Good afternoon. Following opening remarks, the earnings call will be open for questions. Or at mike Sievert 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.
Thank you. Welcome to T Mobile's Q2 2021 earnings call. Joining me on the call today Mike Sievert, our President and CEO Peter Uzwaldik, our CFO as well as other members of the senior leadership team. During this call, we will make forward looking statements, which involve a number of risks and uncertainties that may cause actual results to differ materially from our forward looking statements. We provide a comprehensive list of risk factors in our SEC filings, which I encourage you to review.
Our earnings release, investor fact book and other documents related to our Q2 results as well as reconciliations between GAAP and non GAAP results discussed in this call can I'd like to remind everyone that historical results prior to the Q2 of 2020 represent standalone T Mobile prior to the merger with Sprint. I would also like to note that we are in the quiet period for auction 110 and will not comment directly or indirectly With that, let me now turn it over to Mike. Okay. Thanks, Jed. Hi, everybody.
It is so great to be coming to you live from our Bellevue, Washington headquarters here all gathered together with increasing numbers of our employees with each passing week. And it's just great to feel the energy of this team. And it's no doubt fueled by this quarter's fantastic results, T Mobile delivered another outstanding quarter of profitable and industry leading growth, beating our numbers across the board and leading the industry in postpaid net subscriber growth and service revenue growth yet again. And we did it while simultaneously delivering record core adjusted EBITDA and free cash flow above expectations. All of this while accelerating the transition of Sprint customer traffic onto the T Mobile network, further 16% year over year increase in free cash flow, 16%, which is just the beginning of our rapid free cash flow expansion journey and the unlocking of massive shareholder value.
Listen, we're just past halftime in the game here for 2021, And our team is feeling more confident than ever. So we're increasing our guidance expectations across the board with today's announcement. Net additions, core EBITDA, synergies, CapEx investments and cash flow outlooks for the year are All being increased today. These results stem from our focus on executing on our 3 core ambitions that I've talked with you about before, Delivering industry leading profitable growth by expanding our addressable market and growing customer relationships Delivering substantial enterprise value by realizing merger synergies faster and bigger while transforming our business and positioning the company growth. Our 1,300,000 postpaid nets were the best in the industry and we continue to lead the industry in postpaid phone growth year to date as well, adding another 627,000 postpaid phone net adds in Q2 above our plan and consensus.
This includes another strong quarter of growth From T Mobile for Business, driven by customer wins in key industries, including airlines, automotive and retail and government agencies such as the Department of Veteran Affairs and the U. S. Army. But importantly, our reliable, profitable growth is product of our progress on churn. T Mobile again produced the biggest sequential improvement in postpaid phone churn compared to all other Our T Mobile and Sprint customers by providing them with best in class experiences and we continue to see the lowest churn in the entire industry From our loyal T Mobile branded customers, our T Mobile brand's consumer churn is lower than Verizon's and this quarter so was our business This achievement is a testament to our awesome customer loving team and also to our synergy backed model, which allows us to sustainably deliver the best value Our higher Sprint churn is rapidly improving, giving us ongoing potential tailwinds in this area.
Speaking of our customer loving team, Just this morning, we were awarded the number one ranking from JD Power in U. S. Customer Care Performance for the 22nd time. And our net promoter score for customer care among our Sprint customers is up 48% year over year. The way Now with all the line growth we've been seeing in the industry, another strong metric to watch is postpaid accounts, And growing them over time with additional products and services to drive ARPA growth.
This quarter, we delivered our highest ever Postpaid account growth at 349,000 and we continue to focus on capturing quality, profitable growth. I'll say it again. This quarter's account growth was our highest ever, at least in all the years I've been here. That's over 600,000 net postpaid accounts added year to date compared to Verizon, which is still negative for so far this year and AT and T who doesn't want to share account growth information. In addition, we're the largest prepaid provider in the country and we're consistently growing and delivering strong ARPUs in this valuable customer segment despite our size and despite the ongoing industry growth of postpaid at the expense of prepaid.
In Q2, we delivered 76,000 net adds, which reflected record low industry leading prepaid churn of Okay, let's discuss the financial outcomes. One thing that continues to distinguish us as an investment Is that only T Mobile is converting that record service revenue and our synergy backed model into industry leading core EBITDA, adjusted EBITDA, What's even more exciting is that we're delivering these results before we begin to fully capitalize on our 5 gs and before we fully tap into the new market opportunities and underpenetrated segments we've been discussing. Peter will tell you more about our financial results But what I'll say is that T Mobile showed again today that we consistently deliver smart growth on the top line metrics, While consistently leading on financial outcomes like core EBITDA and cash flow, pacing nicely to unlock the massive cash flows we outlined In our 5 year plan, a plan that promised outcomes we are reiterating here today, built around consistent, Our opportunities are enabled by the fact that we already have And as we continue to pull further away from the pack with the pace of our network We're clearly beginning to differentiate ourselves, not just on 5 gs, but on network performance overall.
Already this year, 7 third party network reports show that T Mobile customers get the fastest 5 gs speeds and spend the most time connected to 5 gs. While others are clutching to the work of a single paid consultant to support their network claims, our 5 gs leadership is showing up loud and clear Time and again in reports that are coming from multiple independent industry leading firms that look at real customer usage Now I know we all spend a lot of time talking about 5 gs and for good reason, but we have also quietly eliminated the legacy advantages that AT and T and Verizon previously enjoyed on LTE, which is where most traffic remains today. In fact, the latest Ookla data shows that T Mobile customers get the fastest overall network speeds nationwide and T Mobile swept Every mobile category in Ookla's latest report. This is in addition to OpenSignal's latest findings that T Mobile delivers the best 4 gs availability and umrah's latest report which highlights again that T Mobile has the most reliable network overall. So whether customers are on 4 gs LTE or 5 gs, they're covered by a far reaching and speedy network at T Mobile.
