T-Mobile US Q4 2024 Earnings Call Transcript

AlphaStreet
Provided by AlphaStreet
January 29, 2025
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Operator

Good morning. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, please press star then 1. To withdraw your question, please press star then 2. You may also submit a question via X by sending a post to @TMobile IR or @Mike using hashtagmus. I would now like to turn the conference over to Kathy, Senior Vice-President of Investor Relations for T-Mobile US. Please go-ahead.

Cathy Yao
Senior Vice President, Investor Relations at T-Mobile US

Good morning. Welcome to T-Mobile's 4th-quarter and full-year 2024 earnings call. Joining me on our call today are Mike Sievert, our President and CEO; Peter, 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. We encourage you to review the risk factors set forth in our SEC filings. Our earnings release, investor fact book and other documents related to our results, as well as reconciliations between GAAP and non-GAAP results discussed on this call can be found on our Investor Relations website. With that, let me now turn it over to Mike.

Mike Sievert
President & Chief Executive Officer at T-Mobile US

Okay. Thanks, Kathy. Good morning, everybody. Well, my senior team and I are coming to you from New York today, ready to close the books on a fantastic 2024 for T-Mobile. Before we start, I'd like to first express that our thoughts are with everyone affected by the devastating California wildfires. And I want to thank our team members who worked tirelessly to keep Californians connected. Our network held up very well during the emergency, restored to 99% within a few days, thanks to advanced network self-optimizing technologies. And in addition, we activated T-Mobile Starlink satellite to cellular capabilities on an emergency basis, allowing customers to send hundreds of thousands of techs and receive emergency alerts via satellite even from affected areas. As we speak, our people remain on-the-ground, engaging in community support and we'll continue to do what we can to help. Okay. Let's shift to those fantastic 2024 results, which I know you're all eager to hear about. Once a year at the end-of-the year, we have the opportunity to widen the aperture a little bit and let's start with growth. In 2024, more customers than ever before decided to join the uncarrier. We delivered our highest-ever postpaid phone gross additions. We also saw our best-ever postpaid phone churn. In fact, 2024 marked our third straight year of more than 3 million postpaid phone net additions. Now sometimes I get asked whether our greatest growth years might be in our past. So I want to be clear. In our storied growth history, 2024 was our greatest growth year ever across multiple metrics. And we finished strong. In Q4, we once again led the industry in postpaid phone net additions with 903,000, growing our share of households year-over-year across both the top 100 and smaller markets in rural areas, while leading the industry in postpaid switching share. At the same time, we continued to deepen our relationship with customers and meet them where they want us to be. Many are taking the opportunity to self-select up the rate card. In Q4, we continued to see over 60% of our new customers selecting our premium plans and we grew our postpaid ARPA at the highest rate in over seven years. As you know, a big part of our growth trajectory centers on tapping into digital to transform customer experiences. And we're already seeing great results from our efforts in this area. And one example is our flagship digital platform, TLIFE. Customers are loving it. We said we'd see 40 million downloads by the end-of-the year, but we saw more than 50 million and with some incredible engagement numbers. And we aren't just delivering industry-leading growth in consumer mobile, we're also doing it in business. In Q4, we delivered our best-ever quarter in phone net additions, our best-ever quarter in phone net additions and saw our lowest ever total postpaid churn, driving our 10th consecutive quarter in positive port trends across every part of the T-Mobile Business Group. An example of this momentum, I'm excited to share that the City of New York awarded us with a significant contract, which includes services for the city's public safety network. Look, there's no city in the country with higher standards or more complex needs than New York. Given our differentiated ability to deliver network capabilities, including our groundbreaking key priority service that I first unveiled to you at our Capital Markets Day. It's no wonder the City of New York chose the T-Mobile network to keep their team connected. Speaking of network, third-parties continue to affirm our leadership. In January, OpenSignal named us the winner in all five overall network experience categories and Ukla once again recognized how our network outperformed others across the country by a lot. I promised you that we would not just defend, but we would further extend T-Mobile's 5G network leadership for the long-haul and that is exactly what we're doing. Let's hit on growth some more. This time turning to our 5G broadband offering. We captured our highest-ever share of industry nets once again this year. And in Q4 for the 12th quarter in a row, we led the industry in broadband growth with 428,000 net additions. We also updated our pricing construct allowing us to compete for the most price to certain customers while simultaneously creating opportunities to self-select up the rate card to more feature-packed plans. In fact, in Q4, we delivered our highest year-over-year broadband ARPU growth and we did it while simultaneously winning customer hearts with superior value. That is a great formula. Our story is simple and it's consistent. We have sustainable long-term structural advantages, allowing us to continue to offer the unique combination of best network, best-value and best experience and we have lots of room to run. Let me be clear, we are not chasing growth for growth's sake. In fact, we're focused on delivering thoughtful, smart and profitable growth and that translated to industry-leading financial growth in 2024. In Q4, our postpaid service revenue grew over 8%, a rate more than double that of peers. We saw core adjusted EBITDA growth of 10% in the quarter and 9% for the full-year, continuing to lead the industry by a wide margin. And for the full-year, we delivered our highest-ever diluted earnings per share paired with our highest-ever free-cash flow of $17 billion, generating industry-leading cash-flow conversion from service revenues of 26%. This outsized cash generation has allowed us to return a cumulative $31.4 billion in total returns to our shareholders through year-end just since we launched our program in '22. The stellar year we just delivered, along with the strong Q4 exiting momentum, sets us up extremely well for 2025. In fact, we're starting 2025 with our highest-ever beginning of the year guide for expected postpaid net additions. And in addition, we're increasing our service revenue growth expectation for '25 versus what we shared just a few months ago. Peter is going to share our detailed guide in a minute, but it's clear that 2025 will be an exciting year that should outperform prior growth expectations, while also setting the table for '26 and '27 with important network investments and transformation investments. Also, I am pleased to say that the next time we do this, Srini Gopalan will be here at the table with us as our new COO. You may have seen our news on this Monday about his appointment starting March 1st. As we get deeper into our Challenger to Champion Plan, arguably the most exciting chapter in our history, I decided now is the time to return to having a COO at T-Mobile, so I can have a left-to-right operating partner and therefore focus even more of my time on our longer-term opportunities and strategy. Srini is the right guy and one of the reasons for that is he is well-known to all the rockstars here at this table. I can't wait to see his impact. Let me wrap-up by expressing pride in our incredible team who produced these powerful results. This is a team who sets out to do hard things and is full of ambition. And often we actually even over-deliver on those ambitions. Our 2024 results speak for themselves. But what I'm more excited about is the Clear Eyed strategy we have for the future and the momentum running into '25 that should allow us to not only deliver strongly this year, but position us even better for '26, '27 and beyond. This team is laser-focused on consistent execution and value-creation, both for the short-term and the long-term and I have never been more excited about what's ahead. All right, Peter, over to you to provide an update on our guidance.

