Good afternoon. All participants will be in a listen-only mode. You may also submit a question via X by sending a post to @TMobileIR or @MikeSievert using the $TMUS. I would now like to turn the conference over to Kathy Au, Senior Vice President of Investor Relations for T-Mobile US. Please go ahead.

Good afternoon. Welcome to T-Mobile's Third Quarter 2024 Earnings Call. Joining me on our 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 fact book, and other documents related to our results, as well as reconciliations between GAAP and non-GAAP results discussed on this call, can be found in the quarterly results section of the investor relations website. With that, let me now turn it over to Mike.

OK, thanks, Kathy. Hi, everybody. Welcome to the Q3 call. We're coming to you from Bellevue today, and I'm joined by several members of our senior leadership team to talk about another outstanding quarter for T-Mobile. Now, given our recent Capital Markets Day, Peter and I are going to keep our remarks pretty light so that we can get right to your questions. And before I get into our quarter, I want to take a moment to recognize our team for their hard work around the clock to help our customers, fellow employees, and communities to get back on their feet in the wake of hurricanes Helene and Milton. It was devastating to have back-to-back storms of this scale form in such rapid succession, but I am so proud of how our team showed up. From readiness to recovery, their tireless efforts and use of innovative technologies made a huge difference in affected communities. OK, turning to the quarter. In short, it was a really strong one. In fact, Q3 is an example of the consistent execution we talked about a few weeks ago as a core enabler of our bold multi-year plan. As you know, achieving that plan is predicated on delivering strong results reliably and repeatedly to keep pace with our ambition. And we did just that in Q3, empowering us to raise our 2024 guidance yet again. I'll start with our mobile business. We delivered the best Q3 postpaid phone net adds in a decade, fueled by record-low Q3 postpaid phone churn and continued year-over-year growth in gross adds. We also continued to lead the industry in share of switchers, and we grew share of households in both top 100 and smaller markets and rural areas. Our powerful combination of our best network, best value, and best customer experience continues to be a winning formula. We believe we have lots of room to run in our underpenetrated areas and segments, including among those who shop primarily on network attributes all across this country. Now, you heard us lay down some pretty audacious digitalization goals at our Capital Markets Day event, and we're making steady progress. I'm proud to share that our total digital mix of iPhone launch sales in Q3 is up 40% just year-over-year, and that for the first time the majority of T-Mobile branded iPhone pre-orders this year were digital. This highlights the early progress we've already begun to make in further simplifying, digitalizing, and transforming the customer buying experience, and it validates the appetite our customers have for buying online when they are given the option for a more seamless process. Our customer momentum also continues in broadband, where we delivered industry-leading net adds once again and reached a major milestone of 6 million customers in just three years. We're now halfway to our long-term target of 12 million customers by 2028. Our performance is fueled by our leading 5G network, which was recently awarded once again as having the best 5G availability in the world by Opensignal. And our industry-leading technology will continue to further differentiate us as more and more new handsets come into the marketplace that can take advantage of our new technologies like voiceover new radio, our incredible four-way carrier aggregation technology, and so many other things. Across the board, our team is doing awesome work to further extend our 5G network leadership for the benefit of customers. And they're noticing the superior speed, capacity, and consistency relative to our competition. OK, moving on to our financials. In Q3, we once again demonstrated our ability to deliver profitable customer growth, which we translated to industry-leading service revenue growth, including year-over-year postpaid service revenue growth about 2 times that of peers, driven by our highest ARPA growth in seven years, as we continue to deepen customer relationships. Our core adjusted EBITDA growth of 9% led the industry by a wide margin. That combined with our unparalleled capital efficiency led once again to industry-leading free cash flow conversion. I said I'd keep it brief, so let me sum it up. Our formula for generating outsized value creation from focusing on smart and profitable growth continues to work really well. We have lots of runway ahead of us to continue to deliver profitable industry-leading growth as we drive forward on the ambitious plan we shared with you last month. OK, Peter, over to you to provide an update on our guidance, please.

All right. Thanks, Mike, and thanks everybody for joining us. As Mike highlighted, we delivered yet another fantastic quarter and are raising our guidance yet again. So let me provide a quick update on our expectations for 2024. Starting with customers, we are once again raising total postpaid customer net additions and now expect between 5.6 million and 5.8 million, up 150,000 at the midpoint relative to our prior guide. We now expect the postpaid phone customer net additions component of that total to be approximately 3 million for the full year. We expect our full year postpaid ARPA to be up around 3% year-over-year with industry-leading service revenue growth continuing to accelerate at a higher rate in 2024 than we delivered in 2023. We now expect core adjusted EBITDA to be between $31.6 billion and $31.8 billion for the full year, up $50 million at the midpoint. Turning to Cash CapEx, we now expect to be between $8.8 billion and $9 billion, unchanged at the midpoint. Our longer-term expectations continue to be in the $9 billion to $10 billion range annually, as we outlined for you at our Capital Markets Day a few weeks ago. And finally, we now expect adjusted free cash flow, which includes payments for merger-related costs to be in the range of $16.7 billion to $17 billion, up $50 million at the midpoint, driven by both margin expansion and capital efficiency, resulting in industry-leading service revenue to free cash flow conversion. In closing, when we spoke with you all a few weeks ago at Capital Markets Day, we outlined an ambitious plan of evolving from challenger to champion. One that requires consistently strong execution. Our Q3 results are another proof-point on that journey with our unique combination of the best value, best network, and best experiences continuing to resonate with customers. And with that, I will now turn the call back to Kathy to begin the Q&A. Kathy?

