T-Mobile US Inc at Wells Fargo TMT Summit Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Eric Luebchow - Wells Fargo Securities, LLC - Analyst : So Jon, maybe to kick it off, we're right in the heart of a very competitive holiday season. We just had Black Friday, we've had new phone launches with a new iPhone a couple of months ago and some holiday promotions. So maybe you could just update us on the state of the competitive market in Q4, how things are tracking, it looked to us like a lot of the carriers had pretty similar promotional offers in the market in early Q4 from previous years, but maybe you could update us on that. Jonathan Freier - T-Mobile US Inc - President - Consumer Group Yeah. It's great to be here with you, too, Eric, and thanks for having us. This business is such a great business. When you think about how the industry is growing its overall service revenues, how it's growing its EBITDAs and how that's converting into free cash, and customers are winning more than ever. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Eric Luebchow - Wells Fargo Securities, LLC - Analyst : Okay. Great. And kind of coupling that with another topic that we've seen more recently is just a historically low upgrade rate environment. throughout the course of the year, we've seen upgrade rates down across the industry, obviously, helping retention efforts at a lot of the carriers. But with the new iPhone release, some of the new AI functionality that we're seeing introduced, do you think we're set for a bigger year of upgrades or more switching activity as you look into 2025? Jonathan Freier - T-Mobile US Inc - President - Consumer Group It's hard to know. It's hard to know where upgrades are going. And to your point, that we've seen these kind of record low upgrade rates across the entire industry. That's not a phenomenon that's exclusive to us. You're seeing that across the entire industry. And that's a testament, in my view, to Apple and Samsung and Google making such great devices that are lasting longer and customers are keeping them longer. And then what's specific to us is that 80% of our postpaid customers have a 5G device. So when you're looking at the experience difference from one model to the next model, there might not be as much of a difference, given that the base already has 80% to 5G devices. So we're seeing that upgrade growth being lower. It's hard to know. Now what we saw during the early days of the iPhone 16 launch is we saw our sales up on a year-over-year basis. But for us, switching was up, gross adds were up, overall demand was up, during that period of time. And so when you look at the overall upgrade rates, yes, lower, but overall sales were up given the demand and the switching that's coming into our business versus others.

Question: Eric Luebchow - Wells Fargo Securities, LLC - Analyst : And just to follow up on that, Cathy, I know at your Capital Markets Day, you did give some guidance measures for 2025, service revenue, ARPA, EBITDA, CapEx, you didn't talk about free cash flow. So maybe you could provide any color on how we should think about free cash flow trajectory into 2025?

Question: Eric Luebchow - Wells Fargo Securities, LLC - Analyst : Okay. I appreciate that, Cathy. So I wanted to switch to, obviously, one of the big topics over the last few months, and that's been convergence between wireless and wireline. AT&T this morning had an announcement to reach 50 million homes, Verizon and Frontier, have some announcements on their future fiber footprint. So clearly, your two largest peers are moving in the direction of more fiber Internet bundled with mobile. You guys obviously have some JVs in the market. But does that -- do these announcements at all change your strategic thoughts about the importance of having a broader fiber footprint versus what you've already announced? Jonathan Freier - T-Mobile US Inc - President - Consumer Group They don't. And the reason why is that when you look at convergence, we believe that convergence is here. It's not coming. It's here. And when you think about customers, and more than 80% of customers for the last five years have been able to purchase a mobile product and a broadband product from the same provider. And during that period of time, you've seen our results and how we've been successful during that phenomenon. And what we're seeing is that when you look at penetration and overall growth in fiber markets versus non-fiber markets, there's no difference. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Eric Luebchow - Wells Fargo Securities, LLC - Analyst : And some of your peers have talked about how bundling fiber Internet with mobile can lead to better retention, reduce churn. They put some stats out there on that. I mean -- do you see any sign of that whatsoever when you're going up against fiber in terms of switching activity from your peers? And also, you have a very large fixed wireless footprint as well. Are there any retention benefits to bundling a fixed wireless product with a mobile product? Jonathan Freier - T-Mobile US Inc - President - Consumer Group There are. And you've heard us talk a lot about over the years about deepening customer relationships, which is really kind of going beyond the smartphone relationship. So it's not something that is exclusive to a fixed wireless product or a fiber product in our experience, but having multiple connections across the entire account, a smartphone, a tablet, a watch. And again, a fixed wireless product those multiple connections does create stickiness, and that's what we're seeing as well. When we see customers that have a deeper relationship with more products, including fixed wireless access, yes, the churn is lower. But the churn is also lower when they have a tablet or a watch without fixed wireless access. So having a multiple product approach across a customer's account and deepening that relationship absolutely does create retention and stickiness and lowers overall churn.