Peter Osvaldik
Executive Vice President & Chief Financial Officer at T-Mobile US

All right. Thanks a lot, Mike. As Mike already mentioned, we delivered industry-leading results in 2024 and that momentum is carrying on through 2025. So starting with customers, we expect to deliver total postpaid customer net additions of between $5.5 million and $6 million, our highest-ever beginning of the year guide. We expect approximately half of that total to be postpaid phone net additions, also representing our highest-ever beginning of the year outlook. The strength we've seen in our service revenue growth underpins our expectation to now deliver approximately 5% growth in-service revenue for the full-year, up from the 4% we indicated during our Capital Markets Day. As part of that service revenue growth is our expectation for postpaid ARPA growth of around 3% for the full-year as we see continued deepening of customer relationships and continue to find opportunities to optimize our rate plan structure. We will intentionally leverage to strengthen our top-line to both fund our highest-ever beginning of the year, total postpaid net customer additions expectation and also bolster investments across our network and digital capabilities not only to deliver on 2025, but continuing to set-up momentum against our multi-year guide. In-line with what we told you in September, we expect core adjusted EBITDA to be between $33.1 billion and $33.6 billion for the full-year, up 5% at the midpoint. Turning to cash CapEx, we expect cash CapEx to be approximately $9.5 billion as we outlined for you at our Capital Markets Day, fueling the investments to not only maintain but extend our network leadership. Finally, we now expect adjusted free-cash flow, including payments for merger-related costs in the range of $17.3 billion to $18 billion, driven by both margin expansion and capital efficiency, resulting in industry-leading service revenue to free-cash flow conversion. To add some more color on this, this includes an expectation for 2025 cash income tax payments of approximately $700 million based on current tax policy and increased cash interest payments of approximately $3.9 billion as we continue to maintain our prudent 2.5 times leverage target on a growing core adjusted EBITDA. And I want to be clear that none of this contemplates the impact of our announced and pending M&A. We remain on-track to close our outstanding transactions between early to mid-2025 and we'll provide additional information after they close. So looking back, 2024 was another strong milestone year that continued to highlight our consistent execution, delivering industry-leading growth once again. And we are so excited for the long runway we have to further deliver profitable growth in the years ahead. And with that, I will now turn the call-back to Kathy to begin the Q&A. Kathy?

Cathy Yao
Senior Vice President, Investor Relations at T-Mobile US

Okay. Let's get to your questions. You can ask questions via phone by pressing star then 1 and via X by sending a post to IR or @Mike using hashtag TMUS. We will start with a question on the phone. Operator, first question, please.

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Operator

The first question today comes from John with UBS. Please go-ahead.

John Hodulik
Analyst at UBS Group

Great. Thanks and good morning, guys.

Mike Sievert
President & Chief Executive Officer at T-Mobile US

Hey, John.

John Hodulik
Analyst at UBS Group

Maybe first on the -- hey, Mike, on the guidance, the 5% service revenue growth. And Peter, I think you sort of teased it out a little bit, but are you assuming faster postpaid service growth or sort of less of a slowdown on the wholesale side? Because wholesale obviously grew sequentially, which surprised us this quarter. But maybe a little color on what's going on in terms of the piece parts there. And then on the postpaid sub guide, you know the -- I'd say the guidance sort of goes against the narrative that we're seeing slowing growth in subscribers. Can you talk about your confidence against that dynamic to put up these type of numbers? And is it driven more by sort of changes in gross adds or potentially better churn as we look out into '25? Thanks.

Mike Sievert
President & Chief Executive Officer at T-Mobile US

Well, I'll let Peter start with the revenue guide, especially compared to what we saw a few months ago. And then maybe I'll start on the post postpaid subscribers and see who else wants to jump-in.

Peter Osvaldik
Executive Vice President & Chief Financial Officer at T-Mobile US

Perfect. Thanks, John. So your question around wholesale. So remember, what's happening in wholesale has long been foreshadowed and planned for us and particularly what's happened with as we anticipated both track phone as well as DISH as they build their own network and offload off of our network that we would see the tapering of those two ultimately going to zero. And what we foreshadowed at Capital Markets Days is that 2025 would be the low-point for wholesale revenue and with growth thereafter because underlying those two things plan to come off, there's growth in the wholesale base for us. So I'd expect probably the exit-rate being very similar to what we'll see throughout 2025. And so to that point you're making, it really is both a function of growth in customers on total postpaid customers as well as postpaid phone customers as well as that deepening of the relationship that drives ARPA growth, we just delivered just over 3% ARPA growth in a very successful '24 and expect '25 to look the same there. And that's fueled by all of those growth opportunities that Mike talked about across every single business sector that we have.

Mike Sievert
President & Chief Executive Officer at T-Mobile US

So wholesale declines slowing, ARPA growth picking-up and the guide on subscribers is the third component, which you asked about. Look, as you look across our subscriber outlook, there's just not an area that's doing anything other than outperforming prior expectations. I talked about in my prepared remarks that we're gaining share in the top 100 markets, a place where a lot of people felt we would just defend. We are gaining share rapidly in smaller markets in rural areas, an area that represents more than 40% of the country. We're having experiencing our best quarters ever and gaining share rapidly in T-Mobile for business, fueled by all kinds of things, including our groundbreaking T priority offer and other-related 5G advanced services like network slicing capabilities that are now starting to demonstrate that they allow us to unlock market-share gains in highly CLV positive ways. And so there's -- we -- and when we look across-the-board, this formula of best network, best-value, best experiences, it just doesn't have a weak spot right now. And so we looked at it and said, it's time to tune-up that guidance as we enter the year.