Okay, let's get to your questions. Operator, first question, please.

Our first question comes from Simon Flannery from Morgan Stanley. Please go ahead with your question.

Thank you very much. Good evening. Mike, could you discuss the buyback pace, or Peter, how it's been progressing? It seems like you were quite active in the last few weeks, but less so in Q3. Last quarter, you mentioned activity in June. Was that related to Capital Markets Day? What are your thoughts on this as it has been somewhat inconsistent for a while? Peter, could you provide insight on the wholesale side? You mentioned there would be impacts from ongoing secular factors like ACP and Mint Mobile. Can you help clarify as we see this drop down to around $700 million at the quarterly level? Is there more to address, and how should we approach this moving forward? Thank you.

I think, Simon. First of all, I'll pass it to Peter for both those questions. But I just want to say congratulations to you on your retirement and thank you for keeping us all honest. I know that investors have valued your insights for many years, and you've done an excellent job for them. We'll all miss you. I thought maybe your last question would be an easy one, but instead, come on, Peter. What happened with those buybacks? You never disappoint there, Simon.

Yeah, thank you so much, Simon. You know, what happened, both on the Q2 call, we anticipated to be back in the marketplace, And we saw a similar dynamic happen after our Q2 call, as we saw before Q2. And that was our trading plan really didn't anticipate the faster than expected or earlier than expected run-up in the share price. And what that meant for us is really, it gave us an opportunity after that happened a second time to step back and rethink strategically how we wanted to approach the buybacks. And we did that. And now you see something that's less informed by quick movements towards where we think it's going and more of a consistent execution. Still thoughtful of many factors. Of course, I can't get into all of those, but it's a little bit of a change in strategy. And that's what you saw happen after that strategic change. Since that point, we've been in the marketplace consistently. So that's the buyback story. And you know, on wholesale, much like I said, in 2025, what we expect is the trough of wholesale and other service revenue. And underpinning that though, there's actually growth in wholesale and our partnerships if you consider, as you mentioned, both the ACP decline, which we now expect to be towards the higher end of that $350 million to $450 million range that we gave previously. And of course, the long-planned transition of TracFone away to Verizon, as they complete that merger integration. So the underlying dynamics are great when you take out the ACP and the TracFone. And that's what we expect as we hit that trough to continue to fuel growth past 2025.

Great. Thanks a lot.

Operator next question, please.

Our next question comes from John Hodulik from UBS. Please go ahead with your question.

Thank you. I have two questions. Firstly, regarding spectrum, it seems you've made some moves in the market, particularly trading some of your 3.45 for 2.5. Can you share your thoughts on that strategy? I see Verizon is purchasing spectrum from USM. Are you also looking for additional spectrum at the right price? Additionally, could you provide an update on the 800 megahertz spectrum, which wasn't addressed during your Capital Markets Day? Secondly, Mike, could you offer some insights on your digitalization efforts? Is there a way to frame or quantify the potential upside or cost improvements from that process? Thank you.

Well, let's do the digitalization one first, John. If you recall at Capital Markets Day, we laid out a pretty ambitious plan for value creation over the years. And Signal Day 2027 core adjusted EBITDA, about $10 billion at the high point of our guidance above 2023 levels. And so that kind of shows you the potential. Now a lot of that's revenue growth, which is partly driven by digitalization, and a lot of that is recrafting the underlying operation, getting more precise in our marketing, preventing customer problems that are a source of so much value loss in this industry. And so we didn't unpack all the details of which parts to drive which parts. But I can tell you that we arrived at that plan after working on it for almost two years. And after detailing out a 14-quarter quarter-by-quarter detailed plan of what will land when. So that we have the barometers of knowing if we're running ahead of our plan that we can increase our promises to you. If it looks like we're going to be running behind, we can course correct, that's how we do these things. And if you go back to our 2021 plans when a lot of people thought what we said back then was unbelievably ambitious, and we did it. But we did it because we had a detailed plan. We don't always provide a lot of transparency. I think we do a good job there. We provide more than others on transparency, but we also have to keep some of the secret sauce to ourselves for competitive reasons. To make sure you saw the barometers underneath that, though, we put some markers out there. We said we wanted person-to-person customer service interactions to be reduced by 75% in the planning horizon. That's a big marker. We said we wanted the majority of all activations to be digital and many other markers that we put out there. And one of the things that Peter said was that the actual business plan that we laid out didn't assume full achievement of each of those KPIs. So in a world where we deliver each and every one of those KPIs, there is upside beyond the guidance range. And so we try to put out a plan that's realistic, but at the same time ambitious. And that's kind of what we mean by Challenger to Champion. It's a plan for the future that's an evolution from Challenger to Champion that really causes us to have to do things that nobody's ever done and really rethink how this industry works, as you see us doing in so many ways. And hopefully, that came across well at Capital Markets Day. Now switching to spectrum. You asked a couple of different questions. One of them was about 3.45 specifically, and I'll just ask Ulf to talk about what's going on there.

