Unfortunately.
All right. Good afternoon, everybody. It's my great pleasure to welcome back Neville Ray, President of Technology at T-Mobile. We're delighted to have you here, but we're also sad because you've announced your retirement, and we'll get into that. Thank you for making the trip here. Let me just read out my disclosures, and I'll let you do the same. For important disclosures, please see Morgan Stanley disclosure website at www.morganstanley.com\researchdisclosures. If you have any questions, reach out to your Morgan Stanley representative. Neville?
Before we jump in, just want to note that today we may make some forward-looking statements that involve risks and uncertainties, and encourage you to review the risk factors set forth in our SEC filings. In addition, we may discuss non-GAAP financial metrics. Reconciliations of these non-GAAP metrics to our GAAP financial metrics are on our investor relations website.
Great.
Get it out of the way.
Let's start off with your plans here. Why, why now? What was the decision for you to step back?
On retirement? Yeah. Well, it's a great time for the T-Mobile network. I mean, so many things have come together, over, you know, the last three years. I leave the network in a, you know, tremendous shape, the best shape it's been in. It's been a, you know, an incredible journey for me, Simon. I started my U.S. wireless career about 30 mi away from here with what was then Pacific Bell Wireless in Pleasanton. That was 1995. You know, after that I joined, about five years later, joined VoiceStream, became T-Mobile when DT acquired the business. Shortly after that, we purchased the network I'd been building in California. One way or another, I've been working on this network for... it's almost 30 years. It's been almost a lifetime journey.
We built this network site by site, I think, megahertz by megahertz, generation at a time, 2 to 3 to 4 to 5G. It's been an incredible journey. You know, the last three years as we've combined Sprint and T-Mobile together has been, you know, the most rewarding period in my career, and certainly the most formative change in, you know, both the T-Mobile and Sprint businesses, and we've executed against that plan remarkably well. We fought really hard for two years, you know, to get this deal approved with the various state and federal entities. We made a lot of commitments and promises, in terms of what we would deliver in the subsequent period, and here we are almost three years to the day, and we've delivered on pretty much everything we said we'd go do.
For me, it's kind of, that's a great way to wrap up, you know, almost a lifetime of a career building this network. Not sure what comes next. Nothing for a little while. That's the main thing for me. I need to relax and decompress from, you know, the years of building out this network at a phenomenal pace. I think I leave the place in a way better condition than when I started, which is always what you want to do in a, in a job, in a career. The T-Mobile network is something that we can be very proud of, as a company and I think, you know, across the U.S.
I think we have today the leading global 5G network in the U.S., and you could argue one of, if not the leading 5G networks in, you know, on Earth globally, so.
That's a great summary. When you see all the test results coming out and validating that, I think T-Mobile's probably best known for its Un-carrier, its marketing as being the secret source, but you're hitting on something that's really important. You took a small regional, you know, or sub-scale carrier and have built it into this best network. What is it in the DNA of the technology organization that allows you? You know, MetroPCS was a heavy lift.
Right.
This was a heavy lift, and, you know, you had COVID thrown at you just as you were starting that integration.
Yeah.
What were the things that led to the success? Really talk about Ulf and the team that you're leaving behind and what gives you confidence that they'll be able to continue your legacy?
Yeah. It's always been fun to be the scrappy underdog. And when you, when you come from, you know, those roots, you know, you push every day to, you know, against big competitors. And for us, I mean, it's super interesting just, you know, back to the deal quickly, Simon. You know, I wish we'd been able to get that deal done, you know, earlier. I think there was almost an inevitability about Sprint and T-Mobile coming together at some point in time. And that deal allowed us to. You know, that was a two-to-three deal. I mean, we had, you know, a very tough duopoly with two of the largest scale global telcos on Earth, you know, to fight against in the U.S. We had to be scrappy. We had to differentiate.
We had to stand for something different. The opportunity with the deal was to go from, you know, two sub-scale players who would have fought really, really tough battles to stay alive, to combine them to a very viable third player that could drive, you know, new competition in the U.S. That's been really the most exciting piece, to start leveling the playing field, to start leading and driving ahead on network performance, which has been so critical to the brands of Verizon and AT&T, and drive that Un-carrier value that we're famous for now coupled with a best network proposition, which this is gonna sound terribly arrogant, but I mean, I think we've changed the U.S. wireless industry for the foreseeable future.
