Welcome to T-Mobile's second quarter 2023 earnings call. Joining me on the call today are Mike Sievert, our President and CEO; Peter Osvaldik, our CFO; as well as other members of the senior leadership team. During this call, we will make forward-looking statements, which involve risks and uncertainties that may cause actual results to differ materially from our forward-looking statements. We provide a comprehensive list of risk factors in our SEC filings, which I encourage you to review. Our earnings release, investor back book and other documents related to our results, as well as reconciliations between GAAP and the non-GAAP results discussed on this call can be found in the Quarterly Results section of the Investor Relations website. With that, let me turn it over to Mike.

Okay. Thanks, Jud. Hi, everybody. Welcome to the call. As you can see, we're here with several members of our senior management team. We're coming to you live from Bellevue, Washington and we're ready to take your questions. But first, let me share just a few comments. If you'll recall at our Analyst Day in early 2021, we shared our strategy to build the best network, couple it with a leading un-carrier value proposition and customer experience and grow our share in areas where T-Mobile was massively underpenetrated relative to our peers. That strategy and our approach has remained remarkably consistent and our Q2 results continue to show that it's working better than ever. In fact, T-Mobile delivered our highest Q2 postpaid phone net adds in eight years, fueled by both industry-leading gross adds and the lowest postpaid phone churn in company history. And importantly, we did this while industry growth normalized, proving that the growth opportunities and durable advantages we've been sharing with you really are unique to T-Mobile. We also told you that if we delivered the best product and the best value and the best experiences, there was no reason we couldn't get to the lowest churn in the industry, remember that. And in Q2, we did it. For the first time in our history, T-Mobile reported the lowest postpaid phone churn in the industry. That is a remarkable statement and it's a testament to the work our team has done to build the best network. And to further our value proposition to deliver even better experiences to customers. Now I'm sure there's still going to be some back and forth between us and the other guys before we consistently put them in the rearview mirror for good on churn, but all the same, it is great to get this first win. We also continue to run the business in a smart and sustainable manner, translating our industry-leading customer growth in Q2 into industry-leading service revenue growth and core adjusted EBITDA growth, while growing free cash flow by more than 60% year-over-year. This industry-leading customer and financial growth led us to raise guidance for the year again. And we're fortunate to deliver these industry-leading results within the context of a vibrant wireless industry, with growing industry service revenues and industry cash flows and healthy competition that continues to deliver more value and better networks to customers. In fact, on network, we not only defended, but extended our leadership in both overall and 5G performance. With the latest third-party reports showing that T-Mobile's lead is widening. Looking at Ookla data, T-Mobile once again swept every category for overall network performance with median download speeds more than double our closest competitor. We've long talked about how our dedicated 5G spectrum assets with superior propagation would result in a demonstrable advantage in customers' everyday lived experiences even as the competitors try to catch us. T-Mobile's head start, our dedicated 5G spectrum assets and our technology leadership are the things that allow us to stay meaningfully ahead as in like two years or more ahead in 5G reach and overall network performance and to stay ahead for years to come. And the most exciting part is that many prospective customers are only just beginning to notice, which means lots of the benefit from this is in front of us. And importantly, these things also allow it to do it all with the best capital efficiency in the industry. Now we also continue to build on our fame for providing the best value. Our latest un-carrier move Phone Freedom, freeze customers locked up into those three-year contracts at the carriers. And our new Go5G Plus rate plan delivers the best value in wireless. The response from customers has been really amazing. In fact, Go5G Plus instantly became our most popular plan, and we're seeing improved porting ratios against every competitor including yet another quarter of year-over-year improvement against cable. In fact, total postpaid porting ratios for us have improved every month since we launched Phone Freedom including in July. As more and more customers learn that they can break free from those three-year contracts, come to a better network and get a better value at T-Mobile. All of these catalysts, coupled with our unique growth opportunities in underpenetrated markets are what enable a differentiated and profitable growth strategy that separates us from the competition and you're seeing it again in these Q2 results. We added 299,000 postpaid account net adds, the highest reported in the industry showing that we continue to win the switching decisions in the market. And we had postpaid net additions of 1.6 million again leading the industry by a wide margin. This included postpaid phone net adds of 760,000, our highest Q2 in eight years, even as the industry sees more normalized levels of growth. Our increased share was driven by our industry-best phone gross adds, which grew over last year's Q2 as well as the lowest postpaid phone churn in our history. And as I mentioned, the lowest in the industry for the first time ever at just 0.77%. In T-Mobile for Business, we had a record quarter with best ever phone net adds and our lowest ever phone churn. Enterprise and government customers buy based on their own rigorous testing of the networks, not just price, and our network leadership, innovative solutions and customer experiences are driving major wins and fueling our momentum in these segments. We're attracting profitable customers with CLVs in the hundreds of dollars each and still growing. As I mentioned, consumers are beginning to take notice of our network strides as well, as we're winning prime network seekers in the top 100 markets who increasingly recognize that T-Mobile offers the best combination of network coverage and capacity to meet their needs. We saw our share of switchers in the top 100 markets increase both sequentially and year-over-year. In smaller markets and rural areas, where we continue to bring the first and in many places, only 5G network, we're seeing an incredible response. We're capturing a win share of switchers in these areas in the upper 30s, which shows we're not only on track to meet our goal of 20% share in 2025, but it gives us confidence we have room to run in the years beyond. In addition to mobile wireless, we added 509,000 high speed Internet customers. Notably, we've continued to grow our gross adds every quarter since we launched over two years ago as demand for the product just continues to grow. And we saw a sequential improvement in churn again this quarter and Net Promoter Scores that remain multiples higher than cable, demonstrating how our high speed Internet resonates with and satisfies an important target audience within this larger broadband market. We also celebrated another major milestone in our Sprint merger integration as we are now substantially complete with both the billing migration and retail rationalization, well ahead of our year-end target. At every step of our integration journey, the customer has been our primary focus. As you know, this has allowed us to not only unlock synergies bigger and faster than expected, but also to deliver industry-leading growth and record low churn at the same time. I could not be more proud of what our team has accomplished in this area. Okay. I'm going to wrap it up. We are pulling into the station halfway through 2023 with great momentum. Our postpaid phone net adds year-to-date are right on track with last year, which was a growth record year for us. We continue to extend our durable network and value leadership over the competition, which fuels our growth opportunities. And our profitable growth strategy continues to translate into the highest core adjusted EBITDA growth and year-to-date cash flow conversion in the industry. Listen, in our industry, change is a constant, but our team navigates it deftly with the customer as our North Star. And because of that, there has never been a more exciting time to be at T-Mobile. Okay. Peter, over to you to talk about our key financial highlights and an update on our guidance for 2023.