Speaking of far reaching, Did all of you catch Neville's blog earlier this week? He announced that T Mobile's extended range 5 gs now reaches 305,000,000 people. That's nearly everybody. And we surpassed our year end milestone roughly 6 months ahead of schedule, thanks to the terrific momentum of our team. Think of it this way.
Our 5 gs network covers 92% of interstate highway miles across 5 gs across America. With 5 gs, 92% today compared to just 68% for AT and T and only 51% for Verizon, as an example. However, where we are really unlocking transformative experiences for our customers is with our game changing, ultra Citi 5 gs, which as you know we are rolling out at an unprecedented pace. We already cover half of the U. S.
Population, delivering average download speeds of 3 50 megabits per second to 165 1,000,000 people with ultra capacity 5 gs. And we continue to increase both the breadth and depth of our mid band deployment, providing a 50% increase in our customers' average 5 gs download speeds just since the beginning of this year, According to billions of real time device measurements by OpenSignal. That's because we're not just rolling out ultra capacity 5 gs to more of the population, targeting 200,000,000 people by year end. But we are also adding spectrum, targeting 100 megahertz before year end, About what AT and T and Verizon will light up sometime next year with C band combined. We're well ahead in our 5 gs leadership.
What I hope is also becoming increasingly clear as the T Mobile is positioned to maintain our 5 gs leadership for the duration of the 5 key arrow. Thanks to our superior spectrum portfolio, our unprecedented deployment momentum and our synergy backed model. We're doing just what we said we would do during the merger process, leading America into the 5 gs era and doing it without leaving rural areas behind. And this leadership is beginning to really matter to customers. The 5 gs era is here and 7 out of 10 customers say they are excited about it.
T Mobile's 5 gs network perception is rapidly changing. And just since March, T Mobile has seen a 25% increase in people viewing us as the leader in 5 gs. Now at 26%, we're closing in on Verizon's stagnant 35% number on this metric, and we're way ahead of AT and T. And As for business customers, already over 40% of enterprise decision makers think of T Mobile as the leader in 5 gs. With 5 gs quickly becoming one of the top things that customers say they're looking for in their next wireless provider, our network is increasingly becoming a catalyst for them to choose T Mobile.
This network progress is also helping to fuel the rapid realization of merger synergies and our continued progress on integration. For the Q2 in a row, we're raising our synergy guidance for 2021. This progress includes continuing to migrate Sprint customers to the T Mobile network and improve their experience, which is key to unlocking synergies. We've already moved 1 third of Sprint customers to the T Mobile network. And this is important, we're now carrying approximately 80% of the total Sprint customer traffic on the T Mobile network.
This is all within just 5 quarters of closing the merger. And as planned, we're also expanding into new and under penetrated businesses. We commercially launched our broad 5 gs home Internet offering at the beginning of the second quarter. We continue to see great customer satisfaction and product demand continues to put us on track for our target of 500,000 home Internet customers this year, even with demand exceeding our supply for modem of times earlier this year. And we're already seeing 3rd party recognition, including PC Magazine recently publishing Readers' Choice Awards where T Mobile Home Internet is ranked higher than every single cable provider by actual customers for overall satisfaction and likelihood to recommend.
For enterprise and government, our plan is built on taking share in core wireless and it's well on track as I discussed earlier. But in addition, our 5 gs network creates a platform for growth beyond core wireless And we are focused on helping customers realize value from emerging technologies such as private networks and mobile edge compute, which are exciting potential upsides to our plan. We're already in trial programs with major enterprises in these areas, including 12 of the Fortune 50, even though we don't issue empty press releases about it every week. Meanwhile, we're building our best value, best network, best customer experiences formula to smaller markets in rural areas as well, which make up 40% of U. S.
Households. We've kicked off initiatives to add significantly more points of distribution to reach beyond urban areas as well as new initiatives and offers. We're already seeing some early success as smaller markets in rural areas drove nearly 1 third of our new postpaid account activations in Q2, up from about a quarter last year. The potential here is super exciting. So as I get ready to turn it over to Peter to take you through our financials, I want to take a moment to thank our team for delivering another remarkable quarter, delivering highest postpaid customer growth and service revenue growth in the industry, while translating that into the highest core adjusted EBITDA and free cash slow growth in the industry.
We continued to execute our integration playbook to unlock merger synergies ahead of schedule and we further expanded our 5 gs lead with the nation's largest, fastest and most reliable 5 gs network, planting the seeds for our future press. So, okay, let me turn it over to Peter to take you through the financials and our guidance.
All right. Thanks, Mike. As you can see, we continue to have strong momentum across the business. We beat expectations yet again in Q2 as we delivered on our winning playbook. So let me briefly discuss these great Service revenues grew to $14,500,000,000 up an industry leading 10% year over year or roughly 6% Normalizing for the Boost MVNO and 2% sequentially, driven primarily by our continued customer growth.