Cathy Yao
Senior Vice President, Investor Relations at T-Mobile US

Thank you, John. Operator.

John Hodulik
Analyst at UBS Group

Thank you both.

Cathy Yao
Senior Vice President, Investor Relations at T-Mobile US

Next question, please.

Operator

The next question comes from Ben with Morgan Stanley. Please go-ahead.

Benjamin Swinburne
Analyst at Morgan Stanley

Thanks. Good morning. You kind of just touched on it, but I wanted to ask you a bit more about sort of the mix between kind of ARPA growth and account growth? You called out in the deck this morning sort of fewer standalone, I think fixed wireless net-adds and maybe more selling into the base and more bundled customer growth, which is driving such strong ARPA growth. Is that a function of sort of your sales and marketing strategy or just sort of how the market is kind of evolving at this point in fixed wireless? And then I'm just wondering -- I know it's not a huge check for T-Mobile, but I heard that Vistar acquisition was an interesting one. I mean, you talked about T ads back at your Capital Markets Day. Why is this business interesting? What does it tell us about your ambitions kind of in advertising and sort of the digital out-home space? Thanks so much.

Mike Sievert
President & Chief Executive Officer at T-Mobile US

Great. Well, let's start with the ARPA growth. I'll turn to Peter.

Peter Osvaldik
Executive Vice President & Chief Financial Officer at T-Mobile US

Yeah. And I think specific to your question around high-speed Internet and account growth, yeah, I mean, we saw continued very strong account growth in Q4 of this year. And to the question of what happened relative to last Q4, every quarter, we see a little bit of ebbs and flows in terms of high-speed Internet and are those high-speed Internet-only accounts as an entry into T-Mobile that we can then sell into other connected devices like postpaid phone or are those existing customers taking it? And that relative mix changes quarter-to-quarter in Q4, we saw strong demand for our high-speed broadband product from existing customers. Still had lots of new to T-Mobile customers come in, but that just drives it. And so that will change quarter-to-quarter. Remember, at the same time, what we did was drive the highest-ever year-over-year fixed broadband ARPU growth. And so it's a fabulous result with what we've seen and what's been done from a rate plan introduction perspective there. And that underpins the sales. Overarchingly, ARPU is driven by both that, it's really growth across all of those vectors. We talked a little bit about consumers continuing to self-select up the rate plan in our postpaid phone constructs. We see great momentum in high-speed broadband and we see great momentum across all of our other products as well. And that's given us the confidence to continue to see and guide on ARPA growth as significantly as we have in 2025.

Mike Sievert
President & Chief Executive Officer at T-Mobile US

Yeah, add a couple of things to that. You know, everything that's happened with high-speed Internet and account growth is as we forecasted for you and outlined. So we had talked early in the year about settling into a pattern at this level of growth on HSI versus a prior pattern slightly higher when we were much smaller. And so we're in the 400s now per quarter the last couple of quarters versus the 500s last year and that has a small effect on the overall account growth. I want to underscore though that this account growth is by far the highest reported in the industry. And this trend of kind of feeding on just selling into the base is something you're seeing from others. And you see that in their disclosures about a decline in account growth year-over-year pretty significantly. So we're much higher in reported account growth and that's because we're the share-taking leader in mobile by far, share of overall switching share. That's a really important trend. As it relates to ARPA, in addition to the other sort of tailwinds that Peter talked about, I mean, we do have an ongoing opportunity to address legacy rate plans across the base. And we began a program last year-on this. We didn't complete it. There's more opportunity this year. And I want to be clear that anything that we might do in this space, we will do in a way that really honors our brand value proposition that we will be the best-value and that means the lowest prices of the majors in this industry. And given that context and that focus and that brand, look, there are legacy rate plans out there that are very outdated that we still can address at-scale. And so we began this program last year. It went very successfully and we'll continue it this year. And so that's another potential tailwind for us as we address those outdated plans. You asked about Vistar. This is really exciting. Maybe I'll ask Mike Katz to start us out.

Mike Katz
President, Marketing, Strategy and Products at T-Mobile US

Yeah, thanks. Yeah, man, we are really excited about this acquisition. First and foremost because Vistar is a great company and it has a really incredible and impressive leadership team that we're excited to have join T-Mobile and have built-out an industry-leading technology platform. So excited about the company itself. But what we're really excited about is the opportunity to transform an industry. If you think about out-of-home advertising, there hasn't been a lot of change in this industry really and maybe forever. And a lot of the -- if you think about how advertisers think about the outdoor industry, it's really difficult to understand who's seen these ads. And it's very difficult to understand if a customer has seen the ads, what they do afterwards. And we think we can take this technology platform that Vistar has built, combined with the customer intelligence that T-Mobile has and bring new features into outdoor advertising that can transform the industry and bring things like measurability and impact to an advertising platform that hasn't had them before. And I can tell you because T-Mobile is one of the biggest advertisers in the country, this is exciting for us and I think it's going to be really exciting for other advertisers. So I could not be more excited to get this started with these guys.

Mike Sievert
President & Chief Executive Officer at T-Mobile US

I don't want to overstate things, but this is a big piece of our ambition that we shared at Capital Markets Day. And you think about the digital outdoor place-based media industry, right now, it's about a $10 billion TAM. We think it has the opportunity to grow rapidly and take share from non-digital. And look, our dream here is to transform it. Like we think we have the capability to transform the digital place-based media industry, and it's a big one because we will be able to make it addressable for the first time ever. It's just been, you know, put your brand out there on a big piece of vinyl or a big flashing screen and hope for the best. And we can give marketers insights into how that media performed, who saw it, what they did and we can even in close quarters like bus depots, retail media networks, we can even change what is shown based on who's present. And we can do all this with the explicit opt-in permission of customers to make their digital lives and their advertising lives more relevant to them. So this is a great opportunity. We think it's transformational and it's a part of a larger focus on being becoming a leading for marketers by marketers advertising support service.

