Good morning. Welcome to the T-Mobile US Third Quarter 2016 Earnings Call. Following opener months, the earnings call will be open for questions via the conference line, Twitter, Facebook or text message. I would now like to turn the conference over to Mr. Nils Paellmann, Head of Investor Relations for T-Mobile U.S. Please go ahead, sir.

Yeah, good morning, and welcome to T-Mobile Third Quarter 2016 Earnings Call. With me today are John Legere, our President and CEO; and Braxton Carter, our CFO; and other members of senior leadership team. Let me briefly read the 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 Form 10-K includes risk factors that could cause our actual results to differ materially from the forward-looking statements. Reconciliations between GAAP and non-GAAP results we discuss on this call can be found on the Investor Relations page of our website. With that, let me turn it over to John.

Okay. Good morning, everyone, and thanks for joining us directly from the last call that you were on for the last hour and a half. I want to welcome everybody to T-Mobile's third quarter 2016 Un-carrier earnings call and open Twitter conference. We're live in Bellevue, Washington. Now, I like answering questions way more than reading numbers off of a page so after a few comments, we're going to spend up to 90 minutes taking as many questions as possible from Twitter, Facebook and the phone. And as always, we are live streaming on YouTube so you can watch all the behind-the-scenes action including Braxton and his famous, now infamous magenta cowboy hat. Now okay. Let's talk about Q3. And let me tell it to you. We delivered the best results in the industry again and we beat the competition in key metrics such as net postpaid phone customer additions, prepaid additions, service revenue percentage growth and adjusted EBITDA percentage growth, just to name a few. And I'm going to share those Q3 highlights in a second. But first, I've got just a couple of things on my mind. I just had my fourth anniversary at T-Mobile, so I stepped back and I really looked at where we are and what we've accomplished. When we started, we set crazy high goals for this business. Much to our competitors' surprise and our shareholders' delight, the way we've delivered has been exceptional. Step by step, we're forcing the industry to change and T-Mobile is making wireless better for all consumers. We've more than doubled our customer base and we're translating that amazing customer growth into financial growth and shareholder value. Sure, you've heard some good spinning from our competitors last week, and I think you're going to hear some more tomorrow. But…

Hey. Thanks, John, and good morning, everyone. I'm so excited to give a quick snapshot of our very strong financial results and an update on our 2016 guidance. Let's start with the financial results for the third quarter. Our customer growth is translating into strong financial growth as we once again deliver industry-leading metrics. Service revenues grew by 13% and adjusted EBITDA came in at $2.6 billion in the third quarter, up 38% year-over-year. This includes a spectrum gain of approximately $200 million. Including the spectrum gain, adjusted EBITDA grew by 27% year-over-year while the margin expanded to 34%, up from 30% a year ago. EBITDA benefited from strong cost discipline, with cost of service now equivalent to 20% of service revenues, down approximately 180 basis point year-over-year, and SG&A expenses stay down approximately 100 basis points year-over-year as a percentage of service revenue. Adjusted free cash flow grew by 28% year-over-year to $624 million. Net cash from operating activities increased by 14%. The increase in net cash from operating activities was partially offset by higher cash CapEx, which increased by 3% year-over-year. As said before, cash CapEx was much more front-ended this year due to our aggressive 700 MHz A-Block rollout. This is just a timing issue which will normalize in the remainder of the year. We continue to expect a significant improvement in free cash flow this year compared to 2015. Earnings per share came in at $0.42 per share in the third quarter compared to $0.15 in the third quarter of 2015. Note that this includes the after-tax gain from our spectrum transaction of $0.15 per share. Branded postpaid ARPU was another key highlight of the quarter. It grew 2.2% sequentially. Excluding Data Stash, the sequential growth rate amounted to 1.6%. This has been driven by the…

Simon Flannery, Morgan Stanley. Simon Flannery - Morgan Stanley & Co. LLC: Thank you. John, you touched briefly on porting numbers. I wonder if you could give us an update in anything for October? And then, Braxton, can you just talk a little bit about the operating margin leverage model as we go into 2017? You are past the synergies now. How should we think about if you still have a double-digit top line, what's the incremental drop down to the EBITDA line? Thanks.

So, as I said, overall porting ratios in Q3 were about 1.55, up from 1.43 area for the industry. And they were up in Q3, improved versus every carrier. And they're pretty much flat on the industry into Q4 in October, except we have seen an improvement specifically against Sprint. So we've moved up more towards 1.3 with Sprint. One of the things that we track very closely especially with Sprint porting of MetroPCS and T-Mobile and together the MetroPCS, which was 1.92 for the whole industry in Q3 has moved up to about 2.11 with Sprint. So, we're off to – pretty stable with the other guys and further improvement versus Sprint. Simon Flannery - Morgan Stanley & Co. LLC: Okay. Thank you.

Okay. on your second question. The thesis here has always been to have a significant growth plan translating into significant increases in the top line profit down to true sustainable free cash and we are certainly proving that active vision (17:57). We'll give full 2017 guidance on our yearend earnings call, but suffice it to say we do still expect to grow our top line double-digit going into the next year. We have incredible momentum behind us, we have incredible growth momentum behind us, and then the conversion of that the EBITDA and the truly levered free cash flow gets very exciting when we look at the future. But we'll provide a full update for 2017 on our year-end call. But suffice it to say you can certainly expect on continued strong financial performance and margin expansion as we go into 2017. Simon Flannery - Morgan Stanley & Co. LLC: Great. Thanks, Braxton.

John Hodulik, UBS.

Good. Thanks. John, you mentioned that we were all on another call before this. Could you talk a little bit about how you think that the wireless industry changed, if at all, by this AT&T, Time Warner transaction? Did it change the need for wireless companies to get into content or cable companies to get into wireless? Just your view on the industry would be helpful. Thanks.