Right. Well, thanks, Mike. Well, on our journey, when we are building our network, which is a dense 5G multilayer network, we are always working with our different layers and the different spectrum assets we have. We have a superior sub-6 gigahertz holding today which is providing us with our enormous capacity benefit. And in that, we always value spectrum short-term, long-term and mid-term. And we see that 3.45 is not part of this plan. So that's why we did it. Then this transaction goes through a number of different approvals and so on, and we will see. But the way we did it, we are very satisfied, I could say, with how it came out. On the 800 band, we concluded the auction without really a bid that was qualifying. That gives us now new optionality really. We can either deploy it or we could look at doing something to benefit monetarily from it. So we have those optionalities as we go forward. We're always working on our spectrum portfolio and continue to build this leading 5G network based on it.

Hope that answer the question, John.

Okay. Thanks, John. Operator, next question, please.

Our next question comes from David Barden from Bank of America. Please go ahead with your question.

Hi everyone. Thank you very much. To start off, Mike, you were in Germany at the DT-CMD, where they discussed the expectation that their ownership stake in T-Mobile would increase, potentially reaching the high 50% range from the current levels. Could you explain a bit more about your insights on how this timing might play out? This could influence the mechanics of the buyback on the float, potentially enhancing its impact and providing greater benefits for US investors. Additionally, Peter, your target of 3 million net postpaid phone additions for the year suggests about a 100,000 decrease in year-over-year additions for the fourth quarter compared to flat year-over-year in the third quarter. Is this just a conservative estimate, or is there something else we should be aware of? Thank you.

Okay. I’ll start, Dave. I'm sorry I can't provide a more definitive answer to your question. The typical response would be that you need to ask them directly. I can say that throughout this long journey as an independent company with DT as our controlling shareholder, we’ve seen their position fluctuate from the 40s to the mid-60s. They have maintained a controlling stake the entire time, and our governance structure has remained fairly constant. The Board structure and the individuals involved have been consistent over a long period. Currently, TMUS is a vital part of their operations, and they are very clear about that. Our company has grown substantially larger than theirs, among other factors. From a governance standpoint, it works well because what benefits us generally benefits them, particularly given the relative value and size. They have been extremely supportive of our strategy. Having industry experts from DT on our Board has been advantageous. Many companies in our sector lack the benefit of insiders who can thoroughly examine our initiatives. Ultimately, this management team and Board have collaborated effectively to create significant value and success. They did mention that they have various strategies and multiple capital allocation approaches that might lead them to consolidate their position over time. However, the specifics of if and when that will happen are questions you'll need to direct to them. As for your second question?

Yes, Dave, on the 3 million, so it's approximately 3 million from a postpaid phone perspective. And as you know, Q4 has a unique attribute in that the last couple of months, which are really in front of us here are a period of really great activity. We have certainly positioned well, as you saw in Q3. And of course, we have ambitions to outperform what we put there. But we're always cautious with the two biggest months of Q4 ahead of us, in terms of putting a guide out there that's achievable for us. So somewhere approximately in that 3 million, not right on with, of course, the ability and aspiration for us to get after it.

Perfect. Thank you guys.

Thanks, Dave. Operator next question please.

Our next question comes from Michael Rollins from Citi. Please go ahead with your question.

Thanks, good afternoon. Two questions, if I could. First, curious if you could give us an update on the journey for deepening penetration in the SMRA markets as well as within the business vertical. And then secondly, with respect to postpaid phone ARPU, it looks like it was up, I think, 1.8% year-over-year. And if I remember correctly, just from some of the discussions in the past, the base case expectation for the back half of the year may have been up 1%. And just curious if you could impact the strength in ARPU? And is there something to take from this strength as we look at future quarters? Thanks.

OK. It turns out to be a three-part question. So I'm going to ask three different speakers to try to keep it tight. But we're going to go to Jon on SMRA, quickly to Callie on business, and then back to Peter on ARPU, and I'm going to predict he's going to pivot you to ARPA. But, Jon?