Both cost of services and SG and A expenses, excluding merger related costs, were lower as a percentage of service revenue On a year over year and sequential basis, reflecting the continued scale benefits we are delivering from merger synergy realization. Net income of $978,000,000 and diluted earnings per share of 0 point 7 Core adjusted EBITDA was a record $6,000,000,000 and up 7% year over year, driven by continued Service revenue growth and synergy realization. Net cash provided by operating activities grew to $3,800,000,000 driven by our Strong operating performance and synergy realization, while cash purchases of property and equipment, including capitalized interest, amounted to $3,300,000,000 which was up $1,000,000,000 from a year ago as we continue to aggressively invest in the build out of our nationwide 5 gs network. Free cash flow, excluding gross payments for settlements of interest rate swaps, amounted to 1,700,000,000 Which grew an industry best 16% from a year ago, even with the significantly higher CapEx investment and was also fully burdened by merger related costs of $190,000,000 Postpaid ARPA or average revenue per account was 133.55 As we continue to deepen customer account relationships. Postpaid phone ARPU was 47 point Premium service revenue adoption, including benefits from Magenta MAX to be partially offset by the remaining tail of Sprint customer rate plan migrations And growing lines per account.
Overall, we continue to expect full year 2021 postpaid phone ARPU dilution to be less than 1% compared to 2020. And we continued to strengthen our balance sheet and lower our cost of capital. In May, we issued senior notes in an aggregate amount of $3,000,000,000 structure. We use the proceeds to retire 3 notes with coupons roughly double the cost of the newly raised debt. Amazing execution yet again by the team all around to deliver these strong Q2 results.
So let's touch on How this momentum impacts our outlook for 2021 with another beat and raise quarter from T Mobile, as Mike mentioned. Our Simultaneously delivering on our promise of continued profitable growth. We now expect total postpaid net additions to be between $5,000,000 $5,300,000 Taking the low end above the top of our prior guidance range of 4.4% to 4.9%, reflecting continued profitable growth and prudent share taking opportunities from expected increased switching activity in the second half of the year. This also assumes a Higher mix of postpaid phone net additions as a percentage of the total postpaid net additions in the second half. Core adjusted EBITDA Is now expected to be between $23,000,000,000 $23,300,000,000 primarily driven by service revenue growth And our expectation for higher merger synergies in 2021, which are now expected to be between $2,900,000,000 $3,200,000,000 As we continue our progress towards rapid synergy realization.
We continue to expect merger related costs, which are not included in core adjusted EBITDA, to Net cash provided by operating activities, including payments for merger related costs, is now expected to be in the range of 13 We expect cash CapEx to now be between $12,000,000,000 $12,300,000,000 up from our prior guidance to be at Together, this results in free cash flow, including payments for merger related costs, increasing to $5,200,000,000 to slow generation more than fully funding higher levels of capital investment. And finally, we now expect our full year effective tax rate to be between 23% 25%, the improvement versus our prior guide being primarily driven by certain state tax benefits. Altogether, our Strong momentum and execution enable us to continue to invest in our network and the business to deliver significant expansion We're on track with our plans to unlock significant value for our shareholders, potentially including substantial share All right, let's get to your questions. You can ask questions via phone or via Twitter. We will start with a question on the phone.
Operator, first question please.
Thanks guys. Just one from me. I'm wondering if you can give us some more context on the DISH deal. It would be great to get A little bit more of an understanding of kind of the mechanics behind the scenes and the reasons why you let that relationship gov. But also would love to get some context from you on how you think the sort of a new deal that they've got with AT and T impacts The wireless industry overall.
Thanks.
Thanks, Jonathan. Okay, well, first of all, Peter, you owe me $100 The first question was in fact about DISH. Let me point out a couple of things about this. One is, I want to make sure people understand, particularly investors understand that when we presented you our 5 year plan, We had already factored in rapid declines for DISH revenue into our plan. And so that's kind of in the run rate.
I'll get to it. It could go a little faster than we had thought. Their operations and so there's no reason for us to do anything other than drag right on that when we make our plans. And secondly, we took them at their word that they would build a facilities based network and vacate ours as soon as possible. So all that was built into our run rate.
So much so that in our 5 year planning By the end of it, we have substantially taken out all of the DISH revenues in our plans and the vast majority of them by the end of our planning period. Now it's possible that with this development with AT and T that they will move faster than even we anticipated in moving off our work. And that will open up some both opportunities as well as some gaps in our financial plan. And I want to make sure a couple of things are clear. First of all, we've looked at this carefully and we are When we look at this, one of the things I've learned in wireless is that every time you've got a good guy coming at you, there's some opposing bad guy you have to manage, like great growth.
It's going to cost you an EBITDA, for example, and you got to manage that. Or in AT and T's case, 1,000,000,000 and 1,000,000,000 of dollars in future revenue reversals hang up on their balance sheet. But on the other hand, when you get a bad guy like potentially DISH moving faster off our network than we had thought, it opens up opportunities. And one of the things that we see right away is that when they move off of our network that's going to open up both management attention, but more importantly capacity. And so many things in our plan are predicated on available capacity.
Like for example home broadband, where we don't think we're going to be so much paced by the demand, We're going to be paced by the available network capacity, so there's an opportunity to go faster or enterprise share taking where our ability to put ambitious offers in front of customers is paced by what available capacity or ability to bring in new wholesale partners or double down with our existing ones. This is something that ultimately when we look at it, We're not really that displeased, which gets to the core premise of your question, because it's going to allow us to do what we do best, focus on our knitting and get after share taking and building this great network. And that's always been sort of the core premise of the 5 year plan that we put in front of you. I'll say a couple of things to wrap up. 1, We like and respect the DISH team and we're here for them.
So to the extent that they want us, we're here more or less. It's stuff to them, we will honor every obligation and continue to honor every obligation that we've made to both them and to the government. I may cost you another $100 because I'm going to go back to the DISH deal one more time. And just When you originally signed the deal, can you just talk about, were you willing to extend the deal Or was the duration a significant part of the negotiation? And then I guess just a more General question, where is all the growth in the market coming from?
