AT&T Inc.

Ladies and gentlemen, thank you for standing by. Welcome to the AT&T Second Quarter of 2019 earnings call. At this time, all participant phone lines are in a listen-only mode. Later, there'll be an opportunity for your questions. If you'd like to queue up for question today, you can press one followed by zero. If you need any assistance during the presentation, please press star followed by zero. Just as a brief reminder, today's conference is being recorded, and I would now like to turn the conference over to our host, Mr. Michael Viola, the Senior Vice President of Investor Relations. Please go ahead.

Thank you and good morning everyone, and welcome to our Second Quarter Conference call. I'm Mike Viola, Head of Investor Relations for AT&T, and joining me on the call today is Randall Stevenson, AT&T's Chairman and CEO, and John Stevens, AT&T's Chief Financial Officer. Randall will provide an update of our key 2019 initiatives, and John will cover our operating results, and then we'll follow that up with a Q&A session. Before we begin, I wanna call your attention to our Safe Harbor Statement, which says that some of our comments today may be forward-looking. As such, they're subject to risks and uncertainties, results may differ materially, and additional information is available on the Investor Relations website. I also wanna remind you that we're in the quiet period for the FCC Spectrum Auction 103, so we can't address any questions about that today. As always, our earnings materials are available on the Investor Relations page of the AT&T website. That includes our news release, investor briefing 8K, associated schedules, et cetera. And one more item before I turn it over to Randall. We've scheduled our Warner Media Day for the afternoon of October 29th at Warner Brothers Studios in Burbank, California. We will discuss more details on the new streaming service, HBO Max, and more details will come, but go ahead and mark your calendars. And so with that, I'd like to turn the call over to Randall Stephenson.

Thanks, Mike. Good morning. The headline on the second quarter and the first half of the year is we're hitting each of our commitments we made for 2019, and you can see those on slide three. I'll start with our deleveraging plans, which are right on track. Since we closed the merger last June, net debt is down $18 billion. We expect to further reduce net debt about another $12 billion in the second half of the year. And that should get us to a two and a half times net debt to adjust to EBITDA range by year end. And to the extent that we can overachieve on that objective, you can expect we'll take a hard look at allocating capital to share buybacks in the back half of the year. Wireless is about half of our overall EBITDA and it continues to fire on all cylinders. Last quarter, we grew revenues, EBITDA, and phone subscribers, both postpaid and prepaid. Wireless service revenues were up .4% in the second quarter, and we're continuing to see the payoff on our investments with a world-class network. Our wireless network has been named the fastest, the best, and the most reliable by independent testing services. FirstNet continues to be the driver of our network performance as well as our 5G leadership. And at the end of the quarter, we were about 60% complete with our FirstNet coverage, ahead of plan, and we're now targeting 70% completion by year end. And our FirstNet build is accelerating our 5G deployment. As we deploy FirstNet, we're installing hardware that can be upgraded to 5G with a simple software release. As a result, we're on track for nationwide 5G coverage by the first half of 2020. Turning to WarnerMedia, it was another strong quarter. Merger synergies remain on track and we had solid operating income growth across all three business units. This was a record year of 191 prime time Emmy nominations for WarnerMedia, and HBO alone scored 137 nominations. That was the most in its history. So what was the result of all of this? We had very strong HBO digital subscriber growth in the quarter and were set up really well for the second half of the year. Bottom line, HBO stepped up investment in content is working. And this will be critical as we launch HBO Max next spring. And as Mike mentioned, we look forward to sharing more about HBO Max in October. Our entertainment group continues to make solid progress. We didn't just stabilize EBITDA, we actually grew it by .1% in the quarter. Later this summer, we'll beta launch AT&T TV in a few markets. That's our live TV service over broadband. We have some really high expectations for this product and we're gonna learn from the pilot and then we'll expand to more cities as we go through the year. IP broadband revenue growth remains strong. We continue to see solid growth in our AT&T fiber product. That product now reaches about 14 million customer locations or 22 million when you include businesses. So all in all, solid, steady progress against the commitments we made coming into the year. And I'm feeling even more confident that we're gonna meet or exceed each of those commitments for the full year. In fact, this morning, we've raised our free cashflow guidance for 2019 to the $28 billion range. That's up $2 billion and we have reaffirmed all of our other guidance for the year. So now for more detail in the quarter, I'm gonna turn this over to John and he'll take you through the results. So John.