Absolutely. Thanks, Mike. Q2 was another quarter of best-in-class profitable growth, which underpins the updated guidance that I'll share with you in a moment. It starts with the best postpaid service revenue growth in the industry, up over 5% year-over-year driven by continued increases in both postpaid accounts and postpaid ARPA. Our disciplined focus on profitability resulted in an 11% year-over-year increase in core adjusted EBITDA and we grew our core adjusted EBITDA margin by over 300 basis points year-over-year. In addition, free cash flow was up 64% year-over-year and with the highest free cash flow to service revenue margin relative to our peers year-to-date. We expect this to be a durable and differentiated unlock of shareholder value going forward. This strong financial performance also supported our share buybacks as we repurchased 25.2 million shares for $3.5 billion in Q2 with a cumulative total of 83.5 million shares repurchased for $11.8 billion as of July 21. All right. Let's jump into the details of our increased guidance for 2023. We now expect total postpaid net customer additions to be between 5.6 million and 5.9 million, up 250,000 at the midpoint, reflecting growth across all of our market opportunities and we continue to expect roughly half of postpaid net adds coming from phones for the full year. Our focus on profitable growth allows us to fund those higher customer net adds and still increase our core adjusted EBITDA expectation, which we now expect to be between $28.9 billion and $29.2 billion. This is up 10% year-over-year at the midpoint based on higher service revenues and merger synergies and excludes leasing revenues of approximately $300 million as we transition substantially all remaining customers off device leasing by year-end. Our merger synergies are expected to be approximately $7.5 billion in 2023, achieving the full run rate synergy target provided at our Analyst Day a year ahead of schedule as we build towards the full run rate synergies of $8 billion in 2024. We continue to expect merger-related costs, which are not included in adjusted or core adjusted EBITDA to be approximately $1 billion before taxes. And we now expect cash merger-related costs of $1.6 billion to $2 billion for 2023 as they have underrun the P&L recognition to date. Net cash provided by operating activities, which include payments for merger-related costs is now expected to be in the range of $18 billion to $18.3 billion and we now expect cash CapEx to be between $9.5 billion and $9.7 billion delivering a capital efficiency unmatched in our industry, unlocked by our network leadership. We expect CapEx to taper in Q3 and then further in Q4. The slightly higher operating cash flows fund the increased CapEx resulting in strong free cash flow of $13.2 billion to $13.6 billion, which includes payments for merger-related costs. This is up approximately 75% over last year, thanks to our margin expansion and capital efficiency and does not assume any material net cash inflows from securitization. This also represents a free cash flow to service revenue margin, which is multiple percentage points higher than peers with further expansion expected next year. We continue to expect our full year effective tax rate to be between 24% and 26%. And finally, we now expect full year postpaid ARPA to increase slightly more than the 1% we had previously guided for 2023 as we continue to expand our account relationships across products and services as part of our land and expand account strategy to grow service revenue. Before I wrap up, I want to remind folks that we closed the sale of our wireline assets to Cogent on May 1, which had a partial impact on our results in Q2 and we expect the full run rate impact beginning in Q3 as I laid out last quarter. In closing, we continue to extend our network leadership and further scale our differentiated profitable growth opportunities to deliver the highest free cash flow conversion in the industry and unlock shareholder value. And with that, I will now turn the call back to Jud to begin the Q&A. Jud?

All right. Let's get to your questions. We'll start with a question on the phone. Operator, please go ahead with the first question.

Certainly, thank you. That will come from the line of Brett Feldman with Goldman Sachs. Your line is open.

Thanks for taking the question. And it was great to see the strong cash flow in the quarter. In light of that, we've gotten a few questions around why you decided to downtick a little bit on the buyback. And I guess maybe the higher level question we're getting now that you're much further into the program. How do you think about managing that program going forward? I mean cash flow is obviously an input. You're going to be making some payments for C-band spectrum this year. So what's the right way for investors to kind of frame your expectations around how you're going to manage that on a go-forward basis? Thank you.