I mean, it's clearly a very exciting, and I spent most of the weekend looking at it, as you have. It's a bold move and certainly a long road to go before it's completed. But a couple of things. They also announced their earnings for Q3, and if you look and you compare and contrast their earnings and what's happening, for example, with ours, you'll understand why they are trying to do a vertical integration, which is in effect investing in new businesses and revenue streams as opposed to something with synergies. What yelled loudly in their results was, when you normalize, they lost 354,000 postpaid customers at a time when we're certainly adding many, many. I would point out a couple of things on that, by the way. You did notice as well that U-verse was way down, DIRECTV was barely growing. So, they're migrating with significant amounts of capital to try to grow revenue streams. An interesting factoid for you, which is when they announced in Q2 of 2014 the DIRECTV acquisition, they have not added a postpaid phone customer ever since. So one of the things pertinent to T-Mobile is, I would say, the great news is that they're going to be further defocused than they are now, and the upside opportunity to continue to acquire businesses in this space for us is tremendous. Second thing is that there is a piece of an industry of the future that they are attempting to define. And I think Randall's short version of something I've been saying for quite a while, he used something along the lines that mobile is going video and video is going mobile, which is kind of – I might have gotten it backwards. What we've been saying all along is all content is going…

Great. Thanks, John.

Craig Moffett, MoffettNathanson.

Hi. Thanks. John, I wonder if I could stay with that theme for a second and ask two longer-term strategic questions maybe from the other direction. As you think about network densification and what's going to come in the next five years of your wireless network, what do you think you need in terms of a wired network to support it? And then a related question is – and I apologize, I didn't hear if Neville was there in the room or not – but if you could talk about your spectrum position and how comfortable you feel now that you've been doing unlimited for a while with your capacity and your ability to handle the kind of demand that you're seeing on the network not just in the next year or so but a bit longer term?

Yeah. And Neville is here, and for those of you who don't have a video, he is sitting in his underwear because a couple of years ago, he promised that if the stock ever approached or pass $50 even for a moment, he would join us in his underwear, which he did shortly today. Yeah, you can tune in. I think I'm going to start that, and then I'm going to move to Neville. And I think there's a couple of things. An entry point of what I'd like to say is, as you know, the investments required to create the kind of infrastructure which we have with 312 million POPs now deploying so far 225 million POPs on 700 MHz, and then to prepare for a world of 5G and also participate aggressively in the spectrum auction, this is a significant amount of money, time and focus which also raises an interesting point to me, with the Mexican entry and the DIRECTV acquisition and now Time Warner, how does this position AT&T to make the investment that it's going to require to continue to have competitive carriage and network associated with us. From a standpoint of what we need for a wired network or what the densification plans are, why don't I just have Neville to give an update on the network as well as some of how we think about that (24:38).

Yeah, thanks, John. I promise not to stand up during this televised conference. Hold your breath for later. Craig, I'll try and answer both questions in one really. Let's start with the fact that we have a T-Mobile, the most dense wireless network in the U.S. today, hands down. The combination of Metro seems a long time ago, but it put us in a very enviable position and the other three players have been desperately trying to build out the density and capability that we have on our network. An extremely strong mid-band spectrum position, great, great, growth on low band spectrum with the 700 MHz A-Block. Now as John referenced on the call, 225 million covered POPs. That's another 25 million Americans we've covered this quarter on low band. So we're in a very, very strong position that continue to support great growth on this network. Your question talks and thinks about longer term and what happens. So I look at the major steps that we're making. The first thing is you've got to make sure you maximize every ounce of goodness that you can from the spectrum that you want. And clearly, we're leader in the U.S. I often talk about us having the most advanced LTE network and we clearly do. The first to do so many network enhancements and bring new features, most recently 4x4 MIMO, 256 QAM on the downlink, 64 QAM on the uplink, on the back of VoLTE, ViLTE, RCS, EVS. What's that all about? It's all about making sure you make the most and best use of the spectrum assets we have. The VoLTE for us in the near future as we look to – start to move away from legacy technologies and re-farming at a furious rate. We have 61% of…

Should we try to take a question on one of these feeds? Mike, you want to pick one?

They're kind of still flowing in, aren't they?

Let's take the next one on the phone, and then let's pick one on the feed to keep it moving.

Hello. Philip Cusick, JPMorgan.

Hey, guys. Thanks. John, you mentioned sustain growth in ARPU. Maybe Braxton, can you explain that? What's going on in postpaid on an apples-to-apples basis, correcting for all the Data Stash ins and outs? How is T-Mobile ONE uptake doing that? And then also, Neville, quickly on an iPhone backlog update, and what are you seeing from the Samsung recall so far? Thanks, guys.

Yeah, Phil, I think again it's one of the highlights of this quarter. We definitely did disclosures normalizing for the Data Stash impact. And ARPU minus the impact of Data Stash was up a very strong 1.6%. And I think that's very, very significant but the driver there is T-Mobile ONE. Over 80% of our flow coming in is on this new unlimited paradigm which was enabled by our foundational work on Binge On. And this is underlying strength that quite frankly is a bit better than what the original business case has shown. Certainly we're a competitive environment. I'm not saying that we're going to see sustained substantial increases in ARPU, but this is a very, very good sign and we're very pleased with it.

And I think there's so much in that topic before we go over to Neville. We're just going to double-click for one second because in our industry in the past few years, people have done portions of these things well. Certainly there's been times where AT&T and Verizon have tried very hard to keep their ARPUs high and then had eroding customer bases but drove it for margin. You have situations now where giving prices of 50% off, Sprint is eking out some gains on the postpaid side but clearly not anything that will drive revenue growth, or both at the same time. So I would just say when you do, we have raised ARPU to $48.15 and ABPU of $63.38 and it's very important for people to remember that the ARPU on a postpaid add now is over $38 a customer. So too often we hear companies in their math add a connected car or add a wholesale net. But when you have 851,000 postpaid and 684,000 prepaid, both phone customers at high ARPUs and your ARPUs are going up. That is really with low churn, and I would just ask you to do the math. Before we get too excited about Sprint, if Sprint does 347,000 postpaid nets at 50% off prices but then loses 427,000 prepaid customers at the same time, that will not equate to profitability or revenue growth. So very good item to deep dive on. Neville?

Well, let me handle the recall situation real quickly and then we'll give it to Neville. A very, very unfortunate situation. This recalled handset was probably one of the best, most popular handsets that we've launched in some time. And they were absolutely flying off the shelf. It's such a shame that we've seen those types of issues. But what we had to do because of the recall is 100% reversal of all revenue and all cost of sales associated with it. And then impairing the handsets down to its fair market value. But I got to tell you, the OEMs stepped up, did absolutely the right thing for reimbursement, but it was hundreds of millions of dollars of revenue, and I believe that we were leading the country in sales of it. And had that not have happened, all that would've been, again, reflected in our results. But we'll move on, it's a great company, a great brand, and there's definitely a huge future.