Thank you, Randall, and good morning, everyone. Let me begin with our financial summary on slide five. As Randall mentioned, we're on track with all our financial targets and in many areas, we're ahead of plan. Adjusted EPS was 89 cents in the quarter, including a two cent impact from a higher effective tax rate. We continue to expect low single digit growth for the full year as we were set up for a solid second half of the year performance. We get revenue both on a reported and pro forma basis in the quarter. In fact, all segments are growing on a constant currency basis. Adjusted operating margin was up 90 basis points with the addition of water media, strong growth in mobility, and continued improvement in our entertainment group. Our cash flows were very strong in the quarter. Let's look at this on slide six. Cash from operations came in strong at 14.3 billion. That's up 40% and free cash flow was a record 8.8 billion. The addition of water media operations made an impact, as did adding their receivables to our securitization efforts. The securitization lifted free cash flow by $2.6 billion. Our ability to generate cash continues to be impressive. Over the last 12 months, we've generated $29 billion in free cash flow or about $4 a share. With the benefit of our securitization efforts, we have confidence to raise our free cash flow guidance for the full year to the $28 billion range. Our strong cash position also allows us to continue to invest at industry leading levels. CapEx was $5.5 billion, and total capital investment was $6.5 billion when you include the billion dollars of payments for prior vendor financing activity. And we reduced net debt by $6.8 billion in the quarter. Let me speak more to the leveraging on slide seven. We've paid off 18 billion in debt since we closed the merger. And we ended the quarter with our adjusted net debt to EBITDA ratio at just under 2.7 times. This is down from three times leverage ratio when we closed the deal. And we're squarely on track to hit our year end target of being in the 2.5 times range. Year to date, we've reduced net debt by nearly $9 billion. That includes about 7 billion from free cash flow and nearly 4 billion in asset monetizations, offset by about 2 billion of vendor payments and other purchases of assets. And these sales have come from assets that contribute no EBITDA. Looking at the remainder of the year, we're confident that we'll hit our year end leverage target. To the extent we can overachieve on that target, you can expect we'll take a hard look at allocating capital to share buybacks in the back half of the year. Let's now look at our segment operating results, starting with our communication segment on slide eight. The story of our communication segment this quarter is stable revenue. We're looking at EBITDA and margin growth while adding phone subscribers. Our entertainment group is delivering EBITDA growth. And business wireline revenue trends improved in the quarter, thanks to strength in strategic and managed services and about 125 million from IP licensing. But even without those licensing proceeds, business wireline revenue trends were the best that we've seen in years. And when you factor in strong business wireless performance, our business solutions revenue grew 2.3%. On the cost side, the team is doing great work in controlling content, promotions and other operating costs. Solid cost management was evident throughout the business, especially in our entertainment and business wireline units. Let me give you some more details, starting with mobility on slide nine. Our mobility business continues to perform very well. Service revenues grew by 2.4%. EBITDA growth was even higher, 3.1%. And EBITDA margins expanded by 80 basis points, with service margins of 56.1%. We had a strong quarter with 355,000 phone net ads, including 72,000 postpaid and 283,000 prepaid. And we added 388,000 smartphones in the quarter, further strengthening our customer base. Postpaid phone trend was up slightly to 0.86%, but was down sequentially. And at the same time, our prepaid business, especially cricket, continues to perform at strong, consistent levels. Prepaid revenues were up nearly 10%. We had our 18th consecutive quarter of phone growth, and churn hit an all-time low at both cricket and AT&T prepaid. With the network leadership and first net expansion that Raynal talked about earlier, we're confident that our wireless business will get even stronger as we evolve to 5G. In short, our network investments, particularly our spectrum deployment, are paying off, and we're not done yet. Now let's go on to our entertainment group results on slide 10. Our focus on long-term customer value continues to impact our entertainment group. EBITDA grew both year over year and sequentially. This was the second straight quarter of EBITDA growth. Year to date, EBITDA is up about 4%. Expense reduction, outpaced revenue declines, setting the stage for EBITDA growth. Broadband revenue growth helped us, as well as continued growth in video ARPUs. The number of premium TV customers on a two-year price lock declined by more than 600,000 in the quarter. Video subscriber numbers were in line with what we said to expect for the quarter. Premium declined, 778,000, and DirectTV now declined, 168,000. And as Randall mentioned earlier, later this summer we'll begin piloting AT&T TV, our thin client broadband TV product. We've passed an important milestone with our fiber deployment, reaching 14 million customer locations, and satisfying our fiber build commitments. This will be an important driver of growth going forward. In fact, we had more than 300,000 AT&T FiberDat ads in the quarter, and IP broadband revenue grew by 6.5%. We expect AT&T fiber penetration to grow as the service matures. Bottom line, we remain comfortable that we'll meet or exceed our entertainment group EBITDA target for the full year and lay the groundwork for continued stability beyond 2019. Let's move to WarnerMedia's results, which are on slide 11. WarnerMedia continues to be free cashflow accretive. Our expense management with merger-related synergies are on track. We expect to hit a $700 million run rate by the end of this year, and HBO Max is slated to launch next spring. Overall, WarnerMedia had another strong quarter with .5% revenue growth and solid operating income growth. HBO revenues grew thanks to strong content sales driven by home entertainment and international licensing. Turner revenues were up about 2% on subscription revenue growth, and this includes the advertising impact of not having the NCAA Men's Final Four Championship this year. It'll be back on Turner next year. And at Warner Brothers, theatrical revenues increased due to home entertainment gains and the highly successful release of Mortal Kombat 11, which drove game revenues. With that, Mike, we're now ready to take questions.