That sounds great. Thanks, Brett. I'll start and then maybe hand it to Peter for some comments. The way I think about it is, we're buying at a pace through mostly through predesigned 10b5-1 programs in order to be able to meet the authorization during the time frame of the authorization. So if you recall, the initial authorization of this program is a $14 billion program that takes us through September. And if you look at some of our activity early in the year where we were able to grab some additional run rate. Now the remaining funds relative to the remaining time suggests a run rate where we have it. So it's not really a downtick so much as just kind of a programmatic view. And then maybe Peter can pile in on the second part. The way we think about it broadly is that there's essentially been no underlying change to the thesis we've been communicating all along. Now our Board hasn't made a determination yet about the second step, but the inputs to those steps have to do with the free cash flow development of this company, which, as you mentioned in the premise of your question is right on track. We're guiding to 75% year-over-year cash flow growth this year. And the underpinnings of the growth in the business, as you saw from our fantastic Q2 momentum suggests another good year in '24. And so as the cash flow develops, that's what gives us the confidence that, that original thesis of around $60 billion through 2025 is intact. But maybe you can also comment, Peter, on kind of how we think about this from a dedication of resources to this versus spectrum and other things as Brett asked.

Yeah. Absolutely, Brett. One of the things that we had underpinned at Analyst Day is that it's up to $65 billion of free cash flow that's going to support the $60 billion of potential shareholder remuneration. And within that, we had some room and had reserved some capacity for spectrum purchases and other things. And of course, we'll fundamentally continue throughout this whole period, one to deliver because the underlying delivery of the free cash flow is what allows everything to happen. And, of course, always look at opportunities before us for the highest value creation opportunity. With your question on C-band, that was already included in our assumption here. So when we continue to say, we have optimism around the program in totality, C-band is fully contemplated within that.

That's great color. If I can ask a quick follow-up question as we're talking about overall liquidity. Any update on the spectrum option that DISH hold and if that were to get exercised, how do you think about putting that proceeds to work? Thanks.

Sure. Well, the first thing I would point out is that any proceeds from that have not been contemplated in the long-range cash planning. So if there's cash that comes from that soon, that would be incremental to the planning expectations. We're still awaiting DISH's decision. So just as an update, and I think our filings made some of this clear. The deadline has come and gone for them to determine whether or not they would exercise their privilege to buy that spectrum for $3.6 billion. But they asked for some additional time from the DOJ and we did not object to that. And so we have committed that we would not terminate their agreement and right to do that at any time before August 11. But in fact, we’re in discussions with DISH about whether or not there might be a win-win that’s different from their initial privilege. And if there is, that would be wonderful. But obviously, that deadline is coming. So – but our view was it was worth taking the extra time, especially since they asked for it in case there’s a bigger win-win to be had here.

Thank you. Appreciate it.

Operator, next question, please.

Thank you. That will come from the line of Craig Moffett with MoffettNathanson. Your line is open.

Hi. Thank you. Two questions. One, as long as we're on the topic of DISH. Outside of the 800, if the opportunity came up, would you have an appetite for more mid-band spectrum, either from DISH or perhaps any other source. And what we're talking about sort of meaningful size chunks here. And then second, if you could just talk about the pacing and trajectory of fixed wireless, as you now with a little more experience under your belt, as you look out towards your long-term guidance, how do you think about the pacing to get to 8 million or so households?

Sounds great. Well, I'll tackle the first one and then maybe hand to Mike Katz for the second one. And I don't mean to be flip, Craig, but I think you've been following us for so long. You know we've never met spectrum we didn't like. And so of course. And but one thing that distinguishes us from other providers is that when we get our hands on spectrum, we put it to work right away for the benefit of the American consumer. And so you see that in how we're deploying so ambitiously the 2.5 gigahertz that are the proceeds of the merger, having built the best 5G network in history on that spectrum acquisition that came through the merger. So look, I mean, we're always on the hunt for other ways to add capacity to our network because it allows us to do amazing things like not only continue to take share and grow and meet ever rising needs of customers on their smartphones, but also to get after the subject of your second question, which is fixed wireless access. And to the first part of your second question, nothing has changed in our aspiration. We're still on the hunt for that single-digit penetration. And maybe Mike could comment about what we're seeing in the marketplace and the rate and pace of our growth versus our expectations.

Yeah. Thanks, Mike. Thanks, Craig, for the question. We couldn't be happier with what's going on with this HSI business. You probably saw from all of our results, we just crossed over 3.7 million customers in this business. And this pacing that we're on, which we told you last quarter and the quarter before, right around where we were in Q2, right around 500,000 customers. It gives us confidence that the 7 million to 8 million total customers that we committed to at the end of this planning period that we've got high confidence that we're going to get there. One of the things that Mike mentioned in his comments that I think is worth reiterating is, we saw in Q2 again, our highest gross adds. And our gross adds have increased every single quarter since we launched this product. And then again, in Q2, we saw sequential decreases in churn. And I think that really speaks to the fact that this is a great product. It's a great product that customers are really, really loving. And you see that both in this sequential churn decrease, but also just in the overall NPS scores, which continue to be the highest amongst any broadband category in America. So we're really thrilled with where we are with this product.