Is that – Mike, do you want to just comment on T-Mobile ONE?

Yeah, absolutely. It's going fantastically well. As John mentioned, it's about 80% of our sales to new customers right now, which is better than what we were expecting. But more importantly, our existing base is rapidly moving to it and adopting it as well. And as Braxton said, what's happening, is we're seeing a benefit relative to what our expectations were on ARPU. But as Neville said, what we're not seeing is any negative impact on the network. Because remember, Binge On and the foundation of Binge On from over a year ago gave most of our customers functionally unlimited service in the first place in the form of setting their video free which is by far the most consumptive thing on the network. So after the launch of T-Mobile ONE which has been accretive so far to ARPU and we expect in the long haul to be neutral to accretive, the network is actually faster, performing faster than it was before. So it's a win-win on all sides. And with that, do you want to take one or two from the...

Pick one.

Yeah. So, Jan Dawson, @jandawson says can you tell us a little bit, you have to scroll up, you made it disappear. Could you talk us through what the post Walmart postpaid metrics look like going forward ARPU, churn et cetera? For those of you not tracking along, remember we announced an MVNO deal that was effective September 1. And what it did was move some of our postpaid customers under our brand called Walmart Family Mobile, less than 1.4 million of them, over to an MVNO. And moves them out of our postpaid base where they could be better managed as an MVNO. Over the long haul, we expect this to have a modest but slightly positive impact to both churn and to postpaid ARPU going forward, because Walmart Family Mobile inside of our base, while small, had higher churn and lower ARPU than the rest of our base. @telnetport (35:35) says why not let OEMs do device financing so they can sell devices more directly instead of T-Mobile doing the financing? That's a fascinating idea. We think it's really great. It does remind me to point out one thing, that was sort of buried in our numbers today, but you should really take note, which is device financing, which we've been providing now for years is no longer a cash consumer in our working capital. And we've been saying for many years that this would be normalized at some point. And we've had a couple of quarters now of general stability where the incoming flows of people paying for their financing is generally matched by the outflowing flows of us writing new financings for new customers. And that's really terrific.

Okay. You have a great idea on that one, by the way. As Braxton talked about, what happened with the Galaxy Note 7, and by the way, they'll be back and they'll be stronger than ever. I have no doubt about it. But it kind of raised the awareness of people of a lot of other devices that are going around. There's been a lot of interest in the LGB-20. There has been a lot of talk about the Google Pixel. And I just want to make it clear, there's been a lot of confusion, especially driven by some of the commercials, that you can only have that device on Verizon. Google is smarter than that. They did an exclusive distribution, but it's unlocked, you can buy it from Google and you can bring it to the T-Mobile network and it actually works beautiful, if not better. So, I mean to your question, I think it would be fabulous if Google did device financing and then people could run over and buy it there, bring it over. I might even try to bridge that gap for you. But there's a lot of great devices right now, it's kind of an exciting time. And I think a lot of people's eyes have been opened to various alternatives. Let's go back to the phone for one more.

Brett Feldman, Goldman Sachs. Brett Feldman - Goldman Sachs & Co.: Thanks for taking my question. A couple of cash flow questions for Braxton. You guys have moved kind of back towards EIP from leasing, but you do have a number of leased devices in the base and a lot of them are going to be coming off lease next year, and I do think that there's some residual value in those devices. I was hoping you can just give us some color on how to think about that in our cash flow modeling. And then just at a higher level, after this auction whatever the outcome, how do you think about your capital allocation priorities from there? Is it mostly going to be focused on de-levering, or there are other areas that you'd be looking to invest in the business?

Yeah, so a really good question on the residual value. And obviously we do a tremendous amount of work on accounting for an estimate in the future residual value. But the thing to keep in mind, even with third-party market sale, residual value, valuations, which is of course the standard that you have to utilize in looking at this issue from an accounting standpoint, the highest value realization is organically within our own business. And it's really an opportunity cost avoidance. What we do is we take these handsets back into our ecosystem. We refurbish them like new and then we utilized those in our insurance claim fulfillment and warranty exchange program. And the opportunity there, Brett, is you're not breaking a brand-new box of A stock, a brand-new phone, on to utilize fulfilling those customer needs. And what it does is creates a significant step up in value for us over and above what we could get from a third-party market sales. So this is all opportunity and then once we've satisfied all of the demand for the warranty and the insurance claim fulfillment is we saw certified refurbished products in a lot of our distribution, very effective, gives the customers the ability to step into an iconic phone platform, maybe a generation or two old, at a much more affordable price point. So this is a very good opportunity for us and thanks for pointing it out.

Brett, if I could just interject, after the next commercial break, I'm going to be on CNBC, so I'm going to sneak out and do that, and then I'll be back. So you guys. Keep going on (40:25).

On the capital allocation issue, certainly we'll see what the outcome of the auction is and what our leverage is. It's amazing. You look at all the deals in the industry, you look at all the financial profiles, you'll earn that leverage and we pry out the strongest balance sheet in the entire industry now plus the ability to de-lever organically, very rapidly. We are taking our leverage up without any doubts, as we talked about in the past, up to a $10 billion cumulative spend for all sources of spectrum and the auctions. We'll see where things end up. So immediately we'll need to de-lever a little bit. And again, we'll do that both organically and with true cash generation. And then once we get there, then we're in the classic paradigm of what are our alternatives. And the trick there is to realize the highest return on invested capital and if we can do that organically or inorganically, looking at strategic opportunities, looking at future spectrum deals that could possibly come up and ultimately if you don't have those opportunities then you start exploring return of capital to the shareholders, but my expectation for that type of evaluation is we're still two or three years off. That's more of a midterm question. Brett Feldman - Goldman Sachs & Co.: And just to make sure I understood the answer to the first question, in terms of the residual value of the devices to the extent they come back to you, you're basically saying you'll either be able to avoid buying a refurb device in the second market to satisfy a claim for insurance or you might just have some devices you could sell but either way, it sounds like all those things flow through the EBITDA. So is that the right way to think about it that if there is value in that residual value those devices we'll see it in your EBITDA performance next year?