Yes. Hi, Mike. So just smaller markets in rural areas, I always take a moment to remind everyone that this is 40% of the market, 140 million people, 50 million households. We could not be more pleased with the progression of our growth in this space. Q2 was our highest win share quarter that we've ever delivered. And here in Q3, we beat Q2. And so we've got a great series of momentum happening in the marketplace where we're driving, switching, winning those switching decisions, Number #1 in terms of win share in the marketplace in smaller markets and rural areas. And like I talked about at Capital Markets Day, too, the thing that built a lot of confidence for me is that our overall Net Promoter Score in smaller markets and rural areas is now number one, and it's 20% higher than the next highest competitor. For me, that builds ongoing customer advocacy, customer loyalty and continues to build that overall growth momentum that we have in that particular marketplace. And that's why we're continuing to build net new accounts in the top 100 markets as well. So we're having a lot of fun doing this. I've been talking about it for three years and we're continuing to drive new highs in our switching activity in smaller markets and rural areas.

And I know you didn't ask out this, Mike, but one of the things we reminded you of at the Capital Markets Day is we de-average that top 100 set of markets for you a little bit. And this dynamic that Jon is talking about that has been a huge tailwind for us in SMRA is present in a lot of those top 100 markets. There's a big part of those. Well, we're not Number #1, and some of them we're not even #2. And so there's big tailwind potential there. And in all 3 types, where we're #1, where we're #2 or even while we're #3, T-Mobile is growing. So it really shows that our formula works across the board. And now to the second part of your three-part question, what's going on with the business. And by the way, Callie, while you're talking about that, maybe you could hit Chetan Sharma’s question about enterprise solution deals, what are we seeing? Could you name names, what's going on out there?

Okay. We'll do. Well, Jon mentioned that they're having a lot of fun. And I got to tell you, so is this TFB team. We beat our benchmark competitor again in postpaid phone net adds in postpaid net adds and invoice churn. We're continuing to see profitable growth, rising CLVs in all segments. And we also just declared our ninth consecutive quarter of positive port trends in all segments against our competitors. In enterprise, let me narrow in specifically on a couple of the segments and some customer wins and use cases. Enterprise, we had our best activations on record. So considerable growth across all of our solutions and working with existing customers like American Airlines, where we're developing BTS solutions for their airplane operations or new logo growth with New York Life Insurance, where we are helping them combine solution with Smarsh, to make sure that their voice communications are secure. In government, we saw double-digit growth quarter-over-quarter and net adds across phone, BTS and in HSI. And a lot of that growth is supported by wins in the Fed via the Spiral 4 contract. So we are growing and winning with the Army, the Air Force and the Y-12 National Security complex. And then when I think about HSI in particular, this is one of our strongest quarters ever, highest net adds in fixed wireless. And we're doing really well. So we saw a lot of wins this quarter with retail multisite. So new customers include Lowe's, Spirit Halloween, PetSmart and then in education, where we're able to solve some connectivity problems with some of the largest school districts in the country like Houston ISD. And then again, like I mentioned before, bringing our fixed wireless solutions to the Department of Defense. And we certainly have more room to run. With A&S, we had some really cool deployments this year. We're starting with advanced network solutions to really see our pipeline continue to grow and then continuing to see more and more deals closed each quarter, which the team is working hard against that target. Oxy Petroleum is an example, Chetan to answer your question online, where we deployed a hybrid A&S solution across 20 of their manufacturing plants. And so that's some of the work that we've been doing this last quarter, part 3. I'll hand it to Part 3.

Great. Thanks. Well done. And we're working on increasing ARPU.

Part 3, well, I'll definitely be truthful and redirect you to ARPA in just a second. But honestly, we do see strength there. And previously, what we had said is, from an ARPU perspective, we see probably about a 0.5% year-over-year increase probably now see about 75 bps of that, so a little bit of strength there. But the reason we don't focus on ARPU as much as you know, is because it is very much a mix-driven metric. And so things like the success that Callie just described in the business group where you don't have high ARPUs, you tend to have lower ARPUs. With higher ARPUs, very, very strong CLVs, segment plans, things like that. That's why we pivot into ARPA and again, continued strength there and just increased our guide very exciting to be at 3% year-over-year increase from an ARPA perspective.

Thank you, Mike. Thank you, Peter. Operator, next question, please.

Our next question comes from Jonathan Chaplin from New Street Research. Please go ahead with your question.

Two, one for Ulf on the 800 megahertz again. We've seen some challenges to your request to use PCS spectrum for the direct-to-device service with Starlink. Wondering if you think those challenges posed a real sort of headwind you're being able to use that spectrum and whether 800 megahertz might be an alternative? And then, Mike, a question for you. AT&T said something that totally shocked us today that at some point, they think they could open their network, their fiber network to wholesale. I'd love to get your perspectives on that. Would it make sense for you guys if they did that to leverage their wholesale network to self-bundled products? Thanks.

