T-Mobile US, Inc. (TMUS) Goldman Sachs Communacopia + Technology Conference (Transcript)

T-Mobile US, Inc. (NASDAQ:TMUS) Goldman Sachs Communacopia + Technology Conference September 6, 2023 1:10 AM ET

Company Participants

Mike Sievert - President & CEO

Conference Call Participants

Brett Feldman - Goldman Sachs

Brett Feldman

Alright. If everyone could please find a seat, we're going to get started here with our next session. Always a lot of fun to welcome to our Communacopia + Technology Conference, Mike Sievert, the President and CEO of T-Mobile. Mike, thank you so much for being here.

Mike Sievert

Hey, Brett. Looks like you have snatched the plates up since we were here last. It was good.

Brett Feldman

Yeah. So, you are supposed to remind people of disclosures. Judd wanted me to point that out.

Mike Sievert

Thank you, Jud doing this thing. So, I think we are going to put a slide up. We might say forward-looking statements; actual results might be different. Please look at our disclosures to understand the risks.

Question-and-Answer Session

Q - Brett Feldman

All right. Well, let's jump into it. So, you expect to execute on a number of your key commercial goals by the end of this year, and it's been a long time coming. So, you are going to have I think 300 million plus pops covered with your mid-band spectrum. You are on pace to achieve $7.5 billion of merger synergies. And so naturally, everyone is looking ahead. And the questions we are getting is what do you see as the key drivers of EBITDA and cash flow growth for T-Mobile as you look into 2024 and beyond? And how is that shaping the way your strategic and operational priorities are evolving?

Mike Sievert

Well, it's just -- it's an interesting question because it's being asked at a historic moment in time in our company's history. As you think about, we have just finished six full years of dreaming about, planning for, fighting for this merger. And then 3.5 years integrating it to, I think, create the most successful merger in telecom history. And so, it does beg the question. What's next?

And what's next is taking advantage of the strengths we have built in network and the ability to deliver a superior value to continue to profitably outpace this market on growth, and translate that into superior cash flow returns for our shareholders. And that's what we have been demonstrating quarter after quarter Q2 was a great example of this, and we expect that same playbook to be what informs us through 2024 and beyond. We are in the middle of a multi-year strategy for this company post-merger that is working and the business is performing very, very well. That stability, in fact, is it okay if I break some news at your conference?

Brett Feldman

I would like that.

Mike Sievert

Yeah. So that stability and quarter-after-quarter performance and demonstration of our ability to translate this strategy into cash flows has caused us as a Board to go ahead and authorize the next tranche of shareholder remuneration. And so, we are going to be authorizing a $19 billion program over the next five quarters through the end of 2024 in addition to the $14 billion that we expect to complete this quarter. And it's really an exciting moment for us. And by the way, part of that, this is also, news. For the first time in our history, we will authorize a $3 billion annual dividend as part of that 19 billion.

So, across the five quarters, that's $3.75 billion in quarterly dividend payments. And we expect the dividends to grow after this year at about 10% per year. And so, we're starting down that path now. Now in a business that is expected to deliver $16 billion to $18 billion in cash flows according to our Analyst Day guidance for next year, that's a modest start, but I think it's really important to begin to move down that path without constraining us in any way in terms of our ability to allocate capital to business objectives. So that's exciting. We're also going to move a little faster than expected next year toward our long-term leverage target in the mid-twos, as we've been talking about for a long time. And I think we'll be at about 2.5 next year.

Given the broad macroeconomic inflation and cost of capital environment, we think that's a really smart place to be for our company. And in addition, we're covering in this outlook, the obligations that we see, things like funding for $4.5 billion for things like the Columbia Spectrum acquisition. Things like the final payments for C-band clearing, a kitty for other opportunistic things that we see for the business, and then still having an initial authorization of $19 billion between now and the end of 2024. So, it's a really exciting moment that I think is a demonstration of this business's ability to translate market-leading revenue growth into market-leading cash flow growth.

Brett Feldman

I just want to make sure we get all those great details right. So, $19 billion capital returns program that will kick off essentially in the fourth quarter of this year because you'll be wrapping up the current one at the end of this quarter. Carry you through 2024 $19 billion of which $3 billion on an annualized basis is going to be a dividend. So, I guess a little bit more than $3 billion throughout that…

Mike Sievert

$3.75 billion, therefore across the five quarters, give or take the rest share repurchases.

