Good afternoon. Welcome to T-Mobile's first quarter 2026 earnings call. Joining me on our call today are Srini Gopalan, our President and CEO, Peter Osvaldik, our CFO, as well as other members of the leadership team. During this call, we will make forward-looking statements which involve risks and uncertainties that may cause actual results to differ materially. We encourage you to review the risk factors set forth in our SEC filings. Our earnings release, investor fact book, and other documents related to our results, as well as reconciliations between GAAP and non-GAAP results discussed on this call can be found on our investor relations website. With that, let me now turn it over to Srini.
Thanks, Cathy. Good afternoon, everyone. We're here in Bellevue today ready to discuss another extraordinary quarter for T-Mobile. This quarter is a powerful demonstration that the strategy we outlined for you in February is working. Our strategy is driven by widening differentiation, providing customers with the best network, best value, and best experience all at the same place so that they don't need to make trade-offs anymore. We made strong progress on this strategy this quarter. Nothing demonstrates this more succinctly than our NPS score, an industry-leading 45%, over 20% higher than that of our next closest competitor. This widening differentiation gives us access to unprecedented growth opportunities. Our industry-leading growth this quarter is a testament to this. One of the largest of these growth opportunities is the 20 million+ families and businesses who are network seekers not currently with T-Mobile.
This is an opportunity with a lot of runway and one where we're making great progress. In fact, this quarter, amongst recent switchers who chose to come to T-Mobile from another carrier, the highest percentage ever said they chose us for one reason: network quality. Similarly, across multiple third-party surveys like HarrisX and from the analyst community, we've seen a strong improvement in the perception of our network. That's what's led us once again to grow our share of postpaid households in each of our cohorts in the top 100 cities. In smaller markets and rural areas where we have only 24% share of households, we continue to accelerate and capture more switching share with word of mouth driving strong momentum.
In addition to our tremendous momentum in consumer across network seekers and other under-penetrated cohorts, our low share in T-Mobile for Business also continues to give us substantial growth runway. This quarter, we continued to capture share with our network superiority-led value proposition in T-Mobile for Business. Our industry-leading nationwide 5G Advanced network continues to allow us to drive TAM creation with Advanced network solutions and leveraging that as a thoughtful cross-sell opportunity into traditional voice and broadband offerings. One example of our innovation in action is Major League Baseball's recent rollout of our automated ball-strike system, which uses the T-Mobile network to allow challenges to umpire's calls. Let's now turn to broadband. For yet another quarter, we were the fastest-growing ISP in the U.S., adding over 500,000 total broadband net additions with 5G broadband net adds accelerating year-over-year.
5G broadband continues to lead the industry in terms of customer experience, topping J.D. Power, Forbes, CNET, Consumer Reports, and Opensignal, just to name a few. Our 5G broadband speeds also continue to lead the peer group at over 50% faster than the next closest competitor. Fiber is tracking great, leveraging the T-Mobile brand to draw strong interest. I'm excited about our announcement earlier today, that we're entering into two additional JVs with leading infrastructure partners to acquire GoNetspeed, Greenlight Networks, and i3 Broadband as part of our returns-focused, capital-efficient approach. Every piece of the business I've talked about so far helped drive our tremendous postpaid net account additions of 217,000 in Q1, which was up 6% year-over-year.
In addition to volume growth, as I said in February, we also have a double-digit advantage in backbook pricing over our leading competitors. In Q1, that translated to a really strong postpaid ARPA growth of 3.9%, a powerful proof point that our unique and durable value prop is resonating as we deepen relationships with customers. T-Ads and financial services, smart and thoughtful adjacencies that piggyback off the success and scale of our brand and ecosystem, are also delivering strong incremental growth. Even as we capitalize on our differentiation to drive growth, we consciously double down on the sources of this differentiation across best network, best value, and best customer experiences. Let's start with the network. We're continuing to push the envelope of what's possible.
We're excited to be rolling out live translation on beta soon, our first network-native AI application that we demoed for you at our February event. Live translation, uses language learning models embedded into our core and translates your voice into one of 80 different languages anywhere in the world. All you need is just one connected T-Mobile phone. Importantly, this is just the initial step in us building AI capabilities directly into our network core. Longer term, we see a world where our network becomes the connective tissue for physical AI and accommodates inferencing at the edge. As a step towards this, we're delighted to share today that we're connecting our 5G Advanced network to Figure AI's Figure 03 humanoid robots, enabling seamless and reliable connectivity from the moment they power on.
This partnership, amongst others, will allow us to explore how the T-Mobile 5G Advanced network and its capabilities, including assets like the network edge, can support the broader evolution of physical AI. This is an important stepping stone towards building an even more capable network of the future with 6G. On value leadership, which we guard zealously, we further strengthened our credentials with the rollout of our better value plan earlier this year, which offers access to our premium wireless experience to even more customers at a great value. Our other key differentiator is our customer experience. T-Life is continuing to drive digital interactions with about 25 million monthly active users engaging with the app multiple times a month. T-Life will also serve as the unified platform to support growth into considered adjacencies like financial services and advertising.
