our digital marketing to the next level. We're so excited about this area that we're actually turning it into a business. So not only do we see the opportunity to apply advanced AI models to meet customers right where they want to be met with the right message to be able to get their upgrade or their sale, this is about customer journey optimization the power of the vast amount of data that we have. Remember, most of our marketing is to our existing customers. But in addition, we see an opportunity to use that same capability to grow a new business serving marketers. We disclosed at Capital Markets Day, we have a $1 billion business right now in serving marketers and called T-Ads and associated businesses within our company. And we see an opportunity for significant growth there. This morning, we were reminded that this brand is one of the most respected in the world. In the U.S., this marketing team is one of the most respected in the country. And we're one of the biggest top 5 marketer in many categories, top 20 overall. And so when we're able to apply these capabilities and some of the ways you saw us talk about in our keynote with some of the world's best thinkers, we not only can do a better job marketing and therefore, drive the top line, we can actually create associated business lines as well. That's all in the aspiration set. Now one thing I want to remind you about the aspiration set, there's a mismatch between the goals we've given you and the key indicators we've given you. So make sure you understand that. So in other words, when we grow our T-Ads business by a lot, or when we achieved 75% reduction in customer service, person-to-person interactions or when we achieve 100% upgrades of the majority of activations in digital and the associated changes in the retail footprint size, some amount of that would be incremental to the financial KPIs that we gave you of 5% acceleration in service revenue, CAGR 6% postpaid, 7% core adjusted EBITDA growth, et cetera.

Sorry, if I can just follow up. The question is also, do you see traffic in your network? Do you see that AI will drive more usage of mobile data...

I misunderstood that part. Absolutely. And here's why. Every major -- think about this, every major innovation we've ever been through has started with text, right? Do you remember, how many of you were around when the Internet started? You had a 300 baud modem. And you could see the text flying across your -- no one, okay. Yes, I'm feeling kind of old. You could see the text flying across your screen at the beginning of the Internet. You could -- so much of telephony began with simple T9 texting as we moved into the data era in mobile phones. AI is the same. I mean ChatGPT came out in 2022 and blew all of our minds, but it's basically text. And text isn't a big payload on the network. What's happening in AI is the same thing that's happened to all the rest of the big discontinuous innovations that have come, which is it's transforming itself into deeply immersive experience. And as it does that, the potential for network payloads are enormous. And so I think a world where we carry technology with us, that's actively monitoring the world around us and helping us navigate that world in real time with AI processing. That's a powerful world that is going to require massive payload of traffic on our network. What I would like is somebody walks up to me for -- to remind me your name and how we know each other, I would love that, if just whispered in my ear, I would love that. But think about the power of the network payloads that would be required with an always-on world perceiving uplink to the Internet that's being processed in real-time. One of the things that we disclosed at our Capital Markets Day in my chat with Jensen Huang is that we are investing in AI-RAN. And one of the reasons why we're doing that is that we see this payload coming. And not only do we think there's an opportunity for traffic on our network, we actually think there's an opportunity for data processing near the customers. We think AI will unfold such that there will be a useful middle point between AI that gets processed and inferences that get processed on your device, which is going to be the best for real time. But more limited in capability because of the finite data set you can carry with you. And cloud computing of AI, which is the kind that you became familiar with before and ChatGPT. So real-time processing near to the customer cloud AI workloads, the kind that you could take advantage of if you've built an AI-RAN infrastructure could be a future business for us beyond the planning horizon.

Excellent. I think, Josh.

This is Josh Mills here from BNP Paribas Exane. So you created your brand and a huge amount of value by being a disruptor. But as you've kind of walked us through as you go from being a challenger to a champion, the risk of being disrupted in turn is going to go up as well. So I wanted to ask where do you think the biggest risk of being disrupted in the U.S. market comes from today? Is it convergence taking off cable cutting prices on MVNO services or maybe fiber expansion potentially eating into your 12 million FWA target customer base? And if any of those risks were to materialize, do you think your current business plan has enough fiber-to-the-home in it to use the technology as a defensive measure as well as an offensive one as it's being used today?

Yes. That's a great question. I would say it's pretty clear from our business plan that our bet is that convergence as people understand it in some markets like Europe will happen differently in the U.S. And I want to just sort of share some stats. First of all, convergence has happened in the U.S. and is in the run rate. And that's not something a lot of investors have really stopped to think about, has happened. In fact, 85% of American consumers today, have the choice of getting their mobile phone service from the same provider as their home broadband service, 85%. And that was also true 5 years ago. So it's fully in the run rate. And our bet because of lots of factors around how hard it is to cover the U.S. with mobile service that there is no path for anyone to have nationwide home broadband service, these kinds of factors make mobile a highly considered sale against the backdrop of a European market where for a lot of consumers, any SIM will be fine. That has never been, and I don't predict it will be a core consumer behavior in the U.S. It really matters. It's a considered sale, who is your wireless provider. And you can see that in the low, low churn rates that happened in the U.S. Structurally years ago, the U.S. carriers decided to roll phone service in with the phones. And that means that your mobile service also includes a multiyear contract to pay for your phone. These kinds of things create sort of structural barriers to switching. What we know is that when you have several services churn is lower. That's always been true. And broadband is just one of many services that can have that dynamic. Just having a family plan versus a single-line can have that dynamic. Having a tablet in addition to your single-line can have that dynamic or a device for your car or an additional software service from us, all of which can have that dynamic. Similarly, the people who see convergence rolling out and having sort of structural advantages for those offering the converged services are kind of missing, I think, a kind of causality versus correlation observation. Like for example, I recently heard one of my benchmark competitors say that their churn for mobile service is lower in the places where they have fiber. And we looked at it and said, but our churn is also lower in the places where they have fiber. So in other words, like be cynical about the causality of some of these statistics. The market is very, very different in the U.S. Why we're interested in fiber is because we think we can build a great product and generate a superior return by virtue of the things, the capability and the know-how and the embedded investments we've spent years building that give us a leg up on a purely disinterested financial investor. So we think we can generate a superior turn, 20% or better, as Peter disclosed to you again a few minutes ago. Because we've got that great brand, and that distribution, the capabilities, the know-how, a scaled 5G broadband operation, we can piggyback on top of, et cetera. We are not doing fiber to defend our mobile business.