I mean, we're seeing growth that's now, what, 5 times population growth rate In total phone subscriptions, can you just talk about what it is that's driving that kind of growth and how sustainable you think that will be for how long? Yes. Let's jump in on both of those and then might ask Peter or John to add to it. As for the agreement, one of the things To point out, I think everybody knows this is that our arrangement with DISH is a product of a merger remedy package. Initiated.
And it wasn't something that we looked at in our business plan and had built in originally. We plan to operate the Boost business. So it was part of a remedy package. And in that sense, we were sort of thrust together and asked to negotiate this. We did have a shorter term than what we saw communicated in the AT and T agreement, but I don't really have much comment on that.
I'm not Privy to what interactions happened between DISH and AT and T, I'm very immersed in the interactions we've had with DISH. And Yes, it had a certain term
and it
had it for a reason, because remember the remedy package was meant for DISH to get after building their own facilities based network as fast as possible and to move their revenues and their customers onto that as fast as possible. That was always the intention. And some are asking whether this still enables that or still we'll see that happen or not. I don't know. You'll have to check with them.
As it relates to the second question, what we'll see going forward, Juan, you guys want to jump in? Yes.
Let me jump in on just DISH one more, because I know we have before it cost me $300 We have some questions coming in on the impact. And as Mike said, right, we're here today reiterating the mid and long term guidance that we put out there at Analyst Day. And there's been some questions out there around, what was it, dollars 2,500,000,000 of revenue currently. I think there's some extrapolation perhaps from DSU's cost of service line I'm just here to say it's already less than $2,000,000,000 on an annual basis in 2021. And again, because we assumed DISH would be a successful competitor and would build out their own facilities and take customers off, that was already reflected as a decrease in run rate.
But also one of the things that we talked about at Analyst Day is the prudent plan that we put in front of you, right, with multiple upside opportunities. And that included things as Mike alluded to, mobile edge compute, virtual networking, but also the ability to either Slow down the ARPU dilution that was assumed in the plan as we expanded relationships, go deeper, faster in smaller markets, rural areas And a whole host of other factors of the ability to grow ARPA on a faster rate as we deepen relationships. And what you're really seeing in 2021 and what's Encouraging is the success that we've had to date from a new account perspective, from an ARPA growth perspective, from the ARPU stability that we're giving you. So we're here to absolutely reaffirm everything in the mid and long term guidance, all the way down to free cash flow. I see some questions on Twitter coming in that way.
So Just wanted to make sure that was out there. And again, that's the focus of this team. We put out prudent plans and then our job is to beat them. And
And we still see the upsides that we saw then. Absolutely. Very exciting. So as it relates to accounts, this is one I know Everybody is asking this and all of us only have a lens on our own business. And so we really can't give you all that much to go on.
I I can tell you a few things. One is you heard in my remarks that we're making sure that everybody understands where our focus is. And Our focus is on growing profitable overall account relationships, 600,000 of them on the postpaid side so far this year. This last quarter, the biggest new account quarter in our history. And accounts are a great metric because they are totally new billing relationship.
It's probably somebody porting over and they're an important metric. I heard during the earnings season, one of my competitors sort of said, hey, we're focused on quality growth and not all accounts are created equal. And what What I would say to that is, but service revenues are. And T Mobile led again on service revenue growth with 10% normalized for some things last year, 6 percent overall service revenue growth, the best in the industry. And so look, there's some prepaid to postpaid transference going on.
There's some deepening of account relationships with ad Just add lines going on, there's a lot of dynamics, but it's one of the reasons why I want to make sure that you're hearing us focusing on our knitting about growing overall profitable relationships that result in the market's best service revenue and EBITDA growth. If they want to pile on and say where things are coming from? I think that's perfect. The only thing I would add, Mike and hi, Craig, is yes, there's a big transference from the prepaid category to the postpaid category. You're seeing that happen more from a macro perspective, lots and lots of people from prepaid moving into the postpaid based on the economic realities that you're seeing in the Which makes our prepaid growth that much more impressive.
When you think about us being the leading prepaid provider in the entire industry and And putting up another 76,000 prepaid nets and having our industry or record low churn on prepaid. It's just really incredible in terms of what's happening in that space. And that's a big draw into postpaid specifically is what you're seeing From a macro perspective in prepaid. So let's do another one And our next
phone question will
So as you highlighted during your remarks, this was a pretty solid churn quarter. As you observe the Sprint customer base kind of goes through this transition into a T Mobile customer base, what are the points along the way that seem to be correlated with step function improvements in churn among those legacy Sprint customers. And as you look out over the next couple of quarters as you continue to go through the process, How often are we going to be hitting those? Because I think that the real focus here is, it seems like you're making great headway at moving the base over. So how low can churn go and how quickly can it get there as you move through that process?
Thank you.
Yes. Thanks, Brett. I mean, we have a lot of work left to do. We're Please with our progress. We're ahead of schedule.
But this next year is a really critical time. And remember, in an integration like ours, there's separate We designed this to be able to do separate discrete events when it comes to the migration. 1 is when do you migrate the substantial portion of their network traffic. 2 is when do you migrate their account relationship in terms of the core network that they're attached to? 3 is when do you migrate their rate plan to a destination rate plan?
4 is when do you
migrate their biller because that can be a discrete event? And finally, when do you start telling them their T Mobile migrate their brand. All of these can be discrete events and all of them can contribute to churn improvement. By the way, there's some bumpiness. We're actually starting the process long promised of turning down the network on the source side and adding that capacity to the destination side.