In retail, we're well underway in our journey towards more experience stores with several hundred already up and running. Our experience stores see higher premium mix, higher NPS scores than our traditional outlets, and over time, our mix shift will lead to fewer doors, but also more meaningful customer experiences. Even as our differentiation drives industry-leading growth, we continue to feed and stoke it, so that the gap to competition only widens further. Pulling all this together, this is what drives the industry-leading financial growth we've delivered yet again across all key metrics in Q1. Our postpaid service revenue grew 15% year-over-year. Total service revenue, 11%, a rate that's more than four times that of our next closest competitor. Our core adjusted EBITDA also grew an industry-leading 12% year-over-year.
All of this while continuing to deliver industry-leading free cash flow margins of 24%. Alongside this incredible financial growth, we returned $6 billion to shareholders in the form of dividends and share buybacks. I'll end with saying our results speak for themselves. The unique differentiation we have as the Un-carrier continues to lead to best-in-class results. Just look at our NPS score. The best part of all of this is this team's hunger and the incredible passion our people have to truly delight customers means we're only at the beginning. Okay, Peter, over to you. Provide an exciting update on our guidance.
All right. Thanks, Srini. As you can see, our growing differentiation not only drove a strong start to the year, but also gives us the confidence to increase our guidance across multiple fronts. Starting with accounts, we are raising our expectation for total postpaid net account additions to be between 950,000 and 1,050,000 on the strength of the underlying momentum in the business. Turning to service revenues, we continue to expect to deliver full-year service revenue of approximately $77 billion, representing 8% growth, with Q2 expectations of approximately $19 billion or up 9% year-over-year. As part of that service revenue growth, we continue to expect strong postpaid ARPA growth of between 2.5% and 3% for the full year.
We are also raising our full-year core adjusted EBITDA guide, which is now expected to be between $37.1 billion and $37.5 billion, an increase of $100 million at the lower end of the range. As part of that, we expect Q2 core adjusted EBITDA of approximately $9.4 billion, up 10% year-over-year. Our expectation for full-year 2026 cash CapEx remains unchanged at approximately $10 billion as we continue to invest to further differentiate the network. We now expect adjusted free cash flow to be between $18.1 billion and $18.7 billion for the full year, also an increase of $100 million at the lower end of the range.
Finally, last week we announced we are increasing our 2026 stockholder return authorization by up to $3.6 billion to a total authorization of up to $18.2 billion. As always, we will continue to follow our disciplined capital allocation philosophy. To sum it all up, we continue to see strong momentum in the business and cannot be more excited for the future. With that, I'll now turn the call back to Cathy to begin the Q&A. Cathy?
Thanks, Peter. All right, let's get to your questions. You can ask questions via phone by pressing star then one and via X by sending a post to @T-MobileIR or @SriniGopalan using #TMUS. We will start with a question on the phone. Operator, first question, please.
The first question today comes from Craig Moffett with MoffettNathanson. Please go ahead.
Hi. Thank you. Let me start with the reports that you're considering a merger w ith Deutsche Telekom. Can you talk about the logic behind that and as well as the logistics? Would that require a vote of the majority of the minority among board members as independents? Exactly how would that work? Would there be any premium for U.S. shareholders?
Thanks, Craig Moffett. Let me pick that up. As a matter of policy, we don't comment on market rumors or speculation, nor is there anything specific to comment on anyway. However, the article has raised a lot of questions inbound on governance. We've looked into the governance, what I've been told is, hypothetically, if someone were to ever consider such a transaction reported in the article, that would specifically require a separate approval process by disinterested shareholders, what many of you refer to as majority of the minority. Thanks, Craig Moffett.
That's very helpful. Thank you.
The next question comes from Sam McHugh with BNP. Please go ahead.
Yeah, afternoon, guys. On the fiber JV you announced today, I just wonder if you've seen much movement in kind of a bid-ask spread on fiber assets as we've started to see maybe fiber ARPU come under pressure. I don't know if some of the commentary around broadband growth and pricing impacts your appetite for more fiber JVs going forward. Thanks.
Thanks, Sam, as you well know, and as I've read in all of your stamp surveys, the reason we're doing fiber is much more because we see an equity value creation opportunity rather than the myth of convergence. That sort of drives the way we think about these assets. When you think about things like bid-ask spread or multiples or compression and the rest, each of these assets is a unique case. The way we think about it is, do we believe that this asset has a strong likelihood of giving us our target IRRs? Those are in the double-digit level.
We look at each of these very, very specifically, 'cause as all of you guys know, each of these assets operates in a specific geography, operates in a specific competitive environment, in a specific pricing environment. It's really hard to give you an overall sense of are bid-ask spreads changing, are multiples compressing, what's happening with pricing, et cetera, et cetera. What we know so far is our fiber JVs, the ones we've launched so far, are well on track. They're delivering exactly what we expected. The lift from the T-Mobile brand and our distribution is completely in line with our expectations. On the new JVs that we've done, we are very confident of our double-digit IRRs. That's kind of the criteria we'll use going forward as well.
There is no magic number we're chasing on homes passed, 'cause I could kind of put fiber on a street and claim multiple homes passed. We're looking for places where we can create true equity value, and that'll drive do we have appetite for cases which create true equity value and which tick the box for us, in terms of actually being an opportunity that is monetarily sound? Yes. Are we gonna chase a homes passed number? Absolutely not.