Yeah. And it's not buying refurb handsets in the marketplace, because often you can't. There's not enough supply out there. So where the true opportunity comes from an EBITDA less (42:47) standpoint, Brett, is we're not taking brand new, A-stock, cracking the boxes open for that purposes. We're taking lower cost, refurb like-new handsets and utilizing those for the warranty and insurance claims fulfillment, and that puts a significant opportunity on the books for us so as we have adequate refurbed stock.

And, Brett, just a small caution, which should be obvious, but a lot of those phones if you've been calculating how big the base might be, have already made their way back to us in the form of people who take leasing are people who like to change out their phones more often. We just had an iconic phone launch, two iconic phone launches, and so some of those people have already taken advantage of their ability to swap out. Hey. Should we keep moving? How about one from Twitter? John @JTL2000 (43:45) says Q3 2016 was the first Verizon lost postpaid subscribers. Are they responding? What's the competitive environment look like? This is kind of interesting. It's one of those things that probably hasn't gotten noticed by a lot of people outside the inner circle, but this was a big moment that Verizon is going backwards. But I think what's more important is everybody is going backwards. We always get asked how was this quarter? Was it competitively more intense than usual? And the answer is no. Look, it was a normal and normally competitive quarter. It happened to have an iconic phone launch. But what's interesting is in an environment where we have real competitive intensity, and we have had for some time, T-Mobile is the only company in the space posting double-digit service revenue growth. And in fact, we're the only company in the space posting any service revenue growth at all. John said it's been since the middle of 2014 since AT&T has added a postpaid phone. Verizon has fared a little bit better than that but began moving negative this quarter. So the big guys are obviously distracted with other things, but also, they're facing a competitive intensity that's being brought by T-Mobile that's making it difficult for them to be able to deliver real revenue success in their core wireless businesses. We'll take one on the phone?

Yeah, let's take one on the phone.

Matthew Niknam, Deutsche Bank.

Hey, guys. Thank you for taking the questions. Just two, if I could. One on the T-Mobile ONE. If you can talk about – I'm assuming customer inbounds trended higher, but whether the higher entry price point at around $40 may have limited some growth from customers not necessarily needing unlimited? And then secondly on the EBITDA guidance, I get that the adjusted EBITDA number is moving higher, though, there's $200 million in spectrum gains this quarter and some changes to the Data Stash and leasing. So my question is, is cash EBITDA, is that fair to assume that cash EBITDA guidance is effectively unchanged? Thanks.

Yeah. I'll take the last one. Yes, that is correct. When you look at the layer cake of all the EBITDA guidance, there's no changes to core EBITDA, which is really exciting given the fact that we continue to up our growth guidance quarter after quarter. And it's the same playbook we played in prior years, delivering on our EBITDA cash flow commitments while overachieving on a growth standpoint.

Yeah, and, Matthew, on T-Mobile ONE, not only is it not limiting our sales, it's supporting and helping our sales. It's a highly differentiated offer in the marketplace and it's driving the right kind of customers to our business, principally prime suburban families. So we're delighted with it. Now to your point, there are some people that want a lower price point than $40 a line for a family of four or $70 for a single line and we've not yet withdrawn Simple Choice and our 2 gigabyte offers from the marketplace. As John said, about 80% of our sales are on T-Mobile ONE. That leaves a residual 20% on Simple Choice, some of which at lower price points. And we will be phasing out Simple Choice, but we won't be doing so until we've delivered on the solution that allows T-Mobile ONE to reach all of the competitively important price points and that's still in.

Got it. Thank you.

Okay. Let's do another question on the phone.

Mike McCormack, Jefferies.

Hey, guys. Thanks. Braxton, I guess looking at the implied 4Q net addition expectation, it seems like the bar is kind of low there. Maybe some thoughts around that. And then also I think a lot of people are sort of thinking into the next year, the 10th anniversary iPhone, what it might mean for upgrade rates and translating that into what is – what free cash flow pressures you might feel on working capital? And, I guess, lastly, I was just thinking the EIP that you sort of shifted into and away from leasing, does that protect you against higher upgrade rates next year? Thanks.

Yeah, sure. So, let's start with, is our earnings guidance for Q4 conservative and is the bar too low? I mean, it still implies a very strong growth quarter for us on a postpaid standpoint. And certainly the other part of the equation is we have tremendous momentum going from a prepaid standpoint. And certainly that is going to continue in Q4 and we don't guide to the prepaid growth for the business. But if – you look at the numbers, you look at the trajectory, it's hard to imagine that we're not in the 8 million net addition range again for the third year in a row. And remember, our issue has always been subscale, and the whole translation of this growth to reoccurring sustainable free cash flow is the fact that we're a highly fixed cost business and we're getting tremendous organic leverage on it. The other thing I'll point out, Mike, is we have never missed or not exceeded the guidance that we put into the marketplace. And the strategy that we're deploying is one of balance. Could we grow faster? Absolutely, we could grow faster. And over the last three-and-a-half years, there's been many times where we've made a conscious decision to have balance and to meet the commitments that we're making to the marketplace. And I think we can all see the credibility and the sustained value creation that comes out of that strategy. We have no intentions of not hitting our guidance. We could easily post higher growth numbers and have a slight miss on EBITDA, but we're planning a long-term, very mapped out financial strategy here with one ultimate purpose in mind, to take care of our customers and to create value for our shareholders. If you'll let me turn it over to Mike to talk a little bit about – well, I think it's going to be a very exciting year next year on the upgrades standpoint, the iPhone 8, there certainly will be a Note 8 that comes out which was a phenomenal phone. And the opportunity for T-Mobile with those iconic launches last year.

