T-Mobile US Inc (TMUS) 2015 Q3 法說會逐字稿

Good morning.

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

(Operator Instructions)

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

Please go ahead, sir.

Yes, good morning.

Welcome to T-Mobile's third 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 read a brief disclaimer.

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

Our Forms 10-K and 10-Q include risk factors that would cause our actual results to differ materially from the forward-looking statements, could cause.

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

Let me now turn it over to John Legere.

Okay.

Good morning, everyone.

Thanks for joining us.

Welcome to T-Mobile Q3 2015 Un-carrier earnings call, as well as Twitter conference that we'll be letting you use as well.

We're live from the NASDAQ headquarters here in New York City, where we are again providing a live video stream, so you can watch all the action behind the scenes via Twitter or YouTube.

I'm glad I just reminded myself of that as I said it.

It's already been a big morning here in New York.

The T-Mobile team and I just rang the NASDAQ opening bell about 30 minutes ago, and our stock began trading on the NASDAQ under our ticker symbol TMUS.

We're a mobile internet company, and we like to disrupt things.

So I think we have a lot more in common with the tech companies of Silicon Valley that are traded here on the NASDAQ.

Even more exciting though are our fantastic Q3 results.

Basically we continue to inflict pain on the duopoly by solving customer pain points.

And just to double down on that, I hope some of you got to see the message we sent to Verizon yesterday and we plan to send to AT&T this morning.

Sky writing seemed like a logical way to make sure they don't ignore the fact that consumers want them to abolish overages.

Anyway, today we'll generally go with the same Q&A approach as we did last quarter.

And to accommodate all your questions, this call will last for up to, if needed, 90 minutes.

Taking questions via Twitter, text and on the phone, so let's get on to it.

It's been a pretty incredible quarter for T-Mobile, and our Q3 results show that the business is firing on all cylinders.

Let me jump into some of the highlights.

We now have more than 61 million customers.

Our 2.3 million total net adds in Q3 marked the tenth consecutive quarter of over 1 million.

It was also the fifth time in seven quarters we've added more than 2 million.

We also added 1.1 million branded postpaid customers, the fifth consecutive quarter we've gained more than a million.

Yet again, we demonstrated our laser sharp focus on branded postpaid customers, the most valuable, the branded postpaid phone, the most valuable customer segment in the market.

In Q3, we added 843,000 branded postpaid phone net customers.

For those of you keeping score, that's seven quarters in a row that we've led the entire industry in postpaid phone additions.

And in prepaid, where we have the industry's biggest and best prepaid brands, we added 595,000 new customers.

That's more than triple what we did in the second quarter, and it was our best results since combining with MetroPCS.

Now, we aren't just winning customers.

We're keeping them.

Branded postpaid phone churn was down 18 basis points year-over-year to 1.46%.

That's the best year-over-year churn reduction for us this year.

It did increase a little sequentially, which was expected, given the normal seasonal patterns.

Our momentum continues into the fourth quarter, with positive postpaid porting against all of our competitors.

We've had ten quarters in a row with overall positive postpaid porting ratios, and I don't intend to stop that trend now.

Of course our growth is largely fueled by America's fastest 4G LTE network.

It isn't just the fastest.

It's also the fastest growing, and we have big news here today.

You're the first to hear officially that we now cover 300 million LTE POPs.

This was our goal for the end of 2015, and we achieved the milestone months ahead of schedule.

Huge thanks to Neville Ray and the best network team in the industry.

And we are on track to add 1 million square miles of 4G LTE coverage area this year.

Today, we have 245 market areas with Wideband LTE, and we're on track to be at more than 260 market areas by the end of the year.

We've had the fastest 4G LTE network now for seven quarters in a row, and Wideband is making our blazing fast 4G LTE data speeds even faster.

Our deployment of extended range LTE on 700 megahertz A-block spectrum is way ahead of schedule.

204 markets are live, covering 175 million people, and we are on track to end this year with more than 350 markets, including the cities of New York and Seattle.

Further, we have reached four additional agreements in principle that add licenses covering another 20 million POPs of 700 megahertz spectrum to our portfolio, bringing the total now to 210 million and covering additional cities like Phoenix, San Diego, Las Vegas, Norfolk, New Orleans, Tucson, Baton Rouge, Pensacola, Macon, Fayetteville, and many others.

We expect we will have other 700 megahertz A-block transactions as the broadcast incentive auction approaches and current holders options to monetize significantly diminish.

We're committed to participating vigorously in the incentive auction to fill out and bolster our nationwide low band spectrum.

This new spectrum is a game changer for us.

It travels twice as far and works four times better in buildings, and you can now use it with all of the new devices, including the iPhone 6s and the 6s plus.

Americans continue to respond and switch to the Un-carrier.

We remain completely focused on changing this industry and making it better for customers.

Our Q3 numbers show the huge effect of our moves.

Now frankly I could talk about these results all day, but I'm going to hand it over to our CFO, Braxton Carter for key financial highlights after breaking one more piece of news that I've been waiting to share.

In just two short weeks, Un-carrier 10 or Un-carrier X is coming.

Yes, invites are probably going out to members of the media right now while I'm sitting here, and I can't wait.

Mark your calendars for November 10, 2015, with more details to come soon.

And now on to Braxton.

Thank you, John.

Good morning.

Let me give a quick snapshot of our financial results.

Our customer growth is translating into strong financial growth, as we once again delivered industry-leading metrics.

Service revenue grew by 11%, and adjusted EBITDA came in at $1.9 billion, up 42% year-over-year.

The adjusted EBITDA margin expanded from 24% in the third quarter of last year to 30% this year.

I am particularly pleased that we generated meaningful positive free cash flow this quarter.

Free cash flow was $411 million or $487 million, adjusting for the one-time decommissioning costs of the MetroPCS CDMA network.

That's up from a loss of $69 million last year.

We expect to be free cash flow positive for the full year as well.

Net income and earnings per share were also up year-over-year, and we expect both to be positive in the fourth quarter and for the full year of 2015.

The reduction compared to Q2 was primarily due to a return to a normalized effective federal and state income tax rate, and higher MetroPCS decommissioning expenses.

Based on our great results, we are increasing our postpaid net adds guidance to a range of 3.8 million to 4.2 million.

While maintaining once again 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.

I should point out that this is our third customer guidance raise this year, while maintaining our EBITDA guidance stable throughout the year.

Just as a reminder, our financial guidance excludes any benefit from the impact of JUMP On Demand and Data Stash.

We will disclose the aggregate non-cash impact from JUMP On Demand and Data Stash in future quarters.

In the third quarter, the aggregate impact was immaterial, as JUMP On Demand is just beginning to scale.

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

Now, let's get on 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.

Thank you.

(Operator Instructions)

We will take our first question from Philip Cusick with JPMorgan.

A couple of things.

John, can you expand on the 700 megahertz you've already bought, that 20 million POPs?

How much did you spend on that, and as well on the potential to do major deals ahead of the auction?

With the FCC change in anti-collusion rules, would you expect to be able to talk to other bidders through the process, or should we still think of it as a full blackout period between bidders?

