T-Mobile US Inc (TMUS) 2015 Q2 法說會逐字稿

Good morning.

Welcome to the T-Mobile US second quarter 2015 earnings call.

Following opening remarks, the earnings call will be opened for questions via conference line, Twitter, or text message.

(Operator Instructions)

Those interested in submitting questions during the earnings call through Twitter can do so by tweeting @T-MobileIR using the #TMUS (inaudible) earnings call -- that is #TMUSearnings, or send us a text message to 313131, enter the keyword TMUS, followed by a space.

I would now like to turn conference over to Mr. Nils Paellmann, Head of Investor Relations for T-Mobile US.

Please go ahead, sir.

Thank you.

Welcome to T-Mobile second quarter 2015 earnings call.

With me today are John Legere, our President and CEO, Braxton Carter, our CFO, and other members of the senior leadership team.

Let me briefly read the disclaimer.

During this call, we make projections and statements about the future performance of the Company which are based on current expectations and assumptions.

Our Form 10-K includes risk factors that could cause our actual results to differ materially from the forward-looking statements.

Reconciliations between GAAP and the non-GAAP results we discuss this call can be found on the Investor Relations page of our website.

Let me now turn it over to John.

Okay.

Good morning, everyone, thanks for joining us, and Roger, we already have your message that you don't upgrade that next quarter.

But welcome to the second quarter Un-Carrier earnings call, as well as open Twitter conference then.

Once again we're also providing a live video stream, so you can watch all the action here in Seattle, which I just had to remind both Braxton and Mike they were on camera, because of the things that they were doing here on the side.

We're generally going to go with the same Q&A approach -- oh that's -- sorry, my mic wasn't on.

So just assume all of the things that I said before this were humorous and helpful.

We'll generally go with the same Q&A approach as last quarter, and to accommodate your questions, the call will last -- and I say this, up to 90 minutes.

We certainly won't keep you that long, unless there is a burning desire for asking questions, and we'll take the questions on Twitter, text, and on the phone.

So whichever style works for you.

So as you probably know, the mood is good here, because we had a fantastic quarter.

And before I get into the Q2 results, I just want to share a little bit of update over the past few weeks.

We spent the summer making our signature moves even better with Un-Carrier Amped.

Our Un-Carrier moves, I'm quite sure are already the best in the industry, but we always listen, in any form of talking to our customers, and we always take action.

Now that's our philosophy.

We never launch something, and just forget it.

We always listen how to make things better, and we decided to go for it, and do it this summer.

Now starting on June 25, and in rapid succession, we launched one, a JUMP!

On Demand -- get the phone you want, when you want it, at no extra cost.

And this includes the industry's lowest monthly cost to get an iPhone 6, when you trade in a smartphone.

Then we announced Mobile without Borders, extending coverage and calling to Mexico and Canada at no extra charge.

So now you get all of North America.

That's three countries for the price of one.

And then an amazing family plan, 10 gigs for all, where each and every family member on a four-line gets 10 gigs of 4 gigs of 4G LTE data per person, no sharing required, just $30 a line.

Now just a couple of days ago, we Amped up things with Apple.

First we Amped up Un-Carrier 6.0 which is Music Freedom, and added Apple Music to our list of streaming music solutions.

Now Music Freedom covers 95% of all streaming music in the US, with 33 services live at this point.

Second, we've Amped up industry's best iPhone offer and made it even better.

You now get an iPhone 6 or 6 Plus with JUMP!

On Demand if you do it by Labor Day, and you can lock in monthly price on the next iPhone, and get priority access when you buy your new iPhone, which is a big deal.

So it has been a busy few weeks.

We spent the summer giving more to T-Mobile customers, while as usual, our customers spent the summer doing the opposite.

It's actually kind of depressing to watch them box in customers, as they struggle to react to the Un-Carrier revolution.

Whether it's Verizon launching a totally lame discount on long distance to Mexico and Canada, as their attempt to react Mobile without Borders, or AT&T adding back a $15 activation fee for Next.

Frankly, they almost make my job too easy, and I appreciate that from them.

Keep it up.

So not surprisingly, as the carriers punish their customers, those customers are fleeing to T-Mobile.

Since we released our customer numbers, two of our competitors have announced their quarterly results.

Not surprisingly, it appears that we captured all of the industry's postpaid phone growth once again.

With 760,000 branded postpaid phone net adds, we knocked it out of the park.

Verizon was a distant second so far.

We beat them just by a little, or actually we beat them by 400,000 net adds, despite the fact that they tried hard to stem their losses with their Geese commercial and some high porting bounties, and we can talk more about that in Q&A.

In the distance between us and AT&T, in terms of postpaid phone net adds, was almost 1.1 million this quarter.

Overall, we had 2.1 million total net adds in Q2, and 1 million branded postpaid net adds.

Now in four of the last six quarters, we've had over 2 million net adds, and its the ninth consecutive quarter with over 1 million.

In five of those, we have over 1 million total branded postpaid nets, and 2Q is the fourth quarter in a row, with over 1 million branded postpaid net adds.

We're winning customers, now interestingly they're keeping --we're keeping them.

Customers are staying.

In fact, branded postpaid phone churn remained at our record low level of 1.3%, down 16 basis points year-over-year.

Our momentum continues going into the third quarter, and it continues with positive porting against all of our competitors.

We've had nine quarters in a row with overall positive postpaid porting ratios, and Q2 also marks the eighth consecutive quarter where postpaid porting ratios versus Sprint were greater than 2 to 1. Customers are coming to the Un-Carrier in droves, and we are delivering strong sustainable results.

The results speak for themselves.

Now let's talk about the rapid expansion of the nation's fastest 4G LTE network, which now reaches nearly 290 million people.

We're ahead of our scheduled to reach our year end target of 300 million.

We now cover 212 market areas with wideband LTE, and we're on track to be in more than 250 market areas by the end of the year.

We're also way ahead of schedule on the deployment of low band 700 megahertz A block spectrum, which is already rolled out in 141 market areas, with many big markets including New York, LA coming in the second half of 2015, essentially all markets where the 700 A block spectrum have now been cleared, or have a pathway to be cleared.

Again, well ahead of our earlier expectations.

Now let me talk that MetroPCS.

It's been less than 28 months since we joined forces with Metro, and I am pleased to announce that our network transition is complete.

We've now refarmed 100% of the MetroPCS CDMA spectrum, finishing the customer and network migration 2 1/2 years ahead of the original schedule.

If you look at our competitors, it has taken others more than a decade to achieve what we've accomplished in just two short years.

Obviously, this sets us up to realize full network synergies with MetroPCS by early next year.

And finally, some breaking news that just came out this morning that we are very very proud of.

T-Mobile is back on top in customer service, with J.D. Power ranking T-Mobile number one in wireless customer care.

Congratulations to our customer service team who busted their butts to treat our customers well, and solve their problems every single day.

We are rewriting the rules in the wireless industry, and our Q2 results show the effects.

Our results are rock-solid all around, both operational and financial.

We've been very busy, but we have no intention of slowing down either.

Now our CFO, Braxton Carter, will provide you a quick overview of the key financial results, and then we'll get your questions.

Braxton?

Hey, thanks, John, and good morning, everyone.

Let me give you a quick snapshot of our financial results.

But first let me say that the thesis of turning T-Mobile into a growth platform, resulting in double-digit revenue growth, translating to strong EBITDA and cash flow is certainly playing out, as demonstrated in this second quarter.

In the second quarter, we delivered industry-leading growth across the board.

Service revenues grew by 12%, while total revenues were up 14% year-over-year.

And even with this incredible growth, adjusted EBITDA came in ahead of expectations at $1.8 billion, up 25% year-over-year, and 31% sequentially.

