Good afternoon. Welcome to the T Mobile Second Quarter 2020 Earnings Call. Following opening remarks, the call will be open for questions via the conference line by pressing the star followed by the number 1 and via Twitter by sending a tweet to T Mobile IR or mikesievert using TMUS. I would now like to turn the conference over to Mr. Judd Henry, Senior Vice President and Head of Investor Relations for T Mobile US.
Please go ahead, sir.
Good afternoon, and welcome to T Mobile's Q2 2020 earnings call. With me today are Mike Sievert, our President and CEO Peter Osvaldic, our CFO Neville Ray, our President, Technology Matt Staniff, our Chief Marketing Officer and Janice Kavner, our Chief Communications Officer as well as other members of the senior leadership team joining us remotely. During this call, we will make forward looking statements that include projections and statements about our future financial and operating results, our plans, the benefits we expect to receive from our merger with Sprint, our business and operations in light of COVID-nineteen and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of our management and are subject to significant risks and uncertainties outside of our control that could cause actual results to differ, materially including the risk factors set forth in our filings with the SEC. Reconciliations between GAAP and the non GAAP metrics we discuss on this call can be found in the quarter results section of the Investor Relations page on our website.
Also, I want to point out that our comments related to Q2 2020 reflect the combined results of New T Mobile unless otherwise noted. The prior period results in our earnings materials that accompany our Q2 results represent the standalone T Mobile prior to the merger with Sprint. While we do provide some unaudited pro form a historical financials on a supplemental basis, they are not directly comparable with the actual results for New T Mobile in the Q2 and going forward, nor are they directly comparable with the previously provided pro form a financials that were prepared prior to the completion of final purchase price accounting and policy alignment issues. We are not providing pro form a historical customer base metrics due to the inability to reprocess historical activity under all New T Mobile subscriber policies. As such, we will focus our comments on Q2 results and the comparable forward looking guidance as the best way of looking at the business moving forward.
With that, let me now turn it over to Mike. Okay. Thanks, Jud, and hi to everybody listening in or watching online. We're coming to you live and socially distanced from here in our Bellevue headquarters. And boy, is it nice to be back in the office for once, even if we're behind these huge flexi glass panels and sitting 10 feet apart.
First of all, let me just say thanks in advance for your patience, because my upfront remarks will be just a few minutes longer than usual today, given that this is our first quarterly report for the new company and there's a lot to cover. I promise I'm not Q2 was our Q1 together and what a quarter it was. I am incredibly fired up about everything this new combined team has accomplished since we last spoke in May, and I'm more excited than ever about the future of T Mobile. We have already hit major in record time and made significant progress on integration and we did it while achieving incredible business results for the quarter. That very quarter our competitors were telling you we'd be too distracted by the merger to execute, yes, that quarter.
So let me start by saying this, we kicked off the quarter by achieving something nobody really thought possible just a short time ago. Our total branded customer count surpassed AT and T, making us the number 2 player in wireless at the beginning of the quarter. This monumental milestone in U. S. Wireless history was a historic achievement for all of us at T Mobile.
And even better, we haven't looked back since. We have no intention of slowing down. Our lead versus AT and T is even wider as we talk to you today. In Q2, T Mobile once again led the industry in total branded customer growth for the 22nd consecutive quarter, firmly establishing New T Mobile as the leading growth company in the Now with over 98,000,000 customers at quarter end, we're staring down Verizon with our sights set on the number one spot. Despite the significant challenges we all faced this quarter, T Mobile's case including combining with a much lower growth company in Sprint and continuing to deal with a global pandemic that led to a lower switching environment, this team adapted and delivered.
We didn't skip a beat. In fact, we moved faster. We again led the industry in adding 1,200,000 total branded customers across postpaid and prepaid in Q2, more than 3 times AT and T and Verizon combined. Total postpaid net additions were $1,100,000 also leading the industry and over 3 times more than Verizon, who was the closest competitor. And we actually got something of a formula error when trying to divide by a negative number for our AT and T compares.
Can't believe we wrote that. Needless to say, we are still competing aggressively and our team is having fun with it. And while we're on this topic, I do want to take this opportunity to recognize our T Mobile for Business team. We're really stepping up in a big way to help schools and businesses adapting to new remote learning and work challenges with data points. Most of our over performance this quarter versus guidance on postpaid was in this area.
We also delivered 253,000 postpaid phone net adds, leading the national carriers again for the 26th quarter in a row. And this is after taking a 90,000 unit postpaid customer disconnect accrual related to the FCC's Keeping Americans Connected. And not to be forgotten, we also delivered Q2 postpaid phone churn of 0.8 percent, prepaid churn of just 2.81%. I'm particularly proud of the churn progress as we integrate the traditionally higher churning Sprint business. Now let's talk about how all of our team's hard work and real time adjustments to the rapidly changing market resulted in incredibly strong Q2 financial results.
This includes adjusted EBITDA of $7,000,000,000 which exceeded our guidance. Our new CFO, Peter Osmolik, will share more on our financial results in a moment, but I'll just remind you that our formula is pretty simple. Investing in customers leads to customer growth, which leads to revenue growth, which if we run the company well leads to EBITDA and cash flow growth, a lot of which we invest right back into our customers and their network experience. It's a virtuous cycle that delivered all of our early success as the Un carrier and it will continue to propel us to our goal of being number 1 in customer choice and number 1 in customer starts. While delivering these results, we ticked off a huge list of accomplishments to position New T Mobile to win.
Peter will share more details about our work in the market, but I just wanted to mention 3 big milestones. First, our team executed the largest dual tranche secondary offering in U. S. History. The sale of SoftBank's shares in T Mobile and actually created a positive trading dynamic in our stock with the transaction.
We also fulfilled a major merger commitment when we closed our transaction with DISH to divest the Sprint prepaid business. And we issued $4,000,000,000 of senior secured notes at a weighted average interest rate of just 2.16 percent. All 3 had super successful outcomes. On the customer side, we launched Connecting Heroes, providing free smartphone service and 5 gs access to state and local non profit first responder agencies nationwide. This was the 2nd initiative in our 5 gs for good from last year following T Mobile Connect, a low price plan we launched ahead of schedule in Q1.
The final part of that move, Project 10,000,000 will be coming very soon, so stay tuned. And we unveiled our latest on carrier move, scam sheet. Scams and robocalls are a huge customer pain point and in fact they are the leading FCC complaint. So we put together the industry's most comprehensive solution for customers to help stop this abuse. With Scam Shield, we're helping protect T Mobile, Metro by T Mobile and Sprint customers against scammers for free, while AT and T and Verizon make customers pay for it by requiring a certain plan or phone or premium add on.
This move clearly mattered to consumers because this announcement drove massive social media engagement and the most press coverage we've received since our first uncarrier move way back in March of 2013. And like all uncarrier moves, ScanShield is designed to change wireless for good. So I hope that AT and T and Verizon will step up to our challenge and join us in taking this problem a lot more serious. And I can't forget to mention that T Mobile's care team continues to break records. We just recently received the highest ever score recorded in our industry on the JD Power 2020 customer care survey, taking home our 6th win in a row and the 20th time we've ranked highest among full service providers.