And that will create mostly delight, but it will also create some bumpiness. So there will be opportunities netted out with some pressures and overall it looks like a net opportunity to us. But we're entering a really acute stage here over the next 12 months Where we will begin doing billing migrations at a faster pace, we'll begin doing brand migrations, the way we serve people with our exclusive team of experts model will be start to ramping to ramp up and will simultaneously start turning down those network sites that are not keep sites so that we can start to get you those concrete synergy flows. And all those things will be happening simultaneously. And so far, we're just delighted with how it's going.
But at the same time, we see lots of opportunity to put an arm around and love those Sprint customers and we're all over it.
If you don't mind if I can ask a Early in the process, there was a lot of questions about whether the Sprint customer base had the potential to have the churn profile Now that you're several quarters in and some of those customers have been with you for a while, what's your latest assessment there? Do you think that the long term churn profile So that acquired base can match or get close to what you've historically shown us?
Absolutely. And one of the ways Look at that is when we look underneath of the different kinds of situations of Sprint customers. For example, people who are happily into a device payment plan that was given to them on fair terms and who have a great rate plan, their churn is already remarkably low and most of their data is on the T Mobile network. And so we see that situation in our base. On the other hand, people who have a situation that's less palatable They're kind of a jump ball.
Yes, those churn numbers are still higher and our job is to welcome them to T Mobile with the great taxes and fees included rate plans and Netflix on us and T Mobile Tuesdays and team of experts care and of course the best 5 gs network in the country. And that's happening at pace, but we're only working our way through the base.
And Bruce, to your point, this is one of those areas of opportunity that we highlighted at Analyst Day, where the plan over the medium term was really to close the gap in tab. To T Mobile. So that extent that we get through this period, this next period of 12 months, 18 months, roll out all the benefits T Mobile, it's an opportunity, right, as we see maybe closer alignment during that period to the Magenta base.
That could wind up being a nice upside, Because only closing half the gap. Yes, that's what's written into our plan. All right. What are we seeing on Twitter before we go back to the phone?
Well, you've got Walt's got a couple of good questions in here. One about 2 5 gigahertz deployment, which I'm sure Neville could hit and a little bit about on posted phone growth ads and adelines, which I think we have some great Walt doesn't do the
calls anymore. He's just a digital he's a digital okay,
fair enough. He got in multiple questions that way then.
All right. Well, let's So we'll go to one. Let's see. Does the DISH move to impact free cash flow guidance? No.
Why is there only 40 megahertz of 2.5 gig in some markets? When will it be 100 megahertz or 160 everywhere? Let's talk about that because How our advantage Neville translates into not only people covered POPs, but megahertz deployed to those POPs to get to geek out on an old industry term megahertz POPs. The difference between what we can offer in the next few months versus AT and T and Verizon and then How that translates into a year's long advantage? It's pretty stark.
Maybe you can talk about where we are and where we're going.
Yes, absolutely. So if we pick up On Mike's comments earlier and the 165,000,000 covered people we have already today with our ultra capacity mid band solution. We're 35,000,000 away from an end of year goal of 200,000,000 people covered with our ultra capacity solution, which is a nationwide claim basis. So that's the progress we're making. We're super close.
It's July. I'm very confident about our ability to hit the $200,000,000 And to your question, Walt, that's the point in time we're targeting. On average, 100 megahertz of spectrum will be available across that footprint, 100 megahertz of the 2.5 gigahertz spectrum, The best mid band spectrum there is out there in this 5 gs category. So that's exciting. And if you compare and contrast that To what AT and T and Verizon have announced to date, they're talking about 100,000,000 people covered some point in time in the New Year.
And between them, between them On the C band spectrum holdings, they have 100 megahertz, Verizon 60 and AT and T 40. So when you compound the footprint and the spectrum available, obviously, we have a massive lead. And the good news is that, That lead is there and it's durable and it's sustainable as we move into the coming years. AT and T and Verizon will try and match What we will do this year by the end of 2023 when they get more C band spectrum available in the second tranche. Of course, we get C band spectrum at the end of 2023 too.
But the important piece is we're not sitting at 200,000,000 covered POPs at the end of this year. Our goal is to be at 300,000,000 covered POPs by the end of 'twenty three and to double that spectrum position from 100 megahertz of mid band to 200 megahertz. And in your question, Walt, you mentioned 160 megahertz of 2.5. Our plan is to have all of that deployed the 5 gs plus additional mid band from our AWS and PCS Holdings to set us up for an incredible leadership position So, AT and T and Verizon will spend many years trying to manage.
I was expecting a follow-up question, but I forgot he's on Twitter. Okay, so good. So, Let's go back to the phone and we'll get ready for another Twitter one after this. Thank you. Our next question
comes from Phil Cusick with JP Morgan.
You noted in the fact book that the phone increase This was driven in part by T Mobile for Business. Where are you on that? Can you quantify the size of that customer base on the growth? And then similar on home broadband, can you tell us what the contribution was there in the quarter and how that should pace from here? Thanks.
Beautiful. Well, we'll turn it over to the leaders of those 2 business groups. I am just delighted with what we're seeing on T Mobile for Business. It's a big contributor. We outpaced Verizon this quarter, fantastic, even outpaced Verizon on churn.
So people wonder whether we're for real in business. Maybe Mike you can talk about what's driving it and then we'll flip over and talk about what we're seeing in home product. Yes. Thanks Mike. I'm really pleased with what we saw this quarter.
And as we talked about in Analyst Day, our focus has really been going after the postpaid core opportunity. Because if you look at all the opportunities in enterprise, core connectivity still is the largest opportunity, both from number of subscribers, but also from revenue. So we've been really focused on taking share there. And we've been really Leveraging several very distinct strategies to go do that. 1st and foremost, it's network.