Benjamin Swinburne
Analyst at Morgan Stanley

Thank you very much.

Cathy Yao
Senior Vice President, Investor Relations at T-Mobile US

Thank you, Ben. Operator, next question, please.

Operator

The next question comes from Jim Schneider with Goldman Sachs. Please go-ahead.

James Schneider
Analyst at The Goldman Sachs Group

Good morning. Thanks for taking my question. As you open the aperture of your broadband business to include fiber this year and going-forward. How are you thinking about the overall broadband environment we're set into this year from a net add perspective? And also sort of your ability to kind of either take price on your high-speed wireless product or to potentially segment the market with different price tiers across fiber and high-speed -- high-speed Internet, especially relative to cable competitors? And then maybe secondly, on the capital allocation front, how are you thinking about the potential pace of buybacks you're going to execute in 2025 in light of some of the cash needs you have to close the acquisitions you mentioned in the first-half? Are you going to keep that sort of ratable or be potentially a little bit more opportunistic throughout the year? Thank you.

Mike Sievert
President & Chief Executive Officer at T-Mobile US

Great. Well, let's start the second question with Peter and then we'll come back to fiber growth

Peter Osvaldik
Executive Vice President & Chief Financial Officer at T-Mobile US

And absolutely. So yeah, you're right. Yeah, we have -- 2025 is exciting from all the announced acquisitions that we have as well as JV partnerships. So US cellular, Metro, net, all of those were contemplated in terms of the authorization that we came up with as the Board did and communicated the up to $14 billion in 2025. So all of that is contemplated within there. In terms of pacing, I'd anticipate '25 after -- we saw some things and learned some things and adjusted how we approach the marketplace from a share buyback perspective in 2024. '25, I'd expect it to be probably more ratable during the course of the year as we think about it and approach shareholder returns.

Mike Sievert
President & Chief Executive Officer at T-Mobile US

As it relates to the broadband and growth picture, like first of all, I would just say it's not that big of an input to our algorithm. Like in other words, the rate of growth of the market is much less interesting to us than the rate of share-taking because what we've been doing, the vast majority of people that sign-up for T-Mobile 5G broadband are switching from something else. And that goes to the second part of your question, which is making sure that we have a price construct that is very competitive. One of the things I said in my prepared remarks is we actually made some changes in Q4 that allowed us to compete for the most price discerning customers. But what's interesting is we did that while realizing some of the biggest gains in broadband ARPA that we've ever seen. And so what we've done is created a construct that addresses the value shopper, but also shows them that there's even more value if they trade-up our rate card. And so-far, that's going really well and we have more opportunities to continue to deepen ARPU, not just within the core broadband service, but with associated services as time unfolds. And so we're very optimistic about the revenue trends on this business.

James Schneider
Analyst at The Goldman Sachs Group

Thank you.

Cathy Yao
Senior Vice President, Investor Relations at T-Mobile US

Thank you, Jim. Operator, next question, please.

Operator

The next question comes from Peter Subino with Wolfe Research. Please go-ahead.

Peter Supino
Analyst at Wolfe Research

Good morning, everybody. A question on your wholesale philosophy. I wondered as you look at wholesale opportunities over the next couple of years, MVNO opportunities, what's the philosophy you bring to the opportunity to bid for and you're thinking about how to price those bids as new opportunities come up. And then in fixed wireless, I wondered if you could talk about your strategy in sales that have become more highly utilized and where you continue to see high fixed wireless consumer demand? Thanks.

Mike Sievert
President & Chief Executive Officer at T-Mobile US

Okay. Okay. First on wholesale, it's a pretty straightforward algorithm. We look for partners that are able to go after audiences in a better way than we can go after them with our existing brands. Brands have a certain amount of pliability, but there are audiences and pockets of opportunity out there that partners are better-positioned with an alternative brand to go after in a cost-effective way. And that's what we generally look for. And as it relates to pricing, the algorithm is to get a great return on our network. When you take-out the cost of caring for customers and acquiring customers and you look down at the essentially the margin stream we get per unit of capacity on the network, we want it to be attractive at a wholesale level, not just at a retail level. And so that's generally the algorithm that we used. And as it relates to capacity on fixed, let me just remind that what we try to do in our business model is to avoid the situation that you talked about, which is certain sectors of certain towers becoming congested due to fixed wireless. Because remember, what we do when approving applicants for fixed in the first-place is we study our algorithm right down to the level, 165 meters across and look at not just the capacity available now, but the capacity likely to be available for years to come with normal amount of share-taking on mobile in that sector as well as normal amount of mobile usage gains. And if the algorithm says that, that sector will continue to have excess capacity, then we approve an applicant for home broadband. And with that algorithm, we are by far for 12 quarters in a row, the leading home broadband growth provider in this industry with more growth than the rest of the industry combined. And so it works really well. And when it's working correctly, we don't see sectors or towers become saturated due to fixed wireless.

Cathy Yao
Senior Vice President, Investor Relations at T-Mobile US

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

Operator

The next question comes from David Barden with Bank of America. Please go-ahead.

David Barden
Analyst at Bank of America

Hey guys. Thanks for the questions. I can't believe it got to me before we had to mention that the Saturday Night Live ad was kind of incredible. So I thought that was a win. So I guess one question for Peter. Peter, you know, this is an amazing guide and thank you for all the updated information. But there's a lot that's happening, right, the Vistar, the Lumos, the Metro and that the US cellular deal. Can you kind of just sum it up and say, obviously, it's revenue positive, but is -- what is it going to do to EBITDA in aggregate, maybe either through the year or on a run-rate basis and to free-cash flow-in terms of the investments that need to be made in these fiber projects so that we can kind of get a more holistic picture. And then Mike, if I could, obviously, the subscriber growth guidance, very strong, strongest ever at the beginning of the year. Obviously, there's still a lot of questions about T-Mobile's exposure to the immigration question and what does your exposure to the prepaid market, the wholesale market, even your retail base? How does -- how do we think about and get comfortable with that piece of it, it would be helpful. Thank you.