Okay, great. I'll start with both topics and then see if Ulf has anything to add. Regarding the direct-to-sell, we don't foresee any barriers to progress. We're eagerly anticipating the start of our beta test. During the hurricanes, we managed to test with temporary authorization and successfully sent hundreds of thousands of text messages to people who otherwise wouldn't have received them, even though our network recovered impressively fast. We're getting closer to implementing this. We have over 200 satellites in operation, and I believe things will work out despite the necessary processes with the FCC. This is fundamentally positive, and we’ll be moving forward very soon. Concerning the 800 megahertz spectrum, as Ulf mentioned, we now have various options available. We were required to auction it due to the merger and consent decree, but there were no qualifying bids, so we are no longer obligated to sell it. This gives us flexibility. I want to reiterate that proceeds from any potential sale are not included in our financial plan, which means if we do sell it, those funds would be additional. Furthermore, Ulf's network plan does not currently incorporate using that spectrum. I highlight this to emphasize our extensive options and the value of that spectrum. It's crucial, and you'll need to stay tuned for our decisions on its future use. Regarding fiber and open fiber, the cable industry has seen interesting collaboration because there are no overlaps. Predicting the future is challenging, especially in such a competitive market, which I believe will always be competitive. Many developments will arise over the years, and we need to find the best ways to serve consumers and businesses. We are very excited about our fiber plans and intend to compete vigorously. Our strategy is to be the first to offer fiber where we operate, and that’s why we've partnered with some of the fastest movers in the industry to deliver this exceptional service. With that said, I won't speculate further on future developments.

Thank you, Jonathan, for the question. Next question, please.

Our next question comes from Craig Moffett from MoffettNathanson. Please go ahead with your question.

Sure thank you. And first, let me embarrass Kathy by wishing you a happy birthday today.

Yes. Happy birthday, Kathy.

Appreciate it.

I understand that you may not forgive me for this, Kathy. I would like to ask about the regulatory aspect of upgrade rates, as similar to your peers, there continue to be very low upgrade rates on handsets. It seems that the discussion regarding a significant handset upgrade rate this year is mostly concluded. Looking ahead to next year, the handset manufacturers have mentioned expectations for a more vigorous AI-driven upgrade cycle. What are your thoughts on this? How are you preparing for it? And how do you see it affecting your market share or potential benefits?

Yes, a great set of questions, Craig. Why don't we start with Mike Katz and talk about the upgrade rates we're seeing and little future casting?

Yes, the current upgrade rates are low, largely due to the factors we've discussed in recent quarters. Customers' natural demand is being met through our upgrade programs and the quality of our T-Mobile 5G devices. Over 80% of our customers are using 5G devices, which perform better and are lasting longer, while also becoming more expensive. These elements have influenced the upgrade rates we’re seeing. Looking ahead, it's challenging to predict as many OEMs don’t disclose their long-term plans. However, similar to this iPhone cycle, we anticipate the same situation for next year’s cycles, including with iPhone and other manufacturers. We believe T-Mobile is in a strong position, whether there’s a significant upgrade cycle or not. Historically, we have excelled during times of high marketplace switching, as demonstrated by our performance during the last iPhone launch, where we gained 315,000 net new accounts, the highest in the industry for Q3. We believe that in a market with substantial switching driven by new devices, which leads to significant upgrades, T-Mobile will continue to succeed. This has been evident consistently over the years.

OK. Anybody want to add to that?

Well, the only comment there on the phones that Mike mentioned is that many phones are coming up and getting 2-carrier aggregation, 2-carrier aggregation in the uplink. This gives enormous benefits. It's 30% higher speeds in the downlink, 15% in the uplink. So this stuff performs really well on our network. And just a reminder on what Mike brought up is that we are the only one who has pure stand-alone core. We've had it since 2020. It's well tuned. It's rolled out over entire network, and it allows us to do these things. It allows us to the 4-carrier in the downlink, it allows us for the 2-carrier in the uplink with all those benefits for the new devices coming out. And it also allows us now to use voice over the new air interface as you mentioned in your opening, that's a huge thing. It really leads to much better call setup times. It leads to better quality, and it gives us the opportunity for more effective spectrum use.

It's interesting to consider why we make these statements. First, as Mike mentioned, when customers have an exceptional experience with their current device at T-Mobile, they are less likely to switch. A positive experience leads to less shopping, resulting in low upgrade rates. When customers do switch, we benefit because we excel at capturing those switching moments. There's not enough discussion in this industry about switching, but the data clearly demonstrates that we are the leader in that area. If a super cycle occurs in the future and encourages more switching, that will be advantageous for us. Ulf, your point about newer devices utilizing our advanced capabilities highlights another important aspect. During Capital Markets Day, we indicated that we aim not only to maintain our 5G network leadership but to expand it over time. Evidence supports this, showing that our margin of superiority has increased compared to two years ago. One factor contributing to this is not just the pace of our technology deployment but also the reality that many devices currently in use do not fully leverage the network's capabilities. For instance, the latest iPhone 16 has advanced features that are specifically enabled by T-Mobile's network. As more of these devices get into customers' hands, they will unlock the technology we've already implemented, providing additional momentum for us to extend our lead. This will create a positive dynamic in the future when customers upgrade and feel satisfied with their current devices. We see encouraging trends developing in this area. I hope that clarifies things, Craig.