Thank you.
Okay. Thanks.
Operator, next question, please.
The next question comes from Sean Diffley with Morgan Stanley. Please go ahead. Sean, your line is open. You may ask your question.
Let's move on to the next one.
The next question comes from John Hodulik with UBS. Please go ahead.
Great. Thank you. Srini, could you comment on the competition you're seeing in the sort of postpaid market? I think both of your competitors have talked about sort of less handset subsidies going forward, and I think Brad even pointed to what they saw as a sort of less competitive market as they look out. Just any thoughts on that side. On the broadband, you know, the greater than 500,000 was a great number, and sounds like you got some real strength in fixed wireless. How does the runway look there? Do you know, do you expect similar growth this year as we saw last year? You know, any issues sort of constraining the network in terms of your ability to grow that business? Thanks.
Right. Thanks for that question, John. First on competition and the broader way we think about competing in this market. I think sometimes we tend to over-rotate on promotions and specific subsidies and, you know, how all of that's playing out. In the end, the direction of flow gets driven by differentiation. This is where our unique position of kind of best network, best value, best experience, and therefore no trade-offs for the customer really drives traffic in our direction. That's what drove, you know, not just the 6% growth in accounts year-over-year, but also the near 4% growth in ARPA. That's the fundamental way we think of competing. Now, all of that happened in a quarter where I'd say January was particularly competitive and particularly heavy in one-dimensional competition based on subsidies.
I think February and March and going into April, we've seen some cooling down of that environment. Through that quarter, we focused very much on what differentiates us, and that differentiator is a much broader set of things than purely subsidy. The way we think of it, and you saw a lot of our advertising, it was about savings you make every day rather than savings you simply make at the point you get a phone. It was about our network. It was about that more rounded, broad proposition. Then we decide how hard and heavy we go based on CLVs, right? That ultimately is the test of, you know, how much volume we want in any quarter in the context of our overall guidance. That should give you some sense of the competitive dynamic.
Mike, I don't know if you wanted to add anything specifically on the subsidy section.
Yeah, no, I think you've got it exactly right, Srini. I mean, the way that we think about this is customers, we're providing customers the most important technology in their lives that they use every single day. How through both best network, best experience, and best value can we prove that to customers every single day? Not once every 1,000 days when they're replacing their phone. That's where you've really seen us focus and is having a great overall value message for our customers where they can save more with T-Mobile than anywhere else. In fact, $3,800 T-Mobile customers save relative to competitors over the last five years. They can get a suite of benefits that they only get because they're T-Mobile customers, and these are benefits that really matter. They're not throwaway benefits.
Free Netflix subscription, et cetera. you know, I think the results that you saw in Q4 as well as in Q1 really demonstrate that that's important to customers, and that's why they're choosing us at the rate that they are.
Right. Thanks, Mike. Your question on broadband, let me just touch on the big picture. André, it'd be great if you can talk about some of the stats we're seeing in terms of how many more users and usage. We're very confident on the runway on fixed wireless access. Just to give you a sense of this, right? We said we would get to 50 million customers by 2030 a couple of months ago. How do we get to that 15 million? We basically divide the country to almost 36 million hex bins, order of magnitude, and we look at a hex bin level. We forecast the level of wireless traffic, and what is left is really fallow capacity.
We subject that fallow capacity to saying, "Yes, we've got that fallow capacity, but let's put a reasonable market share on how much we can get to in Fixed Wireless Access." We commit to a number, and that calculation we did for 2030, remember, assumes we buy no further spectrum. It doesn't assume 6G. It doesn't assume any further spectral efficiency improvement. That's the basis on which we got to the 15 million. We're tracking strong to that, and this quarter was another demonstration of it. We feel very good about it. André.
As Srini said, I think, one, we're very confident about the 2030 number. I think one of the reasons that makes us very comfortable is what we're seeing today in reality. Not just the outstanding commercial performance we've had for many quarters in a row, but also the fact that the all the leading indicators in terms of capacity and customer satisfaction continue to go up. We continue to increase our NPS. The average speeds our customers have on our product continue to go up quarter-over-quarter. The new routers we just launched, as we mentioned in February, have even higher speed than the existing routers. All of this we've done while increasing 80% the number of customers we have on the network in three years. As Srini said, we plan very carefully.
We have a very detailed plan for the next four to five years in terms of the capacity of the business and beyond that timeframe to make sure that this is completely sustainable long, long term. We're seeing it come through every day, every quarter for our customers. Very, very confident on the runway we have.
Thanks, André.
Thank you.
Thanks, John. All right, operator, let's go with the next one.
The next question comes from Michael Rollins with Citi. Please go ahead.
Thanks, good afternoon. Two topics, please. The first one is I was curious if you can unpack the contributors to the ARPA growth of about 4% year-over-year in terms of price actions, up tiering, lines per account, the broadband update. Just some color on what you're seeing there. Second, I was just curious if you can share what was happening with the post-paid account churn on a year-over-year basis. Given the comments of what you were just describing competitively, in the answer to an earlier question, is that something that actually started to get better maybe through the quarter and into the second quarter? Thanks.
