The operator introduces the T-Mobile Fourth Quarter and Full Year 2023 Earnings Call and explains the format for asking questions. The Senior Vice President and Head of Investor Relations, Jud Henry, welcomes the participants and introduces the CEO, Mike Sievert, and other members of the senior leadership team. Sievert reflects on the company's successful year and the momentum going into 2024, highlighting their industry-leading growth in customers and financials, as well as their reputation as the overall network leader.

In 2023, T-Mobile saw great success and growth in their 5G network, completing a successful merger and delivering industry-leading postpaid phone net additions. They also saw growth in their broadband services, adding over 2.1 million customers and becoming one of the largest ISPs in the nation. T-Mobile credits their unique formula and network as the key enabler of their success and growth.

In 2023, T-Mobile proved to be the leader in overall network performance, with the broadest and most advanced 5G network in the US. Their partnership with SpaceX has also led to exciting developments in direct satellite to cellular communications. Despite their network leadership not being fully recognized by potential customers, T-Mobile's strong growth momentum in both their business and consumer groups has led to the highest consolidated service revenue growth in the industry. T-Mobile still has room to grow and is executing their balanced growth playbook successfully.

The wireless industry has seen growth in service revenues and cash flows, leading to strong returns for shareholders. The company has also focused on initiatives to provide affordable and reliable wireless and internet services, such as connecting students and refugees, and committing to achieving net zero emissions by 2040.

The speaker is excited about the future of T-Mobile due to the completion of a merger and the development of a 5G network, which will lead to value creation and growth opportunities. They are proud of the team and employees and hand over to Peter to discuss financial highlights and 2024 guidance. The speaker also mentions the impact of issuing shares to SoftBank and expects this to be offset by share repurchases in 2024.

In 2024, we expect to see an increase in depreciation and amortization as we continue to modernize our network and technology systems. Our company is experiencing strong growth in both the top and bottom line, and we expect this trend to continue. We anticipate adding between 5 million and 5.5 million postpaid net customers, with a focus on profitable growth. Our core adjusted EBITDA is expected to be between $31.3 billion and $31.9 billion, a 9% increase from the previous year and above our Capital Markets Day guidance for 2024. This growth is comparable to what we delivered in 2023, despite no major merger synergy benefits in 2024.

The sustained growth of our company is a result of our industry-leading service revenue growth, operating leverage, and operating efficiencies. We expect our EBITDA to increase throughout the year, with cash CapEx between $8.6 billion and $9.4 billion. Our capital efficiency and data-informed approach will guide us as we continue to enhance and expand our network. Our free cash flow is expected to be between $16.3 billion and $16.9 billion, a 22% increase from last year and five times higher than our closest competitor. This is thanks to our margin expansion and capital efficiency. There are no expected net cash inflows from securitization, and our free cash flow to service revenue margin is higher than our peers. In Q1, free cash flow is expected to be approximately 20% of the full year midpoint due to early year expenses.

In the first quarter of 2024, the company expects peak capital expenditures, with about half of the anticipated merger-related costs and other expenses also occurring in that quarter. They also anticipate an increase in postpaid ARPA for the full year. The company is confident in their strategy for profitable growth and believes they have a strong opportunity for value creation in the future. The call then opens up for questions.

The speaker is updating on the progress of the company in smaller markets and rural areas, specifically in terms of market share gain and the expansion of their 5G network. They have seen a significant increase in their share of household position, from 13% to 17.5% in the past nine months. The company is pleased with the results and attributes it to their 5G network build and marketing efforts in these areas.

The speaker is excited about the potential to achieve a 20% goal by 2025 and believes there is even more opportunity beyond that. They mention the success of their Fixed Wireless product and how they are responding to ongoing growth and demand. They recently reverted back to standard pricing and believe there is still room for growth in this area.

Mike Sievert and Simon Flannery discussed the company's 5 million customer broadband base and the potential for bringing more services into the home. They also mentioned a capital light model for high-speed internet and a forecast for 7-8 million subscribers. Craig Moffett asked about the outlook for pricing of T-Mobile's mobile service and ARPU growth, to which Peter gave a confident guide of 2% growth for the year. Mike also noted the trend of customers moving up the rate card and the overall value consumers and businesses are realizing from the category.