Our team loves our customers and it shows. Okay. I really just scratched the surface on what this team accomplished this past quarter, but I know you're all really interested in our top focus and that's of course integration and the work we're doing to go big, go fast on synergy attainment. Let's start with the network. This is a huge piece of our synergy realization And Evelyn and his team are full steam ahead.
We've talked about the fact that our that the biggest block of our synergies come from the network and that it's a 3 step process as we first light up the available Sprint spectrum on the New T Mobile anchor network, which second creates the capacity to migrate the Sprint traffic over. And then 3rd, allows us to finally decommission the sites that aren't in the go forward plan. All of that, of course, takes time and amazingly decommissioning the 3rd step of our initial sites is already under control. The network team is working in overdrive to migrate Sprint postpaid traffic onto the T Mobile network and it shows. In fact, as of today, we have already moved more than 10% of this traffic before we've even started the customer migration.
This is possible because we now have more than 85% of Sprint postpaid phone base with devices that work on the T Mobile network, something we made fully available right out of the gate. So now over 10,000,000 Sprint Plus Pay customers on average are using the T Mobile network every single day. Plus the Sprint base historically had limited access to VoLTE, voice over LTE, but we already have roughly 75% of Sprint postpaid base now enabled on VoLTE. So they're enjoying a better voice experience with simultaneous data access. I hope those stats strike you as surprising and unprecedented as they are.
We also officially unveiled our retail operations and unified our retail operations and rebranded thousands of Sprint stores to T Mobile stores last Sunday. This is an important milestone for our business. And while we did it, we also rolled out the needed tools and systems across our distribution footprint to allow us to serve both legacy basis of postpaid customers in all T Mobile stores. Let me be clear, this was a massive lift. I just can't say enough about how our team flawlessly nailed this effort and executed incredibly fast.
This would have been a major accomplishment even outside of a pandemic. Was really amazing to see all of that come to life during these complicated times. And since bringing 2 big brands like T Mobile and Sprint together only comes around once. We wanted to market in true on carrier fashion by doing something really big for our customers. So we launched 4 for 100.
We have four lines of the industry's best unlimited for $25 each per month. This is possibly our most ambitious consumer promotion ever and it includes 5 gs access. Remember, the other guys may be charging extra for 5 gs, ours includes it. Now to be clear, this is a limited time promotion to celebrate and build awareness for the newly integrated brand, but even after it's gone, we'll find other ways to compete. We said we'd bring the competition with this merger and I hope we've addressed any lingering questions on that front.
I've said it before and I'll say it again, we're here to show customers that they no longer have to choose between the best value and the best network. With T Mobile, they'll get all. Our team has also been working hard to rapidly deliver T Mobile benefits to legacy Sprint customers and they're loving all the un carrier goodness like having access to the same great unlimited plans without future step ups and perks like T Mobile Tuesdays. So the synergies we're starting to see are not just for our investors, our customers are winning big too. At the same time, we focused on evolving our organization structure and design to become one team that will be more efficient and more effective with clear roles and responsibilities for our employees that will help us all move faster and deliver results for the business.
This was a process that we originally expected to take 12 to 18 months, but we've nearly completed it in just one quarter and we felt it was important to do so. And we're hiring. We've doubled down in areas that are focused on better serving our customers today and in the future by kicking off our Un carrier Jobs initiative, add 5,000 new positions in just the 1st 12 months alone. We also accelerated the rationalization of hundreds of retail stores, work that we originally planned to do over several quarters and we consolidated and began to adjust our marketing spend well ahead of schedule. These actions in Q2 alone are beginning to unlock significant synergies now, setting us up financially to be able to make investments throughout 2020 next year and ultimately unlocking future synergies on a net basis.
Last time I told you I was even more confident in our synergy plans than I was before the merger. I just I hope now you understand why. We're executing lightning fast. We said we would, but now we've laid down a ton of track. Because based on the quick action we've taken, I'm confident in our ability to not only deliver $43,000,000,000 in synergies like we previously talked about, potentially unlock even more than originally planned and to do it all faster than planned.
Now let me just say a few words about one of my favorite topics, our rapidly expanding network. In the 5 gs race, T Mobile is pulling way ahead. In the past few years, we've heard a lot of competitive banter and marketing speak when it comes to 5 gs, all talk. And most of it is just hot air. AT and T and Verizon don't want you to see what's becoming so painfully obvious.
T Mobile is miles ahead of both of them and we're quickly pulling away from the pack. But instead of taking my word for
it or Verizon's or AT
and T's for that matter, let's just take a look at a few actual facts. Nobody disputes that we have America's largest 5 gs network and the competition isn't even close. Just this week, we had a major breakthrough and we launched standalone 5 gs. And now our 5 gs network reaches over 250,000,000 people and 1,300,000 square miles. We now offer coverage across all 50 states and Puerto Rico 5 gs.
This geographic coverage is roughly double AT and T's and exponentially higher than Verizon's. But it's not just our reach that matters, it's the experience our customers have on our network too that differentiates T Mobile's 5 gs from the other wireless players. Verizon, as you know, likes to spend a lot of time telling you that they have real 5 gs, whether 5 gs is all about ultra wideband or millimeter wave. But again, let's put the facts on the table. T Mobile customers with 5 gs handsets already have faster average speeds in more places than Verizon customers with 5 gs handsets.
And we're just getting started lighting up our mid band. We're already lighting it up in 2.5 gigahertz in major metros including New York, Philly, Houston, Los Angeles, Dallas, Washington, D. C. And Atlanta. And by the end of the year, customers will find mid band 5 gs in thousands of cities and towns across the country.
By the end of this year, we're currently seeing average speeds north of 300 megabits per second, better than most home Internet speeds and 8 times faster than 4 gs LTE, the peak speeds of a gigabit. It will be even faster as we exit the year across a massive footprint. But even today, we have the advantage. Take a look at OpenSignal's latest report where T Mobile customers have the best 5 gs availability, meaning that on carrier customers get a 5 gs signal more often than customers on any other network. That's 2x more than AT and T's 5 gs and 506x more than Verizon.
Not to mention, Hoopla found that T Mobile customers get a 5 gs signal in nearly 4x more cities than Verizon and AT and T combined. By the way, Verizon would also like to excitedly tell you that in that same Ookla test, they had the fastest 5 gs speed scores, but they often forget to also mention that you can only find their 5 gs 0.4% of the time. And maybe they'll deliver nationwide 5 gs coverage someday, but they'll beg, borrow and steal from their LTE network to do it, claiming the tools like dynamic spectrum sharing will overcome their spectrum short. When you get to what's real about 5 gs, T Mobile's network is demonstrably ahead of the competition, even as we just start pouring on the gas. And it's now clear to most observers that it takes all spectrum bands to build a real 5 gs network.
And our strategy to use 600 megahertz low band as the foundation for 5 gs, something we had planned for years in advance was the right move to make. But it also shows just how well positioned we are to take share in the 5 gs era that everyone is now talking about. T Mobile controls 3 19 megahertz of combined low and mid band spectrum on average nationwide. That's more than AT and T and Verizon combined. We also have more millimeter wave spectrum than AT and T.