And then Braxton, you've talked about spending as much of a turn of EBITDA in the auction coming up.

How do you plan to raise that money?

Should we think about any equity component, like a convert, or expect that to be just straight debt?

Let me jump around and first just say that the additional agreements -- we're not discussing the details on today, because they are late breaking.

So you can just rest assured that the same prudent way we've been very carefully and slowly looking at ways to add to our low-band portfolio, that certain players in their view saw this as the time that they should monetize, and we've had a lot of success.

So we aren't going to give the details of those at this particular point in time.

The question associated with the anti-collusion rules, and it certainly right now is a wide open period from a standpoint of the anti-collusion period.

I believe that will start in January, but I don't see that impacting what we see taking place over the next quarter, if in fact something highly opportunistic does come up.

From a standpoint of the initial portfolio of what we spent on the low band, I don't know if Braxton, if you want to talk about that.

Phil, I think that as the broadcast incentive auction approaches, the opportunity for existing 700 megahertz holders to monetize will be diminished because we'll get what we need in that auction.

We're very pleased that we've already added roughly 20 million POPs since our last public discussion.

Again, due to confidentiality provisions, we're not messaging that.

But we're very excited about that opportunity.

If the holders of the spectrum don't participate in some transactions, they're facing very aggressive build-out schedules.

And again, we think that there's going to be opportunity.

On the upcoming broadcast incentive auction, this is going to be transformational for our Company.

We've talked about the benefits of low-band spectrum, customer retention, better in-building penetration in the major geographical areas, geographical expansion at a much more economical rate, and we are prepared to be as always disciplined but aggressive in the upcoming auction.

Consistent with all of our prior disclosures, Phil, we believe that we have more than adequate cushion from a leverage ratio standpoint with no adverse consequence to our existing bond holders or our corporate rating to fully fund whatever we need to do in the upcoming broadcast incentive auction.

We currently have no intent to access the market from an equity standpoint or any equity-linked securities.

We've met with all the major rating agencies, have confirmed that position.

I'm really pleased to announce that we just put on Bloomberg yesterday, we're kicking off a process to issue secured debt in T-Mobile US for the first time.

This was something that we hadn't had the ability to do before.

We are not going to issue a great deal of secured debt.

It's going to be of course investment-grade rated, but we're going to put a benchmark security out in the next week and announce roughly $1 billion size.

Given the recent success on 700 megahertz A Block continued rollups, we think that it's prudent to take that initial step at this point.

It would be good to have a benchmark security out there in the Term Loan B market.

Any other questions on that?

That's great.

Thank you, Braxton.

You're welcome.

Take one more call from the phone.

All right.

We will take our next question from Jennifer Fritzsche with Wells Fargo.

Great, thank you.

I'm impressed.

Very nice free cash flow performance.

I wanted to explore a little bit on the leasing plans.

Can you talk if you expect these or are they already having an impact on the equipment revenues?

And should we see kind of more year-over-year declines on that, as people migrate to JUMP On Demand?

And then just as an add-on to that, Verizon indicated or hinted towards that the rating agencies are having some questions about the leasing plans.

Are you seeing that?

Or can you talk about any dialogue you're hearing on that front?

Thank you.

Yes, Jennifer.

Good morning.

First of all, let's back up.

JUMP On Demand is oriented towards our hero devices and smartphones.

We currently only have four devices, but essentially all we're doing with those four hero devices is JUMP On Demand.

We've tried to be very thoughtful in our disclosures relating to the impact of leasing and all the in and outs from a financial perspective, but you're absolutely right.

Under the leasing construct, there are no revenues associated with the initial sale or lease of the handset, and there's no cost of sales.

We're capitalizing the price of the handset and then depreciating that over the life of the handset.

We believe that the right proxy for understanding the non-cash impact, which is the rating agencies are very focused on, is the lease revenues that are recognized.

And when you go through all of the in and outs, that's the best way in contrast to EIP to understand the non-cash benefit to the EBITDA.

For the third quarter, there was an immaterial amount of lease revenue, significantly less than $50 million.

And as promised, we are disclosing the net non-cash impact of leasing and Data Stash.

Data Stash was also immaterial.

We had reversals or usage of the [guest] that was given us beginning of the year.

But we also had new deferrals of customers taking advantage of Data Stash.

So netting those two numbers together, it's a very insignificant amount for the quarter.

We will, as promised, disclose this.

We do anticipate it to be more of an EBITDA benefit in the fourth quarter, and certainly we'll put a point estimate out.

We have met with all the rating agencies, Moody's, S&P, and Fitch, and as I mentioned, we are investment grade on the secured debt that we're putting out.

We also understand completely our parameter, with no adverse consequences to our corporate rating or to our bond ratings, which we are very, very committed to.

In the course of that dialogue, the rating agencies are in fact looking at the differences between leasing and EIP, and discounting the non-cash aspect of that in computing their leverage ratios.

So this is something that we've had very extensive discussions and have confirmed with the rating agencies.

I'm going to -- just to be fair, move around.

We're going to go back to the phone calls in a second, but Twitter and other questions are piling in, and I just merged two of them.

One from Arthur Pielak, and then from Zachary Child.

Both having to do with the same topic, associated with, can you give us an update on porting rates from other carriers, as well as who are you taking the most from?

The simple answer in who we're taking the most customers from is AT&T.

The full answer is we're taking customers from everybody, and just I'll give you an update on a few of these things.

Which is for the quarter, for Q3, the overall postpaid porting rate was 1.8% and that is, by the way, the tenth quarter in a row that we were positive porting on the postpaid side against the whole industry combined.

Then it was the seventh quarter in a row that our porting was positive against every individual carrier, so we're clearly taking customers from everybody.

I'll remind you that the postpaid porting, I think I may have covered before, but for Q3 was 1.33% with Verizon, 2% or 1.98% with AT&T, and 2.09% with Sprint.

Now if you just want to get a latest view, I can just tell you that the last seven days -- so you look at a week at a time -- in the last week, the postpaid porting with the industry is 1.9%.

With Verizon it's 1.44%, with AT&T it's 2.25%, and with Sprint it's 2.07%.

Again, I would expect Sprint to post some positive phone results this quarter.

I think they've been doing a good job, but I'll just point out that this was nine quarters in a row that the postpaid porting against Sprint is 2 to 1 or greater, and that's the trend we're at now.

I think the important part is, certainly as I've said many times, if you look at the results that we've just posted, they're phenomenal across the board.

And it seems as if they require some digesting for everyone to understand them in detail, but it's pretty clear that it's not important to us for Sprint to fail, as you can see here.

And frankly, if they do report strong results, it's not at our expense, which I think is good for the industry and good for the consumers.

Now why don't we go back to the questions on the phone?

We will go next to Kevin Smithen with Macquarie.

Yes, when you think about purchasing additional 700 megahertz A Block, how should we think about the CapEx levels associated with that deployment and at least how to think about 2015 CapEx?

How quickly can that spectrum be deployed in the market?

Well I'll start and then hand it over to Neville.

I think this is one of the very impressive things that Neville and his team have accomplished.