Back to my comments, upfront, I said things have been remarkably consistent with what we rolled out to you at our Analyst Day in '21. This is one of those things. We said we saw a potential here of 7 million to 8 million subscribers based on the excess capacity profile of our built mobile network. That means it’s not capital burdened. And because of that, we can make profit there. And so it plays a role. It’s a single-digit penetration role, and we’re on our way to going and seizing it for the benefit of our shareholders and our customers and it’s right on track.

Thanks.

Thanks, Craig. Operator, next question please.

That will come from the line of Jonathan Chaplin with New Street Research. Your line is open.

Thanks very much. Wonder if you can give us context on a couple of things? So firstly, how are you thinking about the evolution of upgrades in the second half of the year as we go through a new iPhone cycle? And kind of what have you factored into your guidance on EBITDA for that. It looks like upgrades to the industry have been coming in sort of lower than expected, much lower than historical trends. I'm wondering how that shifts in the second half of the year. And then, wondering if you can give us a little bit more context on fixed wireless broadband churn. You mentioned that it's come down sequentially, which isn't surprising in that it's always lower in the broadband market in the second quarter. But what does it look like on a year-over-year basis? Maybe you can give us some context around the kind of levels that it's at for the mature portion of the base that's been with you maybe for a year or more.

Yeah, Jonathan. You're spot on in the premise of the question that looking at the aging of the base is the way to get at it. We'll come to Mike on that in a minute. But first, on upgrades, historically low upgrades, Peter, what's contemplated for the rest of the year and maybe a little commentary on why do we think we're seeing that.

Yeah. Well, let me start with why do we think we're seeing that. And fundamentally, we believe we're meeting customers' needs and desires. And if you look at what we've talked about from a network perspective and a value perspective, it makes a lot of sense. You come onto this network and you have a 5G device. Remember about two-thirds of our postpaid base already has a 5G device. And they get experience on this network that is just phenomenal in the broadest sense of the word, much more than the competitive sense can bring. And we think we're just meeting their natural demand. Customers are happy with their devices. They're happy with their devices from a longer perspective, Remember, we continue to have two-year financing constructs, so they have the ability to upgrade earlier than the competition, one of the unlocks of Phone Freedom that we put out there that led to the port ratio changes. So fundamentally, we think we're exactly meeting what customers need. In regards to the second half, the second half always tends to have slightly higher upgrade rates. And you mentioned that you have new product introduction from Apple. You tend to have promotional constructs and a little bit higher switching in the second half, and we're typically the beneficiary of that. We also obviously make very, very solid offers to our base from an upgrade perspective. So we do have higher upgrade rates contemplated than what we saw in Q2, but we don't specifically guide to those other than directionally.

Yeah. I mean I think building on what you're saying, Mike, what we've seen in our broadband business. Our churn typically is higher amongst newer customers and decreases as they stay with us longer. The trends have been positive, and we can see very low churn rates for our mature customer base. For those customers who have been with us for over a year, they're staying with us. So while there are typical market variations, I'm pleased with overall trends that we are seeing.

Okay. Terrific. And maybe, Jud, tell us when it’s time to go to Twitter. So we’re not ignoring the people coming in on Twitter because we always do some of that as well. But while you’re thinking about it, we’ll go operator to one more online.

That will come from the line of John Hodulik with UBS. Your line is open.

Great. Thanks, guys. Two questions, if I could. First, on margins. Obviously, a lot of progress there at 300 basis points, but you guys still trail AT&T and Verizon by about 500 basis points. And do you see that closing over time or is it really just a bunch sort of lower ARPU and in fact or sub growth? That's number one. And number two, Mike, I think you said that your porting versus cable has improved. And I don't think you've called that out before. But maybe just some commentary about what you're seeing in terms of competition in wireless and cable. I mean, they're talking about sort of more and more bundled offerings. And I guess Comcast was sort of flattish on a year-over-year basis, but just what the posture is there and what's driving that improvement in porting from cable? Thanks.

Okay. I'll take that one, but Peter, we'll start with you.

Yeah. Certainly, on the margin question, it's a lot more than an ARPU differential. It's really some structural differences that we always call out. For example, the whole leased versus owned backhaul strategy. The other thing that I'll always note is that with this significant higher switching that we see and the net add production that we're giving, obviously, we have more S in SG&A than the competition does. We have a very dense network built out. So there's fundamentally some structural differences that also mean there's a CapEx OpEx differential and when you compare AT&T and Verizon and us. And that's why it's always important to fundamentally look at conversion of service revenue into free cash flow. Free cash flow is the value generation engine that allows you to further invest, return capital to shareholders or do all sorts of other things to create value. And that is the measure by which we're really comparing ourselves to the competition to get rid of all the structural noise. And on that regard, you heard what we announced today already there from a year-to-date basis in terms of beating them on the conversion ratio when next year anticipated to expand that ratio further. So that's how I think about margins.