And get this, we already have as many 5 gs devices on our network as AT and T and Verizon combined. This is a huge advantage for us as 5 gs becomes more prevalent for businesses and consumers. All of our brands will benefit from a robust 5 gs network. And according to the facts on the ground, T Mobile customers are already taking advantage of how quickly we lit up that 600 megahertz footprint and the work we've already begun to do to rapidly increase capacity and boost speeds with the second layer of our 5 gs layer cake, our deep 2.5 gigahertz spectrum. Honestly, I don't think I could be more excited about the progress we've made on this network and what we're building every single day.
To pass this precedent, Neville will tell us more about all of this when he gets his first question almost regardless of the question he actually gets asked. As the growth leader in wireless, we're poised to bring an even more capable end carrier to even more customers in more places. We're building the best network and offering the best value and that's what's supercharging the uncarrier is all about. We've set the stage for a strong second half by delivering powerful Q2 results. And as you know, we're not stopping there.
I really believe that as the 5 gs era finally gets underway at scale later this year, this is our moment. We're way ahead. We have the strongest assets and we have what will very quickly become the demonstrably superior network in the U. S. Combined with the UnCarrier's brand DNA.
That's a powerful combination that our competitors struggle to match and that will translate. Okay. Now I'm going to ask our new CFO, Peter Ausvoldyc to take us through the financials and our guidance. Most of you know Peter. Prior to taking this role, Peter was already a huge contributor to our outstanding results.
He served for years as our Chief Accounting Officer and Number 2 Financial Officer, participating in every major financial decision that we've made. And like me, he knows what it's like to have big shoes to fill. His transition to the CFO role has been seamless. It comes at an important time for our business, so I'm thrilled to have him in the role and Peter, take it away.
All right. Thanks Mike. I couldn't be more excited to lead a CFO during this critical time for the business. We have an incredible all star leadership team and I feel privileged to be working alongside each of you. We'll continue to execute on our proven playbook and unlock the incredible synergy potential of this merger for the years to come.
Before we get into the financial details, I wanted to cover off on a few points which lay the groundwork for our reporting. 1st, we aligned the legacy Sprint and T Mobile subscribers to our go forward new T Mobile policies. The net impact of these changes as outlined in more detail in our investor fact book in 10 Q resulted in a net reduction in total branded customers $14,100,000 as of April 1 as compared to the standalone balances previously reported for Sprint and T Mobile as of March 31. The biggest adjustment was the removal of 9,200,000 customers associated with the DISH divestiture, including 963,000 which had been classified as postpaid phone customers in the previously reported Sprint figures. The adjustments also included approximately 3,000,000 subscribers associated with reseller arrangements, which were reclassified from postpaid to wholesale.
And recall that we no longer report wholesale subscribers, rather focusing on wholesale revenue. It is important to remember that these adjustments have no net impact on profitability. In addition, we are providing disclosures around the various impacts from purchase accounting and policy alignments in our 10 Q. But in the interest of time, I won't get into too much detail right now. Okay.
Now let's get into some of the financial details of the Q2. Note that during this quarter, our pre tax financial results were impacted by merger related costs of $798,000,000 COVID-nineteen related costs of 341,000,000 dollars as well as non cash impairment charges of $418,000,000 related to changes in our postpaid billing system strategy and a strategic shift in product plans for KeyVision enabled through the merger. These costs, a combined $1,560,000,000 before taxes, are excluded from adjusted EBITDA. Q2 net income of $110,000,000 and diluted earnings per share of $0.09 were negatively impacted by these combined factors by $1,250,000,000 $1,01,01 per share. Adjusted EBITDA amounted to $7,000,000,000 exceeding our guidance range.
Total service revenue of $13,200,000,000 was primarily driven by the merger as well as continued customer growth, partially offset by an estimated 1% to 2% headwind from COVID-nineteen related impacts. And note that our reported service revenues excluded Boost, which was reflected in discontinued operations. Next quarter, the revenue from these customers were reported in our wholesale service revenues. Net cash provided by operating activities was $777,000,000 which includes $370,000,000 for merger related costs and $243,000,000 for COVID-nineteen related costs. This includes the one time impact of $2,300,000,000 in gross payments for the settlement of interest rate swaps on merger financing.
Cash purchases of property and equipment, including capitalized interest of $119,000,000 amounted to 2,300,000,000 dollars Free cash flow, excluding the settlement of interest rate swaps that I just mentioned, was $1,400,000,000 And recall for the swap, the net cash out flow was only $1,100,000,000 as there was an inflow of $1,200,000,000 in cash flows from investing activities for the return of collateral previously provided. Postpaid ARPA or average revenue per account amounted to $130,57,000 and postpaid phone ARPU was 47.99 dollars In terms of customer quality, our results in the 2nd quarter were impacted by the macroeconomic environments of COVID-nineteen. Total bad debt expense and losses from sales of receivables was $263,000,000 or 1.49 percent of total revenues. This includes approximately $46,000,000 of incremental expense related to the FCC pledge that was excluded from adjusted EBITDA. If we normalize for this amount attributable to the FCC pledge, bad debt would have been 1.23% of revenues in line with last quarter.
As we monitor the impacts of COVID-nineteen and the FCC pledge on our business, we are encouraged by some of the early trends. 95% of all accounts that took advantage of the pledge have made some form of payment since going on the payment. Notwithstanding the high customer engagement and solid payment performance thus far, there is a small subset of FCC pledge customers that likely will not recover. As a result, our postpaid results for Q2 reflect an accrual of approximately 110,000 deactivations, including 90,000 postpaid phones, as Mike mentioned, for customers that were still with us at the end of the quarter under the FCC pledge, but whom we expect will likely not pay off their remaining balances. Shifting gears to our capital markets activity.
In just 1 quarter as a combined company, we raised $27,000,000,000 including $4,000,000,000 of senior secured notes issued in June at an average yield of 2.16%, a debt neutral refinancing transaction in which the proceeds will be used to retire high yield debt in Q3. With an NPV benefit of approximately $400,000,000 and record low average yield for our company, this deal was extremely well received and is a testament to the strength of our business and balance sheet. And also, we delivered a $20,000,000,000 secondary sale of SoftBank shares to the public and T Mobile received a $300,000,000 fee facilitating the transaction in addition to being reimbursed for all expenses. Just remarkable execution by the team and transactions that I'm extremely proud of. Okay.
Let me now cover our guidance, which we wanted to provide as we continue to prioritize transparency during uncertain times and when others across the industry have opted to provide a little or no guidance compared to normal practice. We are not immune to the uncertainty either, but we recognize our unique situation as we provide you with the first set of combined results this quarter, including the impacts of purchase price accounting and policy alignment, and therefore, we felt it was very important that we provide best efforts guidance for the back half of twenty twenty. As always, we will continue to closely monitor consumer behavior as well as the economic environment related to the pandemic and how it may impact our second half results. New T Mobile aspires to continue to lead the industry in postpaid growth and expect postpaid net customer additions between 1.7 $1,900,000 Just to double click here a bit, this guidance assumes higher postpaid phone net adds in the 3rd 4th quarters from what we saw in Q2. Also, while there was a tremendous opportunity to move quickly and win share postpaid other devices as businesses and schools adapted to an environment of remote working and learning, we expect to see a more balanced mix of postpaid phone versus other additions in the back half of the year.