Great. Thanks, Mike. Let me pick up the postpaid account churn piece, and I'll hand off to Peter for the ARPA piece. Postpaid account churn is doing exactly what we expected. When you look at the underlying postpaid phone churn, that was pretty stable. It was up about three bips. There's two things that are worth explaining given this is the first time we're reporting this metric. One, why is account churn higher than line churn? Two, why has account churn gone up more than line churn? The simple answer is basically math. There's two groups of customers who churn more than the average. One is new customers, and the second is broadband-only customers. The reality is the weighting of these customers in accounts is higher than the weighting in lines.
That's obvious when you look at broadband-alone customers. Also with newer customers, we just haven't had enough time to grow that relationship. The lines per account with newer customers tends to be less. The two groups that churn quicker than the average, have a higher weighting in accounts than they do in lines. That's why account churn is higher than line churn. Why is it increased more than line churn? Again, it's pure math. It's simply that our fastest-growing business by a long distance is broadband, which structurally, and we've talked about this before, has higher churn than wireless. It's really math that explains the postpaid account churn. Line churn looks great. We're really happy with where we are. Account churn's doing exactly what we thought it would do. Peter, ARPA
Yeah. Probably just to add to that, I think, one of your questions, Mike, was did it get better in March? Well, I think you've heard some of our competitors kind of cherry-pick the, "Well, March is better than December." Well, that's every single year.
Yeah.
Yes, of course, we saw churn improvement in March relative to December.
The last week was even better.
Yeah. 2:34 A.M. on Tuesday was even better. In terms of ARPA growth, you know, it was all the factors, and that's the beauty of this model. Certainly, if you recall back, last year, we did a round of rate plan optimizations that impacted particularly Q2 of last year. You see a little bit of year-over-year impact on the comparatives in Q1 of this year from that. It's also continually deepening the relationship, so an increase in lines per account, and that's across all product categories. The continued success that we're having with rate plan self-selection up the tiers continues to be at over 60% of new account lines are on our premium tier rate plans, value-add service attached.
It's really every element of the equation that we've been talking about before that's driving the ARPA increase. Again, Q2 will be a little bit different because Q1 didn't have the impact of the rate plan optimizations. Continually, for the full year, we're seeing strength of 2.5%-3% growth. Remember, that includes the anticipated dilutive impacts of UScellular and the acquisitions of Metronet and Lumos. The underlying organic growth of ARPA is even stronger than that 2.5%-3%.
Thanks, Mike.
Thanks.
All right, we're gonna try Sean Diffley again, in the queue. Sean, are you on this time?
Can you guys hear me?
Hey.
Yeah.
Yes.
You're on, Sean.
Hello. Hi, sorry for the delay. Thank you very much. I was hoping you could further elaborate on the inference at the Edge opportunity which you referenced. I think you said you signed a Figure AI deal, maybe just flesh out why T-Mobile's better positioned than peers to capture this. Is it your network architecture, AI RAN, your spectrum position? How should we think about the business model? Is this something where you'd have to buy GPUs? How big could this revenue opportunity be?
Yeah. Let me deal with the second part of the question, and then I'll hand over to Dr. John Saw. We might be here for a while.
Settle in.
Here's the vision of this, right? For me, you know, do we need to buy GPUs, et cetera. We've already started introducing large amounts of AI into our network. As we move closer towards AI RAN, in fact, even during things like Winter Storm Fern, you saw AI in our network being a big reason why things like antenna tilt being done automatically, things like optimizing our network, a self-healing network in many ways, is not kind of science fiction, it's reality. It's the way our network runs every day. As we do more and more AI in our network, and as we build for more and more AI in our network, we will be building compute into our network.
Just as in FWA, we have the concept of fallow capacity. As we build more AI into our network, we will generate a bunch of fallow compute, especially at the Edge. The fallow compute plus low latency creates an incredible opportunity because if you're thinking of scale automation, it's impossible to do that without low latency. Just think of robots running into each other, or even worse still, somebody trying to do remote heart surgery, without low latency. Low latency has to be essential to any form of robotics or automation that you do. The combination of low latency as well as fallow compute is what makes us excited about the opportunity. It's too early to size TAM. It depends on who you're listening to at any point in time, but all estimates of this market are very large.
John, you wanna talk about architecture and how we're different?
Sure, Sean. By the way, we are highly optimistic with the prospects for physical AI just because I think when intelligence moves into the real world, right? You're going to start seeing a shift from generative AI to physical AI. When objects move that has built-in intelligence, we believe that we have a big role to play. We are more than prepared to take this on, and we saw this coming a while back. The big advantage we have is our 5G Advanced network that we have built, and we are the only ones that have rolled out 5G Advanced nationwide. With that, we have a bunch of innovations that we have developed with 5G Advanced to increase spectral efficiencies and capacity, like, especially for the uplink, which is really needed for physical AI.
Like, things like uplink transmit switching, a higher transmit power, and uplink MIMO. Right? This is why, you know, the latest iPhones and the latest Samsung phones actually perform best on our network. Now, we didn't build a 5G Advanced network just for faster phones. We actually built it for physical AI and with an eye to the future, right? Now that we have a 5G Advanced network, you know, we can take on the extra capabilities that is needed to support edge inferencing for physical AI better than anybody else, and we believe that we have a multi-year advantage over the competition for this.