Brett Feldman

Do we know what Deutsche Telecom's intent is in terms of participating in the share repurchase program? Because they sat out the first tranche.

Mike Sievert

Right. And they announced in their most recent quarterly announcement that they expect to continue to target in the low fifties for their percent of ownership, which implies participation at a certain rate in 2024 and not before then they made clear. So, they like this ownership level and they're going to continue to target the low fifties and they will not be executing any sales in 2023.

Brett Feldman

So roughly speaking about half of that buyback beginning in 2024 would be in the open market?

Mike Sievert

It could be. They've said that they have a target range, but it's not one for one. The mechanism for their participation will not be to buy shares from us. It will be through a program to offer their shares to the public market.

Brett Feldman

And then have you contemplated the potential authorization or issuance of shares to SoftBank in all of this? And whether you might look to use your buyback capacity to address those shares if they do come to market?

Mike Sievert

Well, we've always expected that that true-up share will get granted. It gets triggered with a 45-day -- at $150. If you look at the massive cash production of this business and you value us on cash versus our peers that seems like an obvious thing that we would blow past. So, we've always assumed that was the case. It's not up to us, but that's our business planning assumption, which means at some point there would be a dilution event between now and when that expires in 2025. But it's of course overwhelmed by our purchases in the market. In fact, we've purchased more in the last 60 days or the last, I would say a few months then that whole potential dilution event in the first place.

So, there's always a chance for a transaction that would accelerate it or satisfied in a different way or get it done sooner, but that would have to be something that all the parties would see as a win-win. And so far, we haven't executed such a thing.

Brett Feldman

Last question on this, you had previously reiterated for a long time the potential to return up to $60 billion to your shareholders through the end of 2025. If you complete the current program and the $19 billion, that will put you about $33 billion through the end of 2024, that's a lot of theoretical capital returns that could happen in 12-month period. Do you still feel confident that that $60 billion is the right framework for investors?

Mike Sievert

I think it's a lot more than that over the long-haul. I want to make that clear. It was just an initial aspiration for the first three-ish years. If you look at our current views on leverage of getting to that mid-2s a little sooner, it might imply would take us 60 days, 90 days, 120 days longer than originally planned. So, it could trickle into the first part of '26. But on the other hand, the '26 could be a much more substantial program that goes well beyond the $60 billion as well.

So, if you -- it's going to depend on how we feel about leverage next year. It's going to depend on exogenous things that that could be cash infusions. So, it's a possibility to get it done right on time. But I would say that, accepting for something that's unforeseen, it may trickle into the very first part of '26.

Brett Feldman

Let's move on. So, in late August, you disclosed plans to reduce T-Mobile's headcount by about 5000 employees, I think it's about 7% of your total workforce. You had disclosed the letter to employees talking about some of the costs associated with acquiring and retaining customers and how that had been going up. I was hoping you could rate a little more and sort of what went into the decision here to make this adjustment.

Mike Sievert

Of course. Well, first of all, I wanted to write that letter to employees, so that they understood the thinking behind it. And this is not a decision that we took lightly. It's not something that we do at T-Mobile every year. This is a culture that is really, really important to me and to us. But it was a long letter and it said a lot more than that. What it talked about was, our ability to reclaim our efficiency, our entrepreneurship, our speed, our decisiveness, the cultural characteristics that got us to this present success in the first place.

And after 3.5 years of integrating a merger and hyper-growth and a historic network build that's never been seen before in this country, we found ourselves with a lot of duplication. And that gets in the way of decisiveness and speed and efficiency. And efficiency to that point in the letter is important, because it costs more to compete now than it did, say at the height of the pandemic a couple of years ago. And we have made that very clear in all of our quarterly releases. But what we do as a management team is we get after it. When the customer started voting with their dollars, two years ago ish that they wanted device subsidies.

It's always been a slider in this business between they want great rate plans. They want device subsidies. They want some of both. Right now, and over the last couple of years, it's been device subsidies, that's been where competition has gone, and it's stable. That's not really changing right now. But I made it clear to our employees that, that was an input factor that in that world, we have to be at our best.