And maybe I would add just one little bit because of those dynamics that we're seeing what Mike described, as I think about Q4, we'll probably see the same seasonality from an equipment revenue perspective that we saw last year. So the same kind of absolute dollar increase that we saw Q3 to Q4 is, what I expect to happen from Q3 to this Q4. Obviously, higher than Q3 with that holiday seasonality happening there, but that's the trend that we'd expect.

Thanks, Craig. Next question, please.

Our next question comes from James Schneider from Goldman Sachs. Please go ahead with your question.

Good afternoon. Thanks for taking my question. I was wondering if you could maybe comment on your plans for network upgrades on the wireless side for next year. Maybe talk about the relative prioritization of your three-plus gigahertz 5G upgrades, as well as how much you plan on doing in terms of rural and markets outside of the Tier 1 against any other priorities you may have? Thank you.

Thanks, Jim. This might be a good opportunity for Ulf to kind of remind that we have a different approach for how to do this than many. And it's algorithmic, it's driven by deep data. And in that sense, the planfulness around big macro topics like that are a little bit different for us. In other words, we're looking now at a much more micro level than kind of a broad secular level without as much preference for whether it is rural or whether it's urban et cetera, but maybe you can explain customer-driven coverage and how it drives our priorities into 2025.

We have valuable assets below 6 gigahertz that enable us to create a highly consistent network. Over 80% of our towers are similarly equipped, and we're unique in the market for having three layers dedicated to 5G. Our approach to building and expanding our network is guided by a methodology we call customer-driven coverage, which took us about 1.5 years to develop. This method utilizes an algorithmic approach powered by AI, analyzing billions of data points from customer experience across the network. We correlate this data with business insights and actual customer behaviors on our network. We then assign a customer lifetime value (CLV) to a grid made up of over 4 million hexagons, each 165 meters wide, throughout the country. These values are assessed relative to competitors to strategically understand where to build to best meet customer needs. This isn't just about populating areas; it's a sophisticated effort to identify where our build will be most valuable to customers, which is central to our capital allocation strategy. Regarding the 3 gigahertz band, we approached the auction for C-band smartly, targeting 50 markets where we believe this spectrum aligns well with our grid. When deployed, it will be optimized for our tower-to-tower distances and effective in markets that may need capacity expansion in the future. However, it's not immediately necessary, as we still have ample capacity to grow with 60% of our mid-band spectrum to 5G already deployed, along with other technology advancements we plan to leverage. This summarizes our current positioning regarding our C-band strategy.

Jim, there are a few key points to consider from that. First, I apologize for the lack of specifics, but we are keeping some details under wraps regarding how and when we will deploy each band and their exact locations. This is due to various reasons. However, we aim to be transparent in some areas. We previously stated at Capital Markets Day that our $9 billion to $10 billion capital budget is adequate for both defending and enhancing our 5G leadership while achieving the goals outlined in our business plan. Our modeling is comprehensive. Our approach is systematic and data-driven, focusing on numerous small projects that may involve upgrades, adjustments, or potential future expansions like the integration of C-band. We have a multitude of projects that are prioritized based on practical factors such as zoning and permitting, but primarily guided by our AI-driven model called customer-driven coverage. This strategy will enable us to stay ahead of demand and maintain our leadership in 5G performance and experience within the outlined capital expenditure limits.

That's very helpful color. And then just as a quick follow-up, can you maybe comment on whether you see anything in either your macro indicators or your underlying consumer data have you at all concerned that we are about to see a significant deceleration in the overall kind of gross add environment in the consumer wireless space. Thank you.

I apologize for not being fully equipped to answer your questions. The reason the second one is challenging is that we've found that T-Mobile, or even our industry as a whole, isn't a reliable early indicator of macroeconomic changes. This is partly due to the essential nature of our service. Therefore, we're not the best source for early signs of shifts in consumer behavior. Our customer metrics show that spending remains consistent across categories and segments, with no significant secular changes to note. Regarding growth in the industry, there are unpredictable dynamics. We've been quite effective at predicting our own business performance, but anticipating market growth has been more challenging. A lot of what's being added to the industry can be somewhat questionable, especially concerning lower-quality net additions. That's why we concentrate heavily on customer switching. We focus on our core business, particularly families on postpaid plans who've switched to us from other providers, which continues to contribute steadily to our revenue growth. Another trend we're monitoring is the ongoing migration from prepaid to postpaid services. This trend could potentially serve as the indicator you’re looking for, as we've observed a significant transfer from prepaid to postpaid over the past five years, especially during favorable economic conditions. In the latest quarter, we recorded a strong net transfer of about 175,000 customers from prepaid to postpaid, indicating that this trend remains robust. This could be a sign to watch; any slowdown here could suggest changes in the ability of customers to qualify for postpaid plans over recent years.

Operator, next question, please.

Our next question comes from Peter Supino from Wolfe Research. Please go ahead with your question.

