T-Mobile US, Inc.

Okay, great. We'll get started. I'm John Hudlick from the communications team here at UBS Research, and I'm happy to welcome this morning Mike Sievert, the president and CEO of T-Mobile.

Mike, thanks for being here. Thanks for doing this. Thanks for having us at this in-house conference center. I guess you're capturing synergies here instead of having this at a hotel. It's a beautiful facility.

Near to your heart.

Yeah.

So great to have you, and we've got about 35 minutes for Q&A. I've got a list of questions that I want to run through.

I'm going to jump right in. My lawyers would like me to point out that I might make forward-looking statements and actual results might differ, and you can learn about our risk factors by looking online.

Perfect. I've got some questions here. We've also got the iPad if anybody in the audience has some questions they want to lob in. I can work them into the conversation. This time of year we always start off with a question about 24, just how you're thinking of the company's positioning and what the priorities are for next year.

Yeah, it is that time of year. Our business, John, is incredibly simple, and so the priorities for next year are incredibly simple. Take share. continue to take share at our historic rates, translate that share taking into cash flow production for our shareholders, and continue to make smart investments for the future. And, you know, that's what's working about this business model. And it really is working in a significant way. You've seen in 2023, we're just, and I'm sure we'll get a chance to talk more about this. You know, we're coming off the four quarters in our storied 10-year growth run that are the greatest growth quarters ever in our history is right now. And so, you know, obviously we've got a formula here that's really resonating as we're out there marketing, you know, this world's best 5G network. And it's to focus on continuing that story, continue taking share, mining those underrepresented segments, having our unique value proposition resonate with more and more people, translate that into outsized cash flow growth and cash production per service revenue dollar, which is the best in the industry, and make smart investments for the future.

How would you... characterize the competitive backdrop that we're seeing and, you know, and maybe, you know, translate that into sort of the promotions we saw on Black Friday. I mean, how does it seem like as we stand here looking out into 24 versus where we were in 23?

It's healthy and vibrant. This is a highly competitive industry, but it's also a very valuable industry. You know, cash production in this industry is much higher than five years ago or ten years ago. And people that side-eye our industry sometimes forget that that this is an industry producing enormous value today in the same time period that people wonder if it's quote-unquote too competitive. We like it competitive. It's incredibly competitive. And in that context, we're delivering outsized results that, as I said, outpace any point in our history. But what's interesting is the customer is also winning. So it's not just the industry that's winning. The customer is winning. I mean, customers are getting service that is four times faster. than just five years ago on average across this entire industry. And they're taking three times more data all against the backdrop that in T-Mobile's case is about the same monthly revenue per customer. And that means that the per unit cost of a transmission of a gigabyte is falling through the floor while the industry produces all time record cash flows. So the customer's winning, the industry's winning. That's the 5G dividend that everybody's been looking for. It's right there in front of our face. And, you know, so obviously we're very happy with the development. This industry continues to look, from a consumer standpoint, very resilient. You know, everybody reports that they're not seeing early signs of stress. Growth continues to come in at modest rates that, you know, look very sustainable. You know, in the holiday, we saw another round of, you know, typical intense competition.

And how was... T-Mobile positioned sort of for Black Friday and the holiday promotions. I mean, was the performance of the company what you expected or were the promotions that you saw from some of your competitors sort of in line?

Both are right on track. Everything we saw looked, you know, consistent with our expectations, our own performance consistent with our expectations. It's all unfolding really, really nicely. You know, and you saw some of that in the confidence in our guide, you know, that we continue to expect 3 million post-paid phone net additions this year or more. Against a backdrop, if you look at Q3, you know, service revenues for us were up nearly 4%. Postpaid service revenues up 6%. That's where most of the value creation is by far, you know, industry-leading. EBITDA up 12% year-over-year for T-Mobile in Q3. And, of course, cash flow up, you know, almost 2x on track for 75% year-over-year cash flow performance. So, you know, everything that we indicated earlier would unfold, you know, as we said at the end of Q3. you know, continues to be on track.

It is amazing. You guys gave guidance a long time ago. I forget how long ago the analyst day was. Spring of 2021. Spring of 21. And it's all on track. I mean, it's, you know, people seem to tweak guidance on a quarter-to-quarter basis these days. And you guys have some guidance out here for another year that seems to be tracking the plant. Since you guys gave that guidance, it does seem like the competition from cable has increased pretty meaningfully, right? These guys are adding a ton of subs. It seems as if Comcast in particular is leaning in this quarter. How should we think of how these competitors entering the scene sort of impact the model?