Yeah, I mean, it's kind of obvious but switching moments like that are great moments for T-Mobile. We had a big switching moment this quarter. You saw the results and how significantly we grew at the expense of our competitors with a switching moment like iPhone 7. And I want to point there's huge opportunity for that in next year as well. Overall, it's a good thing financially that customers are holding on to their phones a little bit longer. And EIP, the construct that we innovated and brought to the market is certainly helping with that. The only thing I would probably watch for next year is whether or not there would be the kinds of promotional intensity around next year's devices that we saw this year. T-Mobile led the way with an offer for a free iPhone 7 that we were very excited about, it was quickly matched by everybody. And I think in the end, that doesn't really change the competitive equation much when everybody is offering the exact same device. So, that's something that I'd be surprised if it happened again. But neat year is an exciting opportunity. And remember, switching moments that cause people to ask do I have the right device is a great time for them to ask do I have the right carrier. So, overall, it's an opportunity.

Hey, we have some good questions here from Walt. Neville, you want to try to take those?

Which ones do you want to go for (51:53)?

Let's go for the top two.

So, the first one is, are you still expecting a Q4 close of the Chicago spectrum purchase? So, Walt is referencing there the 700 MHz A-Block spectrum deal that we shook hands on earlier this year. So, we should see approvals from the regulatory authorities in Q4. We're already busy with pre-deployment activities, so looking to light that spectrum up in 2017. I talked earlier on just to fill out that 700 MHz story, we're at 225 million, covered 700 MHz low-band POPs today. And as we all know, that provides significant improvements in building coverage about four times better. Really enhances suburban fringe and rural coverage, so it's a great story for the company. We now have over 270 million licensed POPs to go after. So, we'll close the 225 million to 270 million gap materially between now and the end of 2016, and that's also a key focus for us as we move into 2017. So, tremendous story. And this quarter, we also closed the transaction, we still need to get approvals, et cetera, for a deal in Montana. The second question from Walt, any evidence of higher gross adds in markets where 700 MHz deployed or has been deployed, providing new coverage? And I'll throw this to Mike, clearly which – clearly, we are seeing a ton of benefits come through where we've deployed 700 MHz. It really adds a quality and capability to our coverage that we've been looking for for some time. We'd often build material density in markets to overcome some coverage deficiency with just a mid-band spectrum position. But the addition of low band has really enabled us to compete on an equivalent basis with AT&Ts and Verizons of the world. As you heard from John at the beginning of the call, with 312 million covered POPs on LTE net, we're now effectively matching the Verizon coverage. But I'll toss this to Mike because I know we've got good reference on sales and what's happening in the 700 MHz markets where we're materially deployed.

Yeah, the short answer is, as Neville said, is yes and – but only where we have distribution present. And that's what's interesting. I want everybody to just bear in mind about these results. Remember, we're doing all of this growth asking, while historically only competing in a little over two-thirds of the U.S. with our full suite of both network and marketing and distribution, think about that. We have a huge opportunity to move to three-thirds of the market, and that's what we're doing. You know about our plans to not only expand the network, which has now hit 312 million of the U.S. population, parity with Verizon, but also our plans to expand distribution in behind that. And we've talked about our aspiration from the beginning of 2016 through the middle of 2017 to add 30 million to 40 million population to our distribution. And when you have both things in place, that's when you see the potential for upside after a period of ramp-ups. So, we're very excited about the potential ahead, and it is mostly driven by that network expansion as the foundation.

And one final thing, Walt, we're just delighted to have you and your family as new customers on the T-Mobile One. Thank you very much for your business. Let's go to Ric Prentiss next on the phone.

Ric Prentiss of Raymond James. Ric H. Prentiss - Raymond James & Associates, Inc.: Yes, thanks. A couple of questions, guys. Let me follow up on Walt's question there. Can you update us as far as how you are doing as far as opening up the stores for that extra 30 million, 40 million POPs of the low-band frequency, where are you at as far as marketable POPs and where you think you could be by mid-2017 and end 2017?

Yeah, absolutely. The only outlook we'd given is for mid-2017, which is to add, as I said, 30 million to 40 million from the beginning of 2016 to what we call marketable POPs. And we're tracking really nicely for that. It is a back-end-loaded plan, but we're tracking for the pieces that we've said. One of the pieces we said is that we would add 400 stores on postpaid this year, and that's tracking along very nicely to be wrapped up by the end of the year or certainly by the next time we talk. The other piece is we're rapidly expanding distribution for MetroPCS, which you've seen the phenomenal numbers that we're posting. A lot of that is due to the distribution expansion. A thousand new stores inside of this year and more aspiration for next year. So, basically it's a very simple formula, put the network there, fill it in behind it with marketing and distribution, and then after a ramp-up period, you see the performance. And we've been able to experience this in some places to test the thesis and it certainly holds. Ric H. Prentiss - Raymond James & Associates, Inc.: And then, Neville...

Go ahead, Ric. Ric H. Prentiss - Raymond James & Associates, Inc.: Yeah, Neville, you touched briefly on the 3.5 gigahertz as well. What are your thoughts as far as could you use that for small cells? Would you use that for backhaul? I think it's, what, 150 megahertz of unlicensed shared spectrum that would be out there, but what are your thoughts to what 3.5 gigahertz could be used for? And when could it make it into the ecosystem of handsets and infrastructure?

Yeah, that's a good question, Ric. I mean, obviously, the old phrase is never seen a megahertz we don't like, right? And we've been a strong proponent of looking to drive LTE into the unlicensed space and ahead of 3.5 gigahertz, almost guaranteed you will see deployments of LTE-U and LAA in the 5 gigahertz bands in 2017. And there's a lot of that spectrum, Ric, in many areas, especially in outdoor environments, which is very heavily underused. LAA opens up I think north of 500 megahertz of unlicensed spectrum. Not all immediately usable and not all immediately necessary to use. The 3.5 gigahertz process is kind of underway. I mean, I think everything we see would point to probably an 2018 timeframe. There's several building blocks that have to be put in place in terms of sharing mechanism, shared access system, SAS is the acronym you will see thrown around in the industry. So, that's kind of a shared approach to using the 3.5 gigahertz. And you're right, there's 150 megahertz of that, but there is military use in a chunk of it. So, it's kind of a sharing mechanism, which is dependent on new infrastructure being built. That all said, we love all these spectrum opportunities. And clearly, in terms of propagation and capability, we're now in this space where everybody talks about the 2.5 gigahertz over at Sprint, but there can be a lot of spectrum in that 2.5, 3.5, 5 gigahertz range, which can do a lot on small cells. And then ultimately then, you look at millimeter wave spectrum coming, 28 gig, 39 gig in the U.S. There will be auctions inside the next two to three years for sure. That's a pretty conservative statement from me, I think. And again, we'll start to see spectrum in millimeter wave that can be used on small cells in the early running. So, there's going to be a lot of different highly competitive spectrum sources coming at that kind of traditional high-band space which create pretty interesting environment and opportunity for everybody I think that is looking to continue to deliver great service and expand their offering. So, we continue to work all dimensions of spectrum: low, mid, and high, and ultra-high coming with millimeter wave.