We expect higher gross adds as industry churn levels increase both from typical higher seasonality and the muted churn effect in Q2 as a result of COVID-nineteen. And we see this as an exciting opportunity as a net share taker. Adjusted EBITDA is expected to be in the range of 12.4 dollars to $12,700,000,000 for the back half of twenty twenty and includes leasing revenue of $2,400,000,000 to $2,600,000,000 We expect higher SG and A expenses in the second half driven by higher selling expenses due to increased gross adds and the impact of close to 300,000,000 dollars of COVID-nineteen related costs, which are excluded from adjusted EBITDA in Q2 moving back into normalized selling expenses. Cash purchases of property and equipment, including capitalized interest are expected to be between $6,500,000,000 $6,900,000,000 dollars As we continue to build out America's largest 5 gs network, we expect CapEx to be relatively flat from Q2 to Q3 before ramping significantly in Q4. For the second half of twenty twenty, merger and integration related costs not included in adjusted EBITDA are expected to be $800,000,000 to $1,000,000,000 before taxes and subject to our ability to go faster on integration.
While expenses in Q2 were primarily driven by severance and merger deal fees, we expect merger and integration related costs in the second half to be primarily operational and focused. Net cash provided by operating activities, including payments for merger and integration related costs, is expected to be in the range of $5,300,000,000 to 5,700,000,000 dollars Free cash flow, including payments for merger and integration related costs, is expected to be in the range of $300,000,000 to 500,000,000 dollars impacted by the aforementioned merger costs and increased capital spending on the network. And lastly, in the back half of twenty twenty, our expected effective tax rate will be in the range of 31% to 33% due primarily to certain non deductible merger related costs incurred in the first half of the year that continue to impact the tax rate throughout 2020. However, we anticipate our future rate to be more in line with historical levels. Now let's get to your questions.
You can ask questions via phone or via Twitter. We'll start with a question on the phone. Operator, first question.
Operator, I'd like to just point out that in honor of Rich Greenfield and everybody at LightShed, we will only be taking questions quarter from people that begin their question with the phrase, great quarter guys. So just kidding. Operator, go ahead.
Ahead.
Thank you. First, we'll go to Phil Cusick from JPMorgan. Your line is open.
Hey, Gus. Thank you. A lot of things to ask about, but I think the number one as I'm talking to people here is on the second half guidance. The 12.4% to 12.7%, can you help us bring that back to what I would have considered like a historical T Mobile cash EBITDA without EIP benefit and with some netting out of the lease benefit?
Absolutely. Peter, why don't you start? It's really about backing out the lease revenues, if you want to look at what kind of what we call core EBITDA, not so much the EBITDA?
Yes, absolutely. And let me begin with, obviously, the second half guidance is also reflective of increased gross adds from SG and A, right? And that's both from the seasonal uptick that we expect as an industry in turn, which is typical from Q3 to the second half, but also as a result of the COVID-nineteen cost $300,000,000 that were excluded in Q2, but again will become part of the normal run rate. And then you have the leasing revenues, as you said, if you wanted to get to a core adjusted EBITDA element.
Okay. So that $10,100,000,000 to $10,100,000,000 or so, that's what you would consider to be sort of a cash EBITDA number the way T Mobile used to offer it?
Yes, the way we used to operate, right? Nothing's really changed in terms of how we think about this stuff, right? So we have adjusted EBITDA then you have leasing and lease revenues get backed out to get to this more operational view. Adjusted EBITDA is what we focus on and guide on those, so it's important that you understand that. And obviously bringing in Sprint, there's a much bigger leasing component.
And so the differences between the 2 are greater now that we've merged.
Yes. And that's the second thing I wanted to ask was, historically Sprint did a lot of leasing, T Mobile tried it and it didn't seem like you guys liked it very much. Should we it looks like from the guidance, we should expect you to continue to be leasing phones in a pretty substantial way, at least through this year. How do you think about that offer?
I mean, I'll start and I'll ask Matt Stanif to jump in. It's not that we didn't like it. It's that our view is that it hasn't always been demonstrated to add to enterprise value and because the customer satisfaction isn't there and then see costs later on as a result. So but it's a tool in the toolkit. We've always done some of it.
I think it depends on how it's done and we're open to it. The guide doesn't necessarily imply any big change, obviously. So leasing revenues come from the run rate that is informed by the customers already in the base. But Matt, other thoughts about financing in general and how
we think about it? Yes. That's great. So as Mike said, we're going to continue. We've passed day 1.
Right now, we've got a new proposition in the
market, largely it's T Mobile the way it was before.
The one thing we do have is that we have a Sprint customer base and we're very aggressively taking care of those customers, watching and managing their churn, helping their churn go down. A lot of them are on lease upgrade offers. And so what you can expect over time obviously is we're not going to take away things from customers that could potentially increase churn. We're going to continue to serve them. And so that's part of what you see in the leasing mix as we've got options available, the T Mobile options, but we're still going to take care of Sprint customers.
And so it will be kind of more of a gradual change in the total mix versus what we're doing for new customers.
Can't say for sure what we'll do over the long haul. But right now, as you know, we've passed day 1. And therefore, our main go to market for us is centered around EIT. But we have all these tens of millions of Sprint customers and a lot of them may like leasing and want another lease device and we're happy to provide that. So see that in as well.
Thanks, Bill. Thanks,
guys. And we'll go to our next question, John Hodulik from UBS. Your line is
open. Okay. Great quarter, guys. That was for Walt. Actually, I got two questions.
First of all, the 80 bps of churn I thought was definitely a sort of a bit of a surprise, especially as Sprint a year ago had, I think, 1.8% churn. So what are you doing to bring that down so quickly, especially given all the integration efforts with the store closings and that kind of thing? That's number 1. And then number 2, given the availability of the 600 megahertz spectrum and the pent up demand for new phones, are you guys looking at the launch of the iPhone in the Q4 as an opportunity to take share? And is that baked into the guidance in the back half?
Because I'd point out that you did $7,000,000,000 in EBITDA for the quarter, but just expecting sort of $12,000,000 $12,500,000 for the rest of the year. So obviously, it looks like you're expecting that not necessarily to be the run rate, especially as we look out to the Q4. That'd be great. Thanks.
Sounds good. Matt, do you want to start
on churn? Yes, I'll start on churn. 80 bps, that's
a great number. It's a great number
to have in the Q1 now that we're together and the comparison is accurate. T Mobile was among the leaders in the category. And as you said, Sprint was in the high ones. I think the last reported Q4 was 2.06 percent and the blend down 80 basis points. One thing to consider is this was done in Q2 when COVID was acute.