Hi, and thank you. A question that's a bit longer term in nature on spectrum costs. your stock valuation multiple expansion shows a lot of market confidence in your growth outlook. And if you put your investor hat on, may you agree that the other key value driver is the cost of that growth. And so I want to ask you about a distant but potentially expensive issue, the 6G cycle. 4G and 5G costs, each of the major MNOs, tens of billions of dollars, your 5G solution with Sprint was quite elegant. I'm wondering if you'd share your view on that and whether anything about your business today sets up the long run for a different level of spectrum and RAN costs than we saw for the 4G and 5G cycles. Thanks.

That's a great question, Peter, and while it's a bit early to discuss, there are many reasons to be optimistic about long-term trends. That's why we wanted to share our vision for what comes after the current 5G cycle at our Capital Markets Day, focusing on AI-RAN and its potential. There might be a significant cycle ahead, which could be more efficient to implement than previous ones. The promises of Open RAN may finally be realized at scale during the AI RAN era, allowing us to mitigate future replacement costs through improved efficiency. We're optimistic about our planning horizon for the next few years, indicating that the $9 billion to $10 billion CapEx range makes sense. While we're not yet in full-scale 6G time frames, we want to highlight our vision for the future with AI RAN, which has great potential. Our plans are built around two core metrics: technology should enable us to derive more network performance per CapEx and OpEx dollar, and it should also enhance network performance per unit of spectrum. This has been the trend and we believe it will continue, with the next cycle potentially being more efficient than the previous verticalized 5G cycle. It's worth noting that the significant costs associated with 5G were partly due to competitors aggressively spending to acquire mid-band spectrum, motivated by the increased competition from our merger. If the situation had played out differently, this may have evolved more gradually, highlighting the competitive impact of our merger on the industry and its rapid progression. Customers have benefited, as has the industry. Although 5G has been expensive for some, overall industry cash flows are at or near all-time highs, and consumers enjoy three to four times more speed and data usage at similar price points compared to five or six years ago. Consumers are clear winners from the 5G cycle, while the industry remains healthy. The outlook for 6G is promising. As we did with 5G, we plan to anticipate future developments and lead the way for 6G. That's why we've formed unique partnerships with Ericsson, Nokia, and NVIDIA to help innovate AI-RAN and create a future that disproportionately benefits T-Mobile customers.

Thank you, Peter. Thanks, Mike. Operator, next question, please.

Our next question comes from Sam McHugh from BNP Paribas. Please go ahead with your question.

Maybe just a follow-up on that in some ways. It's good to hear about like the consumer benefits that your scale through the Sprint deal brought. How is engagement going with different parties on the US Cellular deal, ever as much you could add on that? And then a second, just quick follow-up on the ARPU growth. I know ARPU, not ARPA. But in terms of the upside surprise, is that more of a mix effect of the gross adds? Or is it the price rise that's landed better than maybe you anticipated? Thanks very much.

OK. I'm going to start with Peter on ARPU and ARPA. And is it mix driven? Or what's it driven by and then probably turn to Mike Katz to talk about how US Cellular is unfolding?

Yes. ARPA is a number of factors, as you know. On the consumer side, it's a continual expansion of the relationship, including with 5G home broadband, other connected devices, really seeing strength in growth and expansion of customer relationships. Callie spoke a lot about the success in T-Mobile for business across the segments and how you see ARPA expansion there. In terms of the rate plan optimization, that was a very minor component of the year-over-year ARPA change and certainly not the driver for the 3% increase now that we anticipated really is core expansion of customer relationships that's so exciting.

Yeah. We have several transactions. And I would say all of them are in the process, and the processes are going really well. In terms of Lumos, we expect that to close in the first part of next year. US Cellular, which is also in the process, maybe the middle part of next year. And then Metronet, we also expect to close in 2025. So good progress through the whole regulatory process. There's obviously several different groups that have to review and approve them and feel like those are going really well so far.

We happen to have at the end of the table, one of the nation's most accomplished antitrust layers. So our General Counsel, Mark Nelson, any commentary on things we're learning as we go along.

Yes. Both Lumos and Metronet have passed the DOJ review process. They are still awaiting approval from the FCC, which will take a bit longer, as Mike mentioned regarding U.S. Cellular. We believe this will be beneficial for consumers, resulting in lower prices, particularly for U.S. Cellular customers, and improved coverage for everyone. We are optimistic about receiving clearance in due time and are currently navigating the process with the relevant agencies.

We have started planning with the counterparties, especially US Cellular, as this requires more complicated arrangements. We've met the teams, and they are enthusiastic. They are excited about the core principle that Mark mentioned. This is a situation where we can clearly see benefits, including lower prices and improved network quality. Both T-Mobile and US Cellular customers will experience a better network. There is no doubt about that. US Cellular customers will also enjoy lower prices as they switch to T-Mobile plans. This is a classic win-win scenario. We are very confident, but we need to focus and go through the necessary steps to present our case to all involved parties. It’s an exciting time.

Great. Thank you.

Thanks Sam. Our next question, please.

