T-Mobile(TMUS)2024-10-24 00:23Financial Data and Key Metrics - Q3 2024 was a strong quarter with consistent execution, enabling the company to raise its 2024 guidance again [5] - Core adjusted EBITDA growth of 9% led the industry by a wide margin, driven by profitable customer growth and industry-leading service revenue growth [9] - Full-year 2024 guidance for core adjusted EBITDA raised to 31.8 billion, up 16.7 billion and 50 million at the midpoint, driven by margin expansion and capital efficiency [11] - Postpaid ARPA (Average Revenue Per Account) is expected to grow around 3% year-over-year in 2024, with industry-leading service revenue growth accelerating [10] Business Line Performance - Mobile business delivered the best Q3 postpaid phone net adds in a decade, fueled by record-low Q3 postpaid phone churn and year-over-year growth in gross adds [6] - Broadband business reached a milestone of 6 million customers in just three years, halfway to the long-term target of 12 million customers by 2028 [8] - Digital mix of iPhone launch sales in Q3 increased by 40% year-over-year, with the majority of T-Mobile branded iPhone pre-orders being digital for the first time [7] - Enterprise segment saw double-digit growth quarter-over-quarter, with significant wins in government and retail sectors [38] Market Performance - The company continues to lead the industry in share of switchers and grew its share of households in both top 100 markets and rural areas [6] - Smaller markets and rural areas (SMRA) saw strong growth, with Q3 being the highest win share quarter ever, and Net Promoter Score (NPS) in these areas is now 20% higher than the next competitor [35][36] - The company’s 5G network was awarded the best 5G availability in the world by Opensignal, further differentiating its technology leadership [8] Strategic Direction and Industry Competition - The company is focused on evolving from a challenger to a champion, with a multi-year plan that emphasizes consistent execution and digital transformation [11] - Digitalization efforts are progressing, with a goal to reduce person-to-person customer service interactions by 75% and achieve majority digital activations [20][21] - The company is leveraging its 5G network leadership, with advanced technologies like voice over new radio and four-way carrier aggregation, to further extend its competitive advantage [8][52] - The company is exploring opportunities in AI-RAN and 6G, with a focus on driving future network efficiency and performance [73][74] Management Commentary on Operating Environment and Future Outlook - Management highlighted the company’s resilience and recovery efforts following hurricanes Helene and Milton, showcasing the team’s innovative use of technology to support affected communities [4] - The company remains optimistic about its growth trajectory, with a focus on underpenetrated areas and segments, particularly in rural markets and among customers who prioritize network attributes [6][35] - Management emphasized the importance of maintaining a balance between growth and profitability, with a strategy that prioritizes value, network quality, and customer experience [88][89] Other Important Information - The company is actively managing its spectrum portfolio, including recent transactions involving 3.45 GHz and 2.5 GHz spectrum, and exploring options for 800 MHz spectrum [23][24] - The company is progressing with several strategic transactions, including deals with US Cellular, Lumos, and Metronet, which are expected to close in 2025 [80][82] - The company is investing in customer-driven coverage, using AI-driven algorithms to optimize network deployment and capital allocation [59][60] Q&A Summary Question: Buyback Strategy and Wholesale Business Impact [13] - The company adjusted its buyback strategy to be more consistent and less reactive to short-term share price movements [15] - Wholesale revenue is expected to trough in 2025, with underlying growth in partnerships offsetting declines from ACP and TracFone transitions [16] Question: Spectrum Strategy and Digitalization Cost Savings [18] - The company is optimizing its spectrum portfolio, with 3.45 GHz not being part of its long-term plan, and exploring options for 800 MHz spectrum [23][24] - Digitalization efforts are expected to drive significant cost savings and revenue growth, with a detailed 14-quarter plan in place to track progress [19][20] Question: DT’s Ownership Stake and Postpaid Phone Net Adds [26] - DT’s ownership stake in T-Mobile may increase over time, but the governance structure and strategic alignment remain unchanged [27][28] - The company expects approximately 3 million postpaid phone net adds for the full year, with Q4 trends aligning with expectations [29] Question: SMRA Market Penetration and Postpaid ARPU Strength [34] - The company is seeing strong growth in smaller markets and rural areas, with record win share and high Net Promoter Scores [35][36] - Postpaid ARPU strength is driven by a mix of factors, including rate plan optimization and expansion of customer relationships [41] Question: 800 MHz Spectrum and AT&T’s Fiber Network [43] - The company has optionality with 800 MHz spectrum, which is not currently part of its financial or network plans [45] - The company is open to future opportunities in fiber but remains focused on its own fiber deployment strategy [47] Question: Handset Upgrade Rates and AI-Driven Device Cycle [49] - Current handset upgrade rates remain low due to the longevity and performance of existing devices, but the company is well-positioned for any future upgrade cycles [50][51] - The company’s standalone 5G network and advanced device capabilities provide a competitive edge in future upgrade cycles [52][53] Question: Network Upgrade Priorities for 2025 [57] - The company is using a customer-driven coverage model, leveraging AI and data to prioritize network upgrades and optimize capital allocation [59][60] - The company has a detailed plan for deploying C-band spectrum in 50 markets, with further capacity expansion not immediately needed [62] Question: Macroeconomic Indicators and Consumer Behavior [65] - The company does not see significant changes in consumer behavior or macroeconomic indicators affecting its core business, with steady growth in postpaid and prepaid-to-postpaid transfers [68][69] Question: Spectrum Costs and 6G Cycle [72] - The company is optimistic about the efficiency of future 6G cycles, with potential cost savings from AI-RAN and Open RAN technologies [73][74] - The company’s 5G strategy has benefited both consumers and the industry, with significant improvements in speed and data usage at similar price points [75] Question: US Cellular Deal and ARPU Growth Drivers [78] - The US Cellular deal is progressing well, with expected closure in mid-2025, and is expected to benefit both T-Mobile and US Cellular customers [80][83] - ARPA growth is driven by the expansion of customer relationships, with minimal impact from rate plan optimization [79] Question: Fixed Wireless Business and Growth Trends [94] - The company’s fixed wireless business continues to perform strongly, with consistent net adds and high customer satisfaction [95] - The majority of fixed wireless customers are coming from cable, with gross adds needing to increase to sustain growth towards the 12 million customer target by 2028 [95]