Mike Sievert
President & Chief Executive Officer at T-Mobile US

Okay. We'll start to Peter in fair warning. I'm going to go to John on the second one. And so Peter

Peter Osvaldik
Executive Vice President & Chief Financial Officer at T-Mobile US

Yeah, absolutely. You're right. And again, the guide that we gave, other than for purposes of leverage and the associated cash interest and of course, being incorporated into the authorization from a capital returns perspective, everything else is incremental to the guide. And I think it's a little premature for a number of reasons for me to give you what does the aggregate look like. One is what -- when are we going to close each and every one of these two. Some are private companies, some are public companies. I don't think it would be appropriate for me ahead of close to give that color. But I can tell you one thing, which is, for example, with US cellular, one of the things and we'll give color on this as and when we close, we're looking at. We learned a lot from the very successful integration with Sprint, both from how to make it even better for customers, how to really quickly -- as quickly as possible with the customer in mind first, you know, connect these two companies and generate the synergies. So we're looking at all of that as we're getting closer to close and assessing how quickly can we do this? What does that mean from a cost-to-achieve perspective, et-cetera. And I think when and as these close is probably the better time to give you color on it for all of those reasons. But they're all very accretive, certainly value-accretive in the long-run, which is why we did all of these, very exciting for us. And I'm just excited to get them closed and then give you some color. I will say a little bit more about the JVs and your question around investments and free-cash flows. Remember, part of the reason that we did the JV structure is to one, focus on who's best at what element of it. We're great at customer sales, servicing, marketing, and that's what we're taking on. The JVs and the infrastructure co-behind it is really great, some of the best-in the US at laying fiber. And the ability to have that JV there also means we can lever it up appropriately so and really leverage that capacity and go from a build perspective. So there isn't a capex burden on us. So it really will be very efficient, very effective from a P&L perspective with respect to the JVs for us.

Mike Sievert
President & Chief Executive Officer at T-Mobile US

And these are some of the reasons why we've, I think provided the extra discipline of giving you our outlook before the consideration of all of these accretive opportunities that should drive the top-line, should drive EBITDA and after sort of modest and normative cost-to-achieve should drive cash flows as well. So really positive story developing on the acquisition front. Okay. Let's talk about prepaid and the dynamics that we see there. Maybe what's going on in the prepaid business and what do we expect as it relates to the immigration question?

Jon Freier
President, Consumer Group at T-Mobile US

You bet. So, hi, Dave. Our prepaid business is doing incredibly well. When you look at the overall contribution of this prepaid business with industry-leading brands led by our flagship brand of Metro by T-Mobile, we're very, very pleased with the overall prepaid business. As you can see in our overall 2024 results, over 250,000 prepaid net-adds, the company's lowest churn ever for our full-year in 2024. So we're very, very pleased with the stability of that business. The business continues to incrementally grow. Relative to immigration, it's really early for us to really say in terms of what's happening around immigration. But I can tell you this that when you look at the peak immigration flows into the country, whether on legal immigration, illegal, you know, the overall peak in 2022, when you look at our prepaid business, we didn't really see an outsized impact in terms of inflow into our prepaid business. And we believe that's the case because our business is primarily revolving around the very highest premium monthly prepaid subscriptions and not necessarily the transactional prepaid business. We have some of that, but most of that is concentrated within other companies throughout the entire prepaid category. So relative to our base, we feel that's very, very stable. We didn't see huge inflows in 2022 and 2023. So whatever might be playing out, we think we're very insulated from that perspective around our prepaid business and the overall broader business as a whole.

Mike Sievert
President & Chief Executive Officer at T-Mobile US

I know we don't talk about prepaid off and that's a good point about '22 and it doesn't seem to be that correlated to immigration because of the nature of our portfolio of brands. That's good news. I just want to say like we don't talk about this business much and the team has done an extraordinary job. I mean we're growing prepaid reliably, consistently. This quarter was by far the growth leader and we just -- we have the best portfolio of brands and the best executing teams and our customers love our product. And think about they're getting this incredible market-leading 5G network at an extraordinary value. And so as the leader, you would expect -- you would -- you wouldn't necessarily expect the kind of consistent execution and ongoing growth that this team delivers. So thanks for asking about. We don't talk about it very often.

David Barden
Analyst at Bank of America

Appreciate it, guys. Thank you so much.

Cathy Yao
Senior Vice President, Investor Relations at T-Mobile US

Thanks, thanks, Dave. We'll move on to the next question.

Operator

The next question comes from Craig Milfit with MoffettNathanson. Please go-ahead.

Craig Moffett
Analyst at MoffettNathanson

Hi, thank you. So AT&T has talked a lot about the attach rate of wireless in its fiber footprint with the latest -- their latest disclosure showing 40% attach rate for wireless. I wonder if you could just talk a bit about what kind of dynamics you see in converged footprints for your competitors and whether the very-high attach rates that at least AT&T is presenting and Verizon talks about, whether that influences your view of how much of a converged footprint you actually need as you think about our metro -- Metronet and Lumos enough or do you need -- do you need something bigger?

Mike Sievert
President & Chief Executive Officer at T-Mobile US

Sure, Craig. I mean, not much has changed on this since we outlined it for you last-time, which is, we believe that Americans are already operating in a converged world where they have the option to purchase wireline and wireless from the same provider more than 80% of the time and they've had that option for more than five years. And what we see is that in the places where our competitors have their wireline offers out there and experience attached and the attach that you're describing, we also experience outperformance in those areas. We also experienced better churn. And so there's some selection bias in it that goes beyond the causality that's suggested by the numbers. And what we find is that customers, when you ask them in a survey, would you like to get your wireless and your wireline from the same company, they're like, well, sure. But what we also find that is, it doesn't seem to be a core motivator of purchase in either category. That customer -- this is a considered sale and customers will make the best broadband decision for them. And again, we're by far the broadband leader in this country and have been for 12 quarters in terms of growth and they'll make the best wireless decision for themselves. And if those come from the same company, great. And you can see that in the numbers where, for example, where Verizon says that they have lower churn, where they also have fiber, well, we also have lower churn where Verizon has fiber. And I'm not trying to discount the bundle effect. And we see the bundle effect in our own business. When customers have a family plan of all mobile, they churn less. When they have multiple products from us, they churn less. But there's lots of ways to construct a bundle. In our wireless business and our competitor's wireless business, the phone itself constructs a bundle where you have the rate plan of the service and a rate plan to pay that phone off over two years or more, that's a bundle. So there's multiple ways you can see this churn dynamic of the bundling effect take hold. And as I said, Americans have had the choice four years of getting the same service from their wireline and their wireless. And most don't purchase them at the same time.