It's interesting to note that despite our strong growth and competitive pricing, which have impacted our margins, we still lead the industry in cash production per service revenue dollar this year, and that figure is quickly increasing. With a 75% year-over-year forecast, we are on track for greater cash flows next year. This highlights the effectiveness of our model, which is supported by our team's execution capabilities, our strong balance sheet, valuable assets, proven track record, and various advantages we hold. Regarding cable, we did previously mention that we noticed improvements in our port ratios last quarter. In Q4, we began to see significant net addition trends in cable, prompting us to explore this matter further to understand whether these changes were impacting us or the competition. Fast forward to this quarter, and even with cable capturing a considerable share of postpaid, T-Mobile achieved the highest postpaid phone net additions in Q2 in eight years, along with the lowest churn rates in our history and the entire industry. This suggests that the changes driven by cable are not coming from us, as we are performing better than before their entry into the market. However, it is clear that there are dynamics affecting other competitors, including our two closest rivals and various prepaid brands, which are significant players in this landscape. Nonetheless, our performance makes it evident that these shifts are not impacting our results.

What do we have coming in online?

We've got a question from Roger Entner on how strong was the business growth this quarter. Maybe we can tee that one up. And then we've got a follow-on question around the enterprise sector as well so we can hit those.

Okay. Great. So Roger Entner asked how strong was business growth this quarter. Can you talk about the VA? And any additional color on overall business growth. We also have Chetan Sharma coming in. Congrats on another great quarter. Thank you. I was wondering if you could provide some color on traction you're seeing in the enterprise sector beyond connectivity. What about vertical industries, people using 5G, 5G advanced services, et cetera. So maybe, Callie, why don't you start on both of those and anybody else can jump in.

Okay. Thanks, Mike. And thanks, Roger, and Chetan for the questions. As Mike mentioned earlier, we delivered on our highest phone net adds and lowest phone churn ever, handily being Verizon again. And we're seeing profitable growth in all three segments. In SMB, we achieved positive port trends against AT&T and this makes five consecutive quarters against Verizon and we grew ARPU quarter-over-quarter again. As Mike mentioned in his opening remarks, in enterprise and in government, our business is good business with very profitable CLVs, but roughly 60% to 70% relative to consumer and they're rising year-over-year, quarter-over-quarter. And Q2 for enterprise, for instance, we welcomed both the largest global asset management firm and yet another leading global bank as new accounts. We also added two huge government contracts with the EPA and the IRS and continue to double our net adds quarter-over-quarter with first responders, most significantly in rural areas where an older LTE network just doesn't cut it for critical response. So a lot of really good growth this quarter from an incredible team in the business group. And then for the VA question, if I could just take that one for a second. I wanted to say, as you may remember, we took Verizon share back in 2018. And now because of our network, we've taken the pole position and have added roughly 20,000 phones year-to-date supporting more than 50% of the VA phones today. And I'll note to our contract also includes T-Mobile's 5G Internet for the VA's community-based outpatient clinics. So we're able to provide health care for veterans in rural areas because of the network that we have built. So just wanted to add some clarity on the VA subject. And then one last thing on use cases for 5G applications outside of pure connectivity. I'll start Chetan with some of the verticals where we're seeing the most traction. And that would be in retail, where we have many use cases for fixed 5G solutions where people are looking to look at better costs and less truck rolls and support, or perhaps older wireline services and are replacing that with T-Mobile's 5G in multiunit national retailers. And then in health care, this is another area where we're seeing CTOs and CIOs from large hospitals come to us and say, look, we need ubiquitous connectivity, both indoor and outdoor. We need more of a programmable network. We need certain places in our buildings where we want to designate private networks. And because of our public 5G network and the solutions that we can offer with our stand-alone core, we're able to offer a hybrid solution that's really working in a place like a hospital that has lots of different variations to the types of connectivity they need. And then lastly, I'll say we're seeing some traction in education. Large campuses that want to provide connectivity for their students, but also ways to use their data differently and to get in all of the dorms and places in the campus and rooms and libraries and perhaps older buildings, where there's really a need for ubiquitous coverage throughout the campus. So for the 3 hours that really pop out to me. The last one I would say is in the federal use cases with the Department of Defense with not a surprise to anyone, lots of areas for us to begin to deploy hybrid networks and private networks for use cases specific to the military.

Well, hopefully, that answers it and more. I mean if you listen to Callie, it just reinforces what I said in my upfront remarks, which is some of the biggest and most sophisticated and profitable customers are choosing T-Mobile because of the sophistication of our advanced network capabilities and our ability to translate that into solutions for their business. And that's just so different from where we were a few years ago. It's a complete 180 and it's fueling momentum. In fact, all-time record results in our business group. So hopefully, that answers the question, guys. Terrific. Should we go back to the phones?

Let’s do it. Operator next question, please.

Thank you. That will come from the line of Phil Cusick with JPMorgan. Your line is open.

Hi, guys. Thank you. Hi, Mike. The wireless industry is still running maybe hotter than many expected at the beginning of the year. Certainly, your momentum is strong. Are you seeing improving porting ratios versus other MNOs and maybe the MVNOs or do you think there's a growing mix of customers who are coming in without a phone history or a number? And then second, if I can, CapEx, Mike, you talked about tapering in the second half. Does that jumping off rate in the fourth quarter indicate a much lower '24 CapEx level. Thank you.