That combination of Sprint and T-Mobile has leveled the playing field on many, many fronts and will allow us to bring that scrappy underdog mentality of delighting our customers with everything that we do to drive new levels of competition in the U.S. The team that, you know, has been with me for many years, you know, it's a very powerful team. Ulf Ewaldsson, who will succeed me in my role, is a multi-decade veteran of Ericsson. He knows this business incredibly well. He knows the T-Mobile business incredibly well. After, you know, most of his career, he's worked with us, but the last four years he's been in the company. Ulf executed on the plan of site modernization for us, which was unheard of, I think, in, you know, in the industry.
There may be an example in China where the pace of execution and delivery on a modernization program, was marginally higher. Ulf's done a tremendous job driving that combination and all of the benefits of the two networks coming together. Delighted with him stepping into the role. We're in very, very safe hands. We have a great team, too. you know, Abdul Saad, who's been with me since the California days, John Saw, who was the CTO from Sprint, John's on the team. We've got a lot of bench and a lot of strength, and the team is tightly glued together and, I mean, I'm gonna really enjoy watching what they do next with, you know, this powerful network that we have. There's a lot of opportunity ahead of the business.
Right. You were just in Barcelona last week at Mobile World Congress. What's the report from the show floor? I know you had some announcements yourself that you might wanna share with us.
Yeah. Yeah. I mean, it's interesting. I mean, MWC is kind of back, I suppose, Simon, right? There was a lot of people there, a lot of, you know, a lot of energy. I think for me, the two major takeaways, and I know we'll talk about this later, but Fixed Wireless Access is clearly it's arrived, and it's the most formative, declarative 5G use case. I think many folks are looking at us and, to a slightly lesser extent Verizon with how we've driven 5G network capability into new business. A lot of operators globally, I think, are trying to figure out what's that Fixed Wireless Access formula.
Depending on their competitive situations, et cetera, et cetera, I think they're all trying to figure out where can we go play and drive, you know, this 5G technology. There was a lot of that to see, which I was super enthused about. We can come back to it. That's now that's a global use case story. That's not just T-Mobile and Verizon driving stuff. A lot of discussion on O-RAN, and, you know, maturity in the O-RAN space. Saw a lot of that activity. My primary goal in going to MWC is to drive our vendors on, you know, our journey to continue to improve, you know, this network, and I see healthy signs. We're far from done on this 5G story. We have, you know, many dimensions of growth and opportunity to come.
We did make some announcements, not heavy announcements, but we talked about how we are advancing the network in terms of our ability to drive all of our traffic onto 5G. That was primarily around voice services in the 5G space. Another acronym for everybody to digest, VoNR, Voice over New Radio, easily forgettable, but 5G voice. That march continues for T-Mobile at real pace. We're the only player in the U.S. Dish is working on this, that's really driving that. It's kind of, you know, the question then is, why is that important? Why is it important? It's because it allows us to drive all of our traffic onto this 5G network.
Today, for voice services, you have to step down off of the 5G freeway and down to the LTE services. That's inefficient. It's not as reliable as you'd like it to be, and you want to keep all of that traffic, especially for voice video type services on that 5G lane.
You can refarm the LTE spectrum.
That's right. You can refarm LTE. I mean, there are kind of quick lateral, Simon. There's like three dimensions to this network story on 5G and overall performance and coverage. you know, the first one is about breadth. you know, we continue to advance. No updates for you or the team today on, you know, where we are with our footprint, but 325 million people covered with our 5G low band, 265 million covered with our mid-band footprint. They're great numbers, but you have to understand the competitive dynamic. That 325 million, you convert that to square miles, raw coverage, that's 5X the Verizon footprint.
Mm-hmm
In the U.S. today. That's kinda hard to, you know, really believe that we would have our footprint on 5G would be that big and scaled. So that's one. We've built massive breadth. You come to this depth of capability and performance and capacity, which is really spectrum-driven. I can update you today, we're at 150 MHz now of committed mid-band spectrum on 5G. That number will be 200 MHz by the end of the year. That's a very powerful spectrum story. What we're doing now is it's not just 2.5 GHz spectrum. We're now adding PCS spectrum.
Mm.
By the end of the year, we'll also be adding AWS spectrum. One of the announcements, get back to your question eventually, I promise-
Mm-hmm
Was about announcements we made at MWC, and one of the announcements was our ability to aggregate all the spectrum layers together. We've talked about this layer cake, low, mid, high band, but what you really want is a slice all the way through the cake.
