Good afternoon. Welcome to the T-Mobile US First Quarter 2020 Earnings Call. After the opening remarks, we will open the floor for questions. I would now like to hand over the conference to Mr. Jud Henry, Senior Vice President and Head of Investor Relations for T-Mobile US. Please proceed.

Welcome to T-Mobile's First Quarter 2020 Earnings Call. With me today are Mike Sievert, our President and CEO; Braxton Carter, our CFO; and Neville Ray, our President Technology; as well as other members of the senior leadership team. Please note that any comments on this call related to Q1 2020 results are referencing standalone T-Mobile prior to our merger with Sprint Corporation and all forward-looking statements refer to the combined post-merger company. During this call, we will make forward-looking statements that include projections and statements about our future financial and operating results, our plans, the benefits we expect to receive from our recently completed merger with Sprint, our business and operations in light of COVID-19 and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of our management and are subject to significant risks and uncertainties outside of our control that could cause our actual results to differ materially, including the risk factors set forth in our quarterly report on Form 10-Q filed today. Reconciliations between GAAP and the non-GAAP results we discuss on this call can be found in the quarterly results section of the Investor Relations page of our website. Let me now turn it over to Mike.

Well, thanks a lot Jud, and thanks to everybody for joining in. Welcome to our first quarter earnings call coming to you live mostly from our living rooms and home offices, and maybe a few kitchens across the country. And let me just start by saying, what a crazy quarter this was, and I think a really proud moment in history for our team. Over the last couple of months, we've closed one of the largest telecom mergers in history, after fighting for it for over two years. And we started by making immediate progress on our integration work to unlock the value of this combination. We transitioned our CEO office, we established a new leadership team for the company, and we completely reinvented how we serve our customers, all during a global pandemic and all at an incredibly fast pace. And through it all we did it while posting some pretty fantastic business results, which is what we're here to talk with you about today. Okay. We've got a lot of ground to cover. I plan to share some early insights and thoughts about the New T-Mobile, touch on the impacts of COVID-19, cover some highlights from Q1, and of course brag about some of those early wins that Neville and his team are already delivering on our network, including some really fast work the team has done to roll out our 2.5 gigahertz spectrum from Sprint in Philadelphia and in New York onto the T-Mobile network. Then Braxton will unpack the financials and we'll share some guidance for Q2. Amazingly, it's been just five weeks since finally closing our merger with Sprint, and let me tell you, we're incredibly fired up about the opportunity ahead. While the process took way longer than anyone could have imagined, we took advantage of every moment during the approval process for this deal to plan for a rapid integration of these companies, and we've hit the ground running. As we dig into our combined businesses, we see an opportunity to move even faster and potentially to unlock even more synergies from this combination than originally planned, opportunities like the acceleration of our retail rationalization and network integration. And we'll likely see additional upside from our increased scale in areas like procurement and potentially faster improvements in the churn rate of Sprint subscribers than planned. There's been a lot of talk about the changing landscape that we all find ourselves in right now. And I can say this about it: The value proposition and unprecedented network that we'll deliver will position New T-Mobile incredibly well to serve even more customers, particularly as the economic environment continues to change. I've said it before, and I'll say it again today, customers are not going to have to choose between a better value or a better network. With the New T-Mobile, customers will finally get both. Before we dive into the results, I do want to highlight how our company has navigated the impacts of COVID-19 so far. The way our people and this team has responded to support customers has been nothing short of heroic. And I couldn't be prouder of each and every one of them. The crisis has highlighted how crucial connectivity has become to our daily lives. And as it's unfolded in front of us, we took immediate steps to ensure our customers would continue to stay connected while working hard to simultaneously protect the health and safety of our employees. We were one of the first to take bold steps to do our part to help mitigate the impacts of COVID-19 with wide-scale temporary store closures and transitioning employees to work remotely, including 14,000 U.S.-based care employees from T-Mobile and Sprint. We utilized our digital capabilities to enable things like virtual retail, and we introduced curbside and mobile fulfillment. Through all this transition, our frontline employees have stepped up big to support our customers and continue to deliver the industry-leading customer service that makes us different. And that has translated into record-high Net Promoter Score satisfaction scores. Right out of the gate, we knew that our network would see increases in demand and changes in usage patterns. So we took immediate action to increase capacity, including temporarily doubling our 600 megahertz capacity and expanding roaming for Sprint customers. Our network has performed phenomenally, delivering excellent reliability for our customers. In fact, according to OpenSignal, average LTE download speeds on our 600 megahertz spectrum actually increased significantly even during this crisis, after we layered on the additional 600-megahertz capacity. We're also a proud supporter of the FCC's Keep Americans Connected Pledge, and I really appreciate the work the Chairman, Pai, and the FCC have done to bring the entire communications industry together during this crisis. As a result of our commitment, we've waived late fees and maintained service for our consumer and small business customers impacted by COVID-19, regardless of their ability to pay. Additionally, in the early phases of the crisis, we chose to lift smartphone high-speed data caps, made additional smartphone mobile hotspot data available, and accelerated the launch of T-Mobile Connect to support our customers as they navigate the impacts of COVID-19. We've also donated millions of dollars through a number of initiatives to support our communities, from support for Feeding America to the Boys & Girls Clubs of America, local schools, and programs for our frontline health care workers. I'm really proud of what this team is doing to help across the country. While this pandemic is definitely not over, we'll continue to take the