And we said the switching flows were down. We were taking care of customers and at a collection hold, we've accounted for all of that. But Q2 was a bit of an anomaly. And you've seen that across the industry in terms of what churn has done. We have been very hard at work.
We've been talking about what we've done getting the Sprint customer base access to the network. We've got 10,000,000 customers kind of on a daily basis using the network. We deployed VoLTE with a much better experience. And we've been hard at work giving value to the Sprint customer base and taking the Un carrier principles and deploying them pretty broadly across the base. So we're not predicting where churn will go.
In fact, as Peter said, seasonally, it's going to be up a little bit in the Q3 and we've put that into our guidance. And I can't predict where churn will go. But what I can say is the things we did to get it to where it was at 0.80 last quarter, we're going to keep doing and more of
as we move forward. Not to mention, in addition, the legacy T Mobile side of things, which will be increasingly difficult for us to unpack for you because we're past K1 now and we're one business going forward. But the legacy T Mobile side had a blockbuster low churn number. And so blended in that also helps. So this is really gratifying.
We have tailwinds on churn over the medium and long haul because we know what drives it. We've seen this journey on the T Mobile side from some of the highest churn in the industry to some of the best churn in the industry in its network. And we're I just got done talking at length about how no one's going to be able to catch us on network. So we're really excited. And to Matt's point, seasonally this year, there are going to be 2 dynamics.
One, COVID, we think the impacts of it will start to abate, which brings some normalcy back in because there was big suppression this quarter, as well as what's normal for T Mobile, which is a seasonal uptick in the second half, all in the against the backdrop of real exciting tailwinds. So that's the first piece. And the second piece you asked about was how to think about the second half. And I will say we have burdened our plan with the activations that we think are necessary to deliver the growth we guided. And that means we know that activations will be up in the second half.
Why? I just told you that seasonally and due to COVID, churn will be up and we'll outrun that churn and the other guys' churn will be up. That's an opportunity for us. When the other guy's churn goes up a little bit, that's when we compete. You asked about phones.
I don't know. I can't comment about phones. I really hope there's a well rounded 5 gs phone portfolio as we exit the year. So I'll just leave it there. And if there is, that would be a great competitive moment for us.
So hopefully that helps, John.
Yes. Thanks, Mike.
And next we'll go to, let me see, Mike Rollins with Goldman Sachs. I'm sorry, Brett Feldman with Goldman Sachs. I apologize. Your line is open.
Thank you.
Thank you for squeezing me in. Hopefully, Mike comes next. It's easy to call this a good quarter, so congratulations on that. I want to talk about the integration. You expressed your confidence in the synergy targets that you had outlined in the release.
All the commentary sounds like you're just moving faster than I think we would have expected when you first announced this deal 2 years ago. And so one of the questions would be, do we think we can start seeing the synergies come into your numbers more quickly? That would seem like it would be accretive to the NPV. And also the integration spending that you outlined for the second half of this year actually looks pretty modest considering that you had previously talked about spending $15,000,000,000 through the integration. So is that spending going to ramp more significantly as we move past this year?
What would drive that? Or are you actually at the point where maybe you are realizing there are greater efficiencies associated with the integration as you get closer to execution on it? Thank you.
Yes. Let me start and then ask Neville to comment. First of all, I love the fact that some of the tower companies are out there sort of spreading some disinformation about our pace. I just got done telling you we're in all the biggest cities in the country with 2.5 gigahertz 5 gs already, and that we will be in thousands of cities and towns across this country as we exit this year with that layer cake. So we're that's what where we'll be.
We're running really fast. The reason it feels tough over there at the tower companies is because both standalone T Mobile and Sprint were planning on lots of new sites, Sprint for coverage and T Mobile for capacity. New T Mobile has synergies. That's called site avoidance. And I know that's tough if you're a tower company because 1,000,000,000 and 1,000,000,000 of dollars of site avoidance causes the kinds of comments you're now hearing from them.
That doesn't affect our rate and pace. We're going like crazy. And you're right, there's not only speed potential, which is NPV accretive, but look, the faster we get out in front of the pack on the monsterable customer approvable network leadership, the more the operating results start to give us the potential to start talking to you about the magnitude of synergies as well and the enterprise value created from outgrowing our competitors. So Neville, why don't you tell us a little bit about the rate and pace because I know that's on everybody's mind?
Yes. I mean, thanks, Mike. I mean, we're moving at an incredible pace. I mean, I could not be more pleased with the progress that we've made in what's a few short weeks since we combined with the Sprint team. And it's on two fronts.
I mean, we've been rapidly accelerating the breadth of this network. Mike talked to the 250,000,000 people now covered with T Mobile's low band 5 gs. We have 327,000,000 of people covered with LTE 2, right? And we are closing in on that opportunity for our 5 gs footprint. So that gives us the breadth, the depth comes from the 2.5 gigahertz spectrum, the mid band slice that's so important.
And all I can say is we're baking that cake super, super fast. So to give you some idea and dimension that for you, I mean as we exited the Q2, every week we were starting upgrade activity on about 600 sites per week. In the last month, that number has gone to 700 sites per week. So you can all do that math, that's thousands of sites in a month and in the quarter. And we are running very, very hard of adding that mid band layer of the network to this great opportunity.
Mike outlined the experience and the speeds. To the earlier question about 5 gs phones in Q4, we have a great lineup today. Lots of great phones, great news from Samsung just the other day announced. And we want to make sure that there's really only one 5 gs network that you would look to put a 5 gs phone on and it's from T Mobile. The coverage is spotty at best from AT and T, nascent from Verizon.
And when you can combine great coverage with great performance and speed with mid band inside the Q4, that's going to be a complete game changer. So great quarter, great numbers, but we are only just getting started with this network rollout and the pace is phenomenal. Mike outlined, obviously, we're not building in all the places that standalone T Mobile and Sprint would have planned to. I mean, that's good for this business, right? We are starting to generate those cost avoidance, site avoidance synergies at pace, real pace in second half of this year and we'll talk to those numbers more as we close out 2020.
But tremendous progress underway, and I couldn't be happier. Tower guys, not so happy. We could be doing some more with the tower guys, but there's a competitive process in play right now and we have choices that we can make. So I would fully anticipate that we'll start more tower build as we move into the second half, but to be seen. That doesn't slow us down.
We have lots of options to build and we're building furiously. And Peter,
just very briefly on Brett's last part. He was asking about the operational spend and it was maybe sounded like it might have been a little less than he was expecting given the Q2 spend. Do you want to unpack that a
little bit because I think
it's important for people to understand?
Yes, absolutely. Brett. And as you said, what you saw in Q2, while there was an elevated amount of merger related costs, there was a lot of transaction and then restructuring and severance, right, from acceleration some of those synergy opportunities. When we flip into the second half, it is primarily what I would call operational synergy capture now. So that's when you think about the pace, that's an element to consider in there.
And of course, it's subject to us identifying ways to prudently go faster, which we're going to continue to do just like you saw in Q2.
So in other words, operationally, it's rapidly growing in the second half. The operational component of our cost to achieve in Q2 is actually quite small. Most of it was deal related transaction costs. And so the and it's all operational from here on forward. So big, big uptick in actual cost to achieve flowing through the system in the second half.