When we purchased the first 150 million POPs in the Verizon transaction a year and a half ago, roughly 50% of it had Channel 51 interference.

In traditional duopoly practice of warehousing spectrum to keep it away from the competitors, when we started calling the broadcasters to clear it, they said wow, this is the first call that we've ever gotten, and his team did an amazing job in clearing essentially all of that spectrum now, which is being very aggressively rolled out.

And that is certainly our expectation on any additional spectrum that we are able to roll up from current A Block holders.

From a CapEx standpoint, we have already rolled out the vast majority of the spectrum that we own, all within the CapEx parameters that we've disclosed and reiterated our guidance for the third time, because essentially the vast majority of it is overlaying the existing network.

Now certainly we're doing geographical expansion, but that's also fully included in the guidance.

So I would look at that as being a catalyst for any significant step function changes in CapEx going forward.

I would more look at it, Kevin, from a standpoint of tremendous opportunity for our Company.

It's the one asset that we haven't had in the past.

The improvements in customer retention from better in-building, the ability to very cost effectively expand geographically.

The team's done an amazing job populating 700 megahertz compatible handsets into our ecosystem, and the recent iPhone launch was a big win for us in that regard.

There's going to be a lot of goodness that's going to come out of this.

Both from tapping areas of the US where we have zero penetration and haven't been relevant before to better overall customer acquisition.

I'm going to turn it over to Neville to talk a little bit about where we stand and some of the phenomenal success his team has had in rolling this out.

Thanks, Braxton.

Hello, Kevin.

How are you?

So incredible momentum on the LTE front within the business.

Couldn't be more excited about cresting 300 million POP sets.

That's a lot of work over many years, but the change in the network over the last 12 to 18 months, with the advent of low band and the pace at which we've been able to both clear and then deploy that spectrum is a huge, huge lift for the business.

So when I look at the next opportunities coming for us, we've already deployed 175 million of the 190 million license POPs of low band that we had in the stable.

As John referenced in the opening comments, another 20 to come.

The lion's share of that is unencumbered.

You can anticipate it will be rolled out at very fast pace, as we demonstrated this last year.

The non-encumbrance allows us to very rapidly hang the equipment we need, our antennas, our base station gear onto existing steel.

That's the model that we utilize, which is very, very CapEx efficient, as you've seen through 2013, 2014 and now 2015.

So hugely excited about the momentum.

Looking at that next 20 million.

Hopefully there'll be more opportunities coming, prior to the auction in the 600 spectrum.

And we've got a great team that deploys this spectrum extremely fast and with great results for the business.

Okay.

Next question?

We will take our next question from John Hodulik with UBS.

Thank you.

A couple follow-ups to some previous questions.

First, can you give us what percentage of device sales in the quarter were from installments?

And how should we think of that, modeling that going forward?

And then, I think Braxton, you were alluding to this.

You made a lot of progress on the postpaid churn side.

There's still a pretty big gap between you guys and AT&T and Verizon, but as you rollout the A Block and you get more penetration of devices that can see the A Block spectrum, do you expect that gap to close?

Thank you.

Yes.

First of all, the majority of what we're still doing is EIP financing, and I want to highlight something very significant.

For the first time in the last two and a half years, you actually have seen reaching an inflection point where the collections on EIP receivables have outstripped new EIP coming in.

You actually saw a decrease of roughly $300 million in our overall EIP balances.

JUMP On Demand, which is our leasing construct, again is for hero devices.

And on those devices, the vast majority of what we're doing is on leasing, but EIP still is a very important part of the equation.

Your question on closing the gap with the competition, I think that it's very important to note that sequentially all of the carriers that have reported have seen the normal seasonal uptick in churn, and specifically, AT&T.

What I want to highlight is the continued significant year-over-year improvement, down 18 basis points for T-Mobile US year over year, which again is the best year-over-year decrease in churn that we're seeing.

And that's with really just getting to relevance on the 700 megahertz rollout, and this is why this is so important to us.

We believe that there is definitely upside and that it will help us close the gap with a lot of the operational initiatives that Mike Sievert has in place in addressing customer [paid in] points and reducing churn.

Mike, do you want to add to that?

John, I was just going to add, we don't have to guess about the answer to your question.

The short answer is yes, we expect continued improvement.

Every quarter this year, we've had major improvement of 16, 17, now 18 basis points, year-over-year improvement.

Our best churn quarter of the year.

But what's interesting is we can already study what happens when somebody has a 700 megahertz phone in a 700 megahertz market with extended range LTE, and the answer is a lot lower churn.

So we're not guessing.

We've already got millions of customers in this situation, now that we've rapidly rolled out, thanks to Neville and team being ahead of the curve.

So we're very confident about our ability in the medium term to continue closing that gap, because of the data we're seeing every day.

Just a quick follow-up on the JUMP On Demand.

As we look into the fourth quarter, obviously the holiday sales, big quarter for handsets.

Should we expect JUMP On Demand and EIP to flip in terms of majority sales?

Because you'll have a full quarter of the iPhone 6s, and those are some pretty attractive plans you have out there in the market.

Yes.

In short, yes.

I think you know the curve is JUMP On Demand is our most popular offer.

As Braxton said in the third quarter, it was only available in a very limited number of handsets.

We'll be modestly expanding that, but they are our most popular handsets.

So I would expect in the fourth quarter the majority of handsets in that category will be on JUMP On Demand.

That's by far the most popular offer right now.

And again, I think it's going to be important that we certainly love to take shots at the competition and we'll continue to do so on a daily basis.

Just the question you had was related to AT&T and churn, so let's just keep the data the way it is and see what's happening.

A year ago, their postpaid phone churn was 0.99% and then this year, it went to 1.16%.

Ours was 1.64%, and it went to 1.46%.

So you can draw the trajectory of those.

And I think importantly as well, in the year of 2015, the year that we're in, over three quarters, our postpaid phone additions are 2.6 million.

AT&T's are minus 1.5 million, and that's including the 300,000 that they won't tell us where they really came from.

Let's just assume they come from this year.

That's a 4 million customer swing so far, and this trend is not new.

If you take 11 quarters, so you start with the beginning of 2013, we have added 8.6 million postpaid phones and AT&T has lost 900,000.

So this is the trend.

We're very comfortable with where it's heading.

And as I said, the porting ratios with AT&T have only gotten better.

So I think this with the re-segmenting of their business, there's a piece of the business that they're not interested in or they can't compete in.

And we can have a broader discussion about content in video et cetera, but in this part of the business, there really is a trend that's very, very positive from our standpoint and will continue.

Thank you, guys.

Operator?

Thank you, and we will take our next question from Ric Prentiss with Raymond James.

Thank you.

Obviously some very strong success on the customer side you're pointing out, John.

The EBITDA growth is also impressive.

Want to probe a little bit deeper on the EBITDA side though and the revenues.

Braxton, you mentioned Data Stash has started to reverse, but you've seen some new deferrals.

Can you help us understand a little bit as we look into the rest of 2015 and then 2016?

Does Data Stash become still a negative somehow?