necessary steps to support our customers and do what's right for our employees and communities as things start to reopen. This will result in some continued near-term impacts to our business. Stores that have been closed temporarily obviously reduced our store traffic and subsequent retail volumes. And that impacts customer additions, service revenues, and equipment revenues in the very short-term. We also introduced some operational changes to help with business continuity, which has impacted our overall performance in the latter part of the first quarter and will likely continue in the second quarter. As the nation starts to emerge post-COVID-19, customers across the industry will likely be looking for better value in a tougher economic environment, and we'll continue to be there for our customers when they need us most. It's who we are and it's what our Un-carrier brand stands for. I expect that AT&T and Verizon customers will most certainly be looking to get out from under their high monthly bills in search of a better value. And it's likely there will also be an increase in churn from today's low levels as the carriers won't be able to keep themselves from squeezing customers who are already budget constrained. These factors will likely mean more switching across the industry as things change, and we will be there to help. We know from the past that T-Mobile does disproportionately well in an environment with a larger pool of switchers. We're a proven share taker, and I intend to keep it that way. We will be there for our customers with prepaid and postpaid products that are geared to their needs, particularly in a time of constrained budgets. And we expect to consolidate our marketing and new offers under the T-Mobile brand later this summer, just as this switching opportunity starts to come to life. Okay. Time for a few T-Mobile stand-alone highlights from Q1. Let's start with our main business driver, branded postpaid phones, where we once again led the industry in growth with 452,000 net customer additions in Q1. Not that I'm counting, but that's 25 quarters in a row of leading the industry, this time with about 70% of the combined industry growth, which is approximately double the sum total of the rest of the industry combined, including Big Cable. Total branded postpaid net additions were 777,000. And prepaid net losses were 128,000, yielding 649,000 total branded net adds for the quarter. One of the things I'm most proud of is our customer experience obsession at this company, which in part shows up in our branded postpaid phone churn numbers. We posted a record Q1 low of 0.86%, down 2 basis points versus last year and down 15 basis points versus last quarter. I'm also really proud of our team's ability to deliver our financial results while simultaneously taking care of our customers and employees during these difficult times. We've said it for years, investing in customers leads to customer growth, which leads to revenue growth, which if we run the company well leads to EBITDA and cash flow growth, which we invest right back into our customers and their network experience, which is what started the success cycle in the first place. Our financial results in Q1 show that this winning formula continues to benefit consumers and shareholders alike. Service revenues in Q1 hit an all-time high of $8.7 billion, up 5% year-over-year, more than twice the growth rate of the next best big provider. Adjusted EBITDA also hit an all-time record high of $3.7 billion, up 12% year-over-year despite the environment created by COVID-19. Free cash flow, excluding payments for merger-related costs, was $893 million, up 37% year-over-year. Now let's talk about the foundation of our New T-Mobile growth story, our network. Despite COVID-19, Neville and his team are hard at work expanding the network footprint and quality and continue making incredible progress. Our network continues to perform. And that's being amplified as we integrate Sprint's spectrum, putting us on our path to build the world's best 5G network. The whole process will take about three years to complete, but our team was able to take advantage of the extended approval cycle to get moving on a lot of the site leasing and permitting work ahead of time. Combining the spectrum holdings of T-Mobile and Sprint, the New T-Mobile controls 319 megahertz of combined low-band and mid-band spectrum nationwide, 319 megahertz. New T-Mobile's combined low and mid-band spectrum is nearly double that of AT&T and nearly triple that of Verizon. It's no wonder they spent the last two years fighting the merger behind the scenes. And while AT&T and Verizon are depending on millimeter wave spectrum for their 5G strategy. Well, we have that too with over 1,000 megahertz of millimeter wave spectrum more than AT&T. We're ready to leapfrog the carriers in network capability. And you know what? They know it. In fact, we've already started deploying our 2.5-gigahertz spectrum on the T-Mobile network and Philadelphia is already live with peak speeds of over 600 megabits per second in our tests. And just yesterday we went live in New York City as well. And there will be many more other cities we'll light up in 2020 and beyond. For Sprint customers, we're delivering an enhanced network experience by significantly expanding access to the T-Mobile network to improve coverage as well as 5G availability. More than 80% of the Sprint postpaid phone base has compatible handsets today, and we are seeing a big increase in weekly roaming on the T-Mobile network as a result. Finally, we remain hard at work on all the network projects you heard us talk about over the past year. Recall that we launched America's first nationwide 5G network on 600-megahertz spectrum in early December, covering more than 200 million people right out of the gate. We have 215 million people covered with 5G today, recently lighting up 5G in Detroit, St. Louis, Columbus, Ohio, and just this week we turned up the Bay Area of California as well. So before I hand it over to Braxton, let me just say this. In the face of unprecedented adversity, we delivered another record-setting quarter, while simultaneously driving changes across our business to deliver for our customers and close one of the largest telecom mergers in history. We rose to the occasion and hit the ground running in our first five weeks as the New T-Mobile. We feel more confident than ever about our ability to unlock the massive synergy potential of this transaction, and we already see opportunities for upside to our plans. Our passionate, fired-up workforce is focused on one singular mission: being the absolute best at serving customers. The success of this business depends on it, and we're moving rapidly to drive innovation in this industry and supercharge competition. As we start to emerge from COVID-19 and look ahead, T-Mobile is a brand that's the best positioned to stand up for customers and deliver a great value combined with an amazing network right when they need it most. And with that, it's now time to ask our CFO, Braxton Carter, to take us through the financials and guidance. Braxton, take it away.