And is the $15,000,000,000 still the budget? Sorry, is $15,000,000,000 still the budget in the outlook for integration?
Yes, nothing really has broadly changed in our aspirations. And at some point by the way, you raised a good question. At some point, I know we owe you an update on all that. We keep saying and I hopefully we backed it up with actual evidence and reasons why we're saying it today by giving you something to chew on. But we keep saying, hey, we're more confident now.
With this 2 year old plan, we think it may be a little conservative. I know we owe you some more color on that. But listen, we have exactly one data point for this company so far and that's today's report. So we're going to get a little bit more of a line established for you and then we'll give you a different updated way to think about the future. So I know we owe you that.
Great. Fair enough. Thank you.
Okay. Thanks. Operator?
And next we'll go to Michael Rollins. Sorry, go ahead.
Sorry, operator, who's next?
Next, we have Michael Rollins from Citi. Your line is open.
Hi, good afternoon. Thanks. Well, thanks for squeezing me in. I appreciate it. Couple of quick questions.
First, when the deal was originally announced, management teams talked about in the pro formas, there were some expectations of revenue headwinds of Sprint plans migrating to T Mobile plans? And as you've now finished this process of bringing the Sprint metrics and measures over to T Mobile, how do you look at any potential headwinds from repricing to T Mobile plans over the next few years? And then secondly, was just curious if we can get an update on the distribution and distribution presence as you've integrated, you're still managing through the pandemic and maybe some observations of customer behavior is changing upon store reopening, staying more digital or it's reverting back to the historical get into the store and have a handholding that the reps in the store deliver to the customers? Thanks.
Yes, you bet. And by the
way, I got so enamored with the second part. Tell me the first part again. What was the main thrust? Revenue. Yes.
So listen, on pricing and revenues and ARPU and all that, one of the things you got, I think, from our report was that we see a relatively stable outlook in the near term. Our competitors, I guess, didn't guide or give you much to go on. We felt with a new company, it was important for us to do a best effort to you. And we don't see catalysts in the near term for big changes one way or the other in ARPU. Separately, you heard Peter start to talk about ARPU and that we're looking at this at a household level because we think there's in the 5 gs era, there's all kinds of opportunities to develop deeper relationships with households that would be accretive to ARPA without necessarily bring an intense level of competition to this market like we've always done as the Un carrier, but now in a sustainable way backed by the long term network plans that we have.
And that's obviously going to be to the benefit of consumers and we funded that fully in our model. How that relates to ARPU specifically and how that will unfold over the years? Again, I know we have a 2 year old set of thoughts and we'll at some point need to update that. But a few things to say. We're bringing competition into the market.
That's who we are. We've got the capacity to do it. It would be crazy not to leverage that capacity advantage to compete hard and grow top line revenues through competition. So that's number 1. Number 2, in the very near term, we see no real catalyst one way or the other for ARPU changes.
So we see it generally stable for the second half as we commented on.
And then Matt, do you want
to jump into the second half? Yes, I'll tackle that. Mike, I think
the question was a little bit around what the distribution footprint look like and then what we've seen with COVID. So the first thing I'll say is what we've shown this quarter is a great ability to execute. Our plan had always been to get to day 1 within 90 days or so from close and we effectively did that. It slid a little bit out. But we in all the adversity, we had to relearn a lot of things, many companies did and we still pulled this off.
And today, the vast majority of all all all retail shutdown and we had to keep our employees safe, keep consumers safe and put the right protocols in place. Our team as well worked very, very quickly to be safe and take care of customers. And we saw some changes in buying traffic, switching from retail into digital. Now historically, T Mobile hasn't relied heavily on digital. Sprint relied a little bit more.
And the number increased a lot, but it was a very small percent and increased by a lot and it's still a relatively small percent.
I'd say those numbers have been generally stable as well as we've recovered. We've gone and been able
to open the vast majority of the stores in a safe way to serve customers and the communities. And as the market has opened back up, the trends have what I'd say generally stabilized. We do intend over time like many folks to serve customers where they want to get served. That's digital, that's full digital. What we've seen a lot of the times is customers start digital and then fulfill in retail.
And we're fully set up to support that. We're going
to continue to support that as we move forward.
Another way of saying that and one of the reasons why we don't break down digital is that and I know it sounds a little cagey, Mike, but all of our customers come in through digital and all of our customers nearly come in through retail. So in other words, they're hybrid approaches. Almost everyone deeply researches a rate plan. Many start a card, some finish a card. Even the ones that come through pure digital, the majority of those get some kind of human touch shortly thereafter.
So it's a hybrid model and that hybrid model to your point is changing. It's not changing in a way that's going to bring material changes to our financials anytime soon because right now anyway customers expect a human interaction at some point in the process. And I hope that changes over time. But as long as they do, that's where our people shine. And our people are just we won J.
D. Power again. We just won the highest scores ever in the history of J. D. Power for customer care.
So human interaction is a real source of strength of ours and even digital customers benefit The last part of your question was about retail rationalization, about the store counts, about our reach. I can tell you that I'll go to John Fryer if he's on the audio line just for a quick comment, because he really engineered our Head of Consumer Markets engineered this day 1 with so much coordination with our communications group, our marketing group, our product and technology groups, our engineering groups. But John has led the go to market approach. And we've simultaneously reached more people as T Mobile now with a deeper population reach of retail than ever before, while going faster on store rationalization than people expected. Do you want to share a couple of those stats, John?
Hey, everybody. Yes, it has been an incredible last 90 to 120 days. And like Mike said just a few moments ago, we've got a unified how about unified a unified operation behind the T Mobile brand. And what that really means, guys, is that no matter if you're going into a legacy T Mobile store or a legacy Sprint store, the answer is yes, we can help you. And what we did here is we took the legacy T Mobile systems and installed them into our legacy Sprint stores.
And then we took the legacy Sprint systems and installed them into our legacy T Mobile stores. We rebranded everything. So if you're driving around, you'll probably see these banners that say Sprint now part of T Mobile. So we've got the Sprint exterior signs down, the new banners up and there'll be permanent T Mobile signage that we'll be following over the next several weeks months. But what we wanted to do is be able to put customers in a position to say, yes, we can help you.
No matter if you're coming into the store that you've always come into or maybe you're coming into a store that's more convenient to you now. And we're in a position where, yes, we're not sending you from this store to that store, but we can help you in all of that. So we've done an extraordinary amount of training, lots of system work from our product and technology teams, and our team has been in a great spot to do that. And like Mike said just a few moments ago, not only simultaneously reducing some overlap stores, as you guys know, we talked about this, that we've had stores that just are really right on top of one another. Of course, you're going to rationalize that and optimize that as you need to.
But at the same time, we have expanded presence. We actually have 10,000,000 more covered POPs across the country that we're expanding to. So about 275,000,000 people that we're distributing to. Prior to close, that was about 265,000,000. And so there were places in the upper Midwest and the Great Lakes, for example, where our distribution reach wasn't as great, but the Sprint distribution reach was really there.