Question: Eric Luebchow - Wells Fargo Securities, LLC - Analyst : And I think one other thing that we often hear is that kind of perception sometimes lags reality in terms of network performance. And I know for many years, T-Mobile was viewed as a network that worked great in dense urban areas, but was a little bit spottier when you move into these smaller markets. So maybe you could talk about where you're at in terms of network performance in the rural areas, but also improving perception so that people realize, like actually, this is a premium network now sometimes that takes a little longer, right? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Eric Luebchow - Wells Fargo Securities, LLC - Analyst : And in the metro markets, which have been, as you said, kind of the bread and butter for T-Mobile for a long time, your two largest peers have been actively upgrading their networks with a lot more mid-band spectrum and some of them put out stats around how they have better wireless penetration, where they launch spectrum like C-band. So maybe you could talk about in the larger markets where all three carriers do have mid-band spectrum rolled out. Has there been any discernible impact in those markets to your results from that competitive factor? Jonathan Freier - T-Mobile US Inc - President - Consumer Group We believe our results speak for themselves. When you look at what I just described in smaller markets and rural areas and how we're growing there, the reality of that extends into the top 100 markets as well. And we look at where we're number one in share position, number two in share position or number three in share position, we have the majority of the top 100 markets where we're number two or number three. So we're only number one in, call it, 30%, 35% of the market. So we're number two or number three in the majority of these markets where we have more growth to go and get in these overall markets. But when you think about how we're growing, where we're number one or number two or number three, we're growing across those entire segments. And that's really related to what Ulf Ewaldsson has been talking about with everybody around extending our network lead, driving

Question: Eric Luebchow - Wells Fargo Securities, LLC - Analyst : One other thing we've seen this past year is that all the carriers have made some pricing adjustments or pricing optimization moves, whatever you want to call them. One of your largest peers has been definitely by far the most aggressive, but it's interesting that we haven't seen a really big uptick in churn from these pricing adjustments that have been made over the last year, and that may be due to some structural factors that we talked about earlier. But maybe you could talk about whether that those moves by your peers give you more of a pricing umbrella to consider future pricing actions? Or do you feel pretty comfortable kind of being the value leader? You can drive better share gains in the market. How do you think about that dynamic? Jonathan Freier - T-Mobile US Inc - President - Consumer Group Yeah. Our strategy is to be the value leader. And that's our covenant as a brand with our customers and that's what we're famous for, and we're going to continue to be the value leader in the marketplace. We're going to defend that position and be the value leader. We haven't taken any decisions in terms of any other pricing actions, but we remain flexible. But there's opportunities that we see, great, we'll explore that. But only if our brand covenant of being the value leader remains intact. That's the most important thing for us because the path to value creation for our company is not necessarily on pricing action, it's on account growth. That's where our service revenue differentiation, the growth that we have in service revenue will come from, not just by jacking and people's prices up but providing great value, being famous for the value leader, and drive an overall switching and account growth in our business.