Hey, thanks Mike. And yes, so I am proudly wearing my magenta hat out here in Washington wine country. The opportunity that lies ahead for New T-Mobile is significant. And as we look to unlock the massive synergy potential, I couldn't be more excited for what the team will deliver in the future. Let me get into some of the financial details of the quarter to best explain why. Record Q1 net income amounted to $951 million in Q1, up 5% year-over-year. And diluted earnings per share was $1.10, up 4%. Note that net income was fully burdened by the Sprint merger-related costs of $117 million as well as COVID-19-related costs of $86 million in the first quarter. Similarly, EPS was impacted by $0.14 related to the Sprint merger and $0.10 related to COVID-19. These costs $250 million combined before taxes are excluded from adjusted EBITDA. Adjusted EBITDA amounted to a record $3.7 billion, up 12% year-over-year. The increase was primarily due to higher service revenues and lower equipment sales, partially offset by higher cost of services and SG&A expenses. Cost of services as a percentage of service revenues increased by 10 basis points year-over-year in Q1, as we continued the rapid rollout of the 600-megahertz spectrum and investments to transform our 4G LTE network to 5G. SG&A as a percentage of service revenues increased by 70 basis points year-over-year in Q1 as we invested in our people and customers during this difficult time. Excluding the Sprint merger-related costs of $143 million and $117 million of supplemental employee payroll third-party commission and cleaning-related COVID-19 costs, SG&A would have been down 90 basis points year-over-year. Free cash flow increased by 18% year-over-year to $732 million in Q1, as net cash provided by operating activities increased 16% and cash CapEx decreased 9%. Free cash flow in Q1 included $161 million in payments for merger-related costs. Excluding these merger-related payments, free cash flow would have been $893 million. Branded postpaid phone ARPU amounted to $45.80 in Q1, which was generally stable sequentially and year-over-year as an increase in our promotional activities including the ongoing growth in our Netflix offering, a reduction in regulatory program revenues from the continued adoption of tax inclusive plans, and a reduction in certain nonrecurring charges were offset by the growing success of new customer segments and rate plans. We also reintroduced branded postpaid ARPA or average revenue per account this quarter, as we focus on growing total revenue per account, which is the real customer relationship. Branded postpaid ARPA was $129.47 in Q1 and was essentially flat year-over-year. In terms of customer quality, our results in the first quarter were impacted by the macroeconomic impacts of COVID-19. Total bad debt expense and losses from sale of receivables was $138 million or 1.24% of total revenues in the first quarter of 2020, compared to $108 million or 0.98% of total revenues in the first quarter of 2019. However, excluding the adoption of the new credit loss standard, which now recognizes lifetime expected credit losses upfront, bad debt would have been flat year-over-year in Q1. We are watching bad debt very closely given the current economic backdrop, which may put pressure on bad debt in the next few quarters, but we feel we are well prepared to manage through these economic conditions. One reason we feel well prepared is that subsequent to the end of the first quarter, we raised $23 billion in debt financing. I am super proud of what we achieved. When you think about it, we literally hit the market the day we closed the merger when the markets had basically been closed for weeks, and we were able to issue $19 billion in investment-grade notes. Even in that market, the confidence and excitement to invest in T-Mobile led to an order book of $74 billion. And despite it being our first issuance in the investment-grade market, our 10-year notes have recently been trading inside where AT&T notes are trading. In addition, our recent merger loan syndication with another strong showing from investors effectively reopened the leverage loan market, which had been quiet since the inception of the COVID crisis. Just a remarkable execution by our team. And that support from the market gives us confidence in our liquidity and our ability to go full speed ahead on the integration of Sprint and T-Mobile businesses. So let's get to guidance. Due to uncertainty around the ongoing impact of COVID-19, purchase price accounting, and accounting policy alignment work; we are providing guidance for the New T-Mobile for Q2 2020 at this time. We expect to provide full-year 2020 guidance on our Q2 earnings call when we share the combined quarterly results of New T-Mobile and hopefully have better visibility into the COVID-19 and economic conditions for the back half of the year. For Q2, we expect postpaid net customer additions between zero and 150,000. This reflects the ongoing impact of COVID-19, including retail store closures and lower gross adds, partially offset by lower churn. Adjusted EBITDA is expected to be in the range of $6.2 billion to $6.5 billion in Q2. Our adjusted EBITDA target includes leasing revenues of $1.3 billion to $1.4 billion. Cash purchases of the property and equipment, including capitalized interest of approximately $100 million, are expected to be between $2.3 billion and $2.5 billion for Q2 2020 and will ramp substantially as we get into the outer parts of the year. In Q2 2020, merger-related costs are expected to be $500 million to $600 million before taxes. These costs are excluded from adjusted EBITDA but will impact net income and cash flows. These amounts are before any incremental opportunities to accelerate synergy realization through a potential pull-forward of additional spending into Q2, such as severance-related restructuring, store rationalization, and network build expenses. COVID-19-related costs not included in adjusted EBITDA are expected to be between $450 million to $550 million before taxes. Net cash provided by operating activities includes payments for merger-related and COVID-19-related costs and including $2.3 billion in gross payments for the settlement of interest rate swaps is expected to be in the range of $0.7 billion to $1 billion. Free cash flow, including payments for merger-related and COVID-19-related costs but excluding $2.3 billion in gross payments for the settlement of interest rate swaps, is expected to be in the range of $1.3 billion to $1.5 billion. We will continue to monitor developments regarding COVID-19 and evaluate appropriate steps we need to take as a business to align with guidelines from state, local, and federal government agencies to do what is best for our employees and customers. We expect our business liquidity and financial condition, as well as operating results, to continue to be adversely impacted by the COVID-19 pandemic for the remainder of 2020 and potentially thereafter. The full impact of COVID-19 on our business is difficult to predict and is subject to uncertainty. Potential impacts may include lower net customer additions, equipment revenues, and cost of equipment sales; and higher bad debt expense; continued cost to protect and support our employees and customers, which will increase from the costs incurred during the first quarter of 2020; and potential disruptions to our supply chains. In addition, we are in the process of reevaluating our spending across various operating areas. We are taking actions to adjust our spending given the significant uncertainty around the magnitude and duration of any recessionary impacts arising from the COVID-19 pandemic. The uncertainties related to COVID-19 may also adversely impact the Q2 guidance we provided. Now 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.