And it's all the things that Neville just talked about with 5 sheet, we have a distinct advantage right now in the 5 gs network. We've got a huge lead that right now our competitors can't touch and that matters in this enterprise space. And so we've been using that to really get conversation started enterprise space. And so we've been using that to really get conversation started with enterprise, using it to get into testing with enterprise. And when they test us side by side, we win.
We simply win because we can't be touched in 5 gs right now. We're also really focused on disrupting in enterprise, specifically around simplicity and value. One of the things that you heard us talk earlier in the year when we launched WFX Solutions was how complex the enterprise space is with core wireless, still lots of pooled plans and sharing. And when you're doing that across tens of thousands of employees, it's incredibly complex, so complex in fact that we see enterprises hiring 3rd party companies to manage it. And we've really seen enterprise respond favorably when we can come in and offer a much more simple, much more straightforward forward value proposition.
So those have been some of the big key steps they're doing it. And like Mike said, it's really translated into incredible results. We beat Verizon again until the postpaid ads and that growth is translating both into year over year revenue improvements that are double digit. And the network is really resonating with the base where we saw both year over year and sequential decrease in churn from our postpaid customers and you heard Mike mention in the opening comments lower than Verizon this quarter. So we We're talking about blended not just on the Well, Donnie, your second part of your question, Phil, was about home broadband.
And We're just out of the gates. We're really pleased with what we're seeing. Dow Draper leads all of our emerging businesses. And one of the things I'll say to tee up Dow is that One of our early insights is that it sure doesn't look like this is going to be about demand. This is going to be paced by network capacity, as I mentioned in my answer on DISH, by device capacity for a minute here as we recover from COVID, but not by demand.
And by the way, the customer experience is pretty But now why don't you tell us what you're seeing? Yes. Thanks, Mike. First off, thanks for the question, Phil, because we're super enthusiastic about this business. And as we talked about Previous this year, we really entered 'twenty one with 100,000 customers in a pilot.
And then we officially launched in April to 30,000,000 households with our 5 gs home Internet service. And there's really as we're It is early days here. To basically echo what Mike said, we started and what we've learned is that one is the customer satisfaction and what customers are telling us about the product It's really positive. Our customer satisfaction scores are very high in an industry that is known for basically Bottom of the barrel customer satisfaction metrics. And so that's really great to see and it's nice to get The results of the survey in BC Magazine's Readers' Choice article.
And so it's great to see that. And then What that's also translating to is we are seeing demand outpace really outpace supply in the second quarter. And we've done a lot of things where we're working to catch up with that. We think we're going to be caught back up here in the next month. And so what that means is So our aspiration was to end the year with 500,000 home broadband customers and we feel really good about that trajectory.
I think we should go through there's a couple in here about prepaid, which she touched on, but there's lots of we'll go from Bill Ho. Prepaid seems to have a resurgence given yesterday's aggressive offer, given the comments on postpaid, prepaid Has anything triggered this second half prepaid thinking? And any color on this amazing stellar drop in prepaid churn? And he kind of goes on about the aggressive offer that we just launched. One of the
things, it's 5 gs. Look, we just as a company, we don't believe that 5 gs is for rich people on postpaid plans. We think it's for everybody. And that's really important and we're moving absolutely ambitiously to make sure everybody gets a chance to see and experience this remarkable network. And by the way, with prepaid customers, that's even more important for so many of them because their switch from Booster Cricket that don't seem to be going at a fast pace to introduce prepaid customers to 5 gs, and not only to give them a great rate plan, but also to give them A brand new Samsung Galaxy 5 gs phone.
And so it's a fantastic offer. Really it's about celebrating this 5 gs moment and getting people to come see what our network leadership is all about. And I think that's a contributor. That network leadership, both on 4 gs and 5 gs is certainly a contributor to the lowest churn we've ever seen or anybody's ever seen from a major prepaid brand. Let's go back to the phone.
And we'll go to Doug Mitchelson with Credit Suisse.
Thanks so much. You mentioned in the prepared remarks You're expecting higher switching activity in the second half of the year. So I'm just curious if that's something you've already seen? And is that suggesting that there'll be a higher environment for the higher the entire industry as a result, just curious the implications there. And then for Neville, beyond putting more spectrum into use I sense the growth in fixed wireless might be constrained by you delivering capacity to the team versus demand for the product.
Is there other things that are happening in future years beyond that to drive capacity? Are you going to go back and touch the towers again? Are there going to be software updates? Are there So the new antenna deployments that you're not doing this go around, anything on capacity beyond putting the spectrum to use would be helpful. Thanks.
I'll start and hand it to Neville, then we'll go back to your first question. It's funny, it's the opposite the question we often get asked is actually the opposite, the converse of yours, which is you're building all this incredible capacity. What are the use cases? Tell us please Neville about the 5 gs use cases. How are you going to fill up all that capacity?
And it's really important you ask the question the way you did because wireless home broadband is one of the killer apps of 5 gs. And that's why I mentioned earlier that anything that frees up capacity to allow us to go faster on this multi $1,000,000,000 opportunity is a good guy. And but maybe we can talk about that whole equation and what you're thing when it comes to enabling home broadband and other high capacity applications, Neville?
Yes. I mean, I think obviously the heart of the opportunity is spectrum. And we are in a strong position and I outlined for you the pace at which we're deploying that 5 gs spectrum, which It's going to create a fairly sharp contrast with our competition. I mean, I love our messaging on 5 gs for all and part of that is the prepaid segment of the customer base that we just talked about. But it's also really hitting All corners of the United States, right, going into rural markets, small town America and bringing 5 gs capacity and stability at an incredible pace.