Yeah.
You have the ultimate pipe, and we are way out in front. We announced four-carrier aggregation. Now we can combine TDD and FDD spectrum assets in low and mid-band, which quite honestly five, six years ago was a bit of a pipe dream. Now the technology's in place and we're driving, you know, industry adoption on those pieces. That's really the third dimension. If you think about breadth, depth, and that the next dimension to round out to make that cube is how advanced and feature-rich is the 5G, you know, capabilities that you're bringing with that spectrum. There's all those dimensions of leadership and capability for us that we continue to push on.
That cube is getting bigger and bigger and bigger, we outgun our competition on even the simple breadth, you know, competitive axis today, let alone the spectrum depth. The richness of the feature set that we bring is second to none. It, it's a great position to be in. Again, you know, I couldn't be prouder of the work the team has executed to get us to that point in a very short period of time.
Great. It looked like satellite and, was now that it's getting integrated into the 5G standard, you know, to phones was a big theme at the conference last week.
Yes.
You had your announcement with Starlink a few months ago. Any updates there on how you're feeling about the implementation on that?
Well, I'd come back. I think there's been a bunch of questions, Simon, about, you know, kind of still the why. I think, you know, there's a lot of focus for us on we want to be the best wireless connectivity provider, hands down. I mean, another stat for you, and this is fairly recent, but the breadth of our service area where we can connect our customers today, pre-SpaceX, is bigger than Verizon's. That was not the case for the vast majority of my 23-year career with this company. We were way behind. Now we have this bigger footprint, but we don't want to stop there. We want to make sure that that last 500,000 sq mi of the U.S.
That nobody covers, that when you need connectivity, that rural connectivity is available to you. We've talked about going into beta and testing, you know, in the latter part of this year, you know, with the SpaceX team. Super excited about what that can bring. I think that's the first, maybe the first down payment on what will be, you know, a relationship that will grow over time. Our intent is, and we've, you know, we're very loud about it, is to, you know, to really cover this massive country from end to end. That's the goal and mission of the team, and I think we have a highly efficient, capital-efficient, deployment-efficient model with partners like SpaceX, you know, to go make that happen.
Great. In the past, Mobile World Congress used to be a lot of product announcements and consumer products and so forth like CES. Anything that the vendors were talking about, wearables, stuff that they were prototyping with you, are we gonna see everybody's looking for that next breakthrough product, the glasses or whatever it is?
Yeah.
How do you feel about, you know, what's around the corner?
Well, I'm a huge fan of, you know, the kind of the AR eyewear wearable space.
For consumers or industrial?
For both, actually.
Okay.
I did not see anything specifically kind of new or groundbreaking in that space in MWC, but I think we're very aware of massive investments in that space. I think some of the breakthrough stuff is starting to happen in industrials where you can afford a much larger, you know, form factor of wearable. The real work that's ongoing is how do you into glasses like you're wearing today, how do you drive all of that technology, power, compute, all of those pieces into what should be a lightweight, you know, set of AR wearables? I think, you know, sometimes we're trying to push the horizon too hard. I think there were really compelling use cases for very lightweight AR on lightweight product.
You know, I don't have data to share with this team, but I think over the next couple of years, that will be a formative, you know, emerging use case. It's gonna happen. It will drive, you know, a new form factor of 5G consumption and utilization. It will open up new innovation, and it will open up new use case and application. I think that's almost certainly that is a guaranteed source of new innovation and output for this industry. You're going to need one or more of the big players to bring that to market and make sure it's really effective. I think once those announcements come, then you'll see traction in that space. So that's one area I'm very bullish on.
I see us as T-Mobile very well positioned to support that specific use case. You know, there are many things that come to bear with a standalone network like we have, such as the latency capabilities that you can bring, keeping all of that traffic on a 5G lane so you get all of those capabilities and benefits. That's a, that's a big leading advantage for us at this point in time. I'd love to see those products come to market, and I'd love to see them come to market on the T-Mobile network first. I think we're in a position where we can support that better than our major competitors here in the U.S.
You've talked about Fixed Wireless a couple of times. Let's come back to that. You laid out the business plans for this model four or five years ago in your pleadings with the DOJ and the FCC.
Right.
It's really played out very consistently with what you put out there. Put on your glasses again and project out the next few years 'cause there's a ton of pushback on the ability of fixed wireless to sustain the growth that we've seen with, ongoing increases in traffic and, congestion fears and so forth. You've obviously had these plans, and now you've really scaled it in the last 12 months. You've added millions of customers.