The adjusted EBITDA margin expanded from 26% in the second quarter of last year to 30% this year.

Net income and earnings per share also came in strong, with earnings per share of $0.42 in the second quarter, up from a loss of $0.09 in the first quarter.

And as we previously stated, we will be solidly profitable for the full-year 2015 in all remaining quarters.

Based on these great results, we are increasing our postpaid net adds guidance to a range of 3.4 million to 3.9 million, while maintaining our adjusted EBITDA guidance of $6.8 billion to $7.2 billion, and our cash CapEx guidance of $4.4 billion to $4.7 billion.

To be very clear, our financial guidance excludes any benefit from the impact of JUMP!

On Demand, as it is too early to quantify this benefit.

We intend to disclose the aggregate non-cash impact from JUMP!

On Demand and Data Stash in future quarters.

There was no significant impact on our financial results from JUMP On Demand or Data Stash in the second quarter.

In summary, we've delivered all around very strong financial results in the second quarter, and maintain a very aggressive outlook for 2015.

We won't stop.

Now let's get to your questions.

You can ask questions via phone, text message, or via Twitter.

We will start with a question on the phone.

Operator, first question please?

And we'll go to Mike McCormack with Jefferies.

Great, thanks.

And Braxton, I certainly appreciate the disclosure on the leasing impact, and also the true definition of free cash flow.

So much appreciated on that.

I guess, on the first question, thinking about handset postpaid ARPU, you guys a making really good progression there.

Just trying to get a sense for your thoughts on the back half, particularly as we have continued Data Stash reversal maybe in the fourth quarter more heavily, against fourth quarter potential promotions?

And how we should be thinking about that progression of improvement in the year-over-year declines?

And then the second question is on the secondary handsets.

The JUMP!

On Demand product or program should result in decent volumes coming back at you.

I just want to get a sense for how comfortable you are, valuation for those secondary handsets coming in, and the available channels for you guys have to resell those into?

Thanks.

Sure, Mike, first of all, let me thank you for the comments.

I mean, we pride ourselves on being more transparent than all the other carriers.

I don't know that anybody is really disclosing the non-cash impacts of leasing programs or rollover programs, and we think that transparency is important.

And specifically on cash flow, we are at an inflection point.

And when you look at cash flow from operations that we've very -- have very clearly laid out and improved our disclosures, you will be able to track the progress on a quarter to quarter basis.

And I think the appropriate way to look at it -- this is a proxy for true operational cash flow.

So taking into account, all changes in working capital, versus a simple free cash flow computation.

But we do think it's appropriate to exclude the one-time decommissioning costs on the MetroPCS network, which will only occur through the end of this year, and you've seen our guidance out on that.

So from a pure operational standpoint, we are already generating true cash flow from operations, considering all changes in working capital.

On the ARPU, I think it was one of the great stories this quarter.

We were, I think, very transparent that we would see sequential, significant step-ups in ARPU, relating to the charge that we took a Data Stash in the first quarter.

And we have quantified that in the investor fact book, that excluding the impact of Data Stash, we actually had a 1% underlying increase in ARPU.

And what that shows is the overall strength of our underlying ARPU.

And when you look at the other metrics that we disclosed, [APU] in the per account metrics, we actually are hitting all-time record highs in all of those metrics.

And our guidance of -- increases in ARPU after the first quarter, we certainly still expect stabilization to increase in ARPU throughout the year.

The one caveat that I will tell you, is that that we do believe that family plan penetration is extremely important.

And this is a sweet spot for us, with the expansion of our network, and the value proposition that we are giving.

We will continue to promote family plans.

And you saw the latest Un-Carrier Amp move with the 10 gigabyte for All.

But I think it is a great move, and we still expect stabilization to increase in ARPU.

Okay, operator, hold until the next one on the phone, just so we can get used to using the way they all are coming in.

I'm going to a real quick one that came in on -- actually, Howard, @4GHoward, he is, multi-tasking -- it's coming in on TMUSearnings @TmobileIR.

I am going to take that, and then I'm going to do a text question, then we'll come back to the calls.

And I'm going to be really quick on Howard's first question, which is he wants to know will T-Mobile offer a plan like [ex Sprint's #allinfor$80], and then he goes on to describe what it is.

I'm going to simply say to you, that the Sprint $80 all-in plan is the return of contract.

So that, from a standpoint of, when will be office of the like that?

I thought I had been very clear, never.

So the contracts will not return, Sprint all in is a contract two-year oriented plan, and we will not be moving in that direction.

Now on text, something came in and I could read the phone number, but then I would be like President Trump's taking out then numbers.

How many LTE POPs, how much band 12 has been deployed, and lastly has the band 12 deployment in LA been completed?

I'm going to turn this to Neville.

And while I turn it to Neville Ray, I'm going to knowledge on this call the organization that Neville runs, that I said in my opening comments has been accomplishing things under the deployment of our network, that has never been seen before in the wireless industry.

So on behalf of that, really, a proud hard-working team.

Let Neville brag, and give you an update on these.

Thanks, John.

So tremendous progress on the LTE footprint.

I think the great news is, we are right on the heels of AT&T and Verizon.

They can see us right in their rearview mirror right now.

The number is 290 million, it's actually slightly north 290 million covered people in the US today.

Our media target was 280, so we are well ahead of that plan.

The goal for this year is 300 million.

We've talked about that many times.

I am very confident that we will deliver that early, and we are pushing very, very hard as far to drive that number north of 300 million by the end of 2015.

So great progress there.

The text question outlined, what is happening with band 12.

So just to decode that for some of you, that is the low band spectrum that we secured from one of our competitors sometime back.

We're making tremendous progress with that spectrum.

The rollout is well ahead of our expectations.

There were some interference issues that we had to deal with adjacent broadcasters, and we've actually crushed those issues over the last six months.

The team has executed way beyond our plans.

That's allowed us to really accelerate and ramp up our rollout on low band.

Our customers are now starting to really experience the benefit of low band coverage, great in-building, really expanded suburban and rural coverage.

So great, great story coming through there.

And there was a specific -- on the end of the question, about what's happening about LA specifically.

I will say that key markets such as LA and New York which were really in our plans for 2016 for low band coverage, are now pulled into 2015.

And deployment has already started, it's well underway in LA.

We're not yet done, but we will be done at least six to nine 9 months ahead of our original plan, and that market will be up and running with significant low band coverage inside this year.

And I am hopeful we can actually reach the majority of that goal inside this quarter.

So tremendous progress on brand 12, tremendous progress on LTE overall.

And kudos to the team, it's tremendous execution right now.

Okay, operator, we'll take the next question on the phone.

And from UBS, we have John Hodulik.

Great.

Thanks, guys.

A couple questions, maybe a follow-up on the A block for Neville.

Can you give us a sense for how many POPs you will have covered with A block by year end, especially pulling in New York and LA?

And then, you may not want to answer this, but do you expect for the support for band 12 in the next iPhone release, and is that how you pulled those forward?

And if so what kind of sort of boost do you think, or does it help as you look out to 2016 in terms of network performance and subscribers growth?

So that's it on that topic.

And real quick on the margins, you've reached a new level on the margins.

If we look up to the second half, is that 30% level sustainable?

Thanks.

Let me take the first piece, and then John.

So the licensed area we have with band 12 A block licenses is just shy of 119 million POPs covered people.

We won't get all of that done this year, but I tell you we will get damn close.

We're well over 100 right now.

That number is kind of around 130 million.

You add LA and New York, Atlanta, markets like Seattle, Sacramento, these are all big markets coming on, between now and the end of the year, and we will get very close that number.