Our next question comes from Kannan Venkateshwar from Barclays. Please go head. With your question.

Thank you. Maybe one on pricing. Mike, when you look at pricing across the industry right now, it just seems like it's taking much better than expected. I mean, churn is not as high when these price increases are taken, and we've seen multiple price increases, of course, from your peers. Does that make you think that the value gap is maybe bigger in wireless and maybe this becomes a recurring opportunity? And related to that, when you think about your volume growth, you're over-indexing versus the rest of the industry by a significant amount. And that's obviously great from a share perspective, but it does come with its own cost in the form of working capital and equipment margin rate and so on. So is it a third that if prices are making better, then maybe the balance can shift a little bit more towards price and drive the rest of the P&L and cash flow in a slightly different direction. Thanks.

That's a great question. Our strategy has been very consistent. Regarding the working capital and P&L impacts of a growth orientation, that's pretty much in line with our expectations. It's true that this quarter, we had the best Q3 in a decade, which is beneficial. However, we're growing methodically and consistently, which is what you want to see as we pursue our ambitious long-term goals. I believe our revenue growth plan is among the best, focusing on delivering value to customers, which has led to service revenue growth and postpaid service revenue growth that significantly outpaces the industry. I want to emphasize that our strategy, which highlights value, network quality, and customer experience, is effective and we are careful not to jeopardize it. That being said, we need to adapt to changes. We have been doing some of that, and I think it has been successful. Nevertheless, anything we do now or in the future must align with our vision as the Un-carrier, which stands for superior value. Your question suggests that there may be room for adjustments over time, and if changes are needed in the future, we will ensure they remain true to our brand.

Before we go to our last question on the phone, I'm going to take one question from social media probably for Peter. Given the nice EBITDA take-up for the year, can you help us understand what's driving that? Is it the rate increase? Or are there other puts and takes we should think about?

Yes, absolutely. Thank you, Kathy. There's a number of things. Of course, we're at that time of the year when the year guide is the Q4 guide. And so maybe I'll just focus on all the puts and takes within Q4. Of course, there's more adds for the year as we just raised guidance yet again on total postpaid as well as total postpaid phone. And then there is a few puts and takes as I think about, while the net is an increase in the midpoint. There is a non-cash spectrum swap gain as that deal has closed. That's about $137 million. But that is primarily offset by slightly higher ACP decline. So as I mentioned earlier, we'll be at the higher end of that $350 million to $450 million range. And then, of course, there's hurricane costs that we're incurring in Q4 to make sure that we get the network back up and running and serve customers as quickly as possible on that front. So with all those puts and takes, we still saw a nice increase of $50 million at the midpoint and I'm very excited about that.

Every guidance we provide is fundamentally based on the business fundamentals, and each quarter has various unique factors that can either help or hinder our performance, and this quarter is no exception. Good one. Was that question related to Kathy's birthday online?

Okay. All right. Last question. Thanks, operator.

Our last and final question comes from Eric Luebchow from Wells Fargo. Please go ahead with your question.

Hi, I appreciate you fitting me in. I wanted to discuss the high-speed HSI or fixed wireless business. You updated your guidance at Capital Markets Day with a $12 million aspiration. While we mentioned this suggests a modest slowdown in net additions if we project it linearly, you have maintained a consistent quarterly run rate of 400,000. Does that still seem like a realistic target in the near term? Additionally, could you share more details on the trends between gross additions and churn? Also, how does this break down geographically between urban, suburban, and rural areas where you have implemented it? Thank you.

Sure. Most of our growth is coming from cable and from existing T-Mobile customers. The overall trends haven't changed significantly. As we expand, we need to increase our gross adds to stay ahead, even if churn remains steady. Each quarter brings its own dynamics, but over time, our churn trends have improved nicely as this customer cohort has matured, which is encouraging. While there may be fluctuations each quarter, I’ve been generally satisfied with our performance over the past year and a half. However, we need to continue boosting our gross adds. This is a key reason for the difference between our current run rate and the expected size by 2028, at least for now. We'll see how things progress. It's been notably consistent; we've been adding more net customers than anyone else in the industry, and in some quarters, more than all competitors combined. One factor that boosts our confidence is the strong customer appreciation for our product, which has achieved the highest Net Promoter Score in the country by some measures. Our average speeds are comparable to cable averages, with usage at around 0.5 gig or 0.5 terabyte per month and increasing. The everyday experience is three times better than it was three years ago, showing steady improvement. While it matches cable performance, it also stands out among other fixed wireless options. We’re very optimistic about the product and will continue to invest in enhancing the customer experience to keep it exceptional, and so far, things look good.

Thank you, Mike. That's all the time we have for questions, and we appreciate everyone joining us today.

Thanks, everybody.

We look forward to speaking to you again. And if you have any further questions, you may contact the Investor Relations or media departments. Thank you.

Ladies and gentlemen, this concludes the T-Mobile Third Quarter Earnings Call. We thank you for your participation. You may now disconnect, and have a pleasant day.