And my job as a management team as the leader of our management team, is to always look around corners and to make sure that, I'm positioning our company to be successful, not just this year, but for several years to come. And having that efficiency and that ability to compete and that speed and decisiveness and entrepreneurship was something that we felt was very, very important to reclaim culturally. But I do want to make it clear, we are really comfortable in this competitive environment and it is not rapidly changing. It's been stable for several quarters. It did slide more towards device that is more expensive. But as you saw in our Q2 results, we are navigating through that beautifully.

Brett Feldman

Well, you make a good point. I mean, the market has been, I think, a lot more durable than investors have feared. And I will make that point. And the first thing I will hear back and say, yeah, but look at what cable companies are doing, first line free, some experience with that through a predecessor company that you acquired. DISH is now offering a $25 limited plan available through Amazon. And so, the question we keep getting is, is this just temporary? Are we going to see the underlying fundamentals of this industry deteriorate? What's your outlook for the wireless sector?

Mike Sievert

I'm so bullish on it, and look, I've been getting that question at every earnings call now for 45 calls. This has been an evergreen question about our sector. The what about -- Isn't it all going to fall apart? The bottom line is, yes, it's more competitive. Now, that's maybe in part due to our merger. We weren't kidding when we said we would bring more competition. But our companies insulated in a way to be able to navigate that competition.

We have the best network in this space, and we have the assets to make that continue to be true, and the ability to execute, to continue to make that true. We have the best values in this space and the balance sheet to be able to defend that value leadership position.

And we deliver the best customer experiences, and we have the culture to be able to continue to dispense that for our customers. And so, we're navigating it beautifully. And cash flows across this industry are way higher than five years ago or 10 years ago. This industry that people side-eye and keep saying, yeah, but sure, it's good now. But isn't it all about to fall apart? I don't think so. And I look at the stability of it, the fundamental trends, and more importantly, our ability to execute and navigate a competitive environment where there is a lot of head-to-head competition. That's where we shine. And you saw it in Q2 with the -- in this environment, with the highest performing postpaid phone net ads in our history tied to ish for one eight years ago.

And the lowest churn in our history and double-digit EBITDA production during a year when we're delivering 75% year over year cash flow growth. And we're going to translate that cash into 20 plus percent cash flow margins on service revenues. That is a healthy, stable, growing business. And that's why we're engaging in such a significant shareholder remuneration program.

Brett Feldman

And has that momentum continued into the second half? Because the first half of the year you generated essentially the same number of subscriber editions as you did in the first half of last year, even though the industry dipped a bit, the year-on-year comp gets a little harder for you guys in the back half. How are you feeling about the performance of the company relative to the guidance you've given?

Mike Sievert

Well, I see you brought your pen. If you -- since I've already broken notes out news, I'll just give you a run by week actuals for the Q3 so far, if that works out. Now listen, it's a stable environment where we're performing really well. We're confident. Look at that churn number. I mean, I told the market, three years ago, when we brought these companies together and combined T-Mobile, which was the lowest churning brand with Sprint, which was the highest churning brand. And I said, with best network and best value, we'll get to the lowest churn.

And we did. That's not done. I mean, we've kind of matched everybody now and we've noted our first quarter as the leader in churn, there'll be a little more back and forth before we put them in the rear-view mirror for good. But when you have the best network and the best value and a culture that delivers the best customer experiences, the natural place for churn to be is leadership. I want people to join T-Mobile and stay with T-Mobile for life. And so, any churn is a regretted loss for T-Mobile.

And that's our competitive environment. That's how we're navigating. And what I want people to understand is that we lay out these multi-year aspirations, we have detailed business plans behind them, and then we put our heads down and we go execute. And that's why we consistently deliver the results that we promised to our investors.

Brett Feldman

When you're looking at churn right now, what is the driver of it?

Mike Sievert

It's the best network and best value that's what people want. And this, it's so simple. And by the way, wireless is a deeply considered purchase. People think it through, they compare, they ask their friends, they look at where coverage is, they think about where they go, who's got the best overall experience. It's a really important category to people. That's why it's so sticky when budgets get tight. But it's also something that I think is important to understand as a pure play wireless company, how important this category is, because obviously, some believe that they will just slap on any wireless offer along with their broadband. That's just not the case.