So we're accelerating our plan inside 2015.

You are totally right, the benefits in terms of customer performance, what this means in terms of speed, this is capacity too, it really sets us up for a great customer experience in 2015.

But probably more importantly in 2016, and we're driving very very hard on the handset front.

My goal is to have at least 50% of our customer base for the band 12 handset by the end of this year.

Now is there an inherent assumption in iPhone in there?

Can't say.

We can never disclose what Apple's plans are or are not, we do not know.

But I'm very hopeful that there will be band 12 capability in the next set of iPhones.

John, I think, let's break Neville's sentence apart.

His sentence was that we can't disclose, because we don't know.

I mean, Apple is very secretive.

We don't even know, if and when they're coming out with a new device, although we already created a plan to help you get it, when it does come out.

The question of do we expect band 12 support?

The answer is yes.

I mean, w certainly would expect that, and we'll look forward to hearing that in the near future.

And John, on your last question, on the 30% EBITDA margin is that sustainable for the balance of the year?

If you look at the guidance which we just reiterated with a much higher growth outlook.

Yes, it certainly implies that this level of margin is sustainable for the balance of the year.

Okay, great.

Let's stay on the phone for one more.

Operator?

And the next is Rick Prentiss from Raymond James.

Good morning, guys.

Obviously, very nice growth, and I'll throw the comment about really appreciate you are going to provide the JUMP!

On Demand benefits in the future.

That's very important for us.

You guys have a history of obviously, taking care of the customer, listening to what they want.

We're one month in, but what do you -- lease take rate will be, and where will that head?

Are asking about JUMP!

On Demand specifically, Rick?

Yes, specifically about JUMP!

On Demand leasing?

Well, we expect it to be the most popular option on the eligible devices.

We've launched JUMP!

On Demand on all of our super phones, the iPhones, the Galaxies, the flagship LG phone.

It is the most flexible way to get a new smartphone from T-Mobile, and really it's pretty obvious.

I mean, you've got absolutely no payment due upfront, not even sales tax.

It is a simple by the month payment, and there is no way to ever pay more than the sales price on the phone.

So you get all of the benefits of ownership as well, and a lot more flexibility along the way, because we're the only ones in the industry offering upgrades rights throughout your journey with that phone, anytime you want to move to the next one, with zero cost or penalties or fees associated with the upgrade.

We don't see why it shouldn't the default choice among the vast majority of people on those eligible devices.

Now we are continuing to offer EIP in JUMP!

and that's important because some people have established themselves on that path.

They've earned a right to an upgrade with JUMP!, they might want another one with JUMP!.

They've got established on a family, they're familiar with it.

So we'll continue to offer it, but you can expect our emphasis on the high velocity superphones to be on JUMP!

On Demand, because it is just a better offer for our consumers.

And I think Rick, one of the things -- the picture that I want to paint is, certainly it was a lot of logic to our nonstop deployment of the Un-Carrier Amped Summer.

And in effect, what's about to happen now is back-to-school season.

So when it is time for people to go into stores as we know they do in heavy numbers going back to school, the combination of new things that are going to be discussed with them, including JUMP!

On Demand and Mobile without Borders, and 10 Gigs for All, and locking in your next iPhone rate, it is a plethora of really amazing new tools.

And as Mike said, in that basket of things, we expect a pretty high take rate on this as well.

So we're pretty excited about the coming back-to-school ramp up, with all of what we have announced.

And I am sure there will be more.

Great.

And one other question, kind of a strategic question.

With AT&T closing the DirecTV deal and Verizon pending offer, how do you think about, how important is video to wireless customers, content to wireless customers?

And how do you compete in that type of marketplace then?

Yes, and I again, I appreciate that question as well.

First of all, it remains to be seen, outside of an announcement, what is going to happen on both of those.

I'm not sure if you interviewed 10 young millennials in Times Square as to how panting they are for Go90, or whatever the item is, that is coming from Verizon in the future.

I am not sure.

Let's wait and see.

Now on the broader question, as I think Mike was the one who coined this term, and we use it in here to think about this.

As we all know, the world is moving to a point where content is going to the Internet, and Internet is going mobile.

And yet thinking about that in this context, in which they are thinking about moving video content to mobile devices.

So everybody is moving in that direction.

One of the things that I think about, is that in that continuum, we do one of those things extremely well right now.

We do pieces of the others, but right now we are a very successful, fastest growing, fastest network in the deployment of things to mobile devices.

Now what I think is happening, and I will use the example of Mobile without Borders, when dumber decided to spend $4 billion, as the way they would think about offering cross-border services to Mexico.

And before they even got a chance to do it, the significant players on the other sides of the border and we got together, and created a superior way to do this, because that was the competitive environment they believed in the same offer.

I think what's happening now is, everybody else who is looking to be successful in getting the content to the Internet, to the mobile devices, is a potential opportunity for T-Mobile to partner, ally, merge with, going forward in the future.

And one of the things I would say is, getting the video and content to the mobile subscriber is as hard as a things that for those players to do, without someone like us, as it is for us to go there.

So we are moving in that direction.

And that opens up obviously, a huge amount of inorganic options and partnership options for the Company.

And when you combine those with what I think we've demonstrated, our standalone business model is scalable, and has legs, and been successful over the period of time into the future.

Those two together I think, bode extremely well for the future.

Great.

And obviously, Neville's team put that in place as well with the network.

Okay, operator, next question?

From Goldman Sachs, we have Brett Feldman.

Operationally over the last few quarters, the reduction in churn has been a big success.

It's been a big part of the growth of subs, and a big part of what's happening with EBITDA.

And so, that inevitably becomes the number one concern for a lot of people, which is are we going to see that metric go up?

Will people who are coming off all the [IP] commitments and jump back out into the market?

Or have you already taken measures to essentially mitigate the risk that, the success you were having two years ago, getting people to sign up with commitments, leads to risk over the next few quarters that they might leave.

Yes, Brett.

Great question.

And let me put a couple facts out there, and then we can some of the things that we've recently done with Un-Carrier Amped.

First and foremost, we have been doing EIP for over four years now, and looking at cohorts during this entire period, the [Bear] thesis that there is a significant uptick in churn after the 24 month period is absolutely false.

And something that we have not seen in any of the cohort analysis that we've done.

And I think it is pretty simple to understand why.

That's kind of a thought that comes out of the old contract paradigm.

But with devices, very few people actually wait two years now to upgrade their phones, especially with the industry innovation that we introduced with JUMP!, and now the JUMP!

On Demand.

So that is factor number one.

Secondly, absolutely the reductions in churn, which I think is the hallmark of this quarter and what you've seen develop over the last two years, it's based upon a very high-quality super fast network and super innovative and creative marketing, and an absolute focus on the customer in customer service.

And you saw the number one J.D. Power award today, and that's what's really happening there.

So there's obviously seasonality with churn.

Everybody can go back and look at all the quarter to quarter on stats, so certainly, you have some variability.

But the important thing is looking at the continued trend of year-over-year, and we're very confident and comfortable with what we're seeing with customer retention.

And we are actually focused on improving it.

Brett, I would just say that, the start of your question, hopefully it's not part of the input to it.

But the next time you find yourself picking up a [Dave Barden] report.

Drop it, put it down, and step away from that report.

It can only cause harm to your otherwise, brilliant thinking about the industry.

And I guess, the important part for me is, that when we started this Un-Carrier revolution, the churn was 2.55%.

And this is not a one-time blip in churn, this has been a consistent increasing churn picture.

And churn is different for us, because churn previously was a measurement, I believe in this industry, of what happened in that moment of truth, at the end of 24 months of being ignored, as people needed to make another decision.