Operator,

we're ready for the Q&A instructions. Thank you, ladies and gentlemen. If you wish to ask a question for us, please press one, then zero on your telephone keypad. You can withdraw your question at any time by repeating that one, then zero command. If you happen to be using a speakerphone this morning, we ask that you please pick up that handset before pressing those numbers. But once again, if you'd like to queue up immediately for question, please press one, followed by zero at this time. And maybe just a brief moment for our first question. It looks like first we have the line of John Hudlick of UBS. Your line is ready.

Great. Great, thank you. Maybe some questions on the entertainment segment and specifically on the video subs. John, you said you've got about another million subs left on the promotions. When did those promotions expire? And maybe if you could comment a little bit on the programming disputes you're having with CBS and Nextar. One, is expectations for a regular show resolution there driving some of the belief in continued growth in EBITDA in that segment? And then how do you expect that to impact the sub trends as we look into the second half of the year? Thanks.

Hi John, it's Randall. I'll take the carriage disputes that are going on with CBS and Nextar first, and I'll hand it to John, let him just kind of reconcile the subscriber numbers for you. As everybody probably knows, CBS has pulled their signal off DirectTV as has Nextar. And they're two very different situations. On CBS, kind of an interesting situation. The bid ask candidly is not that wide. But it's kind of an interesting dynamic with them. We sent what I thought was a reasonable fair offer over five days ago, and it's been crickets. We haven't heard anything. Had you had a response to the offer, when you're as close as we are, we find it a little interesting that we're still sitting here dark and not having interaction with CBS. I'm guessing they're probably distracted with other negotiations right now, but I don't know. Nextar, it's a very different situation. Nextar, as you know, basically their product is broadcast, the four big broadcast stations, free over the air content, I might point out. And their opening bid in the negotiations was like 100% increase. And not only was it a 100% increase, but the assets that they're trying to acquire, that they don't yet own yet, they were asking for a rather significant increase on assets they don't own. So it began with kind of a non-starter. They've pulled their signal and gone dark. Now the spread is they're asking for a 50% increase on broadcast channels that again are free over the air. And so that one may take longer, but we'll just have to be resolute on this one. We're just not gonna impose those kinds of price increases on our customers. And interestingly enough, unlike other times where we have gone through these type of blackouts for companies who pulled their signal, our customers in a world of streaming are finding other ways to access this content. And so there's other technologies, these technologies could even flow right into the programming guide in our direct TV lineup. And so customers are at a pretty significant rate finding other ways of getting through that content. So that one could take a while. CBS, I'm optimistic, but hopefully we just get them back to the table and get this closed.