The speaker discusses the increased value being given to customers in the telecommunications industry, and mentions finding ways to optimize operations and policies without sacrificing their position as a value leader. They also mention that ARPU is a mix-driven metric and that consumer ARPU has continued to grow while offsetting success in enterprise and government.

The speaker addresses the lower ARPU customers with high CLVs and larger ARPAs, explaining that the company's focus on customer value differential and ARPA playbook has led to strong postpaid service revenue in Q4 and is expected to continue in 2024. They express excitement about this strategy and mention some ongoing headwinds in wholesale. The next question asks about the number of ACP subscribers and the potential impact of bonus depreciation on free cash flow. The speaker responds that ACP only affects a small portion of their base and that the EBITDA guide for the year is slightly wider due to ongoing changes in ACP.

The speaker states that all outcomes for ACP are included in the EBITDA guide provided. The risk profile for ACP is different from broadband companies, as mobile customers are more likely to stick around. The company's job is to win back customers with high-value offers if they lose discounts. The company has strong brands and will position itself as the preferred choice for customers. The risk profile for ACP is small compared to other players and is already accounted for in the guidance. The speaker then hands over to Peter to discuss bonus depreciation. Peter states that they do not participate in ACP on the postpaid side and have a small amount through Metro and Assurance. Wholesale customers are not included in subscriber counts. On bonus depreciation, the company supports a tax regime that stimulates investment in the network and is not anticipating a significant cash tax for 2024. They will update in the future if necessary. John thanks the team and greets them.

The speaker is discussing competition and churn in the fourth quarter. They saw an increase in phone gross adds and a slight increase in churn, but it is still in line with past trends. They believe they have the best value and network and are on a journey towards the best churn in the industry. They may make optimizations in 2024 as long as they do not affect their value proposition.

In the paragraph, the speaker discusses the increase in churn rate and how it led to a higher number of postpaid net additions on phones. They also mention the competitive environment in the industry and how T-Mobile has consistently been the net winner. The speaker attributes this success to T-Mobile's value proposition of best value and best network, which has resonated with customers. They also mention new plans and initiatives, such as Go5G and Phone Freedom, that have contributed to their strong performance in Q4.

During a conference call, the operator introduces a question from Michael Rollins of Citi. Michael asks about T-Mobile's target for core EBITDA margin and the pace of share buyback dollars. T-Mobile's CFO Peter Osvaldik responds by stating that their long-term goal is to see margin expansion in core EBITDA, but their primary focus is on free cash flow margin. He also mentions that in Q4 they made investments to boost customer and revenue growth, and that there was a slight slowdown in share buybacks during that time. He does not provide specific details on current share buyback plans.

The company is confident in its ability to meet its financial goals for 2024, with a focus on increasing share buybacks and dividends. They have already reached their target merger synergy run rate and have reduced headcount. The company expects to see continued growth in valuable customers and increased efficiency in running the business, as well as investments in network expansion and distribution.

The team is focused on driving efficiency and taking advantage of network and technology modernization while keeping the customer at the center. There is potential for growth over the next few years. In terms of upgrade rates, there are no major changes expected, but a new rate plan may have some impact. People are keeping their phones longer due to their high cost and capabilities.

The company's customers are mostly using 5G phones and there is not expected to be a major change in 2024. They are excited about their partnership with SpaceX and plan to offer text messaging, picture messaging, and eventually talk capabilities through the service. This year, they expect to have these capabilities available for customers if things go well. The service appeals to anyone who may find themselves in areas not covered by other networks. The company is also seeing continued growth in Fixed Wireless, with expectations for around 500,000 new customers in the second half of the year.

The speaker is curious about the reasons behind the growth in demand for Fixed Wireless and ACP. They ask if it is driven by supply or demand, and if there is a timeline for when the impact of ACP will be seen. The response is that the growth in Fixed Wireless is due to better execution, increased distribution, and decreased churn. The impact of ACP is not expected to be material and is already factored into their guidance range.

The company has seen a steady improvement in churn rates for HSI year-over-year, with every 10-year cohort showing a decrease. This was expected as the base aged and later cohorts had comparable churn rates to cable. However, even the early 10-year cohort has shown a reduction in churn due to product and execution improvements. The company is on track to reach their 7-8 million target and expects quarterly nets to be around 400,000. The impact of potentially losing ACP is factored into their guidance and they anticipate service revenue growth to be larger in 2024 than in 2023. On the wholesale side, the company expects a drop in magnitude due to DISH coming off, but did not provide specific numbers.