Thank you. Our first question will come from Simon Flannery with Morgan Stanley.

Thank you for the update. Good evening. I appreciate all the insights. Mike, could you share where you currently stand with the integration after a few weeks of working with the Sprint team? Given the challenging circumstances, what positives have you observed so far? Are there any areas where you find things are taking longer than expected? And Neville, it's good to see the 5G rollout. Can you provide more details on what we can anticipate from the fixed wireless initiatives in 2020 and beyond? Thank you.

Well, sure. Yes Simon, I have to say that one of the things we're most excited about is, as I said in my remarks upfront, is that after five weeks as one team, if anything, we see more potential to go faster and to go bigger on synergy attainment and growth than we had been expecting. And there are a number of reasons for that. Among them the fact that we see opportunities to move faster on certain things like network. We had a long time to prepare for this merger. And we left a lot of track when it comes to permitting and leasing and we're moving fast. And as we start to knock this down, it does appear that there's going to be a pace to this that may be able to stay ahead of schedule relative to our now two-year-old plans that calculated up all these synergies. Retail rationalization might go faster than expected. We had always expected to get after marketing one brand pretty quickly, but getting the retail fleets rationalized due to systems issues and people issues, et cetera was something we always thought would take a little bit more time. We may be able to move faster, and that could accelerate synergies. Procurement looks like an area of possibility to exceed plan. On the customer side, the churn level of Sprint customers is one of the most financially sensitive things. And we certainly have hopes that we can see faster movement there as we tackle this network integration at a faster pace. Already we've lit up more roaming for Sprint customers than we had expected to be able to do, and we're starting to see how they respond to that. And you know what? They like it, which is great. So we're not in a position to guide on it or to give you anything concrete yet. I can just tell you that, five weeks in we're really optimistic. And you saw from our print today that standalone business is very strong. You saw our Sprint subscriber numbers a couple of days ago. Those were better than most people expected. So we also walked into this with some momentum. Now, as Braxton pointed out, COVID took a bite out of that for everybody. And there are temporary impacts on our business. But you know what? They're just that, temporary. And our view is that if anything, there's opportunity in the environment that we're going to see when social distancing lifts. As I said in my remarks, people are going to be looking for value. They're really going to be hungry to make sure they've got the right value. They're not going to drop this category. I mean, no way. This category is so important, but they might be asking if they've got the right carrier. And if switching comes and is elevated versus these low levels, we will be prepared to stand up and give customers what they're looking for. So we're feeling very optimistic. Even though it's the premise of your question, look, there's some aspects to it that have knocked everybody in this industry off their stride. Comparatively speaking, we feel very good. And over the mid and long-term, we perhaps feel even better than our deal model that we contemplated two years ago. Your second question, I think, was for Neville and I might follow up too about the network conditions and as it relates to broadband, right?

Sure.

Yes, I’ll take that. It's great to see Simon, and as you mentioned, the rollout of 2.5-gigahertz spectrum is crucial. This gives us a significant advantage in the mid-band 5G space. Mike highlighted that T-Mobile now has over 300 megahertz of sub-6 gigahertz spectrum, and my team is eager to move forward with this rollout. We stayed active during the deal, engaging in leasing and zoning activities. We were already building out 2.5 in Philadelphia and parts of New York before the deal was finalized, allowing us to activate some of this infrastructure immediately upon closing. As we mentioned, the 2.5 rollout in New York is going live this week. Regarding broadband and fixed services, that 2.5-gigahertz spectrum is essential. As we increase this rollout, it will enhance our capacity, providing strong 5G service not only in traditional mobility and wireless but also in broadband. While it will take time to roll out completely—months to a few years—I believe we'll start delivering that broadband service to our customers as we outlined in our planning. This is a significant factor in how we plan to shape the competitive landscape moving forward. While we may not see much progress this year, I am optimistic about making strides next year and beyond.

Simon, the cable companies are good companies. They're good people, but it's the least competitive market in the history of man. I mean, everybody knows that. And so to us, as you know, you know how we're wired. I mean, we're competitors. And as Neville says, we're itching to get in there, because we've got a value proposition that I think is going to resonate with millions of people to be able to bring 5G-based home Internet access to people that have never had a choice, never one single choice for many of them. And man, that's going to be fun. So we've got to get the network in condition. As Neville said, it's more next year and beyond than this year, but we're rearing to go, and we see a very big opportunity to change that landscape in that market forever. Great. Thanks a lot.

Hope another one is coming from the phone operator.

Thank you. Our next question comes from Brett Feldman with Goldman Sachs.

Thanks. I actually want to follow-up.

Hi, Brett.

Hey, guys. I want to follow-up something Mike you were just talking about, the ability to bring Sprint churn down maybe faster than you initially hoped. You alluded to one tactic, which was more rapidly making roaming onto the T-Mobile network, which has superior coverage available to them. But what else do you have to do? Is there a lot of outlets you need? Are there certain vulnerable customers who maybe aren't on the right rate plans and legacy Sprint churn on the phone side was twice legacy T-Mobile churn? I mean, what's the bogey here? Can you get it down to T-Mobile levels? What's realistic? And then just a quick one for Braxton. I don't know if you have it or not, but do you know what the pro forma cash position of the company was at closing, net of all the closing fees and so forth? Thanks.