Cathy Yao
Senior Vice President, Investor Relations at T-Mobile US

Thank you, Craig. Operator, we'll move on to our next question.

Operator

The next question comes from Michael Rome with Citi. Please go-ahead.

Michael Rollins
Analyst at Smith Barney Citigroup

Thanks and good morning. Mike, given some of your introductory comments, can you give us a teaser on some of the other strategic questions that you'd like to see T-Mobile answer over the next 12 months? And then second, just back on the topic of SWA, can you share with us how much of the SWA success is coming from the business or SMB segment? And does this provide in the future that segment an incremental opportunity from what you're experiencing today? Thanks.

Mike Sievert
President & Chief Executive Officer at T-Mobile US

Yeah. Well, we'll start on the second one with Calli. It's a great question because we do see some really vital growth here, even though it's mostly so-far a consumer dynamic and that may show that there's some tailwinds ahead.

Callie Field
President, Business Group at T-Mobile US

Yeah. Thanks, Mike. And Mike. We've -- let me just pause for a second and say, I've had the opportunity to speak with hundreds of CIOs and CTOs in enterprise, in small-business, in the public sector and my team, who I'm so proud of for the results that we delivered this quarter, they literally speak to thousands of them. And what we're hearing from CIOs and CTOs is that they're really looking for more secure, more reliable connectivity with more modern connectivity solutions that allow them to focus as partners and innovation on the value that fixed wireless brings. We see a lot of opportunities in multi-unit retail operations, in pharmacies, in insurance agencies where they have thousands of buildings across the country, where we're serving as the primary connection. We also have lots of opportunities that are growing in our funnel for secondary and tertiary connections with our fixed wireless. And with small businesses, we really see people adopting the value that they can get and then expanding our portfolio outside of just the fixed wireless solution, but with innovative solutions like that allows them to replace some of the more outdated technology in their -- in their operations, which brings the opportunity to infuse AI in the way that they handle their customer calls or in the way that they communicate with their employees. And it's really been -- and it will continue to be a great growth opportunity for us.

Mike Sievert
President & Chief Executive Officer at T-Mobile US

Terrific. So were you asking me about my Mike, about my comments that I want to spend more time on-strategy and so on. You know it's --

Michael Rollins
Analyst at Smith Barney Citigroup

Yes.

Mike Sievert
President & Chief Executive Officer at T-Mobile US

Yeah, okay. Listen, I am so proud of the multi-year plan that we put out in the fall at our Capital Markets Day. And one of the things underpinning it, if you kind of take our comments in is that in this core business of ours, by some measures, we're the most successful telecom in the world. And yet we have so many embedded capabilities around incredible data and incredible network capabilities with room to run-in terms of creating new services around them, a leading brand, incredible physical distribution and rapidly-growing incredible digital distribution and so many other advantages that we can create new sources of value-creation from. And we began to tease some of those things at Capital Markets Day. We laid out a future relative to AI. We laid out a future relative to how 5G advanced and 6G will unfold and we hinted at new business models. And for us, as we arrive at this size and this level of success in our core, we need to have the appropriate amount of focus on Horizon 3 opportunities. And so that's one of the areas where I'm focused and have been focused, which is why we were able to articulate this multi-year plan to you. So that gives you a sense for it. It's -- as I look at what we have and how we're executing and the assets and capabilities and the know-how that we have built, we are so well-positioned to add value to this company. And it's going to take a lot of creativity and energy and partnerships. And I've been putting my focus there and you saw some of that in our Capital Markets Day, I think.

Cathy Yao
Senior Vice President, Investor Relations at T-Mobile US

Thank you. Thanks.. All right. We'll take our next question, please.

Operator

The next question comes from Jonathan Chaplin with New Street. Please go-ahead.

Jonathan Chaplin
Analyst at New Street Research

Thanks, guys. Michael, I'm wondering if we could tap into two of those Horizon 3 opportunities in a little bit more detail. First, given the focus that you placed on AI at the Capital Markets Day. I'd love to get a sense for the impact that you're seeing on-network from AI at the moment, how you think that evolves and what that does for sort of future spectrum demand for you and the industry. And then I was impressed to hear about the availability of the Starlink direct service in California. I didn't realize that had been rolled-out across the entire markets. I'm wondering if there is an opportunity to monetize that or if that sort of fits into the more value for the same price construct? And then last quick one, should we be thinking about 400s again this year for fixed wireless access? Thanks.

Mike Sievert
President & Chief Executive Officer at T-Mobile US

Okay, great. And is only four, do you want us a couple more questions in there?

Jonathan Chaplin
Analyst at New Street Research

I've got more.