And that's not really what is happening with our customers And what we do, and we've demonstrated the last three or four weeks again, we constantly are finding ways to give things to our customers and solve pain points, and we've created a belief and understanding as part of this revolution that that will continue.

And if you look at what Neville is doing with the network, and when you look at the report that came out today, with J.D.P.

ranking our customer service as number one, these are also big variables that we think bode extremely well for the future.

But from a standpoint of the doom and gloom scenarios of what is going to happen, step away from that report.

It's harmful for your health.

Thanks for taking the question.

Okay.

Let's try to grab one here.

Okay, a very detailed question from [Walt Piecyk], and Walt, we'll take one from the others.

But is a very good question, which is, why is Neville Ray not wearing a T-Mobile shirt?

(Laughter).

I don't want to say anything, Walt, but I am confident that Neville's undergarments are T-Mobile at this time (laughter).

Walt, I did want to take this question.

Okay, we'll save that for the webcast.

But Walt, don't roll down any further.

Walt, I did want to take this -- there's a question here, Neville, maybe we could talk about.

Does the completion of 300 million LTE POPs this year mean anything for capital investment next year?

Do you guys want to?

I will start, and I'll pass to Braxton.

Obviously we're going to continue to invest in what is a tremendous growth platform and growth story for our business today.

We still have more work to do in 2016 for sure.

We want to continue to expand and improve the reach and quality of the network.

So we plan to advance our coverage, as well as the density and capability and capacity of our network.

This is absolutely the right thing to do at this point in time, and as we move into the future.

Yes, we'll get on Walt on his -- he is in the queue over here.

But let's go back to the operator.

I think the next questioner might be Roger.

Roger Chen from CNN.

Hey, guys.

How are you doing?

Hi, Roger.

How do you like that [Mackelmore]?

(laughter)

You're not getting tired of it (laughter)?

All right.

Well, let me ask about the customer growth.

Obviously, I'm obsessed about customer growth.

What is the mix going to be down the line?

Obviously, you're seeing with AT&T and Verizon the mix is more tablets, more connected devices.

Do you see phone customers still being the majority of your mix of customer growth for the next couple quarters out?

And just a follow-up, in terms of that other segment, do you see any other opportunities in M2M, other connected devices as well?

Very good.

And as I hand that to Mike, I would just add the snarky introduction that just to remind people that are dialing into the call, that aren't as steeped into looking at these numbers as others, is when you move from right now in the industry from postpaid and prepaid subscribers, to tablets and connected devices -- right now in the AT&T and Verizon world, let's be clear.

Those are no ARPU or minimal ARPU free tablets, and $1.00 ARPU connected cars.

So that is the main reason that they are kind of looked at that way.

The evolution of which, we have show in our ability to target tablets when we choose to, and we're very confident that we can use that going forward.

But Mike if you want to go through the mix there, with some of Roger's question.

Yes, Roger, it is a great question.

I just don't think it's a matter of mix at our competitors.

It's a matter of what they can do.

And so, in an environment where they simply can't get positive phone net adds anymore, and haven't been able to find success in that for many quarters, they've turned their attention to lower value types of products that they can acquire.

And I would be doing the same thing if I was them, so it is really a matter what they can do.

They've hit this kind of terminal size, where their phone churn -- although the churn rates are fairly good customer, some of the best in the industry -- their size is churning so many customers that we are feeding on, others are feeding on, that they just can't out run that with their gross adds.

They don't have brand value propositions that are attracting enough people on the front end to refill the churn on the back end.

And that has to do with their size, and it has to do with the fact that what they have to offer isn't resonating with the public as well as it needs to.

And so, they've turned to these lower value things as John said.

Our strategy is really different, our strategy is to simply to focus on the highest value customer segments.

That's big families, it's postpaid, it's monthly recurring prepaid customers, and go win in those segments, because our brand is resonating with customers who use wireless the most, who are most engaged in the industry.

And that's why you see, not only our customer numbers as the best in the industry.

But you see the underlying health of the business, our churn hitting record low, our average billings per users at a record high.

Our customers are more engaged with our products, and are actually buying more from us, and therefore paying us more than at any time in the history of our Company.

So it really shows that, we just have a very different strategy, and ours is really working when it comes to attracting high-quality, high-value customers.

Great thanks.

Okay.

I think Michael Rollins is next.

Michael Rollins from Citigroup.

Yes, hi.

Thanks for taking the question.

First, I was wondering if you could size the amount of cost of service that's left from the MetroPCS network in the Q2 results, so we could think about what's going to come out, as you finish shutting down that network?

And the second question I had was, can you talk about how successful the sales team is at attaching additional features and options to your base rate plan?

As we look at our current rate of promotions, and try to think about the ARPU translation for that, could you maybe give us a little bit of a bridge of how you start with these great plan offers, but what customer spending may ultimately look like, on average of course?

Thanks.

Yes Mike.

So on the MetroPCS synergies starting to flow the results.

They are certainly starting to go to the results, and you are seeing a reduction in cost of service.

And remember, the real reduction is actually larger than the decrease that you are seeing in cost of service, because we are continuing to expand geographical breadth of our network.

But needless to say, we will not be at run rate until the very end or early next year on the plus $1.5 billion of cash synergy, which is about $1 billion worth of OpEx until 2016.

Yes, on the attach question, it's really pretty straightforward Mike, and it is one of the things that really makes our model work.

Think about it as being in excess of 80%.

We talked about average billings per user and average billings per account being at an all-time high, ARPU being a surprise on the high side.

And so, people can make a mistake of looking at our promotions, like our current 10 gigs for All offer, or last year's 4 for 100, and conclude that customer quality would atrophy because of those things.

But in fact our team's highly successful at getting attach on things like JUMP!

and insurance and data plans.

That 10 Gigs for All offer that we have out there right now is very attractive as it stands, but also for just $10 more, customers can double their data on any of their lines, or all of their lines.

And our team is very successful at helping customers right-size their usage and get the attachment.

So that is shining through very strongly in the results that we reported this morning.

Okay.

Let's do Kevin Smithen, and then I am going to go to a text question.

One quick question.

One of your competitors talks about their new mobile streaming platform that is going to, they think significantly lower the port outs to you and others.

How is mobile video thought of in your Company, and do you have a plan to try to attack this new mobile streaming platform at your largest competitor?

Yes, we talked about this Kevin, a few minutes ago a little bit, which is there is no doubt by the way that video is extremely important to all of our users.

T-Mobile users have the highest consumption rates of anybody.

They are the most engaged in the category.

Video is the number one application consuming resources, and one of the most widely used applications by our customers.

The question is this, do people want their wireless carriers to curate their video options?

Do they want us to do the picking for them?

If they do, we will be there.

As John said, our approach to it, will be very different than from our competitors are doing it, which gobbling up companies and creating walled gardens and so on.

But we are listening.

What we do at the Un-Carrier is really simple, we go to customers.

We find out what they want, and then we go do that.

And if our customers want us to be in the video business, curating and picking video.

And if we can add value to that, by being both into content and into network, with synergies between the two, for efficiency sake or value sake, then we will do it.

But the question really is, what do customers really want, and do they want us in that business?

Got it.

And a question for Braxton on free cash flow if I can.

We've seen in the first half a big working capital hit.

When should we start to see the sequential EBITDA growth translate into big free cash flow ramp?

If you look at the cash flow disclosures that we have in the fact book, you saw a very substantial improvement in the operating working cash flow, including all changes in working capital.

The primary burn on working capital is the continued investment in EIP which has been significantly moderating.

We also paid down, and when you do a detailed analysis on the Q, a fairly substantial reduction in accounts payable in the second quarter.