So John, taking that forward, we've got about a million customers left, as I mentioned, on these price locks. And those price locks expire in the fourth quarter. Pretty much randomly, I'd say, throughout the second half of the year, but in November, they close out, and we expect to have through the process by the end of this year. So we'd expect to continue to see some of the impacts of getting to this value-based, long-term customer value approach that we've taken on those customers and continue to see some of the same trends we've seen. Additionally, we have, as you see in the EBITDA Grow, and the performance of the business being really solid, certainly stable, but solid in my mind, you can see that we believe that this value of customer, long-term value customer approach is working. So on the intake side, we're gonna continue to follow that, and that will also continue to lead us to some working through the rest of this year. With that being said, we're encouraged about our early insights into AT&T TV. We're encouraged about the ability to get it out of the bay to learn from it and take it forward the rest of this year. So when I look at 2020, and we've been through the two-year price box, we've been through a full year of adding long-term value-based customers, and we have the potential to use AT&T TV, we have more optimistic expectations for 2020, and that gives us the basis to believe that margins will continue to be stable next year.

And you know, just most importantly, what John just went through is as we come out of the back end of 2019 and the customer base is cleaned up, we will have a customer base that is going to be perfectly suited for HBO Max, and we really had a really strong second quarter with HBO. And I gotta tell you, with what we saw on HBO in the second quarter, particularly on the digital subscriptions that were added, we're gaining more and more confidence that this DirecTV base as we come out of 2019 is gonna be ideally suited for driving HBO, HBO Max penetration as we launch that next year.

Thanks a lot, Jack. Thanks for the question, John.

We'll take the next question, operator. Next in queue, we'll go to the line of Phil Cusick with JP Morgan. Your line is open.

Hey guys, thanks. Following up there, you've given through the second quarter some thoughts about typical seasonality in video losses in two queue versus one queue, and it came through around that hundredth of that. How do you think about typical video losses in three queue versus two queue? And should we expect a continued sort of subdued level of promotion and video until you get to the wider AT&T TV launch?

Yeah, Phil, so I think you should expect, as you'd call it, subdued, or what we'll call it, the long-term value-focused promotional activity. I think that's right. You should expect that. We have some normal summer activity with video. I wouldn't expect that to change. What I would tell you, though, is the balancing of that with the same number of customers, the amount of customers getting off these two-year price locks. Putting that together, what I'm trying to say is we'd expect this level of losses to continue without predicting what they are, but we need to get through this million customer base and some of the other, if you will, less the value-conscious focused promotions that we've done in prior years. We need to get through those. They'll take us through the end of the year to do that. The positive side of that is I don't know what AT&T TV is gonna do for us. I think it's gonna be a focus of real results in 2020 because we're gonna roll it out later this quarter and then we'll test it, but you can be assured we're gonna continue to focus on this long-term value of the customer.

And next up in queue, we have the line of Simon Flannery of Morgan Stanley. Your line is open.

Great, thank you very much. Turning to the balance sheet and the buybacks, can you help us think about how you're gonna balance buybacks versus continued de-leveraging once you get to the 2.5? Where would you like to end up on the balance sheet and how are you gonna divide your free cash flow between the two? And then if you could update us on the 6 to 8 billion of net asset sales, you've obviously sold almost 4 billion already, but where do you see that trending at this point?