Brett Feldman

Okay. I'd like to talk about some of the recent offers you put in the market. So, you had a series of offers that you rolled out earlier this year, so you are collectively sort of Phone Freedom is the banner you have put on that. So that would include your go 5G Plus and more recently, your go 5G Next rate plans. And what you are allowing people to do is to upgrade their phones every one year to two years as opposed to every three years, which is what your competitors have typically done.

It must be going, okay, because you are now putting the next iteration of the product into the market. So, the first part of the question is, how are investors going to see the benefits of the traction with these various Phone Freedom offers? Is it about net adds? Is it about churn? Is it about ARPU? And then the second part of the question is, how do you do this without shifting the perception of the T-Mobile brand to being a brand that's about device value, as opposed to being about network value because you have invested so much in your network?

Mike Sievert

Yes. Well, that's a great question. First of all, what it's about is ongoing profitable market-leading growth that translates into market-leading cash flow growth. But we believe that, a bit a key formula for that is winning customers and then retaining them. I'm not kidding about leading this market on churn. That's the Holy Grail in a business like ours is keeping that churn as low as it can possibly be. And there is room to run, even though we beat everybody in Q2.

And so, having the offers that people want and being guided by the customer is so important. And right now, what customers want is a great deal on devices. Devices have gotten a lot more expensive. I don't know if you have noticed. And so, they are counting on us to help with that, and to provide discounts and offers and upgrades. They want the new ones that they can't afford it. That's why device upgrade rates have lengthened is because they don't want to dispense the cash. They'd rather pay for it over time in the form of an arrangement with the provider.

But when it's time for the new one, they don't want to be told, no. That was a core insight that we discovered almost a decade ago with our ground-breaking jump button carrier move where we allowed people to upgrade when they want. When you have decided it's time for you, then it's time for you to go and not be told by some nameless face company that, well, you are not done paying yet. And so that's why we provided these offers.

And they are accretive to ARPU. I think that's a great side benefit, that I think, will provide stickiness, that's an important benefit. And we have done this with a set of goals for '24 and '25 in mind that cause us to continue to drive service revenue growth and translate that into EBITDA and cash flow growth through share taking, ARPU, and retention. So, in a way, it's a little of each. This has been a fantastically successful on carrier move so far.

Brett Feldman

Are you evolving the way you're thinking about pricing? You are not explicitly raising price the way that some of your competitors have, but you keep putting new plans in the market that offer more and cost more. And if I just look at Go 5G Next, depending on how many lines you take, it's not even necessarily cheaper than what your competitors are offering. So now that you have completed the network integration, you are two years ahead of everybody on 5G, are you thinking that there is a way that maybe you can capture a bit more of that value in your price points?

Mike Sievert

Well, you asked about our brand before. And this is such an important question, as it relates to our brand. What we do is offer incredible market-leading value and choice, and customers. If you have a high-price offer that offers incredible value and more than anybody else's offering, doesn't make you a high-priced provider. It just means you've got an option. Similarly, if AT&T and Verizon come out with like one offer and stick it in the corner of their website, it doesn't make them a value player. Customers are smarter than that.

They look across the portfolio of offers, and they ask themselves, what am I getting for? What am I paying? And one of the reasons why we keep posting the most net growth of anyone while delivering financial performance is because customers are concluding. T-Mobile has the best value reliably and consistently over time. And that's so essential for our brand.

Now as it relates to go 5G next, it's a higher priced offer that offers an unprecedented benefit, which is the ability for a no-questions-asked upgrade every year at the same price that we offer to new customers. And other people aren't offering you that. They put you in a three-year EIP and then we'll see there might be offers where you can upgrade sooner. There might be a feature you can buy where you get a known discount of a few hundred dollars off a phone at a certain point. But this is a groundbreaking value and therefore it's some people are willing to pay for it because of how important it is.

Brett Feldman

I want to shift you a new topic here. We've been asking and we'll be asking many of your peers about their views on convergence. We've been talking about convergence for over 20 years and the version of it right now has kind of come to the surface because you've started to introduce more product bundles to cable companies that started to offer more product bundles. And so, the question really is, do you think about convergence? How do you define it? Is it a product strategy or is it a network strategy? Because I get by and asked by investors, can a company that exclusively operates wireless infrastructure thrive in a world where people are increasingly looking to buy more than one product?