Mike Sievert
President & Chief Executive Officer at T-Mobile US

It's great to hear from you. Let's start with the Starlink piece. The -- what you saw is that we quietly began in addition to the emergency service that we provided during the wildfires. We've been quietly allowing people into our beta over the past few weeks. And it's just starting. We've been emphasizing a little more the northern part of the country where the -- where the density of satellites is better. And meanwhile, there's rapid launches happening right now. So the satellite density is rapidly improving. And what you're going to see is a phasing. So first, we're letting people in limited numbers to the beta. Then pretty soon there's going to be a moment where we widen that aperture by quite a bit and that will be an exciting moment. And then pretty soon after that, we begin commercial service. And all this is going to start happening now and kind of rapid succession. So we're kind of finally at that moment we've been dreaming about on this service and we see things coming together pretty quickly. So that's really exciting. As it relates to commercial service, when we get it going, I mean, there's a couple of things here. One is, we think this will be another reason, maybe the most compelling reason in a long-time to self-select up our rate card. And so this will be something that our -- the customers on our most value-packed plans will be able to benefit from. And so that's an area that we'll monetize. And attracting and retaining customers market-share, that's an area where we'll monetize because this is a differentiated service that we think touches a chord with the American public, the idea of being connected everywhere. If you can see the sky, you're connected, this is powerful. It's likely to save lives. It's likely to change lives and it's very attractive, so share-taking. And then finally, a la carte sales. For those that don't have the plans that include it there -- and lots of other customers, there may be opportunities there. And so taken together, it's a pretty exciting moment for us. Fixed wireless, it's -- I can't give you a guide on it today other than to say that you've seen us over the past few quarters executing remarkably consistently. We're really happy with this performance. And so we like it where it is. I don't think that's exactly a guide. It's a present statement, but we like it where it is and we can execute pretty consistently there. So that gives you a sense. And then finally, and get ready, we're going to crank up both here. You asked for it. How -- how are we using AI in the network?

Ulf Ewaldsson
President of Technology at T-Mobile US

Yeah. Well, thanks for that question. It's great. And let me just start before we go into the absolute detail there that the network is based on some fundamental things that are really delivering for us. One is our assets, our deepest frequency assets sub-6 in every one of those assets, the lowest part of the frequency. All of those together with this grid we have are delivering just amazing results in terms of third-parties looking at our network and all that. How we evolve that with AI is applying AI gradually into the RAN, for example. We went out on Capital Markets Day, talked about AI RAN where we are able to evolve our network. This is about an evolution into 5G advanced into eventually even sixth-generation, all of that in the RAN piece. Then it comes to our customer-centricity, the whole network team has industrialized a process over the last years that gives the opportunity for us to dedicate towers, build-up, upgrades everything we do to exactly where customers need it. We're using AI to analyze thousands and millions of millions of data points across the network on a daily basis to understand exactly sentiments and movements in our customer-base and correlate that with business outcomes, which is giving us the ability to allocate capital into those hexpins that Mike talked about earlier. And last but not least, it's our technology leadership. And that technology leadership, we are applying AI together with our partners and vendors on the roadmaps that they provide to us. I would pride our team and I'm extremely proud of our team that is able to take the latest and greatest of features and softwares that come out of our partners and put that to work-in our network and a lot of that is already AI-based. Last but not least, I think what is really good with the network team now is that we are able to platformize the network using AI capabilities for an autonomous network model and we've already got there. Others are talking about it, but we've already done it. And by that, we can support Fryer's consumer business, Calli's enterprise business, MyCat's new business development. So great question and lots of work. More to come. And this is really exciting.

Jonathan Chaplin
Analyst at New Street Research

You seeing an acceleration in traffic?

Mike Sievert
President & Chief Executive Officer at T-Mobile US

Yeah. I want to make sure I get to that, Jonathan. So and just before I do, I want to give Olf that opportunity to talk about what we're doing and how advanced it is because it's really differentiated and you see it all over the place in terms of how we apply capital dollars with our AI model, we talked about at Capital Markets Day called customer-driven coverage. It's a breakthrough in terms of how capital gets allocated with the business outcomes in mind. Or in my prepared remarks, I talked about self-optimizing technologies. This is remarkable stuff where the network can self-heal now using AI techniques. And so if we see an area for whatever reason go down due to a wildfire, the network can tilt other sectors to beam in from further away and borrow from that sector's capacity to make sure that nobody goes unconnected. It's very powerful. And it's stuff that we don't get to talk about much that's -- that are -- some of which are real differentiators that are resulting in additional reasons why we keep winning all these awards. As it relates to AI, I would put it a different way, which is, AI demands on our network are going to be one of the reasons that we are able to ongoing showcase the additional differentiation that we have. In other words, I don't see this being a reason why we're going to need more capacity or more spectrum, it's going to be a reason to showcase the massively superior capacity that we already have. And you can see that in the speeds. We won Ukla by a lot nationwide. I mean, 46 out of out of 50 states, we are the fastest provider. And what that translates to, I mean, speed is like a proxy for capacity, right? So what that translates to is that we have way more available capacity per customer than anyone else. And so AI growth and AI workloads are going to be a way for us to increasingly showcase that differentiation, especially as AI begins to make the leap from textual interfaces to much more video, audio imagery that we're now seeing the popularity take-off on. It's early days, but I think this is a nice tailwind for our business because it's going to be important that we're able to showcase these advantages to customers in ways other than you go to a speed test and see a needle that's higher. And do you know what I mean because video only plays so fast. And so if you're able to get these responses in a more immersive way, that's powerful, and I think people are going to appreciate T-Mobile for it.

Cathy Yao
Senior Vice President, Investor Relations at T-Mobile US

Thank you, Jonathan.

Jonathan Chaplin
Analyst at New Street Research

Awesome. Thanks.

Cathy Yao
Senior Vice President, Investor Relations at T-Mobile US

Operator, we'll take our next question from the phone and then we'll go over to social.

Operator

The next question comes from with Barclays. Please go-ahead.

Kannan Venkateshwar
Analyst at Barclays

Thank you. The reported EBITDA. Obviously, the numbers were pretty strong, but just wanted to understand if this was impacted by the strong or insurance or any other elements during maybe it may have been a headwind or a tailwind at least? And then more broadly, as we think about this partnership opportunity with, given that they are also launching bigger satellites with more capacity and so on potentially. Is there an opportunity here to expand project beyond and just the direct-to-device market, especially in rural areas you first have your fixed wireless offering but is there a bundling opportunity potentially maybe a more efficient way to use your spectrum the scale by bundling other services

Mike Sievert
President & Chief Executive Officer at T-Mobile US

Great. And can I just to let you know your microphone is kind of breaking up. So we were only able to get some of that. But as it relates to SpaceX, look, we're really happy to be partnered with them. They're the world's most advanced space organization. They had more launches last year than the rest of the world combined. So they're very important partner for us. We're in a multi-year partnership that we think will confer real differentiated benefits for our customers. As it relates to partnering on home broadband, not right away. I don't want to speak for them, but they have more demand for their service than capacity right now. And so they can sell everything they have available without any help from us. That being said, they are launching a lot. And so those curves may cross at some point, and we'd be delighted to be their partner. And as it relates to the core EBITDA questions, storms, insurance, etc. I'll turn to Peter.