Thanks, John.
Thanks very much.
Thanks, John. Operator, let's go to the next question in the queue, and then we'll probably flip over to social.
The next question comes from Kannan Venkateshwar with Barclays. Please go ahead.
Thank you. Making the broadband business, when we think about the model you guys seem to be adopting, it's obviously a capital-efficient model of joint ventures combined with fixed wireless. The trade-off, I guess, is there's also, you know, some embedded inefficiencies of managing all these JVs and, you know, it's not clear what the economics are, if it's symmetrical, but would be great to get some sense of that as well. The bigger question is? Is there a path here where maybe you look at more scaled deals instead of trying to scale this, you know, in bits and pieces across multiple JVs? Thank you.
Yeah, let me pick that up. André, you can add on to it.
Mm-hmm.
I think it's important to understand scale in the context of fiber. Scale in the context of fiber comes from two things: a national brand and local scale. Scale and fiber is about local zoning, local permitting, local expertise in terms of digging trenches. The fact that you have it in one geography means nothing for the next geography you go into, 'cause quite often zoning and permitting are completely different things. The important thing for us is local scale. We're not chasing a random number of X million spread all over. We're very focused on where we are, creating that local scale so that we're meaningful in that community so that we can drive the right economics. To your point on scale deals, I think there's kind of two or three different cuts to it, right?
Are we interested in a scale deal purely for homes passed on fiber? No. Are we interested in mixed ILEC and different deals? No. We want to be first to fiber, and there would be exceptions where we'd look at it where some part of the footprint potentially has some non-first to fiber. On the whole, we want to focus on first to fiber and driving the economics out of that. That's, that's really the coherent strategy that we're executing. FWA, of course, is a national product. André, do you wanna add anything to that in terms of-
Yes, I think to just to underpin a couple of things you said, Srini. One, as we said before, we look at all of these partnerships, all of these JVs, from a creation of shareholder value perspective. That also includes making sure we have partners that are experts in deploying fiber, experts in managing this deployment business, but also have strong, as Srini said, local footprints and the ability to build in an efficient manner in each of these geographies. We're not looking at a master plan on having fiber everywhere. We're looking at geographically with each of the partners, where does it make sense to build, where we can create value out of these builds. The second thing, as Srini said, which is very important for us, is also partners that bring the right technology.
When we looked at each of these assets, it's very important for us that these are pure play fiber assets. We've done it with the first two deals with Lumos and Metronet, and we've done it now with these two JVs that we set up. On your other question on just addressing it on inefficiencies, the way we've built this is to make sure that we can take the advantages of scale where that scale is meaningful, and that scale is meaningful in distribution, that scale is meaningful on brand. That's why T-Mobile has taken over all of the retail consumer operations for these assets. That scale is also important in terms of, for example, the way we look at internal processes and IT.
The way we've integrated the JVs is we have a common IT platform that runs across all of the JVs that allows us, from the perspective of our customers, our frontline, and our processes, that these JVs all look like one single operation from our perspective and from our customers' perspective. We take scale where scale matters. Where it's more important to have local knowledge and local scale, we will take that. Thank you.
Kannan, it just struck me that your reference to large deals potentially was you asking the question I get asked quite often, which is the cable story. I think I've said this at least a couple of times before. We're not gonna go do scale for scale's sake. Specifically, cable is not something we're interested in. We see our strength as attacking incumbents rather than becoming an incumbent. We see a huge opportunity to attack incumbents across fiber and FWA. That'll be our key play.
Thank you, Kannan.
Thank you both.
We're gonna go over to X from Walt Piecyk. T-Mobile is packaging Starlink as a backup for businesses using 5G internet, branding it SuperBroadband. Good sign for T-Mobile's SpaceX relationship. MVNO next?
Thanks, Walt. Let me deal with some of that, and then hand off to André on some of the pieces on SuperBroadband. First, I think it's, I know everyone around this call gets it, but this is something that gets confused quite often, which is SpaceX, Starlink. Are we talking broadband? Are we talking direct-to-cell? We see them as two completely different businesses. We see the broadband business as actually a substitution to broadband, especially in the rural areas. We see direct-to-cell very much as a complementary product. And I think, if you listen carefully to some of the things SpaceX talked about at MWC as well, they were very clear in positioning it as a complementary product. Let me deal with the MVNO question, and then I can pass on to André on SuperBroadband.
First on direct-to-cell as a whole, look, our partnership with SpaceX is very strong. We've worked closely with them to really invent an entire category, and that's been putting an end to dead zones. We're pleased with that. Most of the usage we're seeing is in national parks. If anything, courtesy of the great network that Dr. Saw has built, we're seeing a lot less usage than we were originally thinking. It's a great complementary product. As you look at the future, we're seeing multiple other space providers show up. The way this will evolve, we think, is as a complementary product, it will become more and more of a standard feature of a whole set of offerings, so in some sense, less differentiated.
We're good with that at the Un-carrier, 'cause this is our history. We go out there, innovate, create a breakthrough, solve a customer problem, and then the others follow. While they're following, we're on to our next big thing. That's how we see DTC as a whole. On MVNOs, we've got a very clear philosophy or approach to MVNOs. MVNOs make sense for us when it's a TAM expansion. A TAM expansion happens because it's a new customer base that we couldn't target earlier. It's a new channel. I mean, an example of this is what we did with cable, focused on SMB. It's not obvious to me how an MVNO with SpaceX or any other LEO operator fulfills those conditions. André, SuperBroadband?