Well, I'll take the first one. And yes, Brett. As you know, the number one driver of churn for any carrier and particularly for Sprint is network. And that's what drives people away more than anything. Network. And then the second one is value. And then you bump those two key drivers of churn up against the value proposition that we're building, we're building the best network at the best value. No one's ever been able to offer that before, the lowest prices and the best network. And those are why people churn, bar none. That's it. Those are the top two out of two. So I can't predict for you how fast that will dawn on Sprint customers, as we start to give them at their incredible rate plans, the best network in the country. But they're going to turn out, because of this merger to be some of the smartest shoppers this industry has, because we're not going to force them to change their rate plans. We're going to honor those rate plans. And yet we're going to serve them up the best network that this industry's ever seen. So we're starting to see some benefits of that already, and people like it. So that's great. But we've got a lot of work to do. To your point about rate plans, we don't think we have all that much tuning up to do. It turns out that the differences between Sprint ARPU and T-Mobile ARPU don't have much to do with the fact that Sprint's prices are higher. It has to do with artifacts like, T-Mobile has more lines per account, and therefore more added lines on average than Sprint does, and a different penetration of business, and different numbers of unlimited customers, other artifacts, but not really a dynamic that would suggest that Sprint's prices are higher. So I can't wait to get at it. As we talked about, we're going to start to unify this summer under one T-Mobile flagship brand with an integrated retail fleet and integrated brand that we're going to do everything we can to get that network experience tuned up for Sprint customers faster than they expect. And I think we're going to like what we see from all that.

Hey Brett, regarding the pro forma opening cash or the actual cash for New T-Mobile, we had $7.5 billion after settling all merger-related expenses on April 1. We also have a $4 billion undrawn credit facility in place for five years. This gives us a total liquidity of $11.5 billion. Interestingly, two to two and a half years ago, when we projected the opening balance sheet, we estimated $11 billion in liquidity, which included that $4 billion credit facility. This means we are actually $0.5 billion ahead of our projections. I appreciate your question. With our financing secured and the opening liquidity, we have a fully funded business plan to achieve everything necessary for our run rate synergies. You heard Mike express our enthusiasm about accelerating these synergies, which will also involve some upfront costs, but this will enable us to realize those benefits sooner. Particularly in light of COVID-19, we are intensely focused on speeding up these synergies to mitigate the impacts we are facing due to this unprecedented global crisis.

Thank you. So, let's go over to Twitter since this is a Twitter conference. And again you can send us questions #TMUS or @MikeSievert. Neville let's bring you into the conversation. Walt Piecyk has a question. Actually there's two questions you might address simultaneously. Walt says what percent of macro have 2.5 gigahertz in the city Neville. I assume he's talking about New York. And then Ronald @ronald_809, I love this one because again we launched last night. Okay. We launched last night in New York City the first example of our full-layer cake. Hey Neville when will the new T-Mobile layer cake expand to fully cover NYC like the Bronx and Queens and Staten Island didn't you leave out parts of Brooklyn? So, how about it Neville?

I wish I could say everything would happen this week, but yes to both questions. We're just getting started and are excited to make this progress. We are only five weeks into our combination with Sprint, and we're already deploying. We were determined to move quickly, and I think people were surprised at how fast we're deploying the 2.5-gig spectrum. We're making a strong start in major cities. For instance, if you consider the square miles of the area we launched in Philadelphia, we built and activated it within 30 days of the deal. That area is about two to two and a half times the entire footprint of Verizon's millimeter wave 5G across the country. They’ve been rolling out their 5G for around two years, but we’ve more than doubled the footprint in just one month. In terms of mid-band 5G versus millimeter wave, our coverage will be superior. We're moving quickly, especially in key Northeast markets. I want to acknowledge my team and the Ericsson team for their excellent work in making this happen. Looking ahead, we plan to launch and expand the 2.5-gigahertz spectrum across thousands of sites this year. We’re off to a great start, building on last year’s efforts, which we undertook at risk. The rollout of 2.5 is set to progress rapidly. We’ve managed to navigate COVID-related permitting delays while ensuring the health and safety of our teams. Our status as a critical service provider has been crucial. In April alone, we built over 1,000 sites, adding new spectrum. We plan to ramp up significantly as we move into May and beyond. There’s a lot of 2.5-gig coming, with New York, Philadelphia, and other Northeast markets as priorities, along with major metros across the U.S. We have many more developments in the pipeline, and we’ll keep everyone updated. New York just went live, and there were tests showing speeds of 600 to 700 megabits per second, even with a limited amount of deployed 2.5-gigahertz spectrum. Remember we secured around 150 megahertz through our merger with Sprint, so we have significant potential for performance improvements ahead. What we currently have in place is incredibly exciting, vital to our deal, and essential for enhancing consumer experience as we aggressively move forward this year.

And Neville, while you're on a roll, I ask this at some risk and peril because I know you're enthusiastic. But I responded to Brett's question a little bit by discussing the roaming situation and we're getting questions now on the site. Could you tell us more about what's the roaming experience like for Sprint customers, how much of it is happening? And roaming itself is kind of a funny turn because they're all our customers. But we're essentially using roaming technology while we operate two networks. Can you just very briefly touch on the day-to-day experience that Sprint customers are experiencing now that we've turned that up so extensively?

Yes, absolutely. Kudos to John Sore, Prasad, and the team for their work on momentum and integration. We launched nationwide LTE roaming across all our sites on April 1, which required significant effort beforehand. This means that Sprint postpaid customers, regardless of their location, now have access to the T-Mobile network when they are out of range of Sprint. We know that this network churn was a major factor in Sprint’s overall churn, and we are seeing a significant increase, with about 10 million unique Sprint customers utilizing the T-Mobile network weekly. This accounts for more than one-third of Sprint's postpaid phone subscriber base. Recently, we've also activated nationwide 5G access on our low band, and that coverage continues to expand, now reaching 250 million people. We've just launched in the Bay Area, and our 5G strategy's foundational layer is growing rapidly. The teams are doing an excellent job building out 600, and Sprint customers with 5G-capable phones can access this expanding footprint as well. We are very focused on ensuring that all of our Sprint customers benefit from the combined Sprint and T-Mobile networks.