Okay. So next, let's have Akhil, please.

It's Akhil from JPMorgan. Mike, maybe if I can follow up on the comments you just gave on fiber. I think you've been pretty clear on it not being a defensive requirement. You've been pretty clear on your view on convergence. But you've also been pretty clear on the return opportunity, which at 20% is obviously very attractive. So I guess I just wanted to challenge what would it take for you to want to scale that bigger? Because it's a very large TAM. There's a very big opportunity potentially. What are the measures, metrics, things we should think about as we think about your journey into the fiber market? And I guess the question is, what would make you one of the bigger?

Yes. And I want to bring my friend, Peter into the conversation here because I think it's important to understand some of the drivers. But I'll just kind of start it by repeating something we've said publicly before, which is we're open to more. But I don't see anything imminent. We're not working on anything right now that we judge to be high likelihood. We're patient. Patient so far has proven to be a great strategy for us because the deals we came out with are we're extremely proud of, win-wins for everybody involved. So I wouldn't be counting on something from us soon. But we're open-minded about it. And we've already shown our hand a little bit as to the kinds of things that we prefer.

Yes, exactly. I mean you've seen us really focus on, number one, pure-play fiber, a simple, elegant complement to the pure-play mobile side of the house. We look at what are the management teams doing, how capable are they of scaling, growing? Do they fit into the culture of this Champion era as we move to the Champion era. And also the economics have to work, right? So I mean, fundamentally, that's kind of where it starts. But it's those kind of three core elements that we're looking to, in addition to other things as well that really will drive as we continue to look across the space does something makes sense or not. And I'd add probably one more thing to the last category that you spoke about, Mike, which is very interesting. Since convergence has been here in the U.S. for 5 years, you might ask yourself, well, how have you performed in those markets? And what's interesting is we have deeper penetration. Our count share of households is actually higher in areas where there is fiber versus where there isn't fiber.

And faster growing.

And faster growing.

We're doing better in mobile where the other guys have fiber. By the way, that reminds me that the -- I really like the structure of these transactions as well. Not that it's a requirement. But you look at something like Metronet where we're with KKR or Lumos where we're with EQT, $1 of equity from us is matched by $1 of equity from them, but then you can expect leverage of about additional $3. So in other words, we're getting $5 of firepower to rapidly build out for every dollar we put in and yet we get 100% of the branded opportunity, right? So T-Fiber is the brand we'll be going to market with across all of the footprint of these partnerships. And so this is a great way for us to add ourselves to the equation, help partners be successful but also get way more firepower for every of our capital.

Okay. Robert?

Robert from Deutsche Bank. One -- there's another question on fiber actually, sorry for that. But one other way of addressing the fiber opportunity could be you parlay your 10 million to 15 million home coverage into a bilateral deal with other fiber providers. Is that interesting to you? Or do you see it where you have fiber you want to dominate rather than sharing economics, but also expanding your footprint with others?

Well, there's a lot to that question. I would say, it wouldn't be that productive to get into hypotheticals, but we're pretty open-minded as to how to think about this. Within that context, I know you're not asking about this, but we're less excited about models where we're not the go-to-market brand. So we really want T-Fiber to be the go-to-market brand. So sort of sharing that with lots of others in an open model, I just think makes it a lot harder to be able to build a scaled operation. We're open to that, but it's less attractive to us. As it relates to kind of go-to-market partnerships and things like that, I'd never say never.

Steve?

Yes, Steve Malcolm from Redburn Atlantic. I probably guess the answer to this is optimistic Americans versus a pessimistic scope. The complexity is kind of a double edge sword I always think in telco is that in some ways, it's defensive because customers end up paying for stuff they don't necessarily need and it maybe stop new entrants coming in. So the comments you make on AI, I find kind of interesting. Are there any areas where it concerns you at all that customers have better information that they may end up paying for stuff that they don't need. They may upgrade more quickly because maybe they qualify for phones, they weren't aware they qualified for a new phone. The upgrade cycle has obviously been very low in the states for 2 or 3 years now. So everyone is obviously very excited. Are there any risks at all that better information damages part of your business? Or you kind of feel that you've got all the safeguards in place to deal with that.

The thing about -- you're getting at a really important point. And the thing about, for example, our partnership with OpenAI to create IntentCX is that we, for the first time, can deeply train models not just on the data set that we have, but the specific objectives we're trying to accomplish. And that's a bit of a breakthrough. So if we're able to train it on what we're trying to accomplish and show its success models then it's less likely to be able to steer customers down a path that's contrary to their success or to our objectives. But that's something we've got to really have our eyes open to for sure.

We love transparency. I mean one of the things we do now, in fact, we're very excited about educating customers more about the value actually packed into our plans. And one of the ways we've grown differentially than others, the way we've grown ARPA is actually customer self-selecting up the rate plan because they more and more understand all the incremental value beyond just the core connectivity. What is the device upgrade benefit? What are streaming benefits that we provide, connectivity in the sky, so to speak. And so as we've been able to educate consumers even more, that's how we continue to see this approximately 60% uptake on our top tier plans with new accounts coming in. So I think transparency for us has always been a ticket to actually showing customers they get more value.