Yep.
Presumably, you're getting some pretty high share in certain locations. You know, how do you feel about the next five years from here?
Yeah. I mean, I, I love this space. I'm the network guy, so I think there's a lot of folks that worry about network capacity and what we're doing, but I think much of that is anchored in, you know, the old world of LTE. This 5G network and capability we're bringing is just... it's so different than anything we've ever done, Simon. You know, there isn't have been a generational change that has created this massive volume of capacity and capability way beyond what can be consumed on existing or even some of the future wireless devices, you know, that we just talked about.
We talked in all of those DOJ, FCC pleadings and presenting our case about how over, you know, a five-year period we could create a 14x or 14 times multiplier on the capacity of the T-Mobile network with the spectrum assets and all the capabilities that we would bring. That comes from two primary places. Megahertz to megahertz, you know, mid-band 5G compared to legacy mid-band LTE, that's a two to three x multiple on efficiency. I mean, that's super compelling. Same megahertz, 5G, 4G, up to three x. That's just where we are today with the technology. You add the volumes of spectrum that we're bringing and deploying on, you know, on these modernized radios today. The cumulative compounding effect is just enormous.
What we're seeing, I look at our numbers, we've said $7 million-$8 million, you know, households served by 2025. Very comfortable with that projection. We're $2.6 million in as of last quarterly results reported. You know, the fun piece is that we're seeing there's so much demand for this service because we're Un-carriering cable. I mean, we've come in with that same, you know, competitive playbook into an industry space, which is just hands down is not competitive. It's often monopolistic in its geography, its turf, its business practices. There are many customers who are super excited about a T-Mobile offering coming in, which is simple, clean. May not be... You know, it's not a fiber story. We're not saying we can deliver gig speeds. I don't know what people do with gig speeds.
I wish I got gig speeds from my cable guy. I don't. I think I pay for it, but I get something very different. For us, I mean, that $7 million-$8 million target is readily achievable. We're finding all sorts of places to go in and compete in this very non-monolithic U.S. marketplace. I think we have this belief that everybody's gonna have fiber or very high-end cable, and that is absolutely not the case. There's a very large population in the U.S. unserved or underserved, and we're only now starting to tap into that base, Simon, as we move into those more rural geographies with our mid-band footprint. I'm very comfortable with our capacity story. You know, we look forward to growing that base.
I want to find new ways outside of the fallow spectrum model we have today to grow that business. Maybe harnessing our millimeter wave assets, looking to go to new deployment models, which, you know, an investor audience and a business audience and our board will be super excited about taking forward. That is something we were pursuing, you know, on the various discussions we had in MWC.
And you-
Nothing to announce yet.
You keep talking to the FCC about more spectrum? Yeah. Continue to.
Yes. I mean, I think, you know, obviously from a spectrum perspective, I talked you through our mid-band assets, you know, that we're deploying today, so 2.5 PCS and AWS. We also did secure great volumes of spectrum in both C-band and the legacy DoD spectrum. We'll start deploying those. That'll be in our run rate capital. That's not like some big spike. That's in our run rate capital of $9 billion-$10 billion as we move into, you know, this year and on. That spectrum is sitting there as a great reserve for us. We'll deploy it as and where we need to, you know, for, you know, capacity reasons.
We have this raft of millimeter wave spectrum, which we deploy in hotspots and venues today, but I'd love to bring that to the market in another aggressive competitive play, and I think home broadband, we can make it happen. You need CPE, you need a receive antenna, which is external to the house to make that really work. There's more complexity in the solution. There's a truck roll and so on. We're getting very confident now we can make those economics work and that model be, you know, very accretive for the business, but more to come.
You talked about not offering a gig. I mean, do you think in five years we'll need a gig for the average, median household, or is 300?
Well, I think we're a long way from, I mean, goodness, I wish everybody could have, you know, gig internet. I wish we could all fly first class everywhere, right? You know, I think it's a great ambition to have. If you look at your average home today, you know, consumption levels are nowhere near a gig and certainly not a gig symmetrical. At some point in time, does technology advance to where that's the case? Maybe that's 10, 15, 20 years out, where that becomes, you know. It's hard to envisage, Simon, that becomes the minimum that you need.
Sure.