But I think the important thing here, is that the EIP is a function of growth.

So it is to the extent that we continue to have the momentum in the growth here there will be some incremental burn.

But certainly, and as we said on the year end call, our growth aspirations were fully embedded in our EBITDA guidance, and our cash flow guidance, and were much higher than we had originally positioned in the marketplace.

And you know that we are conservative in the way that we position growth, which I think is wise given the overall environment.

Okay I'm going to go to a question that is coming on Twitter.

It is, [Arthur] I don't know if I am abbreviating your name, [Arthur Pilak] and it came in and said on postpaid ads, what was the breakdown on porting from other carriers?

Let me say a few things on that, because a I outlined up front, this story is one that I want to put into context -- and I'll give credit where it's due during this analysis -- but it is been nine quarters that we have positively ported with the industry, let's just say, the entire time of the T mobile Un-Carrier revolution.

And in six quarters, or actually 19 months now, the porting has been positive against every single carrier, so that's the backdrop.

You also know that we just raised our guidance for postpaid ads for the year.

So in that context, I would just say, in Q2 based on the results we're talking about, the porting was [1.5] with Verizon.

Or as you know -- for those of you that aren't experts in this, it is [1.5] to us, for every [1] to them, which is very positive.

It was [1.9] with AT& T, and it was [2.5] with Sprint -- to be fair [2.45].

Now we are pretty much into July.

So that the comments that I can make on July are that we remain positive with all the carriers.

We remain at -- or at least [2] -- around [2] with Sprint, which is a wonderful trend.

We remain in the area of exactly where we were with AT& T, we're are about [1.83], so relatively flat.

Now we are trending about [1.2] or so, up a little [1.2] with Verizon.

So Verizon has made some progress in the short term, in the month, due to the very heavy porting pay that they are doing.

But if you think about where they are no -- so I give credit where it is due, a tiny adjustment.

But overall, the porting for T-Mobile on the postpaid side, very, very strong continued with all carriers.

And in July, some progress with one of the largest players in the word handing out cash -- to attempt to -- not get to the point where they can add customers from T-Mobile.

But making a little progress, probably with their geese phone ad, which I thought was kind of cute.

Okay, let's go back to the phone.

We have Simon Flannery with Morgan Stanley.

Great.

Thank you.

And just carrying on from that theme of the porting ratios.

You've had the iPhone for a couple of years now.

You've got some -- a [craft] of new offers for the iPhone related to the new -- the ability to upgrade to the new device.

Can you just give us some color on where the iPhone is, in terms of your mix of your subscriber base, and what you see as the opportunity?

There must be a lot of 5s coming off to your contracts over the next few months, and your ability to sort of disproportionately benefit from that with some of your new offers?

Thanks.

Hey, Simon.

It's Mike.

Yes I can only be somewhat helpful there.

We don't break down our base by device.

But let me give you a little bit of color.

Overall we believe that our penetration of iPhones is the lowest, and that means our opportunity is the highest.

We really see that as a source of strength for us going forward.

Overall in our flow rate, you see iPhones and the main competitive device, Samsung Galaxy devices, being roughly speaking equivalent in their flow rates right now, with our in, our business.

And so, it really is more an issue of the base than it is an issue of the flow.

And with the smaller iPhone base, it means we are less vulnerable to switching, at the time of big iPhone launches.

And it means we have a big opportunity to gain switchers at the time of iPhone launches.

And as John said, we can't say whether or not there is a big iPhone launch coming.

But if there is one, we would see it as a real opportunity for us.

And particularly, with the great work that Neville is doing to get 700 megahertz rolled out and low band spectrum, if we can get to a point this year where all of our devices have our complete network, that is a real opportunity for us to continue to build network perception, take share, and continue to improve in our churn trajectory.

And related to that, how are you addressing retail expansion?

You can presumably hit a lot more communities now, with a full marketing effort than given the 700 and the full LTE coverage

One thing that we are avoiding is, waiting to see if any other really crappy retail stores go bankrupt, and are offering us relabeling their store.

We don't think that's a highly effective strategy, but in general, Mike, do you want to?

Yes we are doing two kinds of expansion, three kinds of expansion here, Number one is we are continuing to roll out our MetroPCS format nationwide, and we've seen amazing success adding MetroPCS dealers in cities across the country, and that's really helping our prepaid performance.

Secondly, in our T-Mobile flagship store format, we have two approaches.

We have a company store approach, and we have and exclusive dealer approach that's almost like a franchise model, because we make no distinction.

We take direct control of the training of the people, et cetera, and we see an opportunity to continue to roll out additional T-Mobile doors into that new footprint.

I mean, think of it, a 1 million extra square miles of LTE coverage this year, thanks to low band and other initiatives that we have underway.

So that really does is open up new areas where there is marketable territory for us to go in plant a stake in the ground.

And finally it is about online, let's not lose sight of the fact it's 2015.

Purchasing in wireless is getting simpler, as there is less overall fragmentation of volume of smartphones.

People have good idea what they're looking for.

So we have a great opportunity to continue to expand our distribution online, and welcome more and more people to our family digitally as well.

Yes, and Simon, I just to wrap up your questions, because as you asked your first question about iPhone, I was actually came back from vacation.

And I was sitting there, because three years ago right now, is was when I was contemplating coming in, a month or two as the CEO of T-Mobile.

And I sit back and I think that it was even then and after, we had no iPhone in our stores.

And I've been thinking about what's happened since then, and the impact on our business, as to where we are of the deployment of a full set of devices.

And then, as Mike said, with the success we've had, it is hard to believe that we have such a significant upside in our base, as each new product comes out.

And what we announced last week, was an attempt to remove that back-to-school fear that generally happens, which is, oh I don't want to do something now, because I'm afraid something is going to come out right after it.

And in effect, what we've done is created a way, if there was such a thing, you could technically buy it now.

And I think that is part of this plan.

Now on the retail presence, we've got a great footprint.

And I think when you go across our channels, remember that we've got about 11,000 MetroPCS doors of some fashion, a very large presence, much bigger than our competitors, and a very good footprint of T-Mobile branded locations, where we have our deepest coverage now.

And part of the opportunity for us as we deploy our spectrum nationwide, there becomes more communities that are an opportunity for us.

So there will be some expansion, especially in suburban areas as the coverage goes up.

But I would also add, over the next year, two years, we see the online and direct to consumer piece of our business as possibly one of the biggest upside opportunities of our business, and how to add very innovative Un-Carrier ways with self-care, and utilization of online tools for the next generation customers, that may or may not feel the need to go to stores.

So all of those together, I think we see a tremendous upside.

Great, thank you.

Okay.

Next question on the phone operator.

We have Jonathan Chaplin with New Street Research.

Thanks very much.

Just a quick question on the platform that Google has rolled out with you guys and Sprint.

Two quick questions around that.

First of all, I've think the product has launched very recently.

I'm wondering if you seen any early trends that are worth commenting on?

I'm wondering how you think about the risk of this sort of project with Google?

And then I'm wondering if you would offer the same kind of platform, or offer Comcast the same opportunity to use a platform like that?

Yes I mean, a few things.

First of all it's early.

It's very early, the process is moving deliberately but slowly.

The application time is slow, but it is moving out.

And I would say the anecdotal feedback that I've gotten from customers that are using it is, I thought this was something they're doing with both you and Sprint, because my phone never moved to the Sprint part (laughter).

Which is sort of what we expected, and you laugh, but I think that is happening.

So significant portion of the roaming is going to the best network capability which is ours.

Second is, this is very profitable for us, so this isn't a gift game.

It's a profitable business, we are excited about it.