Thanks. So Simon, let me take the asset sales first. I feel really good about where we're at. And I put them in two buckets. One is a straight asset sales, Hulu and Hudson Yards, and that was the $4 billion, but we've also done a whole collection of other working capital impacts, just like the Warner Media securitizations, a whole collection of that kind of activity. So we feel really good where we're at. With regard to the asset sales, it's public knowledge that we're out there selling our collection of about 1,300 US cell towers that we still have, we still own. We have a whole collection, over 1,000 cell towers in Mexico. We probably have 250 parcels of real estate with a couple hundred billion dollars under contract. We have an equity investment in a company called CME and their independent board is reviewing their strategic alternatives. So we've got a whole collection of things. That's not all of them, but we've got a whole collection of things that gives us confidence in meeting that six to eight range and hopefully doing very well with regard to that six to eight target. And I'll remind you that that's on a net basis too. So we're expecting to cover the investment we made in millimeter wave this year in the 24 auction. So the six to eight target is gonna include being able to pay for that with the proceeds. We've just got a lot of opportunities, we feel good about it and I'll leave that at that. With regard to the balance sheet, I think if you can think about it, we've talked about it after the fourth year after the close of the deal, we'd look to be, I'd expect we'd be somewhere around the 2.0 range or below. That gives us great flexibility to pay down debt and take advantage of what now is a higher cash cost of equity capital than the cash cost of our debt capital. So when you look at it on a very methodical basis, right now the cash flows of the overall operation on a after-dividend basis can be enhanced by shifting some of your focus from debt repayment to buyback. But I wanna make sure we stay focused to the fact that we're gonna achieve, we expect to achieve our guidance and we'll get there and that is our focus, our primary focus right now to make sure we live up to that. We're well on track, we feel good. I think you can tell that just by the fact that we just raised our guidance on free cash flow. But that's how we think about it. These are historically low interest rate environments and operating at this level has been something we can very reasonably do, very adequately do and feel very comfortable about.

Thanks Simon. And next up in queue we have the line of David Bardon with Bank of America, Merrill Lynch. Your line is open.

Hey guys, thanks for taking the questions. I guess the first one would be, it's been a while since the business wireline side surprised to the upside. And I think that you guys have been trying to kind of just maintain it, but is there something structural or competitively that has evolved that might be, this might be the first data point in the trend or is it more of an anomaly? And then the second question, John Stevens, would be on the cash flow guide. Could you kind of parse down the increase in the free cash flow guidance? Is it related to lower capex as you shift capex to vendor financing or is it related to the working capital benefits from the Warner media asset sale or other things kind of that are gonna come through the year, it'd just be helpful to kind of get a picture of that, thanks.

So they could, David, let me take that free cash flow one first and quite frankly, we're at the 26 billion range, felt very good about that. We did 2.6 billion securitization that we told you about. And quite frankly, some would suggest that raising the guidance to 28 could have been raised from even a higher number of the 20 billion range. But quite frankly, we're gonna continue to invest in the network. Our first net team, our network team is putting first, quite frankly, had a schedule. They're being really efficient, but if they need more capital, I'm gonna have the flexibility to do that and still meet what our guidance is. If we can get software releases out quicker with regard to 5G and put those in place, I wanna retain the flexibility to do that. So quite frankly, the raise in guidance is something that's very reasonable to achieve and feel good about it and yet retains flexibility for us. So I understand the reason for your question, but we have retained some flexibility in this to make sure that if we can continue to build at this, the 60% achievement level that we're at is nine months ahead of schedule. If we can keep doing this and the impacts on that overall wireless business are really showing up in lower chart and customer, we've had a million voice customers in the last year, 355,000 just in the last quarter. So feel really good about what it's doing. So I wanna be ready to support those really quality efforts. That's that aspect of