Thanks, Srini. On SuperBroadband, as Srini said, one just a grounding element. I know, as Srini said, that most people on the or all of the people on the call understand this, but just as a grounding element, this is a broadband product, so it's not a direct-to-cell product, and it's B2B only. We see. I'll explain a little bit why we see that this is an opportunity in B2B, but we don't see any translation of this into the consumer space. First, two things. One, this product is only possible because it's anchored on our 5G FWA product and the best network in America, and that's the core anchor of the product.
Second thing is what we're bringing to the market today, and we announced this morning, is anchored on an innovation by T-Mobile, which is our ability to, within one single device, and within one single network policy, to be able to aggregate and coordinate between 5G FWA for businesses and a second connection, which in this case it's satellite. That allows customers to solve three problems that businesses feel today. Number one is reliability and redundancy, which this product has incorporated by default. Second thing is coverage. Obviously, the reason why we're using satellite and Starlink is that allows us to provide this service nationwide in every single zip code in America, which is a challenge we see some of our customers facing.
Third is that it's very simple from a customer perspective because this means that to cover all your locations with primary and redundancy, you only need one contract, one provider, and one management platform. So we're very excited about this. If you remember when we talked in February, I said that Business Internet was one of the areas where we were looking into, where we thought and believed there was opportunity, and that we were gonna announce something in a couple of months, and we did so today. Thank you.
Thanks, André.
Thanks, André. Operator, let's go back to the queue.
The next question from the phone comes from Michael Ng with Goldman Sachs. Please go ahead.
Hey, good afternoon. Thank you for the question. Just two if I could. First, just on cost synergies, you know, how are you progressing against the $3 billion target exiting 2027? You know, how much have you kind of realized to date in 2026 and, you know, where have the key sources of those cost savings come from? Just as a housekeeping item on the two JVs, anything you could share as it relates to how much you're contributing to the JVs or how much they should contribute to EBITDA on a run rate basis once it closes? Thank you.
Great. Peter, you wanna-
Sure. Yeah, happy to take it. Let me start with the JVs. You know, much like we did with the last ones, from an investment perspective, we laid out in the press release that it's about $2.7 billion of investment across the two JVs when they close. At the time that they close, we'll certainly give you a more wholesome update as appropriate then around, well, what does it mean from a subscriber perspective, increase in our target fiber households, past figures, and all of those things. It's a little early because they haven't closed, so, please hold on that. In terms of the cost synergies, I'm glad you asked just two months after we laid it out for you on, you know, how's the progress going and what are you doing out there?
Frankly, it's going really well. Remember, what we laid out at Capital Markets Day is the source of synergies are across a number of fronts, inclusive of customer care, retail, but you also have back-office efficiencies from AI and trans formation, and we're seeing great progress on that regard. I would say, you know, the $2.7 billion that we laid out for you, exiting 2027 certainly is on track. I would say most of that will come towards the last part of 2026 and then fully into 2027 and beyond. By the way, there's a lot more runway and opportunity than $2.7 billion. It's just that's what we see our way to phasing through to 2027, leaving more runway into 2028.
Probably not a lot of metrics I'll give you in the intervening two months that have created a lot of updates. We are seeing great progress on many of them. One, for example, is just the use of the chatbot, an AI-powered chatbot that is actually capturing a lot of customer questions and addressing them in a great, you know, Un-carrier fashion that you'd expect, and actually containing about 60% of those already. Just another proof point on the way as we're going.
Okay. Great. Thanks, Peter.
Thanks, Mike. All right, operator, next question, please.
The next question comes from Peter Supino with Wolfe Research. Please go ahead.
Hello. A question on the cost of getting new customers. Just running some simple math in your income statement, the cost of equipment sales, versus equipment revenue produced a greater loss than a year ago by a few hundred million dollars. If I look at sort of a rolling four-quarter average of that number for the last couple of years, it's gradually climbing. I'm wondering what the underlying trend in the business is that's driving u p that equipment loss. If it's positive ARPA or ARPA growth, I wonder if we should expect that actually to continue. Thank you.
There's a number of things there. If you just focus on that one line item, I'll step back and kind of give you a view of the business. That is a few things. One, you just have a larger base. You'll notice that our upgrade rate was similar, and of course, our acquisitions were even higher as we see more share of switching and flow to T-Mobile. In a world where you do have device-centric promotionality, that is driving switching as well as upgrades on a smart, you know, value accretive CLV basis. One, you have a larger base, you know, kind of doing the same upgrades. You're capturing more acquisition, naturally you're just gonna have a higher dollar amount there that's associated with that.
To your point though, there is an element of we are able. Remember, we very smartly tend to design our most premium device promotions to be associated with our most-
Mm-hmm
... device plans. Customers see that as a great trade-off inclusive of all the other value that is incorporated in those premium rate plans. You do see ARPA increases as a result of that. In fact, we mentioned that we continue to see over 60% of lines on new accounts taking our premium plans. You really have to step back and say, "Okay, not just that one line item," which I think this same dynamic will continue to play out on that one line item. What is it doing to totality of the business, and how is that doing? I know, Peter, you've looked at this more deeply.