Yes, so the way Data Stash works, we had the gift in the first quarter that we will fully reverse throughout the year.

But as customers use the gift and go into the normal deferral of revenue if they don't use their full allowance of data, there are additional non-cash deferrals that happen.

We receive the cash up front, but we don't recognize the revenue until later.

So yes, this construct will continue to grow, but our projections is that the non-cash benefit of leasing will exceed the Data Stash.

So there is upside to reported EBITDA and as it becomes material, we'll certainly be fully transparent as to the net of the two, which is the non-cash benefit to EBITDA.

Okay.

And then as far as other trends within postpaid ARPU, you have the Family Plans that are part of the promotional plans you put out there.

What are the thoughts about where the trend lines are that in total on the reported ARPU line for postpaid?

It's a great question, Ric.

We have continued to message and reiterate it today that we have general stabilization of ARPU, unlike you're seeing with all the other national players at this point.

The good news, we're fully penetrated on the base on EIP and we're seeing a lot of strong data attached.

But we have an emphasis on obtaining the highest value of postpaid phone customers, which are Family Plans.

And in the third quarter, we were very focused with our 4 for $120 offering, the 10 Gigabytes for all, and attracting additional families from AT&T and Verizon.

When you look at the metrics that we give on the number of devices per customer, you saw very nice uptake in the third quarter relating to those Family Plan promotions.

The bottom line is you have much better retention and lower [sat] costs of the NPV of those Family Plan additions to our business is significantly positive and accretive.

We're more than willing to take a little bit of dilution on ARPU to achieve that.

But we pulse those promotions in and out of the market.

So that's where we're really at a general stabilization.

You'll see some quarters up slightly, you could see some quarters down slightly, but we're at general stabilization.

And Braxton, I'll just add, we've said this in the past quarters, so this is underscoring, the metrics to look at are these account level metrics.

So that's why we started disclosing them three quarters for you.

It's how we model our business.

It's how you should be modeling us.

Those are [APUB] and [ARBA].

They're at all times record highs, and what that means is that our customers are paying more for their services at T-Mobile now than at any point in the Company's history.

That's really important for everybody to understand.

That's not because we're jacking up our prices.

It's because our customers are more involved with our services, buying more from us, paying us more than at any point in our Company's history.

And if you are modeling our Company, you've really got to look at that.

And that's because as Braxton said, the number of lines per account is at an all-time record high.

Was there a follow-up question coming in?

Yes, just on the prepaid ARPU side, and how much usage you're providing into the prepaid, whether it's two gig, five gig?

Just trying to understand trend lines on the prepaid ARPU as well, given that your success adding customers are looking at ARPU and usage.

I think if you look back over the last four or five quarters, what you see is a generally stable trend with prepaid ARPU.

We really like how this business contributes to our EBITDA at these levels.

As you know the financials of a prepaid business are a lot less sensitive to churn and ARPU, because the investment cost per customer at a customer level are a lot lower.

So this business is contributing very nicely to our overall EBITDA performance.

And what you're seeing as we're holding on to these ARPUs, generally speaking over the last five quarters, we're massively growing this business with the leading brand in the space, MetroPCS.

I'm going to jump over to a couple of the Twitter questions and then come back.

I want to acknowledge that Fierce Wireless is in a full all-out typing mode and I'm not.

You actually have a number of questions I'd like to get to.

I'm going to do one from you and then Walt Piecyk, and then there's a second industry-structure question that Fierce has that is quite good.

But just a real quick touch, maybe Mike or Braxton, why did T-Mobile combine results for its wholesale in Q3 and how did M2M business actually perform?

So very simply we're just conforming to the industry practice on disclosure of wholesale as a category.

Breaking out in more detail is sharing competitive information that nobody else was, so we discontinued the process.

But we're very excited about our M2M business.

It continues to grow.

We think it's a very significant future opportunity.

And just to hit straight on the question Fierce was asking, if we were doing this to mask any weakness in one side or the other of that wholesale business, NVO or MVNO, and the answer is an emphatic no.

What we've noticed these two businesses are not two businesses.

They're one business, and their dynamics are similar.

Even some of their revenue dynamics are similar.

So it just makes no sense to draw a distinction and to be the only one in the industry drawing that distinction.

Right.

Walter Piecyk had the question, can we get Neville Ray to comment on network expense?

How will network expense trend with MetroPCS done and 700 megahertz deployment?

And there was a couple of questions Walt and other Fierce had about how many POPs can we expect now by the end of the year, since you've cruised at 300 million already?

Let's take the POPs question first.

So I can tell you that we talked 300 million today, but we can't keep up with the pace and momentum.

I've already crested 301 million.

I know that as of yesterday.

So by the end of the year, we're estimating somewhere in the 305 million range, which to put that into perspective for you is kind of the same as AT&T and Verizon near as [damet].

You know the core piece for us is the geographic expansion.

We've more than doubled our LTE footprint year to date.

By the end of the year, we'll have added a million square miles of LTE coverage across the US.

So the pace and the reach of our LTE network, John referenced fastest growing as well as the fastest.

It was pretty remarkable, and of course we're doing it ourselves.

We built this footprint as T-Mobile, not through acquisition or combination of rural carriers, so that scheduled control of all of that is very much in our hands and we're deploying very, very fast.

We have a great model and a great team.

So expect more news through the end of the year and we'll certainly be piling on more POPs.

In terms of the Metro question real quick, I think that it's easy to forget how quickly we combine two great businesses in Metro and T-Mobile.

The last of the CDMA network was turned off in July of this year, a little over two years from when the two companies came together.

Of course we've grown remarkably both companies, both brands, customer bases, but that spectrum is being put to great use with our Wideband LTE, 260 markets in our sights for the end of the year, from 245 to date.

And of course the cost structure, back to Walt's question, full run rate synergies will be delivered well over a year ahead of plan.

We will hit those fully in 2016, and that number's well north of a billion.

I think we were conservative in our overall synergy estimates when we looked and put this deal together several years ago now, but our run rate there is in the $9 billion to $10 billion range for the full deal.

So tremendous progress with Metro, and of course tremendous progress on the LTE rollout.

Okay, I'm going to do one more Fierce question, then I'm going to go back to the calls.

It sounds like we may need to have a separate Fierce phone call, but just I'll kind of open this and if there are follow-up questions on pieces of it, I'd be glad to take them.

One of the questions was, do you expect companies like Google, Comcast, Charter, et cetera to bid in the 600 megahertz auction?

How will this affect T-Mobile and the industry?

This is one of several industry-structure questions that I find fascinating, things that are going to make the 6 to 12 months just a really fascinating time period.

I would add some of the things that Verizon and AT&T are attempting do in video, et cetera, which I'll comment on.

I guess my answer is I do expect some dark horses to show up.

I think the dark horses showing up is nothing more than clarity for what we all are expecting as an industry that I've said many times, that if the world believes that as all content will find its way to the Internet, and all Internet will be viewed mobily.

If we really believe that, that structure will be managed by four wireless carriers vertically integrating in reverse and horizontally moving into the rest of these industries, it's crazy.