Mike Sievert

Well, I think the bundling part of convergence is quite simply discounts by another name. So far, there haven't been demonstrated to be any interesting and significant benefits beyond discounts. Everybody offloads a ton of their volume onto a home WiFi. That home WiFi doesn't have to come from the same provider with today's digital payments. Having one paper-printed bill that you stroke, one handwritten check, that benefit is long since in the rear-view mirror. And so, what are the benefits? The benefits are discounts and that being able to offer a great value and resonate with customers about that value through our brand, that's one of our competencies. And it's a competency that is defendable by our superior balance sheet and our superior assets. And so, look, we'll have to see where it goes. I've been very clear as it relates to our fixed 5G service that it plays a role in the marketplace.

And we'll fill some single-digit penetration role. And it's a very mainstream offer, but we don't think it's going to take over cable and fiber. Its kind of looks like it right now because our net ad performance is better than everybody's, but I've always been clear that we see some single-digit millions of penetrations, single-digit percentage of penetration we're on our way there. We're well ahead of schedule as usual, what you would expect from our management team? So, we're not going to change the broadband world with that offer in terms of swapping out half the customers in this country, and nor are they going to change wireless that significantly.

We're coexisting with cable and wireless more than we're competing. I think that's partly because they're kind of changing the definition of what's a postpaid customer. They're sort of expanding the tent quite a bit. Most of those customers are not people you found in the postpaid space. That's why we're able to, while watching their growth deliver the best postpaid foam performance in our history for a Q2. And so, we're comfortable. It's working for us and we're executing our game plan and it's translating to shareholder value very nicely.

Brett Feldman

Why do you think the fixed wireless service has resonated so well with consumers? Because by all measures, you're outperforming any estimate that any analyst, including me, would've had 18 months or 24 months ago.

Mike Sievert

Well, that's just because people didn't believe us. I mean, what's happening is exactly what we told people what happened at our Analyst Day and it's happened a little faster because we like to do a little bit better. But look, we people don't like cable companies, and luckily, that's not just like some small niche. There is a lot of people that don't like cable companies. And cable companies are the incumbents in this country.

And that's something that we are feeding on. But also, they love the elegance and simplicity of this product. I mean, some that kind of blows their mind. They are saying, you are telling me that I just take this one thing, and all I need is some AC power. I just plug it as one cord. I plug it into AC power, and I have got home broadband. Yeah, that's how it works. And right now, people don't want to be IT managers of their own digital life. They want mental freedom from all that. And our product is elegant and simple. You set it up simply through an app experience. It helps you to decide the best place to put it in your house, and you are done.

And hopefully, you never think about it again, and people love that. Do you remember those rat's nest of routers and modems and cables and ethernet cables? And you got to pay a guy to come do it for you. You got to roll a truck and I don't know what all that stuff is, and how do I set it? That's the world they are coming from. And so, it's very -- we are 30 points net promoter score higher than cable. We are the highest non-fiber net promoter score brand and we are higher than average fiber nationwide.

And by the way, our performance of our product is mainstream. The download speeds according to Ookla on 5G at T-Mobile are 220, and for Charter and Comcast, they are like 230s or 240s. I mean, we are at the same speeds as median cable for those that think this is like a niche that's for certain roles. Is it for the gamer who wants terabytes and terabytes a month? I mean, we can support those. We have some of those. But it's probably more for like regular families.

Brett Feldman

As you have said, you are doing this because you do have follow capacity in parts of your network because your network is so capacity rich at this point in time, which is why you talk about getting to the single-digit penetration of the market over time. But if there is clearly interest in more people being able to buy this type of product bundle, how do you think about other ways you can meet that demand? Because you are obviously able offer high-quality mobile services everywhere?