Peter Osvaldik
Executive Vice President & Chief Financial Officer at T-Mobile US

Yeah. Yeah. I mean Q4, obviously, we're very, very excited about the Q4 core EBITDA result. And to your question, of course, every quarter has some puts and takes. I think we had foreshadowed there was a spectrum gain there and of course, we were going to have impacts headwinds from ACP, which wound up being a little bit above that midpoint of the range that we gave and of course, storms as well. But despite all that, like every single quarter, this team goes and executes. And not only did we deliver a very fabulous Q4 core EBITDA, but we did it while funding even more customer growth. And so I don't see right now in terms of the guide that I gave you a lot of one-time tailwinds or headwinds. It really is for '25 about being able to take that top-line service revenue growth and fund our highest-ever guide and also make the right investments again, not only to deliver '25, but to set us up for those Capital Markets Day commitments that we gave you.

Mike Sievert
President & Chief Executive Officer at T-Mobile US

Okay, Janice, I know we're tight on-time, but what are we seeing coming in from

Janice V. Kapner
Executive Vice President & Chief Communications & Corporate Responsibility Officer at T-Mobile US

Consolidate two questions that are particularly relevant for area. One is from Bill Ho about how 5G SA is a first-mover translated into any wins. Is network slicing the biggest service revenue opportunity so-far? And we can't not take the question that has to do with -- I want to see how the demand for key priority is shaping up for '25 scenarios where enterprises are interested in using the network slicing.

Mike Sievert
President & Chief Executive Officer at T-Mobile US

So it all ties to see what you did there. So it's over to Kelly.

Callie Field
President, Business Group at T-Mobile US

Thanks. Thanks, Janice. And Chetan and Bill love to talk about key priority. I want to say, first and foremost, we don't fall in love with our technology for the sake of technology. We listen to our customers, we listen to first responders. We listen to CIOs who say, look, we really have a need for better coverage, for more capacity. And we need more modern solutions to address the way that firefighters and police officers are needing to perform their responsibilities and life-saving literal lifeline to our society with technology. And that's where T priority came from. And with T priority, we are able to present to first responders 40% more capacity in our network, 2.5 times the speeds. And in a time of extreme congestion, we're able to allocate more than five times the network resources that we do to the average consumer. And we're seeing this play-out in North Carolina and Nashville and Florida in Los Angeles. And you heard Mike say in his opening remarks that we have been awarded the single carrier contract with the City of New York. This is the City of New York. They take 9 million -- over 9 million 911 calls. They have 1 million buildings in the city. They don't joke around when it comes to the safety of their communities and the strength of the network. That's why we are awarded this deal because of the power of our network, our 5G superiority. And we're really excited about the partnership and the opportunity to innovate with the public safety network as well as connecting school kids in meaningful ways and really understanding what a true partnership looks like for the City of New York. But that's not all. You know, when we look at the first responder community, we told you at Capital Markets Day that one of our strategies was to look at areas of our business where we are underpenetrated and provide solutions in those areas we're underpenetrated. And first responders happen to be one of those areas. There's today 14 million lines that are available in that community. And by 2028, we expect that to be around 18 million. And this is an opportunity where the strength of our network and the way that our team partners with customers and really listens to what first responders needs in a time of crisis to be able to better support and save lives. We really think this is a great opportunity for us. And so that's where we're predominantly using, Bill, to your question, slicing today. We have a lot of exciting opportunities. We've talked about TSIM secure and using our network slicing as a way to make connectivity more secure for all types of applications in our network and we're starting to see our funnels and our demands fill there. But thanks for the question.

Mike Sievert
President & Chief Executive Officer at T-Mobile US

Yeah. And you know, Bill and Chett and I would just add that we waited a long-time before starting to talk about all this stuff because we wanted to see a real business model develop around it. Some people were out there talking about it years ago and built it into business plans. And we were very deliberate that we said, no, we're going to wait. But the moment is kind of arriving and key priority is certainly an expression of it. Other 5G slicing use cases, advanced network capabilities that Olf and team have brought where we're leaders, where we're differentiated are creating the biggest pipeline of interest for TFB that we have ever seen. I mean, our funnel is better right now than it has ever been. And we're demonstrating these capabilities at-scale. I mean, Calli had like 70 CIOs at the F1 racing event where we had a dedicated network slice powering all the commercial operations of the race where there are 1 million people nearby and yet the commercial operations are operating on their own 5G slice and everybody saw that and -- people's eyes are opening. And what's interesting here is that it's not just a direct revenue opportunity, it's also a share-taking opportunity because the dynamic we've seen and we described it in New York is that people come in for the differentiated capability of the 5G advanced services that only T-Mobile could provide, but then they pivot all their smartphones or many of their smartphones over. And so there's two-ways for us to grow based on all this.

Janice V. Kapner
Executive Vice President & Chief Communications & Corporate Responsibility Officer at T-Mobile US

Thanks, Mike.

Mike Sievert
President & Chief Executive Officer at T-Mobile US

So, is that it, Kathy?

Cathy Yao
Senior Vice President, Investor Relations at T-Mobile US

That is it. That's all-the-time we have. Thank you for joining us today. We look-forward to speaking to you again soon. If you have any further questions, you may contact the Investor Relations or media departments.

Mike Sievert
President & Chief Executive Officer at T-Mobile US

Thanks for your interest and your questions, everybody. See you.

Corporate Executives
  • Cathy Yao
    Senior Vice President, Investor Relations
  • Mike Sievert
    President & Chief Executive Officer
  • Peter Osvaldik
    Executive Vice President & Chief Financial Officer
  • Mike Katz
    President, Marketing, Strategy and Products
  • Jon Freier
    President, Consumer Group
  • Callie Field
    President, Business Group
  • Ulf Ewaldsson
    President of Technology
  • Janice V. Kapner
    Executive Vice President & Chief Communications & Corporate Responsibility Officer
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