Think of it as fully in the run rate. Right. You know, I mean, cable, a lot of people, I guess the premise of your question is, is cable the bogeyman that's coming? I'd say that the bogeyman that came five years ago. They're fully in the run rate at this point. And if anything, it gets a little harder as things go along. So you might see promotions, but that's because they're trying to outrun their own churn as they get bigger. And that's just a normal dynamic of a subscription business. And so everything that's happening there looks to us very much run rate. And of course, you see that in that time period you talked about, quote unquote, unexpected competition from cable companies. I don't really view it that way. I mean, it was unexpected for us five years ago. I don't know if you remember, we were out there going, oh, they'll never make it in this industry. You know, obviously they made it in this industry. So we were wrong five years ago. But since then, we've been right. You know, what we've expected from them, they've essentially delivered. And you see it fully in the run rate. And again, you know, our periods of greatest growth ever in our history and value production from that growth has been in the last 12 months during this time period that some say cable's ruining everything.

And it doesn't seem to be affecting, I mean, they're putting up some big subscriber numbers, but it doesn't seem to be affecting your subscriber growth somehow. And maybe that's part of the story of the sort of above-average market growth that we've seen. But, I mean, as you think about competition cable, does it affect your ability to price or to sort of attract new subscribers?

Not at all. I mean, over the last two quarters, the last two quarters, T-Mobile has taken roughly 40% share of overall post-paid net additions, including cable. And so, like I said, they're fully in the run rate. We don't set our game plan based on what they're doing. What they do is reasonably consistent. Where they compete is reasonably consistent. And we continue to be focused on our game plan, which is working beautifully. So it's, I mean, they're a real vibrant player in the market. I'm not discounting their contribution and that they're building a business for themselves. It's just not affecting our game plan anymore.

Got it. You know, turning to a couple of the sort of value drivers of the traditional wireless space. First of all, ARPU. ARPU has been relatively flat, but you've had a lot of success in moving customers into higher value tiers that come with higher prices. How much more room do you have to push that in 24? We think a lot.

You know, on the front book coming in, as we disclosed recently, better than 60% of customers are choosing go 5G plus or better. And that's kind of the benchmark of our most popular plans that we're focused on. Those plans are a little more expensive than their predecessors, the Magenta Max plans, and customers get way more. And again, what we're seeing with customers switching to T-Mobile is they're switching to us because they want the best 5G network. And when they get here, they want rate plans that unleash that network for them. They want more of what T-Mobile has to offer, and that is fantastic as a trend because it means we don't have to go back into the back book the way others have with as extensive of pricing actions. That being said, this is a business about flows, and so this is not a new phenomenon anymore. We were talking about 60% run rates at the top of our book a year ago, and so that starts to penetrate slowly over time the base, and that's a wonderful trend for us. You know, we should be thoughtful and patient and not jolted into that future. But what you see is rising customer value. You know, right at the time that some people look at this industry and say, wow, is customer value being destroyed? It's the exact opposite trend that's happening. And we like the rate and pace of it. So we're very comfortable with this strategy.

And people on those higher rate plans, do they use a lot more data than people on lower rate plans? And then are there any other KPIs? Is there lower churn? Is there lower... or just anything about that sort of cohort in that hierarchy?

Yeah, they use a lot more data, which is great. That's what we built this network for. And, you know, we designed this network to see mobile usage during the planning horizon move from back around the time of our merger. You know, it was in the low double digits of gigs per month. And, you know, we designed this network to see it run to something like 80 gigs per customer per month. And, you know, that's the kind of capacity that, we're ready to serve. And so for us, it's a competitive advantage, you know, to be able to serve customers the data they're looking for from their 5G smartphones because it's something that, you know, there's some disparity in all the providers' ability to support that kind of throughput.

And I'll get to some of the sort of spectrum issues in the network that allows you to drive that plan for 80 gigs per month. But sticking with ARPU, pricing power is another issue. You know, How much pricing power would you say? You guys have made some pricing moves. Bryson, there's been some other in the industry. As you look out in the 24s, there's still room to make some targeted pricing changes.

Yeah, we'll see. I mean, like I said, I like the way it's all working right now. And if we watch that dynamic unfold, you'll see that Go 5G Plus or better continue to penetrate more and more portions of the base just organically. And so that's really good. We're obviously always looking for opportunities to be able to present the customer with more for more. And what we're finding is the T-Mobile customer base is pretty interested in that. There's also opportunities for us to optimize our cost structure and revenue structure here and there, and we take those opportunities if we think they'll be well accepted by customers. And so one of the things that's, I think, different about us, and you mentioned it when you said that we're on track for essentially every single thing we talked about in our analyst day two and a half years ago, is that we try to be very planful and data-driven. We try to be highly analytical. I mean, I don't put promises out there that aren't backed by some amount of deep thought, and in many cases, in-market testing. And so, yeah, we try things a lot, and we will push and see what customers will accept and what they'll highly value and what will allow them to continue deepening their relationship with T-Mobile.

Another thing that certainly we didn't anticipate when you guys, at your annual stay, when you guys gave all that information or all that foreclosure, is just how low upgrades would – I mean, maybe there's good guys and there's bad guys. Just how low upgrades would get? I mean, over the last few quarters, we've been very surprised at just how low really everybody's numbers are. How is that – I would say, one, how is that impacting your business? And, two, do you think that that's sort of something that can persist for a while?

Yeah, I think it's been in the run rate long enough now that it's sort of a new normal. And how it's affecting the business is essentially offsetting, partially offsetting a bad guy, which is the cost per upgrade. It's a lot higher than we had planned. And so one of the places where competition has gone over the past few years is to the cost of device subsidies. And that's a lot higher than it was, for example, three years ago. And, you know, but on the other hand, upgrades are much lower. And, you know, so that all works out fine. That compared... that in addition to other things that have gone differently than planned. You know, we captured synergies bigger and faster than we planned. We built a home Internet business bigger and faster than we planned. Our poo trends are a little better than planned. And then there's these two dynamics on subsidies, upgrade rates being lower but cost per upgrade being higher. Flush all that out, you know, and we're, from a P&L standpoint, right on track to where we said we would be.

And does that also help in churn? I mean, it seems, you know, certainly in the past when people were making new decisions to get a new phone, there was more likelihood that they would shop around and potentially look for a new service provider.

What you want is simultaneously the lowest churn and the lowest upgrade rates. And that's incredibly hard to accomplish. And, you know, for example, in Q2, we had the lowest churn in the industry and by far the lowest upgrade rates. And so what that means is you're not over-investing in upgrades for people that wouldn't value them. because an upgrade is a retention mechanism. And if you can have the lowest churn and the lowest upgrade, that's a trifecta. That means you're placing those upgrades right with the people who value them most surgically. And for us, as a data-driven company, an analytical company, that was a massive first-time accomplishment for us that I hope to be able to come back and repeat many times in the future. And what was funny, it was a little disconcerting, is that we announced that quarter in Q2, and then people said, oh, well, T-Mobile missed on total revenues. You know, because remember, the service revenue growth beat expectations, but the delta up to total revenues is the equipment revenue. I'm like, right, that's because we didn't do all the upgrades. And then on second, and then they looked closer, and they're like, oh, yeah, right, that's actually excellent. But that first read for a minute when you release is, you know, because above service revenues is all just those phone sales that are money losing. You know, and you don't want more of that. You want as little of that as possible.

Right, right, right.

With great retention. You want as much of that as is necessary to drive great retention.

And that's obviously one of the biggest value drivers of the business is the churn. And the churn has come way down. And like you said, leading the industry in the second quarter. I mean, is there room to drive that down even further given where upgrades are, what you're seeing in terms of intensity?

You know, I mean, in Q3, we had the lowest churn ever for a Q3 in our history. And yet... Our company is pacing this year. I could get this wrong. You can all look it up. But our company is pacing this year to lose something like 8 million postpaid customers with the lowest churn in our history. Millions and millions of people are still falling down an accident chain and eventually throwing their hands up and leaving T-Mobile. Now, we're about as good as it gets in this. Q2, we had the best churn in the industry. And yet millions of people leave. And the answer is yes. I mean, millions less should be leaving. When you join T-Mobile, we should be in a position to serve your wireless needs for life. And every single one of those defections is regretted and avoidable. And so winning customers for life, earning their relationship for life, is an absolute passion at T-Mobile, top to bottom. And we think there's lots of room to run.

So now I'm going to shift to the network. And then from there, that'll set up questions about some of your growth areas like rural and business and fixed wireless as well. So first of all, you talked about the 5G dividend. We're still in the early days of 5G, I'd say, at this stage. And how would you characterize the evolution of the sort of 5G ecosystem? Is it sort of a bigger deal or smaller deal than expected? I mean, I think, again, going back maybe to the NF there even five years ago, I think people expected a lot of sort of mobile edge compute, network slicing, apps that you couldn't use on 4G, on 5G. But I mean, how would you say that the 5G ecosystem has been evolving?

I think it's generally on track, although it's on track from expectations in our company that I think were reasonably realistic. I mean, we weren't, although we were very excited about leading 5G network deployment, and you heard a lot of squawking from us about that as we, you know, hit all these early milestones and all the industry first. What you didn't hear from us was lots of sort of breathless prediction that the whole world would change because of 5G. We understood that it's just a faster network. Now, one thing that I think is interesting is that we did expect module prices to come down faster. And whether it's the pandemic, whether it's geopolitics or other things, module prices, those very low-cost 5G modules have taken a little longer. And that is one of the things that will catalyze lots of hardware innovation.

When you say modules, you're talking about the actual equipment or the volume?

Yeah. I mean, people expected lots of 5G devices, you know, all kinds of things in your life with 5G built in, and that requires very low cost modules. And, you know, and those have been more, a little slower and coming down for all the reasons I said, you know, nobody predicted the pandemic and certainly the geopolitical issues, you know, have delayed some of that innovation. So, You know, but it's coming. And, you know, we're three years in to attend to perhaps 15-year 5G cycle. And so we see a lot of that innovation absolutely in the pipeline. And, you know, what is happening, as I mentioned, is that in the massive business that is here, it has turned out to be remarkably resilient. I don't think many people predicted the kind of ongoing, you know, high-end growth we've seen in the United States in the 5G smartphone marketplace. And, again, customers are experiencing... three times more data as an, I'm not talking T-Mobile, as an industry, three times more data than five years ago at four times greater speeds with the price per unit falling through the floor. And units aren't becoming less valuable. I mean, a gig of data being moved is still worth what it was five years ago. I mean, it's still the same amount of video stream, you know, that hasn't changed, right? So this is an incredibly per unit deflationary market to the benefit of consumers and businesses. while the industry is realizing higher cash flows than at any point in our history. And that, you know, as I mentioned earlier, that is all because of the innovation of 5G.

You know, AT&T made an announcement yesterday. We had John Stanky here this morning about O-RAN. And then over the next, I forget the time frame, but they're going to shift a lot of their traffic. I think you said 70% over to O-RAN infrastructure. Is that part of the sort of roadmap for T-Mobile?

Well, I think generally people have presumed that kind of the de-verticalization of the industry is just a matter of time and that you want to be able to smartly buy the different components up and down the stack. And that's certainly our hope and expectation. Now, for us, we really deeply value our partnerships with both Nokia and Ericsson and see it as an advantage that we can buy up and down the stack from multiple partners. We also think it's very good that the Western world has two global leaders in this space, etc. So We're very comfortable with our relationships and highly value those deep partnerships that we have with both Ericsson and Nokia. Makes sense.

Let's talk about some of the spectrum you guys hold and are deploying and potentially selling. So first, starting off with the 2.5, obviously came with the Sprint transaction. Where are you in terms of deploying it, both in terms of the sort of breadth and depth and sort of how has that changed the game for you?

Back to those promises of the merger. I don't really think most people believed us when we said we could blanket this country with mid-band 5G by 2023. And we did it. Two months ahead of schedule, we hit 300 million people covered by our ultra-capacity 5G. That's mid-band 5G, with an average of 155 megahertz deployed already of dedicated 5G. That is just astonishing. This is a big, big country. It's three times more landmass to go from 100... million POPs to 200 million POPs. It's three times again to go from 200 million POPs to 300 million POPs. So we cover 300 million POPs with mid-band 5G with 155 megahertz. We had said we'd get to 200 megahertz around the end of this year. And that's, you know, the plant's in the ground already for that. So that's also done. Now it'll be at our convenience whether we actually switch from LTE to 5G and we'll follow the volume trends there. But with the plant in the ground, that's just a configuration. So we can move to 200 megahertz or north, cell by cell, sector by sector, based on where the demand is between LTE and 5G. So those missions are accomplished, and it's just a huge, huge advantage. I mean, this has been a historic multi-year effort, six long years of our lives to leapfrog everybody from dead last in the 4G LTE era to first invest in 5G. And it's a massive, long-term, durable advantage now that that plant's in the ground. And you see it in our P&L. We said years ago we were going to pull some capital forward to get this done because we had the wherewithal to get it done at pace. We felt there'd be advantages to do that, and we did it. And now we have an outlook for the next several years that is highly capital-efficient as a result because, again, the plant's in the ground. And we have lots more room to run on spectrum we can build. I mean, we're far from done. But this looks like a business model that will be able to deliver against our aspirations in a reasonably capital-efficient way over the next many years.

Makes sense. So turning to some of those other spectrum bands, we were talking earlier that the 600, you guys have effectively aggregated a big chunk of the 600s. just recently signed a transaction to fill in some spots with Comcast, I think first on a lease basis and maybe sort of lease to own. Just what does that band do for the business?

It's critical. You know, we've been talking about our spectrum strategy since, again, at the beginning of that six-year journey when we laid out our merger vision and the layer cake strategy. And we've always felt that 5G would unfold principally in the mid-band and that it would be best supported by a dedicated 5G layer at low band. And we're the only ones that really pursued that strategy. And so now, virtually everywhere you go, we're able to offer multiple carrier aggregation. So your phone is simultaneously attaching to the 600 and to the 2.5 gigahertz and the rest of our mid-band spectrum, 1.9. This is incredibly powerful, and it's a standalone 5G capability because what it does is essentially increases the ring from each one of our towers. And that's really, really important for our overall competitiveness. In general, with that carrier aggregation, the uplink is provided by the low band and the downlink is provided by the mid band. And so really important that we have adequate supply of both to be able to continue this incredible advantage that we have on the network side. So it's not just about building the plant. It's not just about having the right spectrum. It's also about deploying the right technologies that allow you to take advantage of all that stuff the way we have with our first of its kind four-way carrier aggregation technology. So a long way of saying it's really important. And we realized early the value of it. We got our company ready to play. It was the first major auction win really of our history was that 600 megahertz auction. And we've been trying to smartly buy it ever since then. And by the way, it's not just low band. In our opinion, it's also the best low band, meaning it reaches further from towers. It penetrates buildings better. It comes in big contiguous blocks. It's perfectly tailor-made for a 5G layer cake network.

A couple other bands. First of all, you guys bought some C-band spectrum, some 345, and you guys have been talking about deploying that on an as-needed basis once the dual radios are available. Is that still the strategy, and what do you think the timing for that is?

Well, first of all, dual radios are available, so that's great. And it's important. The others were four. They had no choice. They had to jump out before that was the case. And so for us, we had the ability to be able to hold until we had that. But we also hold until we need it. And so as I said, we're at 155 nationwide in mid-band. We're going to 200 here very quickly. That's plenty for the moment. Our plant's in place across 300 million. So within the capital envelope we've been talking about, that kind of 9 to 10 billion a year, You know, we've got plenty of room to be able to get this deployed before customers need it from a capacity standpoint. And we'll just be really smart about how we do that and where we do that and, you know, data-led. Got it.

Okay, last on what has been a very sort of focused strategy or spectrum section here is the 800 megahertz spectrum. Obviously, you've got – you picked that up from the Nextel transaction years ago, and then now – it's on the block and you have a potential deal with DISH and that's been extended, but tell me where you are with that and sort of the potential path this could go.

Yeah, well, just as a reminder to everybody, the divestiture of 800 was a condition of the merger. And so this was part of our original agreement with the Department of Justice and DISH. And DISH did not execute against that along the timelines that we expected and we entered into a discussion with them and ultimately arrived at a deal with the Department of Justice and DISH earlier this year that trades essentially more certainty for us for more time for DISH. And it's a nice win-win for everybody involved. And so the way the deal works now is DISH has until April 1st of 2024 to execute their transaction. They've already sent us a non-refundable $100 million deposit against that transaction. If they fail to close as expected, and I do think their plans are sincere here, the question is affordability, etc., then we've already been authorized by the DOJ to conduct an auction for that spectrum. We're not required to sell it below the reserve price, but we're fully authorized to conduct that. And, in fact, we're authorized to conduct it in advance if we'd like. So what's nice is everything's put to bed on this transaction, and we have certainty now that should we choose, we can execute either a transaction with DISH at their option or an auction – and have this done in the first half of 2024. And that's just a great spot to be.

Got it. Okay, now turning to some of the growth drivers, now that we sort of have a better understanding of where we are from a network standpoint. Fixed wireless has obviously been a focus. It gets a lot of attention here, both because of the wireless providers and because of the cable providers. How, I would say, you know, talk about the product, what it means in terms of your portfolio here. And sort of how much runway do you have given that, you know, sort of long-term requirement that you guys laid out of 80 gigs per month per sub on the mobile side?

Well, that's actually been one of the inputs that was in the design of our fixed wireless plan. So just to remind everybody, you know, this is essentially a plan that looked at our nationwide mobile network. It looked at our ongoing expected share taking on that network. It looked at the ongoing expected growth in usage per smartphone on that network, and it identified sectors all across the nation by the thousands that no amount of normal smartphone usage would soak up the capacity on that particular sector. And on those particular sectors, we have approved applicants for home broadband use. That's the premise on which we are now the fifth largest ISP in the nation and by far the fastest growing for four quarters in a row. It's essentially about monetizing planned excess capacity on our mobile network. And it's just a beautiful strategy. And it's working at least as well as we expected. Some would say better. I'd say no. I mean, actually, I'd love to take credit for it's going better than expected. It's just essentially right on track. The only reason it's better than expected is that when we laid out these plans for our high-speed Internet business, nobody believed us. You know, we said we'd be right here by now. It's just nobody believed us. We believe you. We're right on track. We're really not ahead of schedule. I mean, you could say if you were to take our roughly half million net ads a quarter and our plan to get to seven to eight million by the end of 2025, you could say we're a little ahead of schedule. And because of that, you know, because the TAM on this business opportunity is reasonably finite, you know, you might see us experimenting with rate versus volume kind of dynamics, you know, over this next year. because we want to make sure that we, you know, add the most possible value to the company within, you know, this reasonably finite TAM. So you might see some of that, which could affect the 500,000 quarterly run rate, but that would be, you know, a net positive. So it's just going beautifully.

Yeah, I mean, that's in keeping with the broadband market, right? The broadband is still a product in the U.S. with that consumer, and I think video too, where consumers expect price increases almost, you know, every year. So you're just staying within that and

envelope by moving what's happening that i'm particularly proud of is that the the churn is falling and the net promoter scores are some of the very best in the industry 30 points higher than typical cable higher than typical fiber one of the best in the overall country and so this is a product that i think has surprised a lot of people and it's really a showcase of what 5g especially if you can allow me the world's best 5g can do right

So you mentioned the guides, the 7 to 8 million sub-guides. It does seem, you know, certainly at this pace, and even if you slow down a little bit, you'll hit that number. I mean, I guess, aside from asking you to change guides here on the stage, I mean, how much capacity do you have in the network to, you know, how many subs or talk about the potential capacity and the potential size of this business as we look at a number of years.

Yeah, we've always said we saw it as about 7 to 8 million homes, and, you know, that's still the case. You know, some people discount what we say. Maybe there's a tiny bit of room there, but it's in that area code. But on the other hand, we're also evaluating whether a capital-burdened wireless strategy will work. You know, this is a sort of a capital-free wireless, almost capital-free, but certainly at the RAN level, capital-free strategy. We're looking at whether or not a capital burden strategy would work to take us further in the TAM. We have to be really thoughtful about that. And so far, we have not cracked the code on that in terms of a business that we think would be a great return. But there's lots of movement in that space, lots of technologies emerging, some of them non-standard space, other things that might become available to us. So we're working that really hard, haven't concluded that there's a scalable strategy there beyond what we're doing. And of course, we're also looking at fiber. And I've been you know, pretty clear about the trials that we've been doing and some of the wholesale partnerships that we've established. And that may be another way for us to continue to extend, you know, the addressable market well beyond this initial, you know, 5G wireless market, if we can find the right, you know, win-win there.

On both of those, first of all, on the capital burden fixed wireless, are you talking about sort of adding infrastructure to do, to sort of extend the capacity of the network, say, through small cells or cell splitting or something? Or are you talking about sort of putting masks on buildings and taking an MDU approach, maybe using some of your millimeter wave spectrum to do something that's a little bit sort of non-mobile fixed wireless?

I was talking about both or either. And neither so far is something that is immediately obvious that it would be a high return. But in both of those areas, both kind of the millimeter wave and small cell as well as kind of maybe mid-band but with standards or non-standards-based technologies, all that stuff we're looking at, they're different from each other, and we haven't drawn any conclusions yet.

Similarly, on the fiber to the home, you've had these pilot programs. Any early learnings you can talk about? I mean, are you getting better wireless penetration in those markets? I'd imagine you're selling a converged product.

I'd say as time goes on, our confidence in our ability to execute in this space is rising, and that's good. Not just because of those trials, but also because of our persistent success in 5G home internet. And all that is showing that our team knows how to execute in this space. We know how to not just acquire customers, but care for them, which is really important. It's not as easy as it looks. It's different than the wireless business. That our brand resonates, that our distribution is relevant, that our digital assets are working. And so, you know, it gives us confidence that there could be a business here that could generate a return. And what's interesting is we've never, and I think I've said this before, we've never looked at this really as a defensive play. And that's part of why we've been somewhat patient. You know, people said, Mike, you've started talking about this like a year ago. And we can afford to be patient because our model works so well. And we're only going to plunge into this space if, A, it doesn't really change who we are, if it's capital light and smart, And it's something that we can make money at, you know, because we think it would be a business that would be incremental versus something we do for some kind of defensive fend off the convergence, you know, bogeyman kind of story. That's just not something we're deeply concerned about.

Gotcha. I do want to touch on the rural. Obviously, that's been a nice source of growth for you guys. Maybe just give us an update on where you are in terms of. getting the spectrum out there, getting the distribution out there, and penetrating those rural markets?

We had a giant milestone in Q3. I mentioned it during our earnings, but it didn't get much comment upon, which is that, because we've been the share-taking leader for many years in the top 100 markets. That's part of what fuels our growth. For the first time ever in our history, in Q3, we were the share-taking leader in smaller markets in rural areas. This is 40% of the country. and we took the number one position of share of port ends in Q3, and that is a major milestone. Remember, at our analyst day in 21 when we laid out our aspirations here, we were nobodies in smaller market and rural areas and said we could maybe get to a 20 share by 2025. At last disclosure, which was a quarter or two ago, we were at 16.5 share, and we are taking share now at pace. And that's, by the way, not just in the places where we're competing. Remember, we stratify the 775 markets and classify them based on how much competition we're bringing in those spaces, and some we haven't gotten to yet, some we've gotten to lately, and some we're deeply competing in. This is across the blended entirety of smaller markets in rural areas. We are now the share-taking leader as of Q3. Okay.

Finishing off, you touched on CapEx, the $9 to $10 billion level. I mean, is that a sustainable level sort of going forward, even with these other potential growth initiatives? And then sort of how should we think of the company's use of excess cash in terms of new growth and sort of other options, including the buyback?

Based on the promises we've made on value creation, revenue, and EBITDA, that does look like the right capital picture. Now, I can't say we wouldn't come back and say, hey, we're going to actually increase capital and increase our aspirations. Maybe we will. We'll see. But that looks like the right area code to us to accomplish everything we've set out to accomplish. And that's mostly because, again, and thank you, our investors have been very patient We've spent a lot of money over the past five years, a lot of money building the world's best 5G plant, and it's time to be able to enjoy having that in the ground and be able to realize the benefits of that. So that's just money already spent. In terms of capital return, this is such an exciting story. I mean, we are in the middle. We just authorized our second big tranche of shareholder returns. $19 billion, including our first-ever dividend, $3 billion of that on an annualized basis-ish. Again, it's mostly favoring buybacks because we're a growth company. But there is a first-time-ever dividend that we indicated we would expect to grow on an annualized basis. That's just so exciting to be able to see the cash production of this business. Again, this year, free cash flow tracking to 75% year-over-year growth. Yeah, it's been fantastic. Well, Mike, thanks for being here. Thanks for having me. Appreciate it.

Cheers.