Mike Sievert

Well, what we want to do is, offer in everything we do, we want it to be a business plan that has fantastic returns for our shareholders. And we are very careful about dispensing lots of capital into things that aren't going to have great returns. And so, we are looking at it. And we are looking at multiple paths. One, are there capital-dedicated ways to grow our 5G broadband business beyond the current fellow capacity model that we are executing against? And that might mean a millimeter wave dedicated spectrum. It might mean mid-band dedicated spectrum. It might be multi-dwelling units. We are looking at loop self-backhaul systems, where sites can see each other and other strategies.

We haven't drawn any conclusions yet. We haven't cracked the code yet, as to how we can do a wireless dedicated capital program, and then return money on that capital in a reliable way. But we are not done looking. Just right now, it's not presenting itself as obvious. So, we are heads down looking at that.

And then the other piece that we're looking at, and I have been pretty transparent on this is, whether or not there is a way to smartly invest capital using our brand resources, network, distribution, people in fiber. And we are already experimenting. We have got partnerships in the area to see how our brand resonates, how well we do at serving customers. We are executing now in multiple cities, small partnerships.

And we are thinking about whether or not there is a capital-light way to enter that business and take advantage of our embedded customer base in our fantastic brand. And we are not going to do it until what we can do, what we always do, which is present you with a Business plan, tell you we've thought it through, and promise you a bunch of results from it. And that's what we've built a reputation around making promises and then beating them. And if we can find a way to do something really accretive and exciting and one of those two areas, we will do it.

Brett Feldman

So fixed wireless is one of the growth opportunities you had outlined at your Analyst Meeting, a little way back. The enterprise opportunity the rural community opportunity, those are both areas where your market share going into this was essentially single-digit, maybe low double-digit percent. You have about a 30% share nationwide across the entire business. How are you tracking against your goals in both of those segments?

Mike Sievert

On or ahead of schedule. Rural markets -- smaller markets in rural areas make up about 40% of the country. When we started down this journey, we were at a 13 share. As of Q1, we were at 16.5, sort of halfway to our goal of 20% inside the 2025 planning horizon. It's unfolding beautifully. Our share of four-ins in the 70% of smaller markets in rural areas where we fully compete is in the high thirties and blended across all smaller markets in rural areas. It's in the low thirties, number two already to Verizon in share of port ends across everywhere, including blending in places we don't even compete yet. And so that's just a great place to be. There's pent-up demand for our brand. People have been seeing our national brand for a long time saying that sounds about right.

And then we just kind of weren't there yet. And so now, we're there, not only there, but with the leading network, the only people with any credible rural 5G strategy, and it's really exciting. And home broadband is a front door that attracts some of them to our brand in the first place because we're offering competition there that's delighting them. So that's going beautifully. Enterprise, same story. We were a very low single digit, like a 10-ish share. It's growing like crazy. Q4. It was our highest net add, our lowest churn quarter ever in our history in business.

We're outperforming our benchmark competitor in this space that we've always held up as the gold standard. So now, we've got an engine that's really working and it's working because we're putting together solutions that customers really want with 5G at the center. And we're demonstrating those things to customers that make a considered decision. They check out a hundred phones, they study who has the best network, but they also look at how we connect that network to solutions for their businesses. And that's just starting to fire on all cylinders. We have a lot of room to run there and they're not buying us just on price. We offer great prices like we do to consumer, but we're winning there because our product, our solutions, and our network are, are what they need.

Brett Feldman

How do you feel about your reach into the large enterprise right now? Because obviously, AT&T Verizon have tremendous reach. They don't just sell mobile solutions, they sell a variety of connectivity solutions. Are you finding that not having the non-wire solutions is a barrier to getting into these RFPs?

Mike Sievert

No, it was a year ago. We were kind of working our way past the procurement office and to the corner office and the CIO a year ago. But we've made tremendous strides on that. And so now we have the ability to get the meetings we need and to be in the mix. Everybody knows we're the 5G leader and so they're going to call on us. Even if at first, they think we're just there to price-cop their Verizon deal.

Do you know what I mean? That's how they kind of made that. Some of them look, we'll show up if that's what they want us to do, but somewhere in that sale process, light bulbs go off and they're like what, maybe instead of throwing these guys 5% to keep Verizon honest, maybe we should flip the whole thing. Listen to what they're saying about how this service can really change how we run our business. And those are such exciting moments for our team. They just energize everybody. I'll tell you, our business team is just firing on all cylinders.