And, Ric, I just like to point out what a thoughtful and serious answer Neville just gave you for a guy that's not wearing pants.

Here's a good one on Twitter. You guide a $4.5 billion to $4.7 billion CapEx for 2016. This implies $757 million for Q4, 47% below last year. Any reasons for this?

Benjie Arnaud (01:00:24).

And, yeah, Benjamin (01:00:26). Good question. And I think the way you need to look at this is we've had a very upfronted and disproportionate CapEx spend during 2016. And it also has implications for the true cash flow trajectory that you're seeing. If you look at year-to-date this year versus year-to-date last year, a very significant upfront spending on investment in our network. And what's been driving that is the rollout of the 700 megahertz. Neville and his team have been flat out building this as quickly as they can, and the majority of what could have been accomplished during the year has now been accomplished. So, this is real normal CapEx without overlays of LTE expansion that we've seen in the past or what we're doing right now with 700 megahertz. And it does not imply any slowdown to our overall capital intensity. We're deploying a success-based capital investment program, and we again will give guidance on our year-end call for next year's investment. It isn't going to go down, I guarantee you that, but nor do we see the necessity as we pivot dollars for other uses of it having a significant step function increase. But very good question, Benjamin (01:02:07).

Go back to the phone? Operator, we'll take the next question on the phone.

Michael Bowen, Pacific Crest.

Okay. Thanks for taking the question. I just want to get your thoughts on margins. Obviously, strong here and kind of where you think the throttle points are for margins and how you're viewing that versus subscriber adds. Thanks.

I'll let Braxton handle that as long as he doesn't use the word throttle.

You got it, John. Yeah, it's a great question. The number one sensitivity that we will be dealing with and looking at projecting margins is how quickly we continue to grow from a subscriber standpoint. What you've seen I think is incredible leverage from a cost to sales standpoint on the operating of our network. Neville and his team have worked for years being ahead of the competition, laying in a fiber backbone. We've been doing a major expansion, and you're seeing massive leverage from a network standpoint, which, of course, goes straight to margin expansion, 180 basis points year-over-year. The other part of the equation is the SG&A piece. And there's always variable costs associated with acquiring subscribers. And what we've been doing is balancing growth against all of the progression that we see in our financial metrics, and we certainly will continue to do that, but we also feel very strong about the momentum of the business and about our sustained opportunity to grow. And as long as we're growing to the tune that we have been growing, roughly 8 million subscribers a year, you're not going to see as much leverage coming off the SG&A versus if our growth moderated where you see an explosion in EBITDA and an explosion in margins. But the fact that we continue this growth rate and still expand margins, which we have consistently shown, really provides the context that we're building a lot of terminal value in the future and that's important to us. Again, we're here to create value for all of the shareholders and create value for our customers.

Braxton, just a quick follow-up on that. You typically have been aggressive early in the year. So, that being said, does the AT&T transaction maybe perhaps make you more aggressive given perhaps they take their eye off the ball a little bit?

You're right. We have very effectively deployed a countercyclical strategy. All of the big guns and the big dollars come out in the fourth quarter. And the incremental cost of bringing that incremental add are much higher than if you do it in other parts of the year. And based on that strategy, while everybody else is pivoting off, starting to talk about margin recovery as they go into the first quarter, we tend to be very, very aggressive. And you just heard John say earlier today, we've got another Un-carrier move coming before the next time we have an earnings call, and believe me, it's something we're excited about, and it's something that we think is going to create a lot of value and momentum going into 2017.

Yeah. And, Braxton, let's face it. AT&T can't take their eye off the ball because it hasn't been on the ball for so long. It has been way over two years that they've added a customer. They're just not interested in this business or in participating. And that's why they're vertically integrating their business into other businesses, and they're going to attach them on. It's almost like a – and you can see this in many companies. If you look at their results announcement, you can almost see the stage of when they were excited in investing in something and then they drop it off the bus. Wireless was shrinking. U-verse was shrinking. DIRECTV is already slightly anemic. And this is not going to – this movement is just assuring that it's going to be another year or two of really thankful donations from AT&T to our further growth. I think that's the most exciting part about the deal.

Thanks, guys. And thanks for that mental picture from Neville.

You're very welcome.

If you could just add here's one, Neville. Did you take any of Sasha's (01:07:10) questions?

No.

Just had a ton of them. They are really good ones. I would just say, Sasha (01:07:15) that your Twitter photo scares me. But we can – do you want to take a couple of those?

I'll do them quick. Yeah.

Yeah, emphasis on quick.

So, a couple from Sasha Sagan (01:07:27) here. What carrier aggregation layout will band 66 rollout enable and what speeds? And then when will we see more 4x4 MIMO devices? So, just on 4x4, do that one first. So, that's a global first from T-Mobile in the smartphone space to launch 4x4 MIMO, first company in the world to have 4x4 moving out in the network for smartphone capability. And we'll launch multiple devices as we move into 2017 in addition to the devices we already have on 4x4. We've just recently launched and we have over 1 million customers now enjoying 4x4, so there'll be great traction on 4x4 capability in 2017. On band 66, this is AWS-3 extension to the AWS band. So, depending it is a – can't do this one quick, Sasha (01:08:24). It depends on your holdings and where you sit. Your AWS-3 addition may be contiguous with your existing AWS assets. So, actually, it doesn't require carrier agg in its kind of traditional sense. But long story short, you're going to see that spectrum come to market and become a valuable tool for us in 2017. We've already turned the radio up in some markets in Southern Texas. And we'll have our first device launched with again a first for T-Mobile, the first device launch later this month. And then in terms of speeds, if you think about a world where you have three-way carrier agg and you can do 4x4 and you can do both together which is the story of 2017, then you're approaching gigabit LTE speeds, which is really exciting for 2017. We can do about 400 megabits per second on 4x4 and/or three-way carrier agg. And then the two coming together, you can start to double down and as you expand your carrier agg reach, you can move towards gigabits.