Okay. Great. I'm going to let Peter answer the second CapEx question. The first one is really interesting. The answer to the question is yes and yes. Both are true. So yes, our port ratios are improving each and every month since we launched Phone Freedom against each and every competitor, including cable overall and cable individually. And that's a really interesting fact that shows that not only are people starting to discover our network advantages, which has sort of been a slow improvement over the last 1.5 years. But we have really sparked intrigue with consumers around this idea that we can free them from being trapped with the other guys. And cable in some ways, actually is helpful in that in a dynamic competitive industry, more people are jump balls. And more people are saying, should I be with one of those two look like kind of old-line providers? Or should I be with somebody new? And when they get asked that question, they are picking cable by and large. They're picking T-Mobile, as you saw we had the industry-leading postpaid phone net additions. Now what is happening is cable is growing very rapidly and faster than I think a lot of people expected. But specifically to your premise of your question, our port ratios with cable have been improving year-over-year for nine quarters in a row. And what you see is that the big step forward they started to take in Q4, according to our analysis, about 80% of the year-over-year increment in their performance from the same period a year ago, Q4, Q1 and Q2 is from non-ports. So they're actually not growing the porting side of their business at the same rate as the non-porting side of their business, instead kind of printing postpaid ads. They might be coming over from prepaid. They might be just simply net new. They might be kind of dropped in the bag. I don't really know. There's probably several different factors to it. And we just don't know quite how to unpack it because we don't have all the information. I mean, we double-click into things like Verizon's wholesale revenue and note that it's not growing. That's sort of an interesting diagnostic for us that helps us understand what might be happening. So anyway, hopefully, that helps it. Our industry-leading account growth of 299,000 shows that T-Mobile is winning the switching decisions in high-quality prime paying families, the kind everybody is going for.

Yeah. And on CapEx, Phil, the way I think about next year, although we're not specifically guiding is we're still comfortable in the 9 to 10 range that we gave out. Remember, I wouldn't take Q4 as a jumping-off point because really, the way Ulf and team have built this is a very lean manufacturing approach to the build one of the secrets to our capital efficiency there. And so it isn't that I take a run rate and an exit run rate and projected, but $9 billion to $10 billion feels about right for next year at this point in time.

When discussing our efficient network performance, it's important to recognize the achievements we've made with our capital-efficient strategy. Ulf and his team deserve significant praise. We have now extended ultra-capacity 5G coverage to 285 million people. This is an accomplishment that our main competitors have not even claimed they can achieve, at least not within the next two years. We've suggested that we are two or more years ahead in the 5G race, and it seems that gap is widening. Perhaps you could share some statistics about our current status and give us an idea of our future direction.

Thank you, Mike. In the last quarter, we made significant progress in our leadership. We now have 285 mid-band POPs and are on track to reach 300 by the end of the year. It's worth noting that we achieved 200 mid-band POPs two years ago in 2021. For our low band, we reached 300 two years ago, while others are just starting to catch up. As we grow, it becomes increasingly challenging to add POPs because each increment of 100 million requires about three times the effort in upgrading and constructing new towers for the same level of POP growth. Our network is outstanding, and we take pride in supporting 5G, which not only drives consumer demand but is also increasingly impactful in the enterprise sector, a vision that Oliver has championed for many years. Additionally, we have ample capacity to move forward. Currently, we have 255 megahertz of spectrum allocated to 5G on our mid-band. Unlike others who split their coverage between LTE and 5G, we are fully dedicating our spectrum to 5G. By the end of the year, our mid-band spectrum will increase to 200 megahertz dedicated to 5G as we transition more LTE spectrum. Furthermore, we have yet to tap into our C-band resources for 2024 and beyond, as well as the 345 and 108 auction results that will further enhance our 2.5 capabilities. We also plan to re-farm spectrum on AWS. There is so much potential ahead, and I am thrilled that we are expanding our lead in network capabilities.

It's great that you are because we are making significant progress. We currently have 3.7 million high-speed Internet customers, and this number is growing rapidly. The average speeds on our network are not only twice as fast as our competitors but are also increasing. We're improving, not stagnating, in terms of the typical user's experience with our network, which is remarkable. Additionally, we have a lot of capacity that has yet to be deployed, creating more opportunities as we aim for 7 to 8 million high-speed Internet customers. With our superior network, we will continue to capture market share from our competitors. As we mentioned earlier, we have a two-plus year advantage that we expect to maintain throughout the 5G era, and your performance is validating our claims. Thank you. Operator?

Your next question comes from the line of Simon Flannery with Morgan Stanley. Your line is open.

Great. thanks a lot. Good evening. Just following up, if I could, on that spectrum deployment. I think in the past, you've talked about rolling out fixed wireless to a majority of the U.S. Perhaps you could just help us understand where you are on coverage today with the base offer and how that should evolve over time now that you're at 285 going to 300. And I guess a related question is for Ulf. You didn't mention the millimeter wave. I know you've been looking at potentially a macro overlay product. How are you thinking about that at the moment or attacking MDUs with millimeter wave. Thanks.

Well, let's start with the millimeter wave question and we can come back to the coverage on fixed wireless. I can touch on that one.

Right. So we are actually using millimeter wave today. We have deployments that we early on started off in Manhattan, for example, in Los Angeles in some areas where we really have that extraordinary capacity need we can use the tool of millimeter wave. Our general strategy is not based on millimeter wave. It's based on a macro strategy, which is our layered approach, where our low band in our mid-band and now also being our PCS spectrum for 5G. But millimeter wave could also be potentially an interesting play for us when it comes to enhancing capacities that could be used, for example, for HSI. And we are working with our vendors, and we are working through our OEMs to figure out if we can make a viable economic and technical performance case out of that with them.