And I think that's going to position us for a long term advantage in those opportunity on in home broadband. So it's not just the application of a great set of spectrum, it's where and how and the pace at which we do it. I think the other piece is, not to get too geeky, right? But 5 gs is just really beginning. And The features and capabilities and the spectral efficiency that we can secure from a 5 gs bearer, we're at the very beginning of that journey.
We're only just now rolling out 5 gs in the mid band space. And if you look at what happened with LTE over a decade plus, Material improvements in the capacity and capability of what we could support with our radio network. And that's going to come with 5 gs2. There's a very rich future and roadmap to enhance the capacity and capability that we can bring. So You add all those pieces together, this is an incredible 5 gs factory that we're building.
And to Mike's I mean, we're excited about all of the opportunities with which we can fill up this capacity bucket that we'll roll out over the next 3, 4, 5 years.
Your first question was about switching and trends we're seeing with churn in the second half. I'll tee it up, hand it to John. A lot of this is seasonal. I mean, second half is usually a period with higher switching activity and higher churn. This year there's the additional dynamic of COVID, which is a little bit of a wildcard, but the broad trends notwithstanding Delta variant do look like a continuation of opening up.
And then of course in the fall time in prior years, we've generally had a big important new phone launches. And as you take all that together, we've made on the guidance to fund our plan to compete profitably, ambitiously, reasonably, but to compete in the second half to make Sure that we're competitive. But John, why don't you say what you're seeing? Yes, that's exactly what I was going to say, Mike, that seasonally in the second half of the year, you have 3 big moments. You've got a big back That's typically in the fall timeframe.
You never know, but typically in the fall timeframe. And then of course you have a holiday So what we're seeing is we're seeing a continued reopening. We've been seeing that. I think I said last quarter that There are some places throughout the country even last quarter like Texas and Florida and some states like that that were fully open. And then other places like New York We're still seeing that in terms of those states and some of those big markets that are still gradually reopening.
We expect that Like Mike said just a few moments ago, don't know where Delta is going or any other kind of variants that might be out there, but we're well in the position of post vaccine environment to be able to manage that. We expect there to be much more activity in the second half of the year versus the first staff. We're prepared to win in that space. That's where we win the most. That's what we love to see that kind of competitive activity.
And there's more people evaluating There are options out there. We love that because we want them to look at T Mobile. And when they look at T Mobile, when they're in the market to shop and perhaps Switch, they pick us more than not. So we're excited about it. Thank you.
All right.
Our next phone question will come from John Ogulik with UBS.
Maybe let's go back to the rural and suburban strategy. It's nice to hear that the contribution in terms of accounts has ticked up to a third of the new accounts this quarter. How high can that go? And do you expect it to continue to tick up? And I guess along with that, how far through the investment phase are we?
We talked about hiring local experts and increasing distribution. That's in the run rate or should we expect more? And then lastly, along with that, you guys talked about sort of Getting on these synergies, especially the taking down and decommissioning the Sprint network. And it seems there's an equation there with either some increased investment on distribution, but eventually we're When do we see that inflection and the synergies override the new investments and we start to see acceleration in the adjusted EBITDA number?
Terrific. Well, first of all, let me just say on small markets in rural areas. My opinion, I'll toss it to John, as we're in the 1st inning, we're just getting going a lot of these investments around distribution, around a new way of distributing product, around new offers around reputation where those things take a little time. It's just at the very first inning and yet we're seeing the market respond. So that gives that makes us very optimistic.
Peter, I think rightly pointed out that in our 5 year plan we shared with you, there were a number of important upsides. We're seeing about a third of our activations come from those markets, pretty exciting. So and John, Some of his questions are about, okay, what have we accomplished and what's next and what can we expect? Yes. Like Mike said, I too just I'm so excited and increasingly enthusiastic about this opportunity for us.
And as Mike highlighted in his opening comments, this is a huge opportunity for us. It's roughly 40% of the market, call it 50,000,000 households, 140,000,000 people, call it low teens market share. So we have a huge the Specifically to the activities, we said this year that we would be opening 200 retail stores that's Well on pace to be able to get done. Also hiring 1,000 mobile hometown experts. And this 1,000 hometown experts, just remember, We're going into cities and towns where it doesn't really make a whole lot of economic sense to build brick and mortar distribution.
So this is more extending our reach into places that we ordinarily couldn't get to with retail distribution. That's well on pace as well. So, 200 stores this year, 1,000 hometown experts this year. We made a commitment to have up 2,500 hometown experts. So we're ahead of 1,000 this year as a down payment on that 2,500 and then the balance of that coming into the future quarters and into the next couple of years.
So we're just increasingly excited about it. Like Mike said, almost a third of our postpaid new Counts coming in from small markets rural areas from call it a quarter in 2020, it's a big opportunity. It is in the first inning, so slow burn. We had a lot of perception to change, But we're capitalizing with this distribution push based on the incredible network that Neville and his team are building out there and bringing 5 gs to a lot of these places. It's incredible when you think about it.
There's not really a 5 gs strategy I think from some of our competitors in rural America and they shouldn't be left behind and we have a huge opportunity to go out there and bring ultra capacity 5 gs in so many places and be able to make a big difference in these markets. Perfect. There was a question second part of this question was about synergies.
Synergies and EBITDA. So I think the run rate, as John mentioned, it really continues in the second half from an investment perspective, Both in distribution here, both in, as we talked before, bringing our team of experts model into the Sprint base on a more full basis. So So there continues to be investments and also the second half, of course, as we said, with the larger switching opportunities, with more of the Phone launches that we don't know about, but may know about, and of course, holiday season and such. And then our promotional constructs, as you know, tend to be more We don't hang it up on the balance sheet, but as we go through that, that tends to impact core EBITDA in period. So you'll see a lot of that, The investments, the promotions that we anticipate to be higher as we have more switching and a higher postpaid phone net add in the second half, That all comes through in core EBITDA, but that is offset by the continuation of synergy unlock.