And third, in the combination of all of what you're talking about, I have been clear that the difference between us, and dumb and dumber and the other carriers is, we don't see any of these industry evolutions as a threat.

We see them as a logical progression of that industry structure continuum that we outlined, and a way to use our reach on the mobile side, to other players that want to enter the space.

And I think, I have always thought and said that in several years, we will think back and pick it was completely humorous that we believed that the quote, wireless industry was four carriers, and a structure that needs to be protected.

Because ultimately, both Google, Comcast, other players are going to migrate into the space.

My thought is that if Google is moving into this space with the capabilities that they have, I want to partner with them.

And I want to do that similar to how we were the original Android partner with them, and we're very pleased with what it is done so far.

And we're looking forward to seeing what they choose to do in the future, and hope that they do with us.

Second, when you move over to Comcast, I've said all along, as the cable players try to create and use Wi-Fi as a capability to serve their subscribers, you that that a partnership of sorts between a cable player with Wi-Fi and broadband in the home, and a player like T-Mobile is better.

You just know that.

So you know, who knows that the industry structure will migrate such that those come together.

But it's just logical, if you step back and start from a consumer.

And then the consumer says, hey wait a minute, I have Comcast and I have T-Mobile.

Why don't these guys do something together, to provide a seamless set of capabilities to us?

And then certainly some of the evolution of what's happening in unlicensed and et cetera, is going to provide something.

So that's the way I think about it.

And I think that will be in several years, a big question of not if, but when, and I look forward to that as well.

I think it provides great options for our customers.

To my understanding is that there is some limit on how much Google can sell on that platform.

Did you guys put that in place, just because you wanted to see how the product would evolve?

Or are there risks that you want to protect against as well?

Peter is turning his microphone on.

It is Peter.

We don't have any limits on what Google can sell on their platform.

Got it.

Thank you.

That was an emphatic scream from Peter Ewens, by the way.

Just so you know (laughter).

That was an arms waving -- that was after we woke him up -- (multiple speakers -- laughter) -- those are the ones who really saw that But hanks for you question.

But I fear, operator, that we need to go to the next question, and I think it is Walt Piecyk.

Can you hear me now?

Yes.

Are you guys there?

Yes, we're here.

We have been waiting for this, Walt.

Do not fear anything.

Your ad budget, I mean, obviously you guys are doing a good job on social media, which is largely free.

But the ad budget looks like it was up year on year.

Can you give us a sense of kind of what is behind the in the quarter, and how you thinking about it in the second half of the year as you are launching some of these 700 megahertz POPs?

And also as you can when you are looking at 2016, as you launch 700 in some of these additional markets, it kind of changes the types of customers that you can go after as you are lighting up different types of neighborhoods, does the ad strategy change at all in that regard?

Yes, as I tossed the ball to Mike to talk about the ad strategy, I want to tell you, Walt, in your lead-in question, you talked about how successful we are in social media.

I want to let you know that in order for the Company to do that, I personally have to spend huge amounts of time experimenting with the new vehicles.

And I will tell you that that includes hours of my life that I have had to spend on Periscope, watching you and your children play Trivial Pursuit, or drive down the seat and have your children ask you, Dad, are we almost there?

And I want to let you know that, that with those things that I do it is very clear that the Board and the compensation committee need to step up, and pay me better, because it's taken years off my life (laughter).

But Mike, you want to talk about the ad?

Yes, every quarter is a little different.

I can't give too much of the secret sauce here, but I will say that this is one area where we are proud in most quarters to be solid number four.

We are very efficient in how we go about acquiring customers, especially when you put the lens on it, that shows how our share of overall growth ads in the marketplace, compares to our competitors, and how we rolling up all of the net adds in the industry, And yet we are in most quarters, a solid number four, when it comes to investing in marketing.

And it just shows the strength of our brand.

And to the premise of your question, the fact that we are using our community, and the fact that we've created a consumer revolution, and put our brand on the side of the customer, we are getting an amplification out of our dollars, that our competitors just simply can't match.

Now that being said, this is a seasonal business.

Every quarter is a little bit different.

We do tend to take a few moments through the year, and really invest, and get behind this business.

And I don't know if you've noticed, but we tend to that a little bit counter cyclically to our competitors.

We don't necessarily invest in the times when it looks the most expensive to us, because we can fish during other times of the year.

That's been the pattern the last year or two, I try not to be predictable.

The last thing you asked about was, about regional plays.

And yes, absolutely, we see real opportunity in certain markets, where the network conditions show that we can beat anybody.

And those are places where we are investing disproportionately, because we know that the network is really surpassing what our competitors can offer, and we want to shine a light on that through advertising.

So there is certainly a regional overlay to this, that is greater now than it was a couple years ago, when we were more one-size-fits-all nationally.

And Mike, do you respond to these porting ratios?

I mean, can you give a little bit more color on the ebb and flow of porting ratios?

And then maybe what percentage of gross ads they are actually representing these days?

Yes, absolutely.

The only color I'll give you, is that the movements that we've been seeing -- our best evidence as we look at switcher data -- and we have lots of ways of getting out real switching, versus porting which is just a subset.

And what it looks like to us is that there hasn't been any real shift in switching.

John, threw Verizon a little bone there, and said, it looks like they've made a little bit of progress in porting in July.

There's no evidence that they've actually made progress on us in switching overall.

And what's happening is, more of the switchers are port, and because they're bribing customers to port.

But it's not actually to us looking like it's resulting in a significantly higher number of switchers.

So that's really important.

Again, several quarters in a row now, we've rolled up all the net ads on postpaid phones, and more than the other three combined.

And we are confident that the strategy is working.

Okay, Mike, thanks.

Real, just quickly -- I am reading all the Twitter questions, including the ones that are annoyed, saying that I am not taking any Twitter questions.

And some of that is, just so you'll know, that the Twitter questions so far are overlapping quite well, with what the call-in questions are taking.

But [techspot] is annoyed that I'm barely taking Twitter questions.

So I apologize, although I do like annoying people, but not somebody who name is [tech].

And [techspot] I would just say, you had a couple questions that I thought were covered.

And I'll just tick to them for you right now, to prove that you are not being ignored.

Neville did talk about how many band 12 POPs will be covered, and we said we will approach 190 million by the end of the year.

I think the update was that virtually everything we need to do that has been cleared or we have a pathway to do it.

So that is the deployment schedule.

And there was a question that was harder to answer, because it is a long discussion about, what are your plans for improving indoor signal in non-700 areas, including more 700 purchases, and both things.

Obviously, we have got a significant infill strategy and modernization strategy that is going on, along with the deployment of 700, which has a tremendous overlap with where our customers are so far.

Obviously, more 700 purchases is something we've been very clear and deliberate about.

Which also leads into a longer discussion about the broadcast options and the criticality for carriers like us, and our commitment to be successful in purchasing the 600, in what would be the end of first quarter broadcast auctions that take place.

So are we cool now?

(laughter) I really do love you.

Okay, and now that I've already proved I'm not ignoring you, I'm going to ignore you, and go back to the next call-in question which was, I think it is Phil Cusick.

Thanks, John.

So the typical [perspect] we get on T-Mobile aside from [David Barden's] tome, is that you're going to run out of capacity.

So Neville, can you help us think about, not this year necessarily when you are deploying 700, but the next couple of years when there is not a lot of spectrum, at least for sale from the government and usable?

How do you think about capacity, and should be thinking about CapEx ramping up?

And sort of as part of that, what is the secondary spectrum market look like, or any of the 700 holders getting a little bit more reasonable on selling what they have?

Thanks.

And Phil, as I handed over to Neville, wouldn't you ask that exact same question to all of the other carriers (multiple speakers).