The thing is never, guys, never write off wireless and what it can do. You know, if anything, the last 10 years has taught us, especially recent 2, 3 years with what's happened with 5G, is never underestimate what this industry can do to drive much more efficient and capable use of spectrum. There will be more spectrum to come.
It's all fiber fed as well.
It is. I mean, ultimately, you know, for us, our deployment model on fixed wireless is, you know, we bring fiber to a neighborhood, and then on a cell site, and then we distribute it...
Yeah
...wirelessly. It's just a degree of how far do you take the fiber, ultimately.
Sure.
It's way more efficient to deploy those households on a wireless basis than to run fiber with a 30% success rate on homes passed. That's difficult economics still.
You, another thing you had projected at the time of the merger was the CapEx would come down. Guess as it's come down, you know, into the $9 billion-$10 billion range. I know it's not your budget going forward here, but how confident do you feel that this can be? Because I think the concern amongst investors is there's always some other G or there's always some other spectrum auction. Do you think we do get this digestion phase where you can kind of, you know, reap the benefits of what you've built here for a few years?
Yes. Multiple reasons why, Simon, so, very confident. I mean, part of my role in exiting is to make sure we've got a great plan going forward.
Right.
You know, that $9 billion-$10 billion run rate CapEx is a product of massive investment that we've made over the last three years. you know, we pulled capital forward from outer years into 2022 to take advantage of the momentum that we had in the marketplace, pandemic aside, right? I mean, we worked through that and supply chain issues, but we were deploying at a furious rate while our competition was still kind of pretty slow coming out of the blocks. We took full advantage of that, and we built this very scalable network. The vast majority of the electronics have been placed, and now the job is to load those electronics, more 2.5 PCS, AWS spectrum, to load that spectrum onto those electronics that have been deployed.
Yeah.
I can place that spectrum. I just have to repurpose it from LTE. I can do that at zero cost because the embedded capital's been deployed already. That doesn't mean... $9 billion-$10 billion is a great run rate CapEx for us because we have the footprint. I think your question has to go to really our competition to say, when you look at their announced incremental numbers, is it sufficient to get close to what T-Mobile has already deployed? I think that's the challenge that we've laid down.
Presumably, $9 billion-$10 billion covers small cell densification and additional sites over time. Yeah.
Yeah. I mean, I honestly don't think about densification, Simon, for several years in that... I mean, what we've done the last, you know, year, 18 months is de-densify. I mean, we, you know, we removed and decommissioned 30,000-plus sites out of this network.
Yeah.
We did keep and add, you know, 10,000+ Sprint sites to the T-Mobile network, and we have the most dense and largest scaled macro network in the U.S. We didn't decomm sites lightly. We were looking forward multiple years into what we think we need. We believe we have that footprint. That densification, especially when you look at the spectrum assets that we're using, low-band, mid-band. I never thought I'd say that, but 2.5 GHz, 1.9 GHz AWS in comparison to 3.x GHz.
Yeah.
Those physics are not compelling for our competition. Especially as they get into more rural environments, that's where the densification comes for them, but not for us. We will do more small cells, you know, where we need to, hotspots, but that's a very local story and not a big macro story.
Well-
I'm gonna give you a mic, I think.
Okay. That is good. Yeah. Thank you. Unfortunately, we're running out of time. One last one we get a lot of questions on is fiber. You do have a pilot in New York looking at fiber to the home, and you've talked about the benefits of 5G and Fixed Wireless a lot.
Yeah.
Help us understand why are you looking at FTTH and what's your current perspective?
Yeah
That as a tool in the toolbox?
Yeah. I think it's exactly that, Simon. It's another tool in the toolbox. You know, we continue to evaluate. We're trying to figure out, you know. The fun piece there is when you, when you put the T-Mobile brand and distribution and what we stand for on, you know, on a fiber opportunity, that's the piece we're really trialing and testing to understand, you know, how powerful could that be for our business. That said, I mean, it's really still mainly at the investigation phase. We're very comfortable with our wireless model. Fixed Wireless is a ton of growth for us, and I think it just behooves us to make sure that, you know, we explore the fiber alternatives and see where and when do they make sense. There will be places, I'm sure, where that model does make sense.
The predominant model for us is our wireless, these wonderful smartphones that we have, and now driving into a whole new business segment for us with Fixed Wireless.
Great. Well, great discussion, Neville. Thank you so much for joining us, and all the best for your future endeavors.
Thanks so much, Simon. Thank you.