So you think about what Verizon just did with Go90, launching a curated video service that nobody asked for, coming out in week one as the number 220 app in the Apple store and then shrinking after four weeks to 1,065.

That's clearly not going to fly, and it's not going to be their bridge to profitability in 2017.

Serial TV sold in a cross-selling basis when your phone business is completely declining is not a strategy.

I think we saw Comcast discuss this morning tipping its toe in and using some optionality it may have to look at Wi-Fi in an MVNO basis, and I think these are all just everybody looking at where they may go.

The benefit that T-Mobile has right now is that we have the fastest growing brand and the fastest growing business.

We're generating good cash.

We have a very strong business standalone, but we are also a fascinating component in that continuum because we do control all the growth and the best brand in the mobile piece.

And as you look forward two to three years, we'll be far more thoughtful about how things move forward.

So we're looking forward to being successful in the auction.

We're also looking forward to that and other things that are going to shed some light as to where people are going, and unlike Dumb and Dumber, we don't see these as a threat.

We're waiting for this vibrant industry to consolidate itself around players like ourself that have a significant presence.

So thank you for that question.

I'm sure that opens quite a few others.

Let's go back to the calls.

And we will take our next question from Amir Rozwadowski with Barclays.

Thank you very much.

John, actually touching upon that last comment that you made, I would love to hear your thoughts on how you think the MVNO strategy could impact the market, particularly one that leans on Wi-Fi as a primary means for data consumption.

Obviously there's been some debates.

You folks have put your hat in the ring and willingness to work with other types of third-party providers in providing such types of services.

I would love to hear your thoughts on that.

Well, I think in general, there's a few thoughts, right?

One is certainly this quarter's earnings suggested that one of the bigger MVNOs and TracFone isn't doing too well.

It's a tough model.

There aren't owner economics, and I certainly think that anybody of significant scale would want owner economics.

I'm pretty sure that in the long term strategy of a player like Comcast, they didn't have a strategic board meeting and say, hey, let's be an MVNO.

They're thinking of what's happening with their business and what's the natural evolution, and they have a put option on the table.

They have an old historical agreement that probably neither them or Verizon thought about using, and why not use it?

It's a nice next step, stick your toe in the water, but the question is could you ever see a long term future where being an MVNO through Verizon is the strategy that Comcast will use for mobility without owner economics, et cetera.

I find that hard to believe.

But by the way, if they did, then what I'd do quickly is I, along with Washington, realize we now have five carriers, not four.

And by the way, if Google Fi does the same thing, now we have six.

Then you have a different perspective of what the options are, and then the question really starts to be on a Wi-Fi only model or an MVNO model.

Would you find a value proposition to your customers that by going even further and having owner economics and a retail brand known for wireless?

Could that be a better way to create growth and vibrancy in the future?

Of course.

So I think that's a natural amongst the things that we'll learn in the next year, and of course, they're not alone.

Comcast is in a highly competitive market with other players, who are now watching what they're doing and thinking about what their alternatives are, and in order to compete with their first MVNO, what will they do?

So I think it's going to be fascinating, it's part of what we've been predicting for awhile.

Thank you very much, and if I could do one follow-up question.

Obviously, we saw a pretty strong milestone, with respect to your free cash flow generation this quarter.

How should we think about the pace of cash generation going forward?

Particularly as you balance the need to continue to invest in the network, the need to raise additional capital in order to support your network expansion, as well as with the competitiveness of framework and dynamics that are taking place?

Amir, I think it's a great question.

We have a management team that is completely aligned around value creation for all of our shareholders, and a management team that totally understands that the key to that valuation is generating sustainable increase in cash flows.

Quite frankly, the future is bright.

With the ramp that we're getting from a gross standpoint translating to double-digit revenue increases on the service side, translating into astronomical increases and EBITDA of 42% up year over year, at the mid point of our guidance up 25% for the full year versus 2014, the future is bright.

You also look at the fact that we've been pivoting our capital dollars.

And you've heard us say that we see no catalyst for a significant step function up in CapEx deployment, nor do we see a catalyst based upon our success of any significant decreases in CapEx.

We will continue to invest, strengthen our network, expand geographically, and bring more value to the fastest, best 4G LTE network in the country.

But with that said, you look at all of the pieces.

You look at what we're doing from a working capital standpoint, and on a fully levered basis, we're going to generate significant cash this year and it just gets better in the future.

I will say that we've been very transparent in our MD&A.

We do plan on executing a EIP securitization in the fourth quarter.

The amount will be less than $1 billion, but it's part of our whole working capital management, and there will be goodness that comes from that also.

Okay, I'm going to jump to a quick Twitter message that's coming in from Jim Patterson.

Some of you may know Jim's got a weekly newsletter that he sends, and it's usually great except for when he can't forget that he used to work for Sprint and gets a little carried away with that.

Kidding.

Are you guys getting a lot of adds through Apple stores?

What's your take on their lease strategy?

I can start.

As we said when Apple announced that strategy in Apple stores, we really like it.

We think anything that can simplify things for customers is a good thing.

Personally I'd love to see them really focus on that in the stores.

We were surprised that it was one of many options, but it's really great to have that, and I think it levels the playing field in the Apple store.

And as a result, what we've seen is that we believe we're the fast growing by far through that channel.

I will say it's a great quarter for us, in the third quarter on iPhones.

It's a great quarter overall, but a lot of times people are interested in iPhones.

It was an all-time record high.

We don't disclose the specific numbers, but we sold more iPhones in the third quarter than at any point in our history, and the highest percentage of our sales were iPhones at any point in our history in the third quarter.

So that's fueled by mostly what happens in our own stores.

That's our number one channel, but we had a really nice development in Apple stores as well.

Okay, back to the phone.

Operator?

We will take our next question from Craig Moffett with MoffettNathanson.

I want to return to this topic of your expansion in the LTE network.

How much of that is expanding in order to provide additional roaming coverage?

How much of that is sufficiently dense that you're now really opening up those markets?

And as you think about opening new markets and footprint expansion, can you talk about where we are, with respect to starting to put some retail presence in those markets and some marketing presence in those markets to now try to normalize market share in the places where you haven't been before?

Perfect.

Neville, do you want to clarify the first part, that it's not roaming, and then Mike can talk about the retail strategy?

Obviously the expansion in terms of footprint has been very rapid, and that's allowing our customers to experience great LTE in many, many more places they travel to.

We constantly are working our roaming relationships to improving those and the quality and capability of those.

What we're laying down in much of this geography is the low-band spectrum that we talked about earlier on the call.

The coverage is great.

It's not just a roaming story though for us.

Remember that the improvement in our existing markets with low band is also remarkable, in terms of in-building and capability.

But where we sit today, I mean, the team is working hard on one, getting that coverage layer really robust, really strong and distribution to come in behind, as we look at the best markets in 2016.

I'll hand it back to Mike.

I think in terms of the distribution plans, but we're laying the groundwork for that for next year.

Craig, just to your question about the roaming.

Let me take you something back to what John said.

We're adding this year a million square miles of coverage.

You think about that.

This is a country with something like 3.2 million square miles in the entire country.