And so we've been able to get those synergies and get all that behind us, get more locations to serve more customers, put our teams in a position to be able to help new customers on to the T Mobile platform and then also take care of our Sprint branded customers until they migrate to the T Mobile platform over the next set of years. So I'm super proud of what our team's accomplished. It's been an amazing amount of work. And like both what Mike and Matt said just a few moments ago, in this environment, it's really heroic of what our teams have done. So appreciate the time, Mike.
It looks to us at the beginning of this like we reached about 275,000,000 people with our distribution now, while going faster than expected on retail rationalization. So it's a win on both fronts, really terrific. Congratulations, John. Operator, let's go back to the phones.
And next we'll go to Simon Flannery from Morgan Stanley. Your line is open.
Great. Thank you very much. Good evening. Mike, I think last call you talked about some early wins in enterprise. I wonder if you could just pull back more broadly and just think about where you see the biggest sort of seams of opportunity.
You had a lot of color around the areas where you thought you could make progress as a standalone T Mobile. Now you're combined with Sprint, where do you think the best opportunities to take share are over the next couple of years with the new network?
Yes, terrific. I love the fact that we are a wireless pure play with the highest capacity in the history of the wireless industry in our plan. And because that's ultimately to our advantage. Enterprises, they have a complex milieu of solution providers from the biggest companies in the world. And what they want from our industry is a high capacity connection at a great value and the surround around that with an easy to manage setup.
And we need to be the best at doing business with in this category. So we're very focused on being the winning pure play. Mike Katz and his team have done a phenomenal job. Mike got out of the gates very quickly in this merger and had his day 1 weeks ago with our T Mobile for Business team, integrating our go to market against enterprises, public sector opportunities, etcetera. I mentioned in my remarks that T Mobile for Business led the way.
We had to update you mid quarter on our guidance and then we just updated you again that we beat the high end of the range of our guidance. Both of those were largely, but not entirely due to some outstanding opportunities to serve businesses, public sector and schools, for example, in this rapidly changing landscape. Customers have reached out to us and said, hey, we need help. We need a great deal. We need a high capacity service for kids.
We talked a lot in our project 10,000,000 about the homework gap, if you recall. But that's translated now it's a school work gap. It's all day. It's not just homework. And T Mobile has the capacity to serve.
And that's just phenomenal. So Mike, if you're on the line, would you want to say anything else about the opportunity ahead? Yes. No, thanks Mike.
Yes, I think you're exactly right. I know I mentioned last earnings that we're in this really interesting time in the middle of COVID. And then as we come out of COVID, as companies are doing their long term planning and maybe even thinking about possible recession that we're seeing buying happening in this category at a faster rate than we typically would have rather than companies waiting 3, 4, 5 years to buy this category. It's happening faster. The timelines have compressed.
And that's created huge opportunity for us, when we're in many enterprises, we're not the incumbent. And our teams have just done an incredible job finding that demand from customers and matching it. But at the end of the day, like Mike said, it really is about the network. And the network that we have in the ground today and the things that we're doing that Neville and Mike talked about a second ago really are going to be the difference maker for us because businesses and government agencies
first look at the network,
they look at our technical compliance relative to their standards and then they pick us based on all the other things that we do. And right now, we're able to meet all those demands from customers. And we're now differentiating in network, not just a me too proposition like our competitors. So I
think COVID will cause customers to maybe look to switch carriers more aggressively to get a better price performance?
Yes. I think we've and we've seen some signs of that. Many companies out there are looking at their long term cost model and they're going through their own cost transformation programs as they prepare to maybe weather the post COVID storm. And we've seen lots of examples of companies on government. Great.
I mean, this is Mark. John's kind of hiding the dynamic going on in American companies, which is everybody is looking for dollars and looking under every rock, to find them. And here we are at just that moment, with the best value and the highest capacity service. So that's really exciting. The last word I'll say on this, which is also a little bit COVID related is the CL, corporate liable part of our market has kind of been flat lined for a long time.
And I actually think that post COVID, there's an opportunity that the changing work styles will cause us to see growth again in that sector just at the time we're arriving with hyper competitiveness and able to lead the pack. So the reason for that is simple. Some form of homework and home officing is going to continue. And some amount of that will carry on and companies will feel more of a need than in the past to take responsibility for some of the home connectivity and personal connectivity of their employees. That means enterprise corporate liable lines may be positively responsive to this environment.
That's always been a castle of AT and Ts and Verizons, but it's ours to take and we're scaling the walls.
Great. Thank you.
Thanks, Simon.
And next we'll go to Craig Moffett from MoffettNathanson. Your line is open.
Hi, thanks. You reported in the release that you've converted about 10% of customers over to the Sprint customers over to the T Mobile network and it naturally sort of brings back memories of the way you managed the MetroPCS merger some years ago. Wonder if you could just contrast those 2, maybe particularly with Neville and talk about what's different this time in trying to integrate particularly the 2.5 gigahertz spectrum versus what you did in the MetroPCS merger, which was effectively running off a network and then moving over the spectrum? And just how that should inform the way we think about the cadence of the synergy realization here?
Eveline, it's Duffy.
Yes, happy to take it. Hey, Craig. So the situations are comparable, but they are different and favorably so. I think the biggest delta is that as we looked at MetroPCS, I mean that was primarily a CDMA customer base. And so we had differing technologies and we knew we had to retire and move all of those customers out of the CDMA phone effectively.
Here we are with combining our traffic and our customer bases across Sprint and T Mobile. And the update today, Mike mentioned it in the opening remarks, 85% of the Sprint customer base have a compatible phone with the T Mobile network. So that 10% traffic number, which is remarkable in a very short period of time, it's there because we can start to open the network up, not just on LTE. Our Sprint customers have access to that great nationwide 5 gs now too. But because they have compatible LTE handsets and we've activated and we're moving through VoLTE very quickly, which is the primary voice bearer for us, it's not competing or different technology as it was with Metro.
We can move those customers at a much faster pace. And so I'm always hopeful and confident now that we can move through the migration of traffic and ultimately spectrum and then move to decommissioning at a faster pace, I mean that's the game plan. And as I said earlier on, we're furiously building out the network capability to house that spectrum, the 2.5 gigahertz that we have a huge volume of, as you know, Craig. And as we do that, we can support more and more traffic and start to ultimately migrate these customers across. So very similar playbook in many ways in terms of how we approach it, but we're in a much better place to move faster because of the handset compatibility.
And I think I just have
one follow-up to the previous question about the enterprise segment.
What do you plan to do with
the wireline network from Sprint?
With the competition and post integration, are there any strategic acquisition areas you're interested in to accelerate growth? Obviously, and I know you knew this and asking, it's not something I can address directly, but I can tell you this and I said it a little bit earlier, I like being a pure play. I like being we're focused and we're disciplined. And that's going to be one of the ways that we win. Wireless is where things are going.
You've heard us say John Legere said for years, you've heard us say over and over, all content and communications of all kind are leaving their linear farms and going to the Internet and the Internet is going mobile. Mobile is eating the Internet. And so as a mobile pure play, that's a great place to be. Now on the other side of it, I'll just say, well, we're focused and disciplined. We have a fantastic balance sheet and incredible source of strength.