You know, I don't think Q1 could have been a better demonstration of the things we've been talking about for a long time now, which is if you invest in what is your product. I've heard others in the industry say you don't need to invest in your network. It's not important. I just, you know, I mean, kudos to them if that's what they believe. It's our product. It's what we sell to customers. The differentiation that we're starting to see with consumer sentiment now following what the actual network progress is, the value that we embed in our plans, as well as the experiences mean that it's not just devices that make customers come here. You see us be very thoughtful around the promotions around devices that we do, inclusive of linking them to our top-tier rate plans in most instances.
You see the flow of customers coming to us, because it's not the devices. It's these three other elements. Not only did you see that in top line KPIs-
Mm-hmm
you know, in terms of service revenue of 11%, you know, four times the next nearest competitor, core EBITDA of 12%, the all-important free cash flow generation. If you double-click down like you do so often into the next level of KPIs, you see a tremendously stark difference developing in Q1, and it's one of those that is as a result of all this investment in differentiation that we've done. I mean, if you take a look at what we delivered, 217,000 postpaid account net additions up year-over-year, and ARPA growth of 3.9%. That's what delivers the top line service revenue that's so differentiated. If you look at Verizon, for example, they lost 127,000 postpaid net accounts, and their ARPA was almost down 2% year-over-year. If you
I know they didn't do this for you, but if you somehow back out what you believe the Frontier service revenue contribution was from M&A, their business, the core business ex Frontier actually declined in service revenue. I mean, that's fascinatingly stark to show you, by the way, why accounts and ARPA is such an important metric to focus on in terms of value creation. Similarly, when you look at AT&T, they just delivered the highest, yet again, the highest year-over-year postpaid phone churn increase in the industry, proving that, you know, all the convergence talk is just that. It's talk. Also more importantly, they had declines in postpaid phone ARPU sequentially and year-over-year.
If you look at what they just did with contract assets in Q1, where that was a $300 million increase in terms of pulling costs off the P&L and putting them on the balance sheet. If you adjust that, for that, EBITDA was down year-over-year there. It just shows you if you step one level down, you see the formula here that's way more than a device promotionality formula. It is that best network, best value, best experience, means customers are choosing to change their whole relationship coming to T-Mobile, deepening that relationship vis-à-vis ARPA, and our ability then, because of the efficient way that we run, to translate that not only into core EBITDA leadership growth but also that all-important free cash flow growth.
I think Q1 started showing you a lot more of what we've promised with this differentiation would come, and that is it's starkly different in terms of financial performance as well. Sorry letting me go off there for a little while because it was just not equipment revenue and COGS. You really have to step back and see the broad picture of value creation here. Appreciate you letting me go on, Peter.
Thanks, all.
Thanks, operator. Let's move on to our next question, please.
The next question comes from Sebastiano Petti with JP Morgan. Please go ahead.
Hi. Thanks for taking the question. This is Peter and Srini, I guess for either of you. Could you see the increase in the capital allocation, for the year of $3.6 billion, $18.2 billion? You had the accelerated share repurchase in the first quarter that you announced. I guess help us think, you know, shares have come in here a little bit. How are you thinking about, you know, perhaps the appetite for additional share repurchases? Or an accelerated buyback program here. Related to the postpaid phone account, or postpaid account metric, great to see the upgrade.
Maybe help us think about where you are in the process of integration on the UScellular base and whether that perhaps, you know, led to maybe some of that churn increase that you talked about earlier on, the math, Srini. Where are you in that migration or integration of that base, and when should we anticipate churn perhaps, you know, converges with the legacy T-Mobile base? Thank you.
Peter, maybe you pick up the first bit, and Jon, do another quick update on U.S. Yeah.
Absolutely. On shareholder returns, you know, you just saw us execute in Q1 an acceleration and delivered $4.9 billion in share buybacks for a significant cumulative amount of share buyback and dividends that have been returned to date under the program. You saw us more excitingly just recently announce that the board authorized us to increase up to the $3.6 billion. You know, the way we're gonna approach it is the way we've always approached this, which is I'm not gonna talk about the daily trading dynamics and what we're thinking about and all of that for obvious reasons, but really importantly, it's we're focused on where do we see this company and its discount relative to intrinsic value.
Of course, we'll follow our capital allocation philosophy, investing in the core business, investing in value-accretive M&A, and then its shareholder returns consisting of this very balanced dividend and share buyback approach. That's how we're gonna approach it. You know, I'm not gonna be able to say more in terms of what we're thinking about and how and when and trading dynamics there. I think you saw us execute in Q1 very smartly and thoughtfully based on where we believe the intrinsic value of the company is, and the discount relative to that is gonna guide us in a lot of these instances.
Jon.
Yeah. I'll pick up on Sebastiano, I'll pick up on the USc ellular integration piece. As you guys know, we closed the USc ellular transaction on August first of last year. We stopped promoting USc ellular to new customers right before the holidays last year. We unified everything behind the T-Mobile brand. Even in USc ellular-branded stores, we're acquiring all new accounts under the T-Mobile brand. To the premise of your question, we're now just now beginning into the final, you know, kinda big throes of the customer migration. We've done a lot of the network-oriented migration. That's behind us. Now we're handling the customer migration. It's a relatively small base, you know, 4 million customers or so.