Yes, I would, but we don't hear it about them (multiple speakers).

That's right.

I think the media has been dominated in the last week about speculation about running out of spectrum by Verizon.

So I think this is -- just to put out there, when you get to medium long-term, absolutely everybody needs new source of supply.

Not just us, and we've been clear about it.

We all have different path and we feel very comfortable, and we are still in a superior position as it relates to supply per customer as defined by megahertz POP.

But, Neville, why don't you go through that?

Yes, thanks, John.

Phil, we could talk on this for a while, but I will be punchy and quick as I can on this.

So obviously, an important topic and discussion for the industry, there's a lot of growth, but we're very well positioned for that growth.

I'd say, we are in the midst of great execution on a great plan for growth in this Company.

This isn't -- this stuff is not a surprise to us.

But why are we different?

More spectrums per customer than Verizon and AT&T, right out of the gate.

We have less than half of our spectrum that we own committed to LTE today.

That number is about 40%, right now.

We have a lot of LTE growth ahead of us.

The MetroPCS execution that has been referenced a couple of times on the call, just simply outstanding.

It is delivered two things.

One, the most dense network in the US, and two, best mid-band contiguous spectrum position.

The compounding nature of those two things is the envy of all of our competitors.

They are throwing small cells, host of different ideas and plans, to try and come close to matching that macro network density with a great macro mid band spectrum.

Low band grids don't get there, poor mid band grids don't get there, and throwing tens of thousands of small cells at the problem doesn't get you there either.

So those things are very important and very meaningful.

We are the fastest LTE network.

We have been for 18 months, that's a great proxy for capacity that is available for customers in the US.

We are neck-deep in the rollout of LTE features, and especially LTE advanced features, and a bunch of Twitter questions on carrier aggregation.

It's out there already, between low and high bands.

We've already advanced with 2 x 4 [MIMO].

We have that across many major cities in the US, and we will be completing that footprint as we move through 2015.

That's a 20% to 30% uplift in capacity in its own right.

A whole host of new capabilities and features coming down the road for us, and we are already way out in front, on leveraging unlicensed spectrum.

So you've heard the story of using LTE in unlicensed, license assisted access, and we are working furiously to bring products to market in 2016, to leverage underused and unutilized spectrum out there today.

So there is a whole host of things we're working on.

We're in the midst of strong execution here.

The growth in the industry is an industry challenge, but I think we are executing very well.

We have a very, very strong foundational position to start from following the execution on Metro.

You mentioned 700, it is coming in as an additional layer of capacity.

Yes, we want to add more low band.

We have 190 million covered people with the licenses we have.

I think what is important for us at this point in time, is to complete that low band footprint across the US.

The big auction as John, referenced coming in the new year, which will be a great opportunity, and we need to ensure that the big duopolists don't sit and hog all the low band spectrum.

They own almost 75% of it in the US market to date, and we are hell-bent on making sure that those ratios and numbers change, as we move forward.

Listen, there is a couple things coming in on the Twitter, before we go to the next question, which is going to be Craig Moffett which I want to prepare the team to -- team to speak to him.

Interesting question first, a simple one.

Several people have asked, how is switching and porting different?

And that is an interesting question, because the porting is the same as switching, except you are taking your number with you.

So you are porting your number over.

And the reason this is an interesting question is, because very clearly, the switching dynamic in the industry consistently over the past two years, has been with people switching from AT&T and Verizon and Sprint to T-Mobile.

Porting ratios are a leading indicator of what is happening in the broadening pool, unless you disproportionately do something to that indicator.

So for example, what is happening in the short term, where I've noted a slight improvement in Verizon postpaid porting, it is still negative, it's based upon a significant payment to their customers to port their number.

So a porting amount of money that they are paying.

It doesn't necessarily do anything to the underlying switching trend in and of itself.

So that is a very good question.

Second is there's been a number of questions about the broadcast auctions.

Neville just commented on it.

But let me, I'll just make a couple statements, which is it's a long and winding road, there's tremendous amount of things still to be done.

But let's just give you a small update of the current events in the area.

One is, it seems to be remaining on track, that there will for the first time ever in an auction, be a reserved set-aside for the smaller carriers that need the spectrum, which is a big success.

There is a remaining question, as to whether it's 30 or 40 megahertz.

But I want to point out that those are both significant wins for T-Mobile.

And I'm certainly pushing and hoping for the 40, but the 30, it remains to be seen.

In the second part of this analysis, which is all I know is in the past two weeks, Verizon continues to say, they're not sure they are going to play.

They don't really need to play in the low band space, which I'm really cool with.

And then in the past week or so, I've seen analysis that suggest that potentially based upon rulings, that could cost DISH some additional money on AWS3, they might not be afford to play.

So all I can say is, at this point in time the current events suggest that the spectrum auction is looking positive for T-Mobile.

I want to reiterate our commitment that we are showing up.

We are playing, and we will be successful and we are counting on that.

And so, far things feel pretty good on that.

Now going to the next question, which I think is Craig Moffett.

I don't want to sing the whole song, but I would ask my brethren here to yell, the first few rounds of happy birthday, because it is Craig's birthday.

Okay, go ahead.

(Singing) Happy birthday to you -- all right, that is enough.

That's it, that's good enough right there (laughter).

Thank you, John.

I'm going to take that to be a sign of your highly developed targeted marketing capabilities (laughter).

So I'm going to see if I can slip in two questions then, as my birthday present.

First, you talked a lot about the 700 bands, but not about other stuff from bands.

There's been -- obviously, there's a lot of talk during the quarter about DISH network and their AWS4 band.

I'm wonder maybe if Neville could comment on how you see the other spectrum bands that might be out there in the private market, relative to the 700 -- or the 600 brand spectrum?

And then second, if you could just update us on your small medium business initiatives, and what kind of traction you are seeing in the SMB segment?

Okay.

I'll attempt to have Neville give a short answer on that first one, running the risk that we could be here until tomorrow.

And then Mike can give you an update on the small business.

No short answers for me, John, I can't help it (laughter).

No, I will keep this one brief.

I mean, obviously, there is a secondary market out there, and that the DISH folks have a fair volume of spectrum that is yet to be brought to market, it has to come to market some point in time.

And there is a good mid band portfolio there.

It faces obviously some risks and issues around standardization and time lines and equipment.

And so, when you look at how you're going to handle and grow a very fast-paced business like ours today in 2016 and 2017, those assets they are further out for us.

So hence, my comments on all the things we are doing with the asset base that we have.

And obviously, I think 700 is a perfect example of how T-Mobile when it secures spectrum, it turns that spectrum into customer value, performance, and benefit very rapidly.

I think Verizon sat on the A block for five years, and never talked to a broadcaster, but we've cleared it, and deployed inside 12 months.

So if the FCC wants to look at how to bring spectrum to market, you put more into T-Mobile's hands.

Outside of that, I mean, I think I referenced on license, we're going to push very hard into that space.

That is something that is something very realizable, compared to many of the secondary market opportunities in the near-term.

There are other pieces coming, 3.5, it's a bit messy.

But we're looking at our spectrum position today, and other opportunities that are right in front of us, and we're excited about what we can do in 2016 and 2017 with what we have, and what is coming.

As we go to Mike, I will just say, obviously, not just Neville, but we are interested all forms of spectrum to help our customers.

And in effect, it is hard to look at DISH as -- in fact, I've heard an rumor that they've changed their company name to spectrum pile, which I'm not sure is true.

But it is, it's the mother load of spectrum.

And what makes the topic interesting is it's spectrum that have to find a utilization.

So we find it to be something interesting to look at, and certainly we can put it to use.