Well, thanks everyone. That's all the time we have. Thanks for joining us today. Operator, let's take the next question from the phone queue.

Thank you. Our next question comes from Michael Rollins with Citi.

Hi, thanks. Good afternoon. Curious, if you could just provide some additional color as you're approaching the midpoint of the quarter just in terms of this environment. A little more of what's happening to sales activity and maybe the customer payment behavior. Some companies have disclosed the number of pledges their customers have taken. And you mentioned earlier a cost for COVID-19 that will be excluded from EBITDA. I think it was about $450 million to $550 million for 2Q. Could you just expand on what would get incorporated into those expenses? Thanks.

Braxton, let's begin with you on the details of what is included and how to consider the cost. Matt and I can then collaborate on the insights we have from the marketplace.

Yes, absolutely. So Mike with really busting down the COVID guidance you have about $350 million-ish of supplemental pay and paid time not worked. And we were paying hazard pay for some of the critical infrastructure that we had to put up. It's an amazing accomplishment of what happened in customer service. At the start of this crisis, everyone reported to a call center. Callie has now well over 90% of our customer service reps fully connected in the home and not working. But during that time period, we absolutely were paying hazard pay as well as supplemental pay to support and keep our team intact. That also happened in the retailer and dealer community. So that $350 million is really dissipating at this point. As Mike said, we're significantly opening up distribution as the country steps out of this. And that won't be a significant reoccurring item. The second item is facilities and cleaning and PPE. And that's roughly a $50 million ticket. Very extensive protocols in place, extremely important to protect our people and to protect our customers, and a very understandable and worthwhile expenditure. The final item on here is a range on bad debt, specifically related to the FCC pledge. All other bad debts, of course, aren't included in here nor regular pay for people who are working. And that bad debt range is going to be somewhere in the $75 million to $125 million. What's happening is the inability to disconnect; you're building up multiple layers of payments that need to be due. And at this point, this is our best estimate that we've seen that we were able to come up with about the ultimate cost of this pledge, which has now been extended through June 30 on our business. We are certainly taking mitigation items. We got a significant number of customers that are paying. But we do have customers who aren't paying and thus we anticipate that additional bad debt. So that's really the breakdown for you on that. Any other questions before we go to the other part of your question?

That's very helpful. Thanks.

Yes. The second piece, we're a share taker. And a share taker likes a competitive environment with a certain amount of churn. Everybody's been home, and churn itself has fallen quite a bit. And so obviously, we like an environment where people are able and have less friction to being able to switch providers. And notwithstanding that, we've been competing very hard and finding really innovative ways to get that done. So we were killing it in January and February. And then, of course, things came to a pretty fast stop in March. We were quicker to execute slowdowns and shutdowns of our retail in March. We felt it was very important to be decisive. We're based here in Seattle where the whole thing started, and we took it probably more seriously than others did. So we moved faster. And we may have been more effective in March than some. All that has equalized now. But Matt, why don't you give us a little color on what you're seeing? And then very briefly, I may ask Jon to talk a little bit about virtual retail and curbside and some of the things happening to mitigate market environment from Matt Staneff.

Yes. Thanks, Mike, for the question. As Mike Sievert just said, we saw a pretty rapid slowdown in our business because we took these proactive measures around retail stores for the health and safety of our employees and customers in general. And the market had a pronounced decline right off the gate. And what you're seeing, what we're seeing in the marketplace right now is generally consistent with what you're hearing in the news and in other places is that things are starting to rebound, and things are starting to turn a corner. It was closed down and slowed for quite a while in the first part of the month. We're seeing generally speaking some of the categories that you naturally would expect to react in a marketplace like this to rebound faster interpret that as the prepaid market is starting to rebound a little bit more. There's stimulus money in the marketplace. Consumers are coming out and starting to shop again and switch. And as Mike said, we really enjoy a marketplace where there's a lot of industry switching and that's important for us to continue to grow our net adds as we move forward. So we're starting to see some signs that the marketplace is rebounding in the areas I've talked about, but we've got a long way to go to get back to normal levels of industry switching and consumer buying behavior as we see this thing out throughout the quarter. We've also seen some particular strength in some of the other areas public sector as an example. Lots of students need connectivity on learning and things of that nature. So we've been pretty active in participating in those parts of the markets as well.

We're not waiting for the market to just return to normal. We're changing how we operate. Jon Freier just very briefly about the rapid work we've done to change what retail means in this company.

Yes, Mike. Thank you. On March 16th, we made a significant decision to close around 80% of our company-owned retail stores. Instead of waiting for the situation to resolve on its own, we took proactive steps to transition many of our retail employees into virtual retail mobile experts. This allows customers visiting tmobile.com to chat with an expert for more information or to add lines to their accounts. In a time when many families were adapting to remote learning, we wanted to ensure we remained available while our stores were closed. As a result, we experienced a 500% increase in virtual retail engagement by shifting our mobile experts from physical stores to this online platform. Additionally, we introduced curbside delivery, a capability that didn't exist prior to COVID-19. Working with our product and technology teams, we established this service at all of our company-owned stores, enabling customers to communicate with T-Mobile through the app and conduct transactions for contactless pickup. I am incredibly proud of how quickly we adapted to serve our customers. Our frontline teams across all stores and customer care have shown remarkable dedication; I can't emphasize enough how proud I am of their efforts to ensure business continuity while serving our customers effectively.