And that kind of bridges to your second question. Maybe this is a good time to remind everybody how our capacity model works for fixed wireless access. Essentially, right now, we serve about the potential of about 50 million homes, but they're not in certain geographies. They're geographically dispersed all over the U.S. because the way our model works is we're selling excess capacity sector by sector. And so what we do is study every sector from every tower in our network and determine what amount of normative smartphone usage will there be over the next several years. And in areas where there's still excess capacity, we today approve applicants for home Internet use. And right now, there's about 50 million home addresses, where if you were to go into our tool and apply to be our customer, we'd say yes, out of the 145 million in the country. But what's interesting is if you and several of your neighbors all did the same, the end person would get a no because it's a dynamic model. What we're selling is excess capacity. And because of that, what our modeling shows us that we will get to, as we said at the very beginning, about 7 million or 8 million households with this excess capacity model that's not burdened by capital. And since it's not burdened by capital with an already built mobile network that you need for great coverage and competitiveness, we're able to profitably build this business at very low prices. It's just a win-win for a sort of single-digit penetration part of the market. Now to the premise of your question and what Ulf was getting into, of course, we're studying whether there are ways to go beyond that initial excess capacity capital-free model. And we haven't drawn any conclusions about that yet. I mean, we're looking hard at millimeter wave. We're looking at whether or not dedicating mid-band spectrum to HSI would make sense, whether they're nonstandard-based solutions. And we just haven't drawn any conclusions. It's not immediately obvious that there are economic ways to grow this business beyond its initial single-digit penetration. But you may see us doing trials in the marketplace as we experiment with this and try to crack the code. And so you'll hear about us trying millimeter wave things or MDU strategies or non-standard-based solutions to see if there's a way to get after it. And you see us trialing fiber, whether or not there's a way for our team, our distribution, our brand to add value in the fiber ecosystem and I've made mention of that before. All these things are things we're doing to try to learn. And the good news is we've got some time because we'll hit this kind of initial terminal sizing of HSI, still we've got two more years to run. So our heads are down seeing if there's a way to crack the code on this.

And of course, any of the things we do there that we just talked about, a capital burden model or something with fiber or all things that would have to be accretive to our Analyst Day guidance that we put out there.

Good. All right. Operator, next question.

That will come from the line of Tim Horan with Oppenheimer. Your line is open.

Thanks. Just curious, why wouldn't you be raising fixed wireless prices now? It seems like you have very, very strong demand from everything we hear out there and you kind of have somewhat limited supply. And I guess related to that, the Go5G plan, can you give us some color what that means for ARPU growth in the next couple of years? Thanks.

Okay. Let's start with the second one on Go5G and where is ARPU going and ARPA and all that stuff. Peter, we can start with you.

Yeah, absolutely. I'll let John comment on the success of Go5G Plus. But as I always say, when we think about ARPU and you saw a sequential increase of about $0.20. And we continue to believe on a year-to-year basis, ARPU will be generally stable. There's probably some potential for sequential increase again from Q2 to Q3. And since it is such a mix-driven metric, and you have to put everything into it, whether we're talking about all the benefits we see from Go5G Plus, whether we talk about the benefits we see from a segmented approach, whether it's military, 55 plus and how those might be lower ARPU customers than the average that we see but are high CLV customers coming in very high-quality customers. Similarly, in Business, Business, you tend to get enterprise, government, large accounts that have very, very great CLVs but would have, given the nature of the volume purchasing, lower ARPU. So all of that blends into ARPU that we see is generally stable. But it's the ARPA strategy that we have. It's the switching attracting accounts into T-Mobile and then the land and expand ARPA strategy, which you just saw an exciting update to the guide from plus 1% to slightly over 1% on a year-over-year basis there. And that's really the focus point for us. But the question on Go5G Plus, and then I hand it to John for a moment because it's been a phenomenal success.

Yeah. And then I think, Peter, just to remind everybody, the Go5G Plus is really kind of a front book initiative. We're not going into the base and asking people to migrate to Go5G Plus and doing all of that within the base. It's really kind of a front book initiative. But this is going fantastic. And we had an opportunity to mention this on our Q1 earnings call back on April 27, when we launched phone freedom, Go5G, Go5G Plus in mid-April. And like Mike said a few moments ago, when you look at the overall porting ratios and the attractiveness of this offer, and what's happening that we've increased our porting ratios every month against every competitor and have followed that through so far in July. And over 60% of the accounts that are joining T-Mobile are now subscribing to Go5G Plus. And there's a utility that's different than Magenta MAX in terms of hotspot data that we've increased in terms of high speed, roaming in Mexico and Canada, across North America that we've increased. But the big pain point that I think Go5G Plus is solving is that new and to promise. First of all, paired with the easy unlock in helping people get out of AT&T and Verizon, mostly AT&T given the unlocked devices, helping people get out of that switch in to T-Mobile, but this three-year contract cycle that AT&T and Verizon has. We knew this was a big insight and a big opportunity that even I underestimated how big of a pain point that is, the fact that you can basically go to law school and complete law school faster than you can complete a phone contract at AT&T and Verizon. And so that's a huge pain point in the promise of Go5G Plus of being able to get in a new device same device software as a new customer every two years. It’s a differentiated and unique proposition in the marketplace that’s really different and is really resonating with customers.