And I think you've asked, when is the inflection point, in particular as Regards to the network, well, we're starting. We are still targeting 7, 8000, 8,000 decoms by the end of this year. And with the pace that Neville is going, we feel confident about what we put out there at Analyst Day. And so you see by 2023, We're already assuming we will overachieve against the $6,000,000,000 and ultimately on our way to $7,500,000,000 of run rate synergies by 2024. So very exciting and you're already seeing that happen when you look at year over year margin as a percentage of service revenue.
The competition Both went down in terms of margin as a percentage of service revenue and we went up. So you see the power of those synergies and that unlock already
So we'll go back to the phone and then maybe do we have a couple more on Twitter as well?
Maybe one and then you have a
Oh, I have to go. When do I have to go?
Really ask one more phone call and then
Okay, great.
We'll go back.
Thank you. We'll go 2 Simon Flannery with Morgan Stanley.
So coming back to the fixed wireless, the home broadband, Maybe Neville, you could just talk a little bit about the learnings that you're seeing and this critique about your ability to handle the usage of the So what are you seeing so far? And I think you've been advertising a speed around 100 megabits a second, but at the same time you're saying your ultra capacity networks averaging at Neville for the first and Dow in the second.
Yes. So thanks, Simon. I mean, obviously, so far, we're making great progress. I mean, Dow and the team have been working really hard to get this business moving. And the network is moving at a real pace to support the capacity and capabilities that are required.
The real sweet spot on this program is really the ultra capacity. And you've heard us multiple times now talk about the pace and rollout of that ultra And that's what really brings this home broadband solution to life and allows us to move into these higher tier speeds. I mean, we've committed that and we've talked for many months now around the speeds and capabilities that we can support across this network, across this entire network and those speeds being north of 400 megabits per second. And that all comes to life as we realize all of that spectrum I talked about earlier on, moving on to a 5 gs layer and a massive rollout unlike I think anything the U. S.
Has seen on mid band spectrum layer. And so our ability to support the growth is absolutely there. The economics are there, because we have A deep and heavy layer of mid band spectrum in 2.5 gigahertz. And so we can secure these upgrades And the economics with almost a single radio deployment to leverage and unleash the 2.5 gigahertz spectrum. Very tough to do this stuff if you have to pull together lots of fragmented bands of spectrum as, for example, AT and T has to do.
So for us, Big, big multi lane highway being opened up, not just in metro where we've been focused primarily for the last 4 quarters or so, across the nation and our ability to really transform that home broadband space in many parts of the country where There's very little competition and very poor service at times is absolutely there for us to go run at.
I have to go. But we're going to take the last question, therefore, we'll go to the phone. And operator? Thank you. Our next question will
come from Michael Rollins with Citi.
Thanks. Hi. A couple of follow-up questions. First on ARPU, just curious if you can unpack What's happening in ARPU in the quarter and for the year in terms of some of the helps and hurts and how Magenta MAX may also be contributing? And then just taking a step back, what's the expected pace going forward to introduce new uncarrier initiatives?
And when you look at the totality of the value that you're offering, are you seeing a continued evolution in the take rates
Thanks. First to Peter and then to John, and I'll make my thank yous and excuses. I've got to do one on air hit. So thank you guys and we'll hand it to Peter.
All right. Yes. Thank you, Mike, and thanks, Mike, for the question. So ARPU and really the story of ARPU, I'm very pleased, like I said in the prepared remarks around what's happening with ARPU and really a lot of tailwind that we're seeing with the adoption of Magenta MAX, which is just Really a manifestation is another use case of the power of this network and bringing this differentiated product out into to the marketplace and the ability for John and team on a consumer side to really translate that into value from an ARPU perspective. So that's a lot of the tailwind that we saw from a value add service on a sequential basis.
Remember, we told you Q1 was going to be the low watermark As we really focused in Q1 on moving a significant portion of the Sprint base into their target rate plans and a little bit of that We'll continue throughout the latter part of this year. And of course, there's going to be continued investment in terms of expanding account relationships. Because remember, Plan is built on ARPA growth, not ARPU growth. ARPU is still throughout the duration of the plan through the end of 2023, Expected to decline roughly 1% on a year over year basis. So those are a lot of the puts and takes.
Again, the ARPU trajectory this year, Very, very confident in less than 1% dilution given all the tailwinds there. And the other part that also is an impact And you heard about the success in business. Business tends to have larger, particularly enterprise and government, larger account sizes. Ships there. So very happy there.
In terms of on carrier, I wish I could just maybe I'll Twitter you out exactly what we're going to do from an on carrier perspective And when it's coming, but the one thing that's true from this team, maniacal focus on profitable growth, but never losing that entrepreneurial spirit that we have. So there's more on the horizon, I'm sure, when it comes to un carrier moves. We are not done solving the pain points this industry or new industries like home broadband. So really appreciate it, Mike. Thank you.
And I think probably with that, we'll have to at this point conclude the call. So thank you everybody for tuning in. It's just An amazing set of results again, another beaten race quarter for T Mobile and we're just very optimistic about where we're going I'm very glad that you could spend the time with us. So, operator, can you now please conclude the call?
Ladies and gentlemen, this concludes the T Mobile U. S. 2nd Quarter 2021 Earnings Call. If you have any further questions, you may Thank you for your participation. You may now disconnect and have a pleasant day.