Well, terrific. Well, operator, let’s go back to the phone for next question.

Certainly. Our next question comes from John Hodulik with UBS.

Hey, John.

Great. Hey, how are you doing Mike? Thanks for the question. I guess, first on that postpaid net add guidance for 2Q for New T-Mobile zero to 150,000. Typically postpaid phones are a subset of that number. So I know you don't typically guide to phones, but should we understand that how the stores are closed that you guys might actually lose postpaid phones in the second quarter? And then maybe if there's sort of some background in terms of what are your assumptions within that number in terms of bringing those stores back online?

No, we expect postpaid phones to be positive, not negative. And we're seeing nice trends develop. So we gave the guidance that we gave. I'm very hopeful that we'll see strength through the rest of the quarter. And it does assume that we continue to see some increasing momentum slowly happening through the quarter as social distancing ebbs a bit. But it doesn't assume a wholesale change in customer behavior. We would assume that June would have more going on than May and May more than April, but not step changes. And Neville, do you want to hit the second one very quickly?

Let me just add really quick too. John, you know our playbook. And our playbook has not changed. We're conservative in the way we position to The Street. We got an impeccable track record of doing what we said we were going to do, and nothing has changed about that. Neville?

Yes. So thanks John. We doubled our speeds. I mean, I think the additional 600 was great kind of country, and our customers needed it during COVID-19. We've obviously extended our pledge commitment. We are working with many of those 600 providers to see if they will extend. I'm hopeful they will and continue to enable us to better serve our customers during this period. So more capacity and more speed is exactly what was needed and allowed us to deal with a lot of peaks and increases in traffic that we saw on the network during a very difficult time. So big shout out and thank you to the FCC and Chairman Pai and also the holders that loaned us their spectrum. And as I said, we're hopeful they'll extend a little longer with us as the pledge continues.

Thank you.

All right. Let’s go back to the phone, operator.

Certainly. Our next question comes from Philip Cusick with JPMorgan.

Hey, Phil.

Congratulations again on getting the deal done and Mike on your promotion. Great. First Braxton, assuming your EBITDA was stable from 1Q to 2Q at T-Mobile, the guide would imply Sprint EBITDA ex-leasing of about $1.4 billion to $1.55 billion. So about $6 billion run rate, which is about what we expected maybe a little lower. Do you expect to restate EBITDA that Sprint's doing from this methodology? Or is this guide a good way to look at the run rate going forward?

Yes. It's a great question Phil. We are in the process of aligning over 200 accounting policies that are disparate. And you can be informed on the significant items in the pro formas that we put out. So, we know the material ins and outs, and those are certainly embedded in here. But there's a lot of miscellaneous stuff that we're working through. We also have the very significant exercise of the purchase price allocation. And what assets, how do we value the assets are going to create differences that are not known at this point throughout the geography of the income statement. We don't anticipate any material deviations from the purchase price accounting on the EBITDA numbers that are already baked into this guidance. But what we haven't worked through is all the valuation of the assets including capitalized lease devices things like the wireline business, so on and so forth. And that can create some issues when it comes to what the valuation and what the depreciation run rate is. But we're not providing net add or EPS, but there will be changes that come out of this. We also have a significant KPI alignment to the T-Mobile policies. And in our disclosures, as you pour through everything, you will see that we have specifically mentioned that there will be significant adjustments to the Sprint subscriber base. And until we finish that work, we're not in a position to quantify it. It will be significant. It will be reductions in multiple categories. And of course, that will have impacts on various KPIs as we're looking at the business. Hopefully, that's helpful.

That is helpful. But going back to the guidance, since you provided guidance on total EBITDA and then ex-leasing, can we say that none of the changes you mentioned would be sufficient to move it outside of the range you've given?

We have an excellent track record and we are cautious in our guidance. However, we are confident in its significant representation or we wouldn't have provided it.

Yes, we didn't quantify it because we work with every customer. A significant part of our operation is that we support customers with very tight budgets and those facing challenging circumstances. It's part of our normal routine to engage with every customer and meet their needs, and we have continued to do that. Callie Field and her team have managed this while transitioning 15,000 employees to work from home, which constitutes 92% of our workforce. We are honoring our commitment, and while it has been costly, it's challenging to count every individual customer because we focus on how we treat them. We won't disconnect them but will encourage them not to accumulate bills they can't manage and ensure they are on services they can afford. Our customer care team has been exceptional in this regard and has adapted under Callie's leadership. I'm proud of their efforts, but it is difficult for us to quantify this in numbers. We have, however, ensured that you understand the overall potential financial impact. Let's go to Twitter for a question, and then I will take two more from the phone. I will need to step away for the last few minutes of the call, and Braxton will take over. I don’t want to overlook Twitter, where Bill Ho is asking about enterprise and the integration and ramp-up of T-Mobile Business Group. Mike Katz and Mike Sievert, what are your thoughts on enterprise segment growth and competition? Is it an easy opportunity? Just to clarify, when we mention day one, we're referring to mid-summer for consumer, but Mike Katz and his enterprise team have achieved day one by integrating the combined Sprint and T-Mobile sales force under one value proposition and the T-Mobile brand this week. We're making progress rapidly, and I’m very proud of what our team is doing to seize this opportunity. Mike, do you want to briefly share your insights on what you're observing?