This year alone our network, thanks to Neville and team, is growing by a million.

And that's displacing some roaming agreements that we've got that we won't need, but it's mostly just greenfield new build and the effect of extended range LTE transmission.

Let me stick a bookmark in that, because part of the question was using the word roaming.

The 300 million POPs of LTE do not include roaming.

No roaming at all.

That's our native coverage.

So if you think about from a distribution standpoint, that's just tremendous opportunity for us to go into the edges of cities where we haven't had distribution or new cities entirely.

Now don't expect hundreds of new stores from us all in one year.

We're going to be really strategic about where's the best business opportunity, so we can get a great ROI on our capital investments.

And when we show you our capital numbers every year, there's always a plan for a strategic retail expansion in the right areas, which this year there are great areas to go tackle, as well as modernizing and updating our stores to make sure that we've got the very best ones in the industry.

Next question?

We will go next to Brett Feldman with Goldman Sachs.

Thank you for taking the question.

I want to go back to some of the comments earlier about the MetroPCS cost synergies and Neville's expectation that you'll be towards the higher end.

To what extent are some of those cost savings already in the run rate?

Because based on the July shutdown of the CDMA network, it would seem as we go into early next year, there could potentially be a fairly meaningful step up in the savings or I guess maybe a step down in your spending.

Let me take that.

First of all, as Neville said, the OpEx synergies are roughly $1 billion.

The CapEx synergies are $0.5 billion.

So the run rate synergies that we'll hit in early 2016 are over $1.5 billion, so very significant benefit.

Brett, as we decommission these networks, it takes anywhere from three to six months.

You can see from our disclosures we still have a significant amount of decommissioning to happen in the fourth quarter.

We have not quantified the exact amount, because it's an ever-changing metric.

I think the thing to focus on is yes, there is benefit that's being layered in.

There'll be incremental benefit in the fourth quarter, but we're really going not be at that run rate into 2016, but it is part of the equation on what you're seeing happening with our cost of service.

Our cost of service has been trending down and significantly down as a percent of revenue, and that's not only the MetroPCS synergies but that's the scale of a lot of fixed cost and the efficiency that Neville and his team have rolled out the modernization and expansion opportunities that we have.

That's the great thing about that low band spectrum.

Neville has told us that if he was doing some of the expansion that we did this year, he'd be putting up five macro sites for every one site that we're having to put up with the 700 megahertz A Block, so very excited about that.

So just to follow-up, are you actually reinvesting some of this synergy?

It would just seem that the potential for cost of service to maybe to step down at some point next year would be there, once you get to the full run rate.

But I don't want to extrapolate something if we aren't thinking about it correctly.

I think what I would focus on is that we are also continuing to expand the geographical coverage of our network, eliminating that historical disadvantage that we've had.

Well over a million square miles of coverage this year, and we'll go farther next year.

What, Verizon's network is now, what?

308 million 4G LTE.

Neville just said we're at 301 million.

We want to eliminate that differential and there is additional cost.

So yes, we are reinvesting part of those synergies, and please do keep that in mind.

Okay.

Thank you for taking the question.

Operator?

We will take our next question from Jon Atkin with RBC Capital Markets.

I wonder if you can comment on your LTE network having reached almost full coverage, what the priorities would be for next year?

And then more specifically on the AWS-3 spectrum.

What are you seeing, in terms of timelines, as to when that could be built out?

Thank you.

Want to take that one?

Yes.

Let's take the latter part first.

So on AWS-3, the timing for really infrastructure to come into the marketplace is mid to late next year, so potential deployment in the 2016 time frame, probably late.

What we're seeing on the handset side is really a 2017 story.

So it's 2016 into 2017 where activity will pick up, and I think you'll see some of the other big two playing on similar time frames.

Was there a second part?

What was the first part?

Yes, with coverage now almost complete, what do you do in terms of identification, self-splitting, that type of thing, small cells?

Well next year is a combination of two things, right?

One, we want to continue to advance the footprint and to enhance the footprint in some of these new areas where we're laying down that initial 700 megahertz.

So continued overlay.

We've got new POPs now coming through with new A Block to run at, so you'll continue to see us strengthen our coverage, both in new areas and within the existing footprint.

Everybody is doing very much the same.

And then from a capacity perspective, that's the other focus for us.

Obviously we're in a great position.

We have more spectrum per customers than the big two.

We have a very, very efficient network, thankfully through the MetroPCS combination, a ton of LTE spectrum that we've applied to an extremely dense network that puts us in a very, very good place to leverage that capacity, going forward.

We also, I'd tell you, we have the most advanced LTE network in the US to date, categorically.

We're driving huge efficiencies.

Our move into voice over LTE, into the RCS space with advanced messaging, video over LTE, what we're doing on Wi-Fi, carrier aggregation, HIRO to MIMO.

A whole host of techie terms to throw out there, but they are all driven by performance improvements, as well as driving greater capacity and capability on the network.

We are the fastest today.

We've been effectively for the best part of the last two years.

We look to maintain that performance in speed as we look at 2016, but we will start to move on small cell strategies.

Some of those pieces we've not been in the huge rush that much of our competition have been, somewhat unsuccessfully I'd add, because of the benefit of the spectrum and the density of the network that we have, which to be quite frank is the envy of all of our competitors at this point in time.

So busy year ahead on 2016, always much to do, but we've had a great 2015 in the bag already with the 300 million POPs underway completed.

Let me take one question -- was there a follow-up?

Yes, just for Braxton real quick.

If there's a way to quantify the roaming expense savings that you're seeing on a run rate basis?

And then if there's a way to characterize mature and differential between your 700 megahertz and non-700 megahertz markets?

You talked about it being substantial, but any way to put a little bit more clarity behind that?

From a roaming standpoint, we've never had end-market roaming.

So you have never seen a material roaming expense at T-Mobile, unlike an entity like Sprint that has end-market roaming.

And I think at one point they were paying Verizon over $1 billion a year.

It's about $0.5 billion the last numbers I saw on that.

Ours is significantly less than that.

It is a benefit, but I would not look at it as a material mover of the overall financials.

There's lots of puts and takes, but it is a benefit, but we're reinvesting that benefit in geographical expansion.

So that's the way I'd take a look at it.

The churn profile on the 700 megahertz, we're just really starting to see improvements.

The last stat I saw, we have over 15 million band-12 compatible handsets in the marketplace at this point, and Neville and his team, as you have seen, are going like hell in rolling that out, but the benefit really is to come.

We're just getting critical mass on this.

It will continue to develop, and we believe it will be some very nice tailwinds, when we're looking at customer retention.

A quick question on Twitter.

I don't think we'll be able to do it justice, so I'll make a quick comment on it, from Lionel Barrow When OEMs create phones, but sell them on online retailers or from their own website, do you consider that a slight to you?

I don't want to talk about that myopically, as if there's somebody that just won't sell through T-Mobile, but we love -- remember, we are the ones that have transformed the business model away from OEMs hiding behind service contracts and artificially high prices and contracts -- so we love the ability for all sorts of cool devices to be sold in any different ways, including our retail channel and used on our network.