And so we won't be obtuse to strategic opportunities if they make sense in our business model. But I think you're investing in this company because you see that we have an opportunity to win in this huge market and we intend to focus and to do just that. And operator, why don't we go to the phone?
Thank you. And it looks like our next one is from Jonathan Chaplin from New Street. Your line is open.
Thanks. Thanks, guys. Great quarter. One for Mike and one for Neville. For Mike or maybe it's Peter, were there any synergies captured in 2Q or is it too early?
And then how much of this what are you assuming for synergy capture in the second half guidance? And this one's definitely for Michael. The $43,000,000,000 you said a few times that you expect it to be higher. Is that just from acceleration or the synergy number or the EBITDA number in the out year be larger than you initially thought it would be? And then for Neville, when you get to full tilt on the 5 gs deployment, how many what does that 700 sites per week go to?
Thanks.
You heard I'll have Peter comment on the first one. You heard in my remarks that we moved faster than expected on so many elements of integration in the Q2 and you saw us flow the costs through for some of those things. And yes, that does allow us start to see some run rate synergy impacts from those moves. I also said that that sets us up well to invest in the next round. So you have to kind of keep it in balance because the bigger pieces to the earlier discussion are still in front of us.
The actual operational integration spending was pretty light in Q2. You'll see benefits of it flow in, but that benefit is really allowing us to move to the next base in the round of bases and swing again. And so in 2020 2021, these are big investment years and it's important we start to get some of that run rate to flow in because that actually helps to fund us as we go along. So I think I kind of captured that in my remarks. But Peter, why don't you add to that and then tackle the other
piece? Yes.
Absolutely, Mike. So there's no doubt, right? But with the long tendency of the deal as well as COVID-nineteen, right, it's a differential that's what you put out there almost 2 years ago. But we do remain highly confident in our ability to exceed. And to your point, Mike, yes, the moves that we made in Q2, you saw us accelerate and diligently do things and we put the 8 ks out there, both from the organizational design acceleration, the store rationalization acceleration, you see what the pace of the 2.5 roll out is, which is again the first step of the 3 that ultimately leads to the decommissioning, which is the biggest part of the synergies.
You saw voided site builds already. That's already something that we're capturing. So yes, in the second half of the year, we're already going to be capturing some synergies and that's been only build through the investment periods. And again, as Mike said, I think we're a quarter into this journey. It's a multiyear journey.
We're quarter in. We're already seeing optimistic signs and we're moving quickly where it's prudent to do so. And we do owe you an update on that. As soon as we can, we will.
Hopefully, you hear us saying. And we're laying down some facts to back it up now that our aspiration is to go faster and bigger. And look, I think ultimately you're going to measure our team based on 3 simple things. Did we outgrow the competition through this first timing cycle as a new company? Did we unlock the synergies bigger and faster than we promised, translate that to enterprise value?
And did we set up the company for long term success? And this management team is laser focused on all 3 of it.
Jonathan, on the back end of your question there on the run rate, obviously, we're going to do better than the $700 per week. But I'm delighted with that ramp during the pandemic. So the great news is we've got great resources out there working very safely and with health and safety paramount. Our supply chain is actually really robust. We had a few scares in the early days of the pandemic.
But the things are moving really well. And I want to get into a nice, robust, steady state and go build this network out, as we said, over the next 2 years. I really want to break the back of the 2.5 deployment over the next 18 months and that's the plan. And we have a run rate and a production rate. Network factory now is rolling out, upgrades and incremental site activity on a very, very strong cadence now.
So we're in a good spot.
You guys, I'm going to step out right now, but we are going to take 4 last question and then Peter will wrap us up. So for my part, thank you for this great discussion. This was a phenomenal quarter. And operator, the last question.
Our last one comes from Peter Cipino from Bernstein. Your line is open.
Hi, thank you. I was wondering if you had any insights on Sprint subscriber churn. And I know that COVID-nineteen makes it hard to separate the drivers of changes in churn. But do you see anything about the way Sprint subscribers are interacting with the network that gives you a quantitative sense of how their experience might be changing? Thanks.
Yes. Hey, Peter, it's Matt. I'll start and then if anyone wants to jump in on any other factors there. So, we haven't seen anything that surprised us and we feel great about the results we have in Q2 in terms of subscriber churn for Sprint. We've seen lots of positive signs.
We've been able to rapidly enable roaming and the ability from Sprint customers to access to the T Mobile network. And we've seen noticeable declines in churn rates from those customers who have gotten on the network, which is partly why we're going very fast
at getting the build out done, why we're very happy about
the handset compatibility and why we're aggressively moving fast at bringing those enhanced coverage experiences to the Sprint customers. We've also seen great participation from the Sprint customer base into some of the offers and programs that T Mobile traditionally have like T Mobile Tuesdays. We've had that for a number of years. It's a massive it's a great platform for customers to just get thanked every day for being a customer. It's an example of something we've rolled out to the Sprint customer base.
We've seen great adoption of that from customers. That's a very positive sign. So we have an engaged customer base, very excited about being a part of the T Mobile Mobile company and what we have in front of us. And so we're feeling very positive about where things are headed. All that said, we don't know how that's going to look when we come out of the suppression in Q2 from COVID.
So we're watching that. And as Mike said earlier, we're planning for a highly competitive back half of the year. We're changing pool getting back to normal, new devices coming, so we can really take share in the marketplace.
Yes. I just add quickly to that. This access to the T Mobile network for the Sprint customer base is absolutely key. I mean, we know that coverage churn was a major concern in the Sprint base. You've heard our numbers today, I mean, 10,000,000 customers every day now accessing the T Mobile network.
And that's everywhere, right? It's not this isn't kind of a roaming thing where it's just geographic expansion into rural environments. This is happening in building in Manhattan and Seattle. It's happening in urban cores. It's happening in suburban environments as well as rural and only about 35%, 40% of that traffic is actually in rural environments.
So Sprint customers are already seeing a dramatic improvement in their coverage. We did that the day of close. We opened up the network for Sprint customers with compatible handsets, which is the vast majority as we covered. And so big improvement in that coverage experience has been a key. We're already starting to move towards flipping customers over completely to a T Mobile network experience.
We've been very targeted with that to make sure that customers on the Sprint side that had very difficult and challenging coverage situations. We've moved some of those already completely over to T Mobile network. And there'll be more of that obviously as we ramp up our build spectrum migration and all of the activities we talked about today. So very pleased with the progress there and very positive signs in terms of the uptake from Sprint customers using the T Mobile network.
With that, I'm going to add
That's helpful. Thanks very much.
All right. And thank you, Peter, for the great question.
And thank
you, everybody, for tuning in. And we're really looking forward to continuing on this journey and speaking with you again next quarter. Operator?
Thank you. Ladies and gentlemen, this concludes the T Mobile US 2nd quarter 2020 earnings call. If you have any further questions, you may contact Investor Relations or Media departments. Thank you for your participation. You may now disconnect and have a pleasant day.