You know, we've got recent experience with this given that, you know, we integrated the Sprint base back in 2020 to 2023. A lot of learnings that we're applying to this overall customer migration effort in terms of communications and how we're mapping customers over, making sure they're getting all the benefits and understanding the full T-Mobile value proposition. All of that's going extremely well. I could not be more satisfied with how it's going in the UScellular marketplace. We're gonna be working through that over the spring, the summer, and the fall. I think we'll substantially have it wrapped up by this year in terms of the overall integration effort.
Of course, what that's leaving with is an incredibly bolstered network advantage in smaller markets and rural areas where we're continuing to do quite well. You heard Srini talk about, you know, where our share position is now in smaller markets, rural areas of 24%. The other, you know, big thing that we're doing in smaller markets and rural areas is continuing to drive that win share and postpaid switching. We're leading now 12 quarters in a row. When you think about, you know, the majority of 2023, 2024, 2025, and so far in 2026, continuing to lead that position, enormous runway ahead of us, and really fortified by the overall UScellular assets that we've incorporated into the T-Mobile network.
Yeah, just one thing, Sebastiano, just to clarify, the math I was laying out about account churn, UScellular is not a contributor to that. That behaved exactly like we expected it. This was more kind of weighted average math camp.
Great.
Appreciate that. Thank you so much.
All right, let's move on to our next question.
The next question comes from Brandon Nispel with KeyBanc Capital Markets. Please go ahead.
Hey, great. Interesting questions. I think the last couple of quarters, and it was sort of asked, but, you know, the last couple of quarters, you guys gave an organic ARPA growth, and I was hoping you guys could give that organic ARPA growth this quarter. Then just looking at the guide for service revenue in 2Q, it seems like the trend on ARPA growth needs to come down something with a 1%, and I was wondering if I got that right. Then it just seems like, again, looking at your guidance to hit $77 billion, we need to re-accelerate that. I want to just confirm that all of that was correct and get your thoughts there. Thanks.
I can go on with it. You're absolutely right on the ARPA piece, but remember, it's a remnant of the fact that we had rate plan optimizations that benefited Q2 of last year but not Q1 of last year. You had that being an impact over the year-over-year. Yes, when you think about Q2, I think you're absolutely right in terms of the numbers, probably near 2% on a year-over-year ARPA basis there, simply because of the dynamics of you have the rate plan optimizations, and you have, remember, the dilutive effect that was long anticipated around both UScellular as well as Metronet and Lumos, which were taken on and impact Q2 of this year, but not, of course, Q2 of last year.
We will see an acceleration for the second half of the year back. This is all just math dynamics here. In terms of ARPA and giving you organic versus inorganic, you know, we moved away from that primarily because I just don't have a great answer for you. It would all be subject to art. For example, as we brought on a UScellular customer and they expanded their relationship with us post-merger, what do I do there? Is that, you know, organic or inorganic? When we had fiber-only customers come on board and then expand their relationship and take on phone and other products, how do I allocate that away? You know, we're not in the business of creating art here. We wanna be very transparent with you.
I think at this point, because of how we've accelerated some of the UScellular elements of it and these nuances, we're really not giving organic or inorganic ARPA for that reason.
Right.
Thanks, Brandon.
Appreciate you taking the question.
Operator, let's do one last question, please.
The last question today comes from Timothy Horan with Oppenheimer. Please go ahead.
Thanks, guys. With basically the highest quality service out there on almost every metric, you're at a 20% price discount, give or take, versus your peers. I mean, can you get that pricing to parity over time? I mean, with the quality service, it might not even impact subscriber growth at all. How are you thinking about pricing longer term?
Yeah, pick that up.
Yeah.
The way we think about pricing power and pricing as a whole is ARPA growth, right? We don't tend to fixate on one number. We love the fact that our back book is actually at a lower price than our front book, or simply put, that our existing customers pay less than you. That's rare in an annuity business, it creates incredible dynamics, right? That means as you bring on customers, you're growing ARPU as well as volume. You're growing value as well as volume. When you have this position of having best network, best experience, and best value, that creates a position of no trade-offs. We are going to protect our position on best value.
We're not gonna look at it kind of, you know, with one variable, which is what is our ARPU versus other people's ARPU, or what is our ARPA versus others. We will from time to time do thoughtful moves on our pricing. They are typically more for more moves, where what we'll end up doing is give our customers more, 'cause a lot of the plans, for example, would be outdated. What we will end up doing is bringing them up to date with newer, better plans, and that may or may not come with a price change.
We don't see a world where, you know, we look at a 20% discount and go, "Let's go whack that pricing up and create a change," because we think getting titrating the volume and value, making sure that we stay with this position of best network, best value, best experience, is what creates long-term shareholder value, long-term customer loyalty. It's what creates the number I love the most, our NPS, 20% ahead of everyone else.
All right. Thanks, Tim, and thanks everybody for joining us today. We're looking forward to connecting with you again soon. In the meantime, if you have other questions, please contact the investor relations or media departments. Thank you.