Well said. Okay. And your last question was about HSI pricing. I’ll just answer it briefly. I don’t normally give sort of forward-looking commentary on pricing. So I’ll answer it this way instead, which is do we see ARPU and are we interested in ARPU enhancement for HIS. And the answer is yes, of course. But generally, when you look at our track record, our philosophy in the past as to how to get about that isn’t to jack up people’s prices, is to add value to their life, bring new services, show them increased offers and let themselves select their way up. And obviously, we’re interested in that in this space.

Okay. Good.

Next question, please.

That will come from the line of Michael Rollins with Citi. Your line is open.

Thanks and good afternoon. Just following on the earlier comment on some of the integration milestones that you've hit. What are the activities that are left to get to the full synergy run rate of $7.5 billion for this year's guidance, $8 billion next year? And can you unpack and maybe even size some of the opportunities for further cost efficiencies that may be embedded in your multiyear plan to drive that longer-term margin expansion. Thanks.

Okay. Great, Michael. Well, let's talk about where we are on synergies this year and what's left to be done. I mean on the what's left to be done front, not much the major milestones are behind us, but that doesn't mean the synergy run rates are quite there yet. So maybe you can comment on that dynamic, Peter.

Yes, exactly. A few things in there. Of course, we said we have a small tail of customers to still get over and that will allow the final decommissioning of systems and things to that, whether it's front office, back office, those are the things that are kind of left to do. Certainly, from a cost perspective, there's a little bit in terms of physical decom while the sites are shut off, there's still physical decom happening. And on the synergy development, as we get from $7.5 billion to the $8 billion next year, really, the big chunk of that is avoided costs. So we'll realize the vast majority of the run rate synergies by the end of this year, which you'd naturally expect given we're saying we're substantially done. And then the shift to next year will be fundamentally those avoided site build costs.

Okay. Great.

And just one other. Can you just share how T-Mobile is looking at the role and mix of online distribution and how you're viewing the durability of customers wanting a physical retail location to buy an upgrade devices?

Yeah, absolutely. And it kind of goes to the premise of your follow-on question, your initial follow-on question, Michael. I mean, obviously, across consumer markets generally, customers want a transaction that's fast, transparent, simple and mostly digital. And our industry has been very stubborn on that front, mostly due to the complexity of the offers across all the providers. And so that's something that we're very focused on. And I know everybody in the industry is. Our digital capabilities are rapidly improving, especially as it relates to self-service for our customers. It's incredible what's going on left to right in our company as to how we're already applying AI technologies and machine learning to speed things up, serve customers in a better way. And we can get into some examples around that. But because of emerging technologies, there's a lot of potential over the coming years to not only meet customers where they are finally in this industry because we've been kind of slow in this industry due to the complexity of our offers, but also to potentially realize some efficiencies over time. And that's a good thing because the cost of competition is high. And as you've seen over the last few years, it's gone up. And so it's all about us seizing opportunities to be able to continue this formula that works so well. And for us to continue to do what we do with this flywheel of success, we can't sit on our hands. We have to be able to seize new opportunities, not necessarily to outperform the promises we made you. Those promises were really high, fall some promises, but in some cases, to achieve them in light of what we have seen in the past, which is some increased cost of competition. So at the end of the day, it’s great for consumers.

All right. Thank you. Next question, please.

That will come from the line of Rick Prentiss with Raymond James. Your line is open.

Thank you. I have a couple of questions. I want to follow up on the private network topic. When do you think 5G private networks will contribute significantly to the revenues? Additionally, do you believe that customers, whether individual consumers or enterprises, really grasp what 5G means for them and why they should choose your service given your competitive advantage? It seems like the market is still uncertain about what 5G actually is.

On the consumer side, I agree that people desire a strong, reliable signal wherever they are. That’s what they truly want, and 5G allows us to deliver that better than anyone else. I don’t particularly care if they recognize that it’s 5G providing that signal. We have the best-performing network with extensive high-performing areas of our 5G service, covering significantly more land than our nearest competitor, and we're expanding rapidly. Although customers often don't credit 5G for this improvement, what they want is a robust signal everywhere since they are consuming more video content than ever on platforms like TikTok, Instagram, YouTube, and Zoom, without any buffering. They expect a seamless experience free of latency and jitter, which is exactly what 5G offers, irrespective of whether they acknowledge it or not. Regarding the business side, I’ll keep it brief: we are unsure about the timing of when this will become a significant revenue contributor for us. In our company, “material” means a lot, and we don’t yet know when it will surpass a nominal level. However, we are well-positioned to take advantage of it. As Peter highlighted during our Analyst Day over two years ago, we didn’t include much revenue from advanced 5G network services in our forecasts because we wanted to ensure we were ready to capitalize when it does grow. Kelly has effectively detailed what we are doing in this area with early adopters. But we truly don’t know when this will transform into a major contribution, which is why we made no commitments about it in our long-range plan. However, I assure you that as this market matures, we are in an excellent position to seize the opportunity.

All right. Great. Thank you.

It looks like we're right at time. So I appreciate everybody joining us today. If you have any further questions, please reach out to either Investor Relations or the media relations department. Again, we look forward to talking to you again soon. Thank you.

Thanks, everybody.

Ladies and gentlemen, this concludes the T-Mobile second quarter earnings call. Thank you for your participation. You may now disconnect and have a pleasant day.