Okay. Before we go back to the question just so that I can insert him into the dialogue. There's a question here, it says, a question for today's earnings call. T-Mobile announced a partnership with Twilio for Internet of Things a while back. Is it working? And I bring this up so that I can introduce and let at least say hello, Peter Ewens, who is our Head of Corporate Strategy and Development and is behind the scenes working on a lot of very unique and creative partnerships and relationships so this was one of them. Thanks for asking. And, Peter, maybe you want to comment real quickly?

Yeah, sure. So, I'll take that. So, we did announce a partnership with Twilio earlier this year. The products are just rolling out now, but we have great hopes. What the partnership with Twilio does is it marries our great network with their software development environment and software development tools. IoT is a very fragmented space and we're going to see tons and tons of innovation over the next few years. And what this enables us to do is really go after all the innovators and developers out there. We're going to build great IoT applications on our network. So, we have great hopes for it, and we think it's really going to start to deliver in 2017.

And I used that to say there are significant ways to create partnerships, alliances, and then eventually, potentially investment-related and/or merger relationships without trying to do the earthquake move all at once. And we do have a vision and a strategy how to migrate ourselves to the future environment. And what happens – I've said this before, what happens when mega monoliths get together and think that they have locked the market down in a certain space, it frees up all of the other creativity to align itself behind the more nimble creative players like T-Mobile. So, any one thing that AT&T does, for example, that could prohibit anything for us just creates a plethora of others that now become very capable and willing partners of ours (01:11:40). Let's go back to the phones.

Amir Rozwadowski, Barclays.

Thank you very much. Thank you for the color on how to think about sort of growth versus the earnings capability of the company. I was wondering if we could translate that a bit in terms of cash flow and cash generation. In the past, Braxton, I believe you've sort of endorsed or taken a look at sort of where the expectations were for cash flow for the company in the near term albeit 2016. I was wondering if you could give some color on that? And then as sort of follow-up, how should we think about balancing that going forward? It does seem as though you're at an inflection point when it comes to the capabilities of the company to drive additional cash generation, but would love to hear sort of the puts and takes about how you plan on managing that while balancing the opportunity set for growth going forward?

Yeah, absolutely. So, on 2016, we still are dialing in to exactly what we've talked about in the past. From a core or cash EBITDA standpoint, you've seen our guidance being unchanged while yet once again taking up our growth projections for the quarter and thus, the year. And you saw a slight narrowing of the range on our cash CapEx. I mean, quite frankly, what did we have, a little over two months left in the year, so we have really good visibility how we're going to land the year. So, with the reaffirmance and narrowing of that guidance then the other part of the equation is working capital burn. And again, we have haven't specifically guided to a true lever of free cash flow number, but from a working capital burn standpoint, we're comfortable with the general consensus of $500 million to $1 billion. And when you get a chance to dig into our cash flow statement, you will certainly see the upfront investment we've done from a cash CapEx standpoint this year as well as a fairly significant year-over-year paydown in our accounts payable. So, with that intact, the other part of the equation that gets a true levered GAAP-free cash flow is the interest expense. And quite frankly, that is still an unknown. We can certainly dial in fairly close towards 2016, but ultimately, it's going to be a function of where we end up with this upcoming auction which we can't really talk about at this point. We do have a lot of flexibility with the agreements that were put in place with Deutsche Telekom, which we never could have received in the open marketplace. marketplace. We have the full optionality whether to draw or not. We got significant refinancing capability if we do draw…

Operator, I'm pretty sure that the next caller is one of T-Mobile's most recent customer additions, and in anticipation of him becoming a customer, we've had to significantly add force for the many questions that he's going to continue to ask us on how to use these capabilities we never had before (01:17:12). Can we take the next caller.

Walter Piecyk, BTIG.

This is where you press the mute button, Walter.

Can you hear me now?

Yeah.

Am I there? No, that wasn't on purpose. My headset died. So I know you're looking forward to my speed test on Twitter. So I think my phone is to arrive in about a week, and thank you for the $400 for my iPhone 5 – or, yeah, iPhone 5C, I think, you paid me. That was nice. Can we just go back to Sasha's (01:17:52) question on the band 66? Can you give us a sense of how many of those phones you're going to have in the base by the end of next year, maybe the end of 2018 because I know when Massa (01:18:01) was asked about 2.5 gigahertz spectrum, he made a big deal about saying band 66 is not in the ecosystem. So just curious how quickly you think that's going to ramp into the base.

Yeah, I think it's a 2017 story. As I said, we've got our first – it is the first device in the U.S. which is launching this month. Funny, it's from us, but I suppose we're always the company that drives spectrum to use before all the other guys. I think the big two paid $28 billion for spectrum there and no devices and no news on network from them. But anyway, so we're pushing forward. I know first half of the year we have a slew of devices coming with band 66 AWS-3 capability. So we're pushing it into every device as fast as we can. As you guys know, some OEMs move quicker than others on new banding, but there will be a large number of devices available in 2017 with AWS-3 capability. I don't know when and how. I can't speak to what AT&T and Verizon will do in terms of turning up that spectrum world, but I would imagine it will be a slow process as usual, but not from us.

Okay. And then for Braxton, I think you talked a little bit about the upgrade, I think you said that the Samsung returns were not processed in the upgrade rates. So assuming that people weren't returning their phones, do you have a sense of where the upgrade rate is? And then more importantly, your smartphone sales are growing yet your upgrade rate's down, obviously because of the gross adds. Can you give us a sense though in the fourth quarter, has there been follow-through on that very strong order flow that you saw for the iPhone? So is it possible that the upgrade rate could be flat or even up? That would obviously be further levered to the gross add, so that could kind of make for a relatively sizable smartphone sales quarter. If you could just talk about those dynamics and what you're thinking about as far as the December quarter.

Yeah, so on the recall of the Note 7, every one of those sales both from a revenue and cost of sales and unit standpoint was reversed. So when you're looking at the upgrade rate, it does not include anything for the Note 7. It was as if that handset had never been launched.

So what would it have been if you didn't reverse those? How much higher would the upgrade rate have been?