But it is one of a number of ideas that we have, and one of a number of spectrum opportunities that we have.

Mike, you want to talk about the -- ?

Yes, Craig.

The story on small business is short and simple, it's going very well.

As you know we plunged ourself in the space, with Un-Carrier 9 early this year.

And I think we've said a couple times, we've seen our business at retail in particular more than double, in flow rates since then, and that is holding up.

So we really delighted with that.

Overall, and across all channels including sales channels our flow rate is up about 50%.

So the results are across-the-board, and financially we are seeing good quality customers coming in.

So while we made a big investment in pricing and in simplicity, in the value propositions that we rolled out with SImple Choice for Business, what we're seeing is the customers are coming in.

They are attaching with high-end phones, they are attaching data, our cost of sales is going down.

And so, we've really got a nice beginning to a long-term strategy here.

The second thing I'll say is, Un-Carrier 9 was not the end of the strategy, it was a firing gun.

It was a start, and each subsequent move now is designed to attract, not just consumers but small medium businesses as well.

And Mobile without Borders is a great example of this.

We have seen real business uptake from small and medium businesses, and in fact, big enterprises that do business across the borders, and want a different proposition for their employees.

10 Gig for All, our signature offer and promotion for the back-to-school season, amazingly appealing to small businesses, who don't want to have to worry about whether or not there parceling out data, the right amount of data to each employee, because the 10 gigs for each employee is so attractive.

So a nice start, the team has done an amazing job.

But a lot of legs yet for this strategy over time.

Okay.

Let's take the next.

Let's see, the message is coming in on text.

The only one other that has come in is, would you consider a partnership with various cable companies.

And I think I've already covered that, which is obviously we look at everything from a customer standpoint, and if there is something that is beneficial to them, which I believe there ultimately is, we are interested on their behalf.

So that kind of kills those questions.

The Twitter messages, I'm keeping an eye on, but let's go to another one on the phone.

We have Joseph Mastrogiovanni with Credit Suisse.

Thanks for taking my question.

Two if I could.

Maybe first a follow-up to Mike's earlier question related to the PCS synergies.

Just what is left to do to achieve the full run rate there?

And then switching gears if I could, you've had nationwide VoLTE available for roughly for a year now.

Can you just talk about the consumer response to the VoLTE, and maybe the differences that you have seen, compared to traditional voice, as it relates to quality of service?

Sure.

Really quick on the MetroPCS synergies, we have now as of July 1, shut down all the legacy CDMA networks.

But the accounting rules tell you have to completely decommission on those networks, before you can start recognition of the synergy.

And that's typically a four to six month time period, and so it will take the balance of the year to get to a full run rate.

And remember some of our largest markets, Miami, New York were shut down at the very tail end of June.

So real quick on VoLTE.

Tremendous progress, first the launch nationwide.

This is an interesting start, if you look at the VoLTE call volume on our network, it is 2 times what we have on GSM.

So it is a huge piece of (inaudible) on voice calling.

Everything pretty much we now sell on LTE is VoLTE-capable.

It is a big part of our future.

VoLTE is not just about the customer experience on voice, and fast set up times, it is about how do you really move into a complete and holistic kind of IP wrapper around your services.

We've just recently launched advanced messaging, which is the first piece out of the gate on rich communication services, highly integrated in with VoLTE.

Next to come will be video, VioLTE, and so you're going to see all those firsts coming from T-Mobile.

They all come off the, and stem off of the back of moving voice onto the IP layer.

And a bunch of questions today too, coming through about Wi-Fi, and why don't we do more of other OEMs bringing their devices, BYOD coming to T-Mobile, getting Wi-Fi, the great Wi-FI service we have from T- Mobile onto those devices.

Well, we need all the other carriers to wake up, smell the coffee on the future, and the future is about VoLTE.

It is about Wi-FI integration across their IP planes seamlessly to give mobility.

And none of the carriers are where we are on Wi-Fi, none of them are where we are on VoLTE.

The OEMs have to deeply integrate that new IMS stack to support VoLTE, and VoLTE mobility into Wi-FI.

So our competitors kind of have to wake up and move this thing.

And then all those BYOD devices that would come through the T-Mobile doors could support our service.

But we're working to obviously drive the industry forward in this area, and we have a leadership position right now, globally.

I just want to point out that I think Neville just successfully merge multiple quotes, into smell the coffee.

I mean --

I need the coffee.

Smell the roses, get the coffee, but it was pretty good.

I am sure it translates well.

All right, so here's what we're going to do.

I am going to have Mike rapid-fire a few of the Twitter messages.

But then I think we're pretty much out of time.

And what really caught my mind here -- is it's very hard to ignore a Twitter question, when it comes from the name of Objectivist stoner @godless pothead (laughter).

Now and I'm not -- and there is no judgment here, because I can tell by the question, it sounds like an employee.

But if your name is godless pothead, you deserve to be spoken to.

So Mike, do you want to start with?

Yes, Absolutely, two or three quick ones.

First on that one, that person asked, when are the updates to retail POS systems and other communications technology coming?

I would say, this is an area where we are really, really excited about.

We are rapidly rolling out tablet-based activation and care systems to our retail stores.

And in fact, redesigning our retail stores, so that we don't have those big counters separating our people from their customers.

Our people want to be working collaboratively with customers side-by-side.

We're actually doing a redesign of the entire retail format to enable tablet-based selling and activation.

The second thing we are doing is, we're rolling out a breakthrough technology developed by Neville's team called Grand Central.

And this is an automated tech support solution that took allows our people to go in, and with single clicks, diagnose issues on people's phones and instantly solve them.

It's really exciting.

We are using it in our care tech support.

We're rolling that out to retail soon, and then next year we've got a completely new system, that is much faster and dramatically reduces the activation time.

So lots of excitement there.

Another questioner asked, what is going on with machine to machine, because overall, you saw that we gained 2.1 million net adds this quarter.

But one category if you saw in our disclosures was negative by a small number, negative 33,000, and that was machine to machine customers.

And that one is pretty simple.

We went out to our customer base this quarter, and notified them that we are going to be putting more of our emphasis starting in 2016 on our LTE network, and dedicating more spectrum to LTE, and less to our 2G and Edge networks.

And that has caused some customers to have devices out there, that they're looking at for next year going, they might not have the network to support them by then.

So they are moving those devices out.

I think that what we're going to see over time, is that most machine to machine devices are going to be LTE devices.

So we don't see this as a long-term issue for us, and our LTE customers are going to be very glad we're putting the emphasis on spectrum there.

Another person asked, what about GoSmart and MetroPCS.

Why do you have both brands, shouldn't you simplify?

I would say, they are actually quite different brands.

GoSmart is a 3G brand, and it is focused on multi-carrier distribution, so dealers and national retailers, where people can go in, get a real great value on a very simple offer, and it's a 3G offer, and that helps us keep prices very low.

MetroPCS on the other hand, is our flagship prepaid offering.

It is a high value 4G LTE month-to-month offering at an incredible price, and it's focused mainly on dedicated distribution.

T-Mobile stores, I mean, MetroPCS stores.

So very different distribution, very different offers, so probably not merging those brands.

Okay, I committed to go 90 minutes, and I think we're just slightly over that, so I'm going to stop here.

We will have a lot of other forums to communicate with a number of you, We'll keep an eye on the questions coming in.

And I want to thank everybody for listening.

We're very excited about the quarter, and look forward to talking to you next quarter, if not before.

Thank you very much.

Ladies and gentlemen, this concludes the T-Mobile US second quarter 2015 conference call.

If you have any further questions, you may contact the Investor Relations or media departments.

Thank you for your participation, and you may now disconnect.

Have a pleasant day.