The company has not provided specific guidance on wholesale, but expects a continued decline in year-over-year sequential decline. The acquisition of Mint is expected to close in Q1 and is reflected in the guidance. The company will focus more on EPS in the future, but there are still merger-related costs in 2024. The company is not quite ready to focus on EPS yet.

Callie Field, leader of the enterprise business at the company, discussed the progress and upgrades made in the past year. The sales team has been transformed and the product portfolio has been upgraded with solutions like T-SIM Secure and connected workplace managed services. The company has shifted from transacting with lower-level procurement employees to working with CIOs as trusted partners for connectivity solutions. Business customers have tested the network and determined its superiority, leading to strong results in the core business. The company has also outperformed its benchmark competitor in postpaid phone net additions and win share rate in enterprise.

The company has seen success in bringing on new customers and deepening relationships with existing ones, such as SalesForce, REI, Delta, DoorDash Meta, and UPS. They have also seen double-digit growth in new public safety accounts and have been successful in competing with other companies in the small business market. In addition, they have had key wins in their Advanced Network solutions, such as a deal with Formula 1 and PJM Americas. This shows that the company is now competing to solve important organizational problems for enterprise and government, and their business is breaking records. The company's success is attributed to their retooling of skills and capabilities, and there is still room for growth as more organizations rethink their connectivity in the era of AI.

In this paragraph, the speaker discusses T-Mobile's position as the best provider for reliable and secure connectivity, especially in the current era of technology. They also mention the company's growth in the Fixed Wireless business and their plans for managing it in the future. Additionally, the speaker mentions that they are not yet able to predict the drivers for postpaid phone ARPU in 2024.

The speaker believes that the company has made the right moves to serve mainstream customers, meet demand, and monetize effectively. The demand for the product is high and driven by word of mouth. The ARPU is expected to remain stable in 2024, driven by growth in high-value customers and uptake of the highest tier plans. The focus will continue to be on ARPA and overall service revenue growth. The company is trying to answer as many questions as possible.

Mike Sievert and Ulf Ewaldsson discuss T-Mobile's progress in increasing wireless capacity, with Ulf stating that their network is substantially complete and constantly increasing in capacity due to the pivot from LTE to 5G. They also mention that T-Mobile's network is much larger than any of their competitors, covering more than twice the area in 5G. They also highlight their success in providing a beta version of network slicing in Las Vegas, thanks to their stand-alone core.

The company was able to successfully provide network slicing during a Formula 1 race in Las Vegas, allowing for full service to all points of sale and for customers to use their apps and perform other activities on the network. This is a rare occurrence in Formula 1 history due to network congestion. The company plans to implement network slicing at more events in the future. As for the 15x estimate, the speaker does not have the exact numbers but believes that the company has met or exceeded expectations in terms of phone usage, speed, and handling of various services such as home broadband and enterprise growth.

The paragraph discusses the potential for growth in Average Revenue Per Account (ARPA) in the telecommunications industry, specifically in relation to T-Mobile's network slicing technology and their focus on providing value to customers. The company aims to defend and extend their reputation as the value provider through smart decision-making and their superior network. This, combined with their lower costs, makes for a defensible position in the industry.

The speaker cannot predict the long-term future, but they are confident in opportunities for growth in 2024. They will continue to focus on providing value for customers and monetizing opportunities. The industry as a whole may soften in 2024, but the company plans to maintain its position as a share-taking leader. The speaker also mentions the possibility of using capital for M&A and buybacks, but their primary focus is on delivering value for customers.

The company has a capital allocation methodology that focuses on investing in the network, core business, and adjacent businesses to create value. They also have room for additional investments, such as in the fiber space or US Cellular, but they are not pursuing any large on-balance sheet transactions at the moment. The company will continue to prioritize value creation for shareholders and will bring any potential opportunities to them.

Jud Henry thanks everyone for joining the T-Mobile Fourth Quarter Earnings Call and concludes the call. He encourages anyone with further questions to reach out to Investor Relations or Media Relations. The operator then ends the call.

This summary was generated with AI and may contain some inaccuracies.