it. On the B2B front, David, this is Randall. Look, US business is pretty healthy. US business is doing very, very strong and we're now into, since tax reform, I think like our sixth quarter, a really healthy fixed investment for businesses and that tracks really, really well with what we do. And it's been a little soft in the last quarter or two with the China trade discussions. The administration doesn't like for us to talk about that, but look, business has pulled in investment the last quarter or so as a result of the trade uncertainty. But all that said, it's been six quarters of pretty robust increase in business fixed investment and that tracks very well with us. Second is pricing has been pretty rational in this industry and especially as we've worked off a lot of those old legacy products where you had this incredible pricing pressure. We're now in the market and what's growing are the new IP type services. And the pricing there in the marketplace has been pretty reasonable and stable and the new products that are doing well. You saw special services, we call them, but I think those are up 6% plus for the quarter, which is a really nice healthy growth rate for those. And then we had some IP sales in the quarter and that propped it up a little bit. But even without that, the trends are really, really strong here. We feel good, we feel about as positive on this segment as we have in quite some time. And as businesses keep investing, we'll continue to be really bullish on this segment. And the IP sales, by the way, I mean, I know those are coming big blocks, but they're not one time. We've had these in the past, had a couple in this quarter and we'll have probably, I suspect, more in the future. That's become a nice little opportunity for us. And then we haven't even talked about the Microsoft and the IBM deals that were announced just recently. And those are not inconsequential deals. Those have a multifaceted implications. And predominantly, those deals addressed a particular area. The biggest cost item on AT&T's P&L, we call it the factory cost, but it's the network and the IT cost, the big iron costs. And as you have seen over the last few years, we have very consistently, with all the activity in the network going on, we have very consistently driven those cost levels down on an absolute basis, eight, nine, 10% year over year, very consistently. We're kind of getting to a place where it's hard to continue getting those type of productivity increases. What we're doing with both IBM and Microsoft is leveraging their capabilities in large scale cloud deployments. And they're taking over a lot of applications for AT&T, moving those to the cloud. And what it's going to do is allow us to continue at this type of cost reduction curve on the network and IT side of the house and continue that momentum there. In addition, we are securing revenue opportunities with each of those companies and they actually have -to-market strategies that will allow us to continue to keep the momentum you're seeing on the wireline revenue side. So all in all, I would tell you, we're relatively bullish on the B2B side of the house and hopeful that as we continue to have economic growth, the trade situation doesn't become a distraction for businesses that we can continue and improve on this.

Thanks, Dave. Take the next question. Next up, we have the line of Brett Feldman, Goldman Sachs, your line is open.

Thanks for taking the question. For the last few quarters, we've seen steady execution in the wireless business and that's been without being fully deployed on FirstNet, without really having had a chance to do a lot yet with 5G. But over the next year, both those initiatives are gonna be much more significantly deployed. Can you talk a little bit about how you think about your -to-market and mobility and whether you think over the next few quarters, there's an opportunity to maybe step on the gas a bit more? Thanks.

Yeah, thanks, Brett. This is Randall again. Yeah, look, the wireless side of the house, we're feeling more and more confident every day as we execute through the network strategy and the FirstNet strategy. And as you think about growth in the future, you've hit on the key elements. FirstNet is just in its infancy. And we have a few hundred thousand subscribers that have moved to FirstNet. The first responder community is a rather large market and it's a market where we come into it with very small share. And so our opportunity to grow share as we build out this first responder network is quite significant. And you're starting to see that play itself out. But just as importantly, as we build out the FirstNet network, we're moving into markets where we have had a pretty thin presence in the past. These are rural communities. And as we move into these communities, we are standing up brand new distribution in many communities. And everybody on this call who's modeled this business for a while knows what the penetration numbers look like when a new entrant comes into a community. The first market share goes quick. It comes to you quick. And we're starting to see that as we stand up distribution in new communities. And we're at the very front end of this as well. As we told you, we're 60% built out on our coverage. We have 40% more to go. So there's a lot of opportunity left here. And then the piece that's not inconsequential, in fact, it's probably the most important of all of this, is that AT&T now has claimed the network quality mantle. Network quality is ours. And we feel very strongly about this. And as I told you, we have been rated the best, the fastest and the most reliable network by people who do this for a living on an independent basis. And as a marketing position, that's a great place to be. And we're starting to see the impacts of this in key segment customer churn. We're starting to see it in terms of gross ad capability. And just having a strong network quality brand and message in the marketplace by itself is a growth strategy. And so bottom line, we're feeling pretty bullish about the wireless business right now. John, would you add anything?