We certainly are the beneficiary of a much more open device-selling process than the historical one.

On the other hand, we have and have long been a part of one of the best branded retail channels in any industry right now, and frankly I'll just take the flip side.

I can't think of any good model where an OEM has for good reason created an exclusive sell on their own product and been successful.

I won't tick down the list from Fire phone down, but certainly there is a lot more history that suggests that the retail channels work better, but we love it.

Somebody wants to for example, buy a Windows phone from the new Microsoft store and use that on T-Mobile.

What a great idea.

Okay, let's go back to the dial-in questions.

We will take our next question from Mike McCormack with Jefferies.

Braxton, maybe just a comment on the EBITDA guide for the full year.

I'm a little surprised you didn't raise that.

It looks like EBITDA could be flat sequentially and you'd be at the high end even with the incremental synergies and obviously the income revenue coming in as well.

And then just a second quick on the EIP versus the inventory piece.

Should we be looking at those two on a -- not a, maybe a net basis, but an aggregate basis to really get a better view on cash headwinds?

First of all on EBITDA, I want to clarify that the EBITDA guidance we're giving is cash EBITDA before any benefits on a non-cash basis from leasing or Data Stash.

There will definitely be goodness that we see for the year, but at this point we've stuck with the original organic guidance that we've given.

As to the non-cash piece, we're fully penetrated from an EIP standpoint.

And again, I want to point out that our net receivables on EIP actually have decreased, where collections on EIP have now outstripped growth.

So we're in a very different place than AT&T, Verizon and Sprint, which are still penetrating their bases and having goodness accrete to them from that.

We're actually in the reverse situation now, where our collections are outstripping.

So we believe that it's more than a fair disclosure on non-cash by just taking leasing and Data Stash.

Mike, if you were asking about whether or not you can add the two and get a view if that's our working capital impact, the short answer is not really.

If you look at the EIP receivables base, that's net of the deposits that people make in cash, and about half our customers make a deposit of some sort, give or take.

So the EIP balances have always been a function of that.

That $822 million that we disclosed to you, which moved from inventory to property and equipment, in essence the value of all the lease devices, was the value of all those phones.

But a lot of those people paid cash deposits, which is not in that line item.

So you really can't sum the two and make it a proxy for what it would have been, if it was all EIP, if that makes sense.

No, that does.

Just a follow-up on that, the $1 billion of securitization you guys were talking about in Q4.

What was the rationale for the change in view there, or is that just as things developed over time?

It will actually be less than $1 billion.

But what we've been focused on is just not slamming something in the marketplace with a low advance rate and a higher cost to capital.

What we will be executing will be very efficient cost of capital, given the tenor of what we're doing, with a very high advance rate, really leading the industry on how efficient we're utilizing those receivables that we're taking into securitization.

So definitely more to come on that, but that execution will definitely happen in the fourth quarter, and it makes a lot of sense, given where we're at.

Understood.

Thank you, guys.

We will go next to Simon Flannery with Morgan Stanley.

Thank you very much.

Good morning.

The FCC recently launched another investigation into special access, looking at things like some of these multi-year contracts.

I was wondering if you could just talk about that issue, and what the potential opportunities are if the FCC does indeed make some changes to that.

Thank you.

I'll take it.

Hey, Simon.

It's Neville.

So yes, I see the FCC starting to make noise about attacking some of the rate structure that's been out there on the fixed side for some time.

For us, I mean to be quite frank, we resolved our backhaul problem for our sale sites several years ago.

We embarked on a fiber to the sell strategy.

It's five years ago, and that's been a huge help for us with our LTE rollout.

Not only did we run fiber, we run very scalable fiber and great deals behind that, which have hugely helped us with the flat cost structure we've been delivering to the business.

So it'll be interesting to see what comes out of this FCC process.

Much of what we've been doing on expanding the footprint has driven us into obviously more rural parts of America and backhaul is tougher to find, but that's less of a special access issue I think.

I think the fight is primarily with some of the big-fix guys and one of the other wireless guys.

Not so much our battle to fight on this one, Simon.

We're in a good place already.

Okay.

Just a quick follow-up.

We continue to see you putting up very good speed numbers.

Sprint's talking about getting the speeds up, but what's the right goal for your network over the next couple years?

What do you want to be delivering on average to the customer?

The fastest.

Neville's not competitive is he?

Be seeing 50 mbps anytime soon, or is it still going to be in the 18s mbps, 20s mbps on average?

Well today, and we've stayed around this 20 mbps marker's measured through UCLA for best part of two years.

Every quarter goes by, I think we hear noise about the competition is going to come close.

The Sprint guys will do something.

They're just over half of our average speeds nationally right now, so they have a big, big hill to climb.

AT&T too.

Verizon has been close, but can't close that gap, and so I want to maintain it.

We've actually been improving our speeds, quarter on quarter.

And so with a lot of capacity being carried by the network, we continue with our Wideband LTE rollout and a bunch of the LTE features I referenced, things like HIRO to MIMO while adding cell performance and capacity to the network, as is carrier-ag and the continued drive and contiguous spectrum.

So we want to stay in a leadership position on speed.

It gives us some great bragging rights, which we're very, very proud of.

If you want the best LTE speeds and performance in the nation, come to T-Mobile.

That's a great story that we look to maintain.

Where the speeds go in 2016 and 2017?

I think it's going to be a function of competitive intensity, load, how well we do with rollout of new capabilities, new features, new spectrum of course.

But we look to maintain the leadership position, and great story for us to be increasing speed performance on an average basis, with the tremendous growth that we've supported with our customer base expansion.

I think it's very important to note for Neville.

It was seven quarters ago that we announced the nation's fastest 4G LTE.

Certainly I'm sure to the chagrin of very well endowed with lawyers, companies who if they could prove anything different would have and try every day.

Neville is highly competitive.

I think what you have so far the biggest issue that you see change in 2015 is a significant number of the geographies, as we say over the year, a million square miles of new LTE coverage.

You've got a lot of people that are either going from no coverage at all to really fast coverage, or slow coverage to very fast coverage.

And then obviously with our leadership position that Neville announced, it's one more quarter that I haven't seen the ad yet but I think better equals slower is the commercial that would have to be run right now.

Can I just add one last commercial in this, which is we talk a lot about speed, and you asked about speed.

At a certain point, once you have a speed in our range, there are other things that matter just as much and think about something we don't talk about a lot, which is how fast our network responds, the latency.

We're the fastest responding network, and once you can stream, let's say a 4K high resolution video, which takes about 16 mbps, the marginal benefit of being faster is at least on par with other things we're obsessed with.

And when you're browsing around the internet and you touch things on your screen, you want that network to respond immediately.

And Neville and team have built the fastest responding LTE network in the country as well, so we're obsessed with the total customer experience.

Just to mention it, our latencies are about 15% faster than the other three wireless competitors in the marketplace today, so it's a material gap.

I think the big winner though is in the United States right now, consumers are winning.

And I think we've caused a competition to invest in your network and get speeds.

And let's, this may be the second time this call and history may be made that I give Sprint credit, is the bottom of the pack is moving up.