Yes. Thanks Mike. Yes, I think one thing that's important is at stand-alone T-Mobile we already had a lot of momentum coming into the integration. We had record quarters in enterprise and large government for the last couple of years every single quarter, so a lot of momentum. So now this larger, now integrated team has a lot to work with. And this trade-off that Mike talked about at the beginning of the call, customers historically had to trade between great network and great price and service experience, that is as important to enterprise customers as it is to consumers. And what we're seeing so far is we interact with enterprises. And they're really, really responding to that. And I think the timing for it couldn't be better as we're in the middle of COVID and big macroeconomic impacts as a result of COVID. We're seeing many enterprises going through big cost transformation exercises including what they spend and how they structure their spend in this category. And we think that positions us for a lot of opportunity considering that AT&T and Verizon control 90% of the revenue in the enterprise space. So, we think it's a big, big growth opportunity for us and we're really well positioned post-merger.

Thank you. Our next question comes from Jonathan Chaplin with New Street.

Thanks for taking the questions. Braxton, is this the last earnings call, we get you on?

Mike, are you still on? That's a question...

That's why I asked.

Okay. Let me put it this way: I was supposed to retire two years ago. I've extended three times. We have nothing to announce today. Ultimately, I love this company and I'm not going anywhere. I will definitely be part of the future in some form. Just stay tuned for future announcements.

Rooting for a fourth extension. Just very quickly, if you guys are completing the retail integration by sometime in the summer, does that mean there’s about $1 billion in SG&A synergies that you should have captured by the end of the year?

We're not prepared at this point to really do quantifications. If you really listen to what we were saying about guidance, we are right now operationalizing accelerations of what original plans were, specifically driven by COVID. And quite frankly, Jonathan, we just need some time to work through it and then we'll be able to provide color. And that color, we plan on providing in the second quarter earnings call, which will be the first New T-Mobile earnings call and we're just going to have to wait at this point. I don't want to give you an estimate that's not fully baked, but we're very focused on that, as we are on acceleration of other synergies, and that's all good news. I want to reiterate, we are extremely confident that the opportunity is actually more than $43 billion. And some of our acceleration moves at this point are only part of that. I mean, to the extent that we can accelerate during this time period, it's going to increase the net present value. But, quite frankly, we got pressures because of COVID, as you're saying. And we're super focused on addressing those pressures and making up for them, and we've got a lot of material here to work with. Jon, do you want to add anything?

Yes. Braxton, I will just reiterate exactly what you said. We're working this really hard. And I think Mike Sievert had an opportunity to say that one of the benefits of this transaction taking a little bit longer to finally getting approved and to cross the finish line is that we've had a longer runway to plan. And that's exactly what we're seeing. We've had a number of discussions with independently owned and operated operators around store closures. We're working through that, have been working through that, have gotten through them very, very quickly. Also, we have a lot of integration, internal integration efforts that we're doing that we once thought would be impossible because we're not physically together. We're having to do all of this work virtually, but I've just been incredibly pleased about the amount of interactions that we can do with the team virtually. We've got tens of thousands of employees across the country in retail between the two legacy companies that we're bringing together. And that's just gone incredibly well thus far, in terms of having people do the necessary training, getting people up to speed on installing our systems into the legacy Sprint stores, taking legacy Sprint systems installing them into legacy Magenta stores. So that we can say, yes, we can help you no matter if you're a T-Mobile customer or a Sprint-branded customer, regardless of the store that you visit. So we are in a really good place, call it six weeks, not even six weeks, five-and-a-half weeks into this integration after close. So we're very confident. We're moving fast. We're ahead of schedule in terms of the discussions that we've had. We're very bullish on realizing our distribution-related synergies this year. And we're looking forward to showing you some results here very soon.

Thanks, guys.

Okay. Next question, please?

Thank you. Our next question will come from Jennifer Fritzsche with Wells Fargo.

Thank you taking my question.

Hey, Jennifer.

Hi, everyone. Thank you for taking my questions. I wanted to ask maybe this is more in Neville's area. We've been led to believe that wireless requires wires and a significant fiber component. I think you mentioned that you plan to connect thousands of 2.5 sites this year, which will necessitate fiber and substantial backhaul. How confident are you in your partners? Or would you consider following one of your competitors' approaches and pursue an organic fiber build? Additionally, what are your current thoughts on DSS capabilities? It seemed like you were not very optimistic about them during our last discussion. Has your perspective changed at all?

I’ll address these quickly, Jennifer. Our model is based on leasing fiber. We typically don’t build fiber ourselves; we let others handle that and receive competitive pricing for the services we need. We have been preparing our backhaul for a 5G environment for quite a while. The performance from the sites we are upgrading with the limited volumes of 2.5 spectrum today is supported by multi-gig backhaul. We are in a strong position, and our providers will continue to create significant competition in this area, which looks promising. Regarding DSS, while I noted discussions in the industry last call, I don’t feel significantly more positive than before. I made it clear that one vendor is lagging behind, and they are still not catching up. Ultimately, DSS will be implemented, and we anticipate something from our competitors this year as well, but the important point is that our 5G rollout does not hinge on DSS. Our nationwide coverage is already established and expanding rapidly, as I mentioned earlier. This is the optimal way to deploy 5G with fiber spectrum, avoiding the need to share bandwidth between LTE and 5G users. Our extensive spectrum gives us comprehensive coverage without reliance on DSS. That said, we will still implement the technology, though there may be some challenges.

Great, thank you.

Okay.

Well, terrific. That concludes our call today. Operator, we appreciate your participation. Everyone, thank you for joining us and your interest in T-Mobile. Please stay safe and healthy. And we look forward to connecting with you all soon.

Thank you. Ladies and gentlemen, this concludes the T-Mobile U.S. First Quarter 2020, Earnings Call. If you have any further questions, you may contact the Investor Relations or media departments. Thank you for your participation. You may now disconnect, and have a pleasant day.