Brett Feldman

Coming back to a rural opportunity for a moment would you consider maybe accelerating that strategy, if an asset came up for sale?

Mike Sievert

Say the question again.

Brett Feldman

Would you consider accelerating your rural strategy of an asset came up for sale in the world?

Mike Sievert

Like, what asset?

Brett Feldman

You can pick one, for example.

Mike Sievert

Listen, I maybe. But, I like our Plan A lot. I mean, if you just look at what we said we would do, we would get to a 20 share from almost nowhere in our first four years of trying. And then as you can see in our Soapy [ph] we are performing in the upper 30s where we are fully competing. It suggests that our organic strategy is really attractive. So, the hurdle would be high.

Brett Feldman

Okay. I want to talk a bit about prepaid. Historically, you have been a major player in the prepaid market. Verizon has scaled up significantly in recent years by acquiring TracFone, which they are looking to turn around. How do you think about the outlook for the prepaid market right now? Where does prepaid fit into your retail strategy?

Mike Sievert

Well, it's always been one of our secret weapons. The Metro brand is by far the best asset in the space, high-quality customers, low churn, and good ARPU contribute a lot to us financially. I think we will reclaim the overall number-one spot here. We might already have it. We don't report Lifeline, our share in Lifeline brand. We kind of think of it more like wholesale in terms of how we report. We don't include those numbers. The competitor you mentioned includes them.

So, we may already be the leader again, but if you just kind of look at the trend lines that, either way that kind of happens in the next quarter or two, I suspect. But that's not really the point. The point is that we have got a strong, stable, powerful business because we have a brand in the space people love and trust. And Metro has been a great deal, a no non-sense answer to people that don't want all the complexities of wireless. They want a simple low-cost solution on the best network and they have discovered that's Metro.

Brett Feldman

Last question. You have consistently made a point that you are two years ahead of your competitors in deploying your 5G network and you expect that you are going to sustain a two-year lead on them for a while. They have been working hard to try to catch up. They have been able to acquire and now clear a significant amount of mid-band spectrum. How do you think about the incremental steps T-Mobile needs to take so that this first mover advantage you have had in 5G brand identity can be sustained?

Mike Sievert

All we got to do is execute on our plan. We will end this year covering 300 million people with mid-band spectrum. And when I say mid-band spectrum, I was saying we are dedicating at least 200-Megahertz national average of mid-band spectrum in 5G to those customers across 300 million population. No one is even close to that. Although in some of the numbers it can sound close, but let me explain, to get from 200 million people to 300 million people is triple the towers. I mean, as you get more and more rural from the population areas, it takes a lot more technology to cover fewer and fewer people. We have got all that work in our rearview mirror, and it's taken us years. And so -- and by the way, to get from 100 million to 200 million is also triple the towers. And so, they are starting out that process, but it just takes years.

Let me put it in the landmass. We have more landmass covered by 5G than AT&T and Verizon combined. In mid-band, we have 4 times what AT&T in terms of square miles, that is almost twice what Verizon has in terms of square miles covered with mid-band 5G. So, the numbers of like pops to kind of don't tell the story, because all those other tens and tens and tens of millions of people are really hard to cover. And we have already done it. It's in the rearview mirror for us. We have not begun to deploy any C-band. We were big participants there. 3.45 military spectrum.

We anxiously await our 2.5 Gigahertz from auction 108 that the government hasn't granted to us yet, and we urge the government to do so. All of that is an additional opportunity in terms of spectrum assets we already own that match our grid and can be easily deployed with reasonable capital inside our capital envelope. So, we're just so well positioned to be able to continue to deliver customers what they're looking for.

Brett Feldman

And when do you think you might start deploying that?

Mike Sievert

I don't know. Right now, I'm much more interested in getting my hands on the auction 108 because we already hung those radios. And so, like the government's inability to deliver to us, this is keeping millions of people from having competitive home broadband. And it is keeping millions of people from having better 5G service in their communities, not just from T-Mobile, but generally. And when we get those licenses, we can turn all that spectrum on affecting 50 million people within two days.

Brett Feldman

Mike, we're out of time. Thank you so much for being here.

Mike Sievert

Brett, good to see you.

Brett Feldman

You too. That's great. Appreciate it.