T-Mobile US, Inc. (TMUS) Q4 2018 Earnings Report, Transcript and Summary

Good afternoon. Welcome to the T-Mobile US Fourth Quarter and Full Year 2018 Earnings Call. Following opening remarks, the earnings call will be open for questions via the conference line, Twitter or Facebook. [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. Thank you. Also good morning and welcome to T-Mobile's fourth quarter and full year 2018 earnings call. With me today are John Legere, our CEO; Mike Sievert, our President and COO; Braxton Carter, our CFO; and other members of the senior leadership team. Let me just briefly read the disclaimer. During this call, we will make forward-looking statements that include projections and statements about our future financial operating results, our plans, the benefits we expect to receive from the proposed merger with Sprint and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of our management and are subject to significant risk and uncertainties outside of our control that could cause our actual results to differ materially, including the risk factors set forth in our Annual Report on Form 10-K. Reconciliations between GAAP and the non-GAAP results we discuss on this call can be found in the Quarterly Results section of the Investor Relations page of our website. In addition, in connection with the proposed transaction on July 30, 2018, we filed a registration statement on Form S-4 with the SEC related to the merger. The registration statement became effective on October 29, 2018 and is available on the New T-Mobile website. It contains important information about T-Mobile and Sprint, the merger and related matters. With that, let me turn