It would have been higher but not significantly higher.

Okay.

Definitely would not have moved to more than 50 bps. But it would have been slightly higher. On the iPhone 7, the really interesting thing is – you're hitting on something really important – is extreme supply constraints, once again with an iPhone launch. It's not going to be as bad as we saw with the iPhone 6, but it's going to be pretty much in line with the success. We still do not have adequate inventory. There's still backlog of people wanting to upgrade or new adds coming in on that platform. We currently anticipate it's going to be sometime in November when we have complete health from an inventory standpoint, and then can start stocking in all of our retail fleets this great handset. I just activated mine, it's fantastic. So that will imply additional upgrades flowing into Q4. But again, it's not going to significantly move the needle. There's always puts and takes in upgrade rates. You saw a little bit of elevation in the third quarter. You'll see a little bit of iPhone 7 impact in the fourth quarter, but it's not going to materially move the needle from any financial aspect of the company.

Well, that's because of the phone payment plans, obviously, you can take that through and not have a big impact. But...

True.

...I mean if it's the same as last year and your upgrade rates are the same, that's a change from it being down a couple hundred basis points year-on-year this quarter, right?

Yeah, but again, precisely forecasting exactly what happens, there's a lot of other puts and takes during the (01:22:45).

I mean, the broad trend seems to be people are keeping their phones a little longer.

Absolutely.

Yeah, so that's the broad trend. You should see that when you squint in the general direction of our year over year. But sequentially, for all the reasons Braxton talked about, we see more upgrades in Q4 than in Q3.

Got it. All right. Thanks.

(01:23:05). Operator, if we can take at least one more?

Colby Synesael, Cowen.

Great. Thank you. Two questions, if I may. Just for modeling purposes, I was wondering if you can give us some of the historical churn or ARPU numbers that's tied to the Walmart base that moved from postpaid, just so we have an understanding there. And then secondly, I was wondering if I could coax out any hints around what the next on carrier might be, any areas where you're seeing pain points that are obviously you can be addressing. Thanks.

Yeah, I think if you look in the Factbook, Colby, what we did is we disclosed the pro forma churn with the transaction with Walmart, had it closed on July 1, and our churn for the quarter would have been 1.20%, which reflected in our actual results. The deal closed on September 1. So the month of September, the impact was there. And you had 1.32% reported postpaid churn. So I would use that as a proxy for the churn impact going forward. And I think, suffice it to say, even normalizing – and we're providing full transparency on this – you have very nice year-over-year improvements in the churn trajectory of the business, which you would expect, given our Un-carrier moves, the investments that we're making in the network and all the other things that we talked about. From an ARPU standpoint, it does have some small impact, but quite frankly, it's really not material. It's a little more material for prepaid. It's very immaterial for postpaid. So it's just kind of noise in the system. And I think that's the right way to take a look at it.

And on Un-carrier 13, which we haven't decided we're going to call 13 yet, I have no input at this time but if you want a preview, I refer you to WikiLeaks.

I'll start digging through now.

Okay. One last question, operator.

Tim Horan, Oppenheimer. Timothy Horan - Oppenheimer & Co., Inc. (Broker): Thanks, guys. Two questions. Braxton, could you maybe talk about the pricing of your base? Are there any moves that you can do to kind of help out that ARPU growth? I know you had some unlimited pricing that you were going to keep steady for two years? And then, Neville, can you just maybe give us your thoughts about Wi-Fi/LTE integration, and maybe the ability for cable companies to do that as an MVNO or maybe, conversely, if they owned a cellular network, can they really accomplish that seamlessly? Thank you.

Yeah, I think from a pricing standpoint, the way that we should all continue looking at our business is stable to flat ARPU. And I think to do anything more aggressive would really be a disservice. We're more than holding our own. We're showing a lot of momentum with the business, but there still are promotions, there's still competition in the marketplace. We certainly have a pricing umbrella compared to AT&T and Verizon, which we're very, very comfortable with and is performing quite well for us. But to really sit here and say that we're going to significantly accrete ARPU in the future, given the history of this industry and the saturation, I think, is overly aggressive. We will make other moves in the future and we are really focused on a stable ARPU picture. I'll pass it over to Neville.

Yeah, I'll be quick, Tim. I mean, clearly, if you want to talk to a company that understands how to make Wi-Fi calling work seamlessly with mobility, it's T-Mobile. We're the global leader. We were the first to launch integrated LTE, voice with Wi-Fi. We understand the space better than anybody. We have the strongest smartphone lineup. We're just a clear leader in the space. And when it comes down to connecting various networks, be they Wi-Fi-based, cellular-based, et cetera, the art is you've got to connect through the cores right? So you need to join the intelligence behind the radio together, in a way to build seamless mobility. And that's coming. There's a whole host of features with A&D assessment (01:27:54), HotSpot 2.0, that are coming in 2017 and 2018, that will make that technically achievable. But again, you've got to really share the core architecture across the respective companies. You want to know who does that well and who does it best? You ask T-Mobile.

I think the vision picture, though, is pretty clear. We say all the time, customers don't really care what you use. They want you to use whatever you need to use for them to seamlessly be able to have capabilities on their devices in the home or mobile. And if one player could control and use, simultaneously, Wi-Fi, unlicensed in cellular, in an appropriate integrated manner, it would clearly have a superior capability and, tangentially, people trying to coexist with each other and do hand on. So in a future world, I think ultimately, they will be seamlessly integrated under individual players that have all three. I think that's the vision. I don't know if it's two years, five years, I don't know who gets there, but somebody will get there, and then have the owner's economics of having and controlling that, and they'll be in a superior position. Timothy Horan - Oppenheimer & Co., Inc. (Broker): Thank you.

Okay. Braxton, do you want to summarize?

Yeah, we definitely appreciate everybody's time today. It's been a lot of fun talking with you, and we'll definitely look forward to speaking with you again on our Q4 and full year earnings to be done in early February. Have a great day, and thank you very much.

Thank you (01:29:37) very much.

Ladies and gentlemen, this concludes the T-Mobile US Third Quarter 2016 Conference Call. If you have any further questions, you may contact the Investor Relations or Media departments. Thank you for your participation. You may now disconnect, and have a pleasant day.