T-Mobile US, Inc.

Good afternoon. Welcome to T-Mobile's second quarter 2025 earnings call. Joining me on our call today are Mike Sievert, our president and CEO, Srini Gopalan, our COO, Peter Oswaldek, 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.

okay kathy thank you thanks for keeping us out of trouble over there great job welcome everybody thanks for being with us good afternoon we're coming to you live from bellevue today i've got the whole team here and we are excited to talk to you about our q2 results and more importantly to take your questions and what a quarter it was our results were in one word if i had to pick one fantastic This team right here did it again, delivering the consistent, differentiated, profitable growth that we are known for. We led the industry in both customer growth and in financial growth across multiple metrics, and more importantly, we smashed our own records. This was the greatest Q2 for growth ever in T-Mobile's storied history with the best Q2 postpaid phone nets ever. the best Q2 for total postpaid net additions ever, and our best ever Q2 on gross additions too, with both gross and total postpaid, and both gross and net, total postpaid ads up double digits year over year against a very strong 2024 comp. Equally as exciting, our postpaid account nets also accelerated year over year, and we saw our postpaid share of households grow in every single cohort within the top 100, and of course also in smaller markets and rural areas. And the momentum is continuing, with share of port-in leadership and overall customer momentum right where we want it. Now you may have heard others say that this is a highly competitive environment, and it is. But we love it that way, and we thrive in a dynamic environment like this one. Our results, including our value creation results in this dynamic environment, simply speak for themselves. The quality of our customers continues to improve at a rapid pace with ARPA growth up over 5%, our highest growth in eight years. Our customers are continuing to self-select up the rate card. Here's a new stat for you. After launching our new rate plans in April, within that premium segment we've been talking to you about, customers are loving our most premium tier within it more than ever. Selecting our new Experience Beyond plan at more than double the rate of Go 5G Next just a year ago and up over 50% in just one quarter. Our business group. continues to break growth records as well, leading the industry once again in net additions. And we are not standing still. Just yesterday, we announced a new multi-year partnership with Cable to provide mobile service to small and mid-market businesses to supercharge our growth in an area where we have little exposure today in a true win-win. The deal focuses our partners in the exact areas that would drive incremental revenue because our strongest T-Mobile branded growth comes on the one hand from the very smallest businesses transacting at retail, where we already compete with cable, and on the other hand from large enterprises above 1,000 lines, which are not included in the deal. So while it's going to take some time for this to grow into something meaningful, I'm super excited about their capabilities to generate growth in the SMB sector in a way that will be truly incremental for T-Mobile. Okay, I want to spend a moment on something that I'm very passionate about, our network, America's best network. Over the last couple of years, we've seen a significant increase in the number of customers citing our network as the reason for switching to T-Mobile. And that's a great start, but the reality is most of our prospects don't yet know we have the best network. In fact, only about 20% of switchers in the broader market believe we do. This represents an enormous runway for us. Network perception has now become a major focus for us. For a simple reason. There's a massive opportunity from all of those tens of millions of customers who went elsewhere in the 4G era, deliberately choosing what was then the best network. Well, there's a new best network in America. And you'll be seeing us bring that message to consumers and businesses in really innovative ways. Until every person in America has heard why there has never been a better time to join T-Mobile. And on the substance of our network leadership, we are on the move. We're continuously pushing across multiple strategies to widen our lead and cause the rest of the market to follow. That's why we're out there with Greenfield Builds having already lit up 1,000 sites year-to-date with a plan to bring on nearly 4,000 sites this year alone. That's why we were the first carrier to roll out things like nationwide 5G advanced, automated slicing capabilities, and higher order carrier aggregation. And we won't stop. It's all about getting more and more performance for our customers from every capital dollar and every piece of radio spectrum. The result? Our network lead continues to widen. We're also shoring up our network in smaller market and rural areas with U.S. Cellular. With all required approvals now in place, I'm pleased to say that we plan to close the transaction and become one team next week on August 1st. We can't wait to welcome U.S. Cellular customers to the T-Mobile family. The combination gives us an expected 50% or more increase in capacity in the combined footprint And our site coverage will expand by a third from 9,000 to 12,000 sites. Taken together with the greenfield builds I mentioned earlier, the network experience in smaller markets and rural areas is being fundamentally transformed, just further fueling our ability to compete and grow in this space. And just this morning, we launched our groundbreaking T satellite service commercially, further extending our network to connect customers in the 500,000 square miles of this country that are not covered terrestrially by anyone and with a truly differentiated service. Okay, now let me turn over to 5G broadband. No surprise, given the strength of this product, we delivered yet another stellar quarter. In fact, for the 14th straight quarter, we led the overall broadband industry in net additions. Double-clicking into it, T-Mobile for Business also led the industry this quarter, achieving our highest ever business 5G broadband net additions. Overall, both speeds and usage continue to rapidly grow, demonstrating the mainstream nature of this product, while satisfaction is as high or higher than ever as seen in our record low churn. Let's talk fiber. Last month, we launched T-Fiber after completing our JV acquisition of Lumos in April. And tomorrow, we plan to close our JV acquisition of Metronet. With both up and running under the T-Fiber banner in the second half, we're poised to deliver 100,000 or more fiber nets on top of our planned 5G broadband nets this year. We are off to the races. Let me spend a moment right now on our ongoing digital transformation. At Capital Markets Day, we shared an audacious transformation plan designed to meet customers where they are with breakthrough-AI-enabled sales and services experiences. and a step-change improvement in our business model at the same time. I'm here to tell you that we are more than on track. Look at how far we've come in such a short time. A year ago, TLIFE was just getting started. Our TLIFE app now has over 75 million installs, and it's one of the most downloaded apps in the App Store. And it's a destination for tens of millions of customers to transact and access the incredible Magenta status benefits that they love. As an example, a year ago, very few of our phone upgrades occurred digitally. Today, we've checked that box. About two-thirds of our consumer upgrades now occur via our app. And we're exiting Q2 with significant new momentum in digital adelines and turning next to new customer acquisition. I have never been more excited about the potential here for our customers and also for our business model. Speaking of, let's talk financials. Our best-in-class customer results continued to drive industry-leading financial growth across key metrics yet again in Q2. Postpaid service revenues grew 9% year-over-year, an acceleration from Q1, and total service revenues grew 6%, a rate well over double that of our closest competitors. our industry-leading core adjusted EBITDA growth was 6% year over year. We delivered $4.6 billion in adjusted free cash flow, a new Q2 record, translating to, once again, industry-leading adjusted free cash flow conversion from service revenues of 26%. Listen, what these results demonstrate overall... it should come as no surprise. T-Mobile's industry-leading value proposition of best network, best value, and best experiences is an exceptional combination. Our strategy is differentiated, it's durable, and it has tons of room to run. Not only do we see opportunity to deliver outsized growth in under-penetrated areas like smaller markets, T-Mobile for business, and broadband, alongside smart new adjacencies. But as we solidify our network lead, we're also demonstrating that there's room to run among network seekers in the top markets where we're most established. There are growth opportunities everywhere we look. We have built these differentiated and durable advantages over time, and with unwavering focus. This team sitting here in front of you looks around corners, and we show up every single day ready to win, to win today and to win tomorrow. And we won't stop. We won't stop doing what's right by customers. We won't stop shattering the very records we set, and we won't stop delivering against the lofty, long-term ambitions that continue to set T-Mobile apart. Okay, Peter, over to you to provide a quick update on our key financials and our guidance.

Perfect. Thanks, Mike. Hey, as you can see, we had a fabulous Q2, which underpins the confidence in our increased guidance. Before we jump into those updated full-year expectations, I'll note they now reflect the inclusion of MetroNet, but exclude U.S. Cellular, for which we will provide an update later after the close. Okay, starting with customers. We are raising our total postpaid net additions expectations to be between $6.1 to $6.4 million, an increase of $500,000 at the midpoint. Approximately $100,000 of the total will be fiber net additions. We are also increasing our expectation for postpaid phone net additions, now expected to be between $2.95 and $3.1 million, highlighting the great momentum we're seeing in the business. Both of these represent our highest ever customer guidance at this point in the year. We also continue to expect strong postpaid ARPA growth of at least 3.5% for the full year as we see continued deepening of customer relationships, and we now expect 2025 service revenue growth of at least 6% for the full year. We now expect Core Adjusted EBITDA to be between $33.3 and $33.7 billion for the full year, an increase of $100 million at the lower end of the range, which includes funding our significantly increased total postpaid net additions expectation. As part of that, we expect Q3 Core Adjusted EBITDA to be approximately $8.5 billion as we accelerate investments into our business. Okay, turning to Cash Cap X, we continue to expect Cash Cap X to be approximately $9.5 billion for the full year. We also expect adjusted free cash flow, including payments for merger-related costs, in the range of $17.6 to $18 billion, also representing an increase of $100 million at the lower end of the range. I also wanted to touch on the upcoming close of the joint venture transaction, which is acquiring MetroNet. As with the Lumos joint venture, the consumer experience and residential business will be fully owned by us, and we will also share in 50% of the joint venture economics. We will treat the acquired customers as a base adjustment in our third quarter results, And as we fuel customer growth, we expect the retail business to be slightly accretive to service revenues while remaining neutral to adjusted EBITDA and adjusted free cash flow this year. Additionally, our 50% equity stake in the joint venture will be reported below the line as an equity method investment and is expected to be immaterial to net income this year. Next quarter, we will provide a more comprehensive update regarding the contribution of both of our fiber joint ventures. Okay, let me also spend a moment on the benefits from the recent legislation coming out of DC. While this won't meaningfully impact our 2025 cash tax expectations, we do expect an approximately 1.5 billion benefit to cash taxes in 2026, which will be deployed thoughtfully, guided by our capital allocation philosophy. And finally, I want to provide an update on the sale of our 800 megahertz licenses. We have reached an agreement with Grain Management to divest our entire portfolio of 800 MHz licenses in exchange for a combination of $2.9 billion in cash, all of Grain's 600 MHz licenses, and have additional potential upside via participation in future proceeds Grain receives from monetizing the licenses after a minimum return to Grain. The transaction is anticipated to generate approximately $850 million in incremental income taxes following the close. But as a reminder, all of the net proceeds are incremental upside to the guidance we laid out for you at Capital Markets Day last year. We expect this transaction to close in the fourth quarter of 25 or the first quarter of 2026. Okay, to sum it all up, not only did our results continue to demonstrate our ability to consistently execute and deliver outsized and profitable growth, but we cannot be more excited to carry our strong momentum far into the future. All right, and with that, I will now turn the call back to Kathy to begin the Q&A.