The pack is closing, so on an improvement basis, certainly they've done well as well.

So that's good for the overall country, that all wireless carriers are investing heavily in their networks.

That is, except by the way for the big wireless holder of spectrum, Dish who has been given a lot of waiver by the FCC on utilization of some of their spectrum for satellite so that it could be used to create a competitive environment in the US.

And so far, it has put to work exactly no amount of that spectrum, and I think that's an interesting variable to keep an eye on.

Because I think with the four wireless carriers, Washington certainly was expecting to create more competition with those waivers.

And so far, I'm still waiting to see that as well.

But that was, by the way in the beginning of this, a compliment to some of the progress Sprint is making.

Thank you a lot.

We will take our next question from Jonathan Chaplin with New Street Research.

Hello there.

This is Vivek Stalam, on for Jonathan.

Thank you for taking the question, two if I could.

What drove the deceleration in postpaid phone net adds in the back half of September?

And what's driving the sequential ARPU decline?

We expected ARPU progress throughout the year, so just wondering what the trends are on that front.

Thank you.

I'll start and let Mike pop in.

There's no -- you can't -- it's pretty hard to call our postpaid numbers a decline or a slowdown.

The issue really is, you're probably looking at what September must have been, because I made certain discussions with 12 days left.

The issue isn't September, the issue is that August is our biggest month, so August is a huge, gigantic month, so that's the deceleration.

We also had certain promos that were in effect that went off in September, and we've had some new ones that came in, in October.

So that's really the issue, but as we say, August gigantic, the quarter was very strong.

The momentum right now is very clear, and if you're trying to look at that couple of weeks in September, that's really the explanation, but I wouldn't call it a deceleration.

And on the ARPU, the most important thing as we've said is ARPU is basically flat, but it's kind of in line with what we'd expect for the expansion that's taking place.

We moved up to an average number of customers on an account of just under 2.5, so we're closing the gap on Verizon and others and their Family Plans.

And then if you look at the average billing per account, it's an all-time high for us.

And I think that's the most important.

Some of the way we've run our business has caused an expansion in the family programs, broader number of accounts, flatter ARPU, but broader and stronger all-time high in the average billing per account.

And Jonathan, one thing to add that's kind of interesting.

As you know, we have the highest lines per account we've ever had.

Those Family Plans are highly profitable and the marginal lines are highly profitable, but of course they're suppressive to that ARPU metric, which isn't indicative of our EBITDA development because our EBITDA was 42% year over year.

But what I want you to know is our data attach which is one of the real markers of customer value that we look at on our activation flow in Q3 was at an all-time high.

And so when we talk about our average billings per account being at an all-time high, and our customers being more involved with our services, that's something to look at.

When customers come and activate with us at retail, they're getting data attached more often now than at any point in our Company's history.

Okay.

Operator, I think we'll probably take one more question from the phone.

Okay, and we will take our next question from Michael Rollins with Citi.

Hello.

Thank you for taking the questions, two if I could.

First, can you talk a bit more about how you're looking at the Q4 marketing strategy and your approach to the seasonality of this business, given what your preference was a year ago, where you instead of being more aggressive in Q4, you talked more aggressive about being more aggressive in the first quarter?

And the second thing I was curious about is do you track supporting ratios for smartphones?

And how to think about the share gains of more strategic customers within the postpaid segment?

Thank you.

Mike, the answer is no, not really.

I'm not going to give you color on how we're going to unfold the next three months, because it's competitively sensitive.

A couple of things.

John told you that in the last seven days, our porting was higher than in Q3.

So we've got nice momentum developing right now, and we've got a great game plan for the rest of the quarter.

And we're going to leave it a surprise for our competitors, if that's okay.

So that's that on that topic.

We have a very deliberate seasonality strategy, so we bring about these moments on purpose, like August this year where deliberately we drove what was so far the highest month of our year.

Second question's more important?

I think the second question, we can answer back.

It sounded almost as if a back end way to help us look into our porting and our customer migrations from a type of customer, a smartphone or -- and I want to amplify this, because I think some of this gets caused by I think when AT&T announced earnings, they said they were focused on profitable customers and not chasing those other customers that are non-profitable.

I'm still trying to understand how you train a sales force in a store to profile somebody when they walk in to ask them if they're profitable, but I think Mike -- .

The short answer is there's no significant porting of non-smartphones.

So almost our entire base is smartphones.

Almost our entire flow is smartphones.

And porting is skewed even more, so people with non-smartphones tend to let their number go at a higher rate than smartphone customers, so it's a non-material impact at all.

Thank you very much.

There is, I can't help but notice that the next question that I wasn't going to take because I was only taking one more, but it does happen to be you, Walt.

So Operator, let's take one last question from Walter Piecyk.

Are you sure you want to do that, John?

Of course I do.

Okay, Un-carrier 10.

Everything that you guys have talked about in the past is doubling down, but this one I guess is in LA.

Is there something new?

You've always talked about pain points, but with it being in LA, can you give us some hint whether this is going to be something on the mobile video front?

Well, we can give you a hint that it's going to be warm.

The weather will be nice.

And I think the only -- obviously we aren't going to give any input on it, Walt.

Let's just release it all, right now.

Yes.

You know what I will say, Walt?

Is it at least something new, as opposed to maybe what you were talking about before, as far as -- not that the other stuff wasn't new, but it was more of a -- I think you talked about a doubling down on past successful strategies.

Is this -- ?

Yes, so a couple things.

What we've been doing lately is amping up past ones.

This will not be an amp.

We've been very protective of the Un-carrier being something that solves pain points.

And frankly we've been very protective.

Because there's been at least one or two moves lately where people have said, you know, you guys are running out of steam.

There are less pain points.

I can tell you that this one is solidly in the zone of when we created the idea.

I even said, this thing is gigantic.

Can we really do that?

And I can't wait to announce.

So it's not only one of those ones that I think our competitors are absolutely going to wet their pants on.

It's really going to -- if they're not worried, they should really worry, because they've got until November 10 to really be in trouble.

And when we do it, we're going to do it in the large way that such an Un-carrier move commands.

So Un-carrier X will be worth your time, Walt.

I would actually go out there now and get your front row seat.

Now that it's getting cold here, that's probably not a bad idea.

So I'll see you there.

Well, we appreciate everybody dialing in.

I think there's a lot of follow-on discussion we should have.

But two things that I'd like to do before we close the call.

In this last quarter, as I'm also struck by the strength of the MetroPCS results, the incredible progress that our teams have made, being here at the NASDAQ launching the business together, sadly in the quarter that just passed, the founder of MetroPCS, Roger Linquist passed away.

I would just like to take a moment on this call to acknowledge one of the real pioneers in this industry and somebody that was well loved and respected whose no longer with us.

And have this call and the great results of Metro and use it as a tribute to Roger and those of you that knew him.

And with that, we look forward to seeing you at Un-carrier 10, and then we look forward to coming back and talking about Q4 results soon after.

All right.

Thank you, Operator.

Thank you, sir.

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

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

Thank you for your participation.

You may now disconnect and have a pleasant day.