Question: Eric Luebchow - Wells Fargo Securities, LLC - Analyst : And I think you've also said that 65% of your new accounts are taking the Go5G plans, if I have that correct? And you have about 30% of your base now on these premium plans. Maybe you could talk about what you attribute that success to? Is it partially that you give the best device promotions for people who take these higher end plans? Or do you sense that customers are finding a lot of value in some of the perks that are embedded in those plans, whether they be Netflix or Apple TV or some of the other add-ons that you have? Jonathan Freier - T-Mobile US Inc - President - Consumer Group Yeah. Go5G Plus and Go5G Next, these premium kind of value-packed plans are our most popular plans in terms of when new accounts are switching to T-Mobile to your point, from an account perspective, 60 -- north of 60%. And it's really because of that. It's because of the incredible value that you get with the streaming services with a differentiated upgrade opportunity over two years versus what our competitors are generally doing at three years. Go5G Next, it's actually one year, so customers who want that flexibility to upgrade every single year, have that option on Go5G Next. But the value that we pack into these devices -- to these plans is really the driver for it. Now also, to your point, we do structure our device promotions across REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Eric Luebchow - Wells Fargo Securities, LLC - Analyst : Great. No, that's very helpful. So going back to the fiber topic, I think you've talked about 15 million-plus homes longer term with some of the fiber partnerships and JVs you've signed. Maybe you could talk about how that business will interact with your fixed wireless business, the potential overlap between your prospective fiber footprint and where you will have a big base of fixed wireless. Could you talk about whether there's any kind of cannibalization between those two businesses, whether they're really complementary? Jonathan Freier - T-Mobile US Inc - President - Consumer Group Yeah. We see them as complementary businesses. They're two very different products. We see fixed wireless access as a mainstream use product. And you see fiber for much more higher consumptive -- speeds are approaching, gigabit download speeds and people that are using to the orders of magnitude a lot higher than what you get on fixed wireless and what we're typically seeing on fixed wireless. So we see them as very complementary products. Remember, we have -- fixed wireless is an excess capacity model. So we don't burden capital on fixed wireless. It's selling excess capacity. It's dynamic because it's always changing in terms of the capacity. We have 1 million people on a wait list right now for 5G broadband at T-Mobile, 1 million people, that want to be a part of us, but we don't have a slot open for them right here, right now based on where they live. And so that's 1 million people that are waiting. And when you think about -- this won't cross the entire 1 million people on a wait list when you think about 15 million homes passed, but any kind of demand that we can satisfy on a wait list get into fixed wireless product with the fiber product, that's great for our business. And then anybody that moves from a fixed wireless product into a fiber product creates capacity for more people who want to fix wireless product. So we see this as a very complementary business, and one that's going to be working together versus working against one another relative to the products.

Question: Eric Luebchow - Wells Fargo Securities, LLC - Analyst : Yeah. And at your Capital Markets Day, obviously, AI has been one of the big buzzwords this year. You had some pretty cool guest speakers. I'm not going to lie -- I'm not sure I understood everything they said. But maybe you could kind of break down and provide a little bit of color on the work you're doing, using some of these generative AI technologies to help improve customer experience, reduce inbound call volumes and then ultimately, how that manifests into customer satisfaction longer term? Jonathan Freier - T-Mobile US Inc - President - Consumer Group Yeah. And AI and all these buzzwords have been exactly that. And what we try not to do is to go to conferences and come back and use buzzwords just to hopefully impress people. We try not to do that. What we're trying to do is, look at these technologies and actually make real-world differences that improve the lives of our customers. So when you think about what Sam Altman talked about from OpenAI with IntentCX and our partnership there, we have billions of data points across tens of millions of customers that can help us improve their experience, that can help us improve their overall billing experience, that can help us improve their overall network experience, that can help us improve their overall kind of frontline human-assisted experience. We have all this data that is incredible in a treasure trove of data that we haven't put to the best use just yet. We do a great job in this space, as you can see with our churn rates, et cetera, but we have dreams about what we can go and do in a much bigger way, tailoring treatments to every single customers, making our messaging contextualized to our customers and improving the overall experience to our customer base on a person by person by person basis. When you think about the churn rate that we have, Q3 was our lowest Q3 churn rate in the history of the company. But still, lots of people left this company given that we're a scale player of 128 million connections across our network, even with the low churn rate and at what it is, that's still a lot of people leaving. So the more we can be surgical and thoughtful about every experience and curate a better experience for every single customer leveraging the promise of these technologies, we absolutely want to do that. And then what Jensen talked about, from NVIDIA, with AI-RAN, that's another unlock for us in terms of how we can be smarter about leveraging the network and running the network and generating efficiency of the network, and who knows potentially creating new businesses from this. That's still in front of us. But there's so much real interesting things that's happening here. And what I'm really excited about from a network perspective is Ulf and John Saw and the entire team at NVIDIA, they're pioneering the way to think about networks in the next generation of technology. And it's going to be exciting to see what unfolds. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Eric Luebchow - Wells Fargo Securities, LLC - Analyst : That's great. And one other factor in the customer experience equation is your T-Life app. So maybe you could talk about how that kind of plays into customer engagement, how that helps kind of reduce customer inbound call volumes and improved customer experience. Jonathan Freier - T-Mobile US Inc - President - Consumer Group Yeah. We're basically -- we're taking a large group of applications and consolidating them into the T-Life app, kind of a super app, if you will, to bring all the capability in the T-Life. You probably have already seen -- we've already sunsetted the legacy T-Mobile app from the Apple App Store, the Google Play store. We've already sunsetted that. And now you can only download T-Life. But we've had the T-Life app, we've had a T-Mobile Tuesdays app. We've had a T-Mobile account management app. We've had sync-up product apps, and we're trying to bring all of that into one app. That is going to increasingly be the epicenter of how we do business at T-Mobile, where it's really kind of promoting, empowerment for customers to be able to take care of things when they want to versus when they must in terms of when a store is open or when a call center is available, belonging in terms of really helping them understand all the benefits that they have and then being able to manage their full suite of connections to the network, whether that be their smartphone connection tablet watches high-speed Internet from their home, being able to do all of that within T-Life is our dream. And what we've seen already so far, we said we're going to see 40 million downloads by the end of this year. We're on pace for that. But what we've seen during the iPhone 16 preorder environment that for the first time in the history of our company, the majority of those preorders happen digitally. They were actually up almost 50% year over year. And so customers being able to easily upgrade their device, and we reengineered all of these constructs in terms of making it easier, easier promotional constructs and being able to get an upgrade done in basically three minutes or less. And that's so much more easier for our customer. And when you think about convenience, convenience isn't like a whole bunch more stores. Convenience is making it great and easy for customers right here on our smartphones. That's what the convenience is all about. And that's what we're trying to do.

Question: Eric Luebchow - Wells Fargo Securities, LLC - Analyst : All right. Well, Jon and Cathy, thank you for joining us today. We'll wrap it there. Appreciate your time. Jonathan Freier - T-Mobile US Inc - President - Consumer Group Thank you, Eric.

Question: Eric Luebchow - Wells Fargo Securities, LLC - Analyst : Thank you, guys. DISCLAIMER Refinitiv reserves the right to make changes to documents, content, or other information on this web site without obligation to notify any person of such changes. In the conference calls upon which Event Transcripts are based, companies may make projections or other forward-looking statements regarding a variety of items. Such forward-looking statements are based upon current expectations and involve risks and uncertainties. Actual results may differ materially from those stated in any forward-looking statement based on a number of important factors and risks, which are more specifically identified in the companies' most recent SEC filings. Although the companies may indicate and believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate or incorrect and, therefore, there can be no assurance that the results contemplated in the forward-looking statements will be realized. THE INFORMATION CONTAINED IN EVENT TRANSCRIPTS IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE CONFERENCE CALLS. IN NO WAY DOES REFINITIV OR THE APPLICABLE COMPANY ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY EVENT TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S CONFERENCE CALL ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.