You know, Brad, we think of the first responder community is three million potential. We participate very little in that. We're growing it quickly now. But we also, the secondary first responders, the guys that go in and restore power and restore hospitals and work in that environment that don't necessarily wear firefighter hats or police badges, that's another eight million or brings that total almost, or excuse me, that adds about 11 million to it. So that brings that community total to about 14 million. That's a huge, huge, that's the opportunity we view. And then you think about them having multiple devices, whether it be a tablet or a phone, and then you think about them having family members. So it really is a very large scale. We're making great progress in getting authorized with agencies and adding customers, and adding customers that were previously served by somebody else. But we're also very, as Randall said, this network is outstanding, and it's gonna serve our existing customer base. And so it's gonna give us this opportunity, quite frankly, to lower churn, to give better quality service to this existing 80 million customers, phone customers we have today. That's a real benefit that I have a difficult time putting a price tag on or giving predictions for, but I know it's a real benefit for us and for the shareholders, for the customers. So we feel real good about that. And that leaves us just in a very smooth transition into 5G, this 5G evolution's going on now, to 5G plus with our millimeter wave and our 20 markets that we're in today. And with 5G and the core network, where we'll have nationwide coverage next year, we expect by the middle of the year. So we really are leading in 5G, we really are, and FirstNet is enabling this, and it's gonna have a lot of benefits to us. So you can understand why we do feel good. We do feel good about what the team is doing and how they're performing and optimistic about meeting targets going forward. Last thing I'll tell you is the accountant side of me. You get 70% of this complete by the end of this year, and our network guys have surprised me to the positive side before. We're gonna have a lot of the capex behind us on the build side, and the remaining piece will be software upgrades. So we feel really good about the financial aspects of this process also.

Thanks, Brett. We'll take the next question. We'll come from the line of Mike McCormick of Guggenheim. Your line is open.

Hey guys, thanks. Randall, obviously a lot of news out there and it seems like the landscape is about to change, I guess fairly dramatically. In the wireless business, just sort of thinking what are your thoughts over the next three, four years as you see potentially new entrants coming in? How does that change the AT&T strategy going forward? And I guess secondly, on the business wireline side, just to circle back on that, seems like it sounds like you guys are doing much more in retention efforts around that. Is there something there with regard to share loss being stemmed that's also having a positive impact? Thanks.

Well, I'm sorry, Mike, that last question, but say it again, the business wireline, we're in retention though. The wireline

side, it seems like we've been hearing that you guys have been doing a much better job in retaining customers and losing less share to competitors. I just wanna see if there's any commentary on that.

That's, and it happens to be accurate. We have done a very good job as new big deals come up retaining those. And as I told you, the pricing has been fairly rational in the marketplace. And so yeah, we really have had not only on a retention basis, but also on an acquisition basis picking up new logos. We picked up a number of new logos in the last year or so. And so that business, again, I just, I won't dwell on it, but it continues to surprise us in terms of how it's doing. And I'd love to say it's all 100% great execution, but all of them is just good economic health. And American business is quite healthy right now. In terms of industry structure, there's a lot of noise out there right now on industry structure. And the news this morning that maybe T-Mobile is in close to having a deal with the DOJ. I just, there's so many ifs around industry structure and who's gonna be in the market and who's not. It's actually hard to respond to it. But to answer your question directly, if Charlie Ergen has wireless assets and distribution or Sprint T-Mobile happens or doesn't happen, and candidly, it doesn't change anything we're gonna do for the next three years. Our strategy is pretty well-baked. And I think the strategy is resilient as it relates to changes in industry structure. It's a strategy from a wireless standpoint that is first and foremost centered around FirstNet, getting the FirstNet capability deployed, built, standing up new distribution, tapping that new market, and just continuing to drive network quality. And then obviously the 5G deployment is high, high priority. Also, then pairing that with a unique content. And HBO Max, it's not even here yet, but HBO Max will be a key part of this wireless strategy as we get into next year. And pairing a very unique premium video content with our wireless and our TV and broadband business. So whether anything happens with that or not, it doesn't change our strategy. Now, the status of these deals, it's obviously one that we're watching very closely, but there are so many ifs around does the industry structure change or not? And the interesting part is, it's set up where the DOJ is probably not gonna be the last say on this deal. And I've not seen this happen in M&A before where the state AGs have positioned themselves, where they will be the last say on any deal that gets done. And they're kind of in a position where they're gonna be grading the DOJ's work as we go through this. And so thinking about state AGs and then the rumors and so forth in the marketplace, you know, what level of comfort they'll take that the antitrust concerns and fix is Charlie Ergen coming into the wireless business. That's been decades in the making. So it'll be interesting to see how they react to that. So a lot of things up in the air, it's hard to say which way this thing goes, but at the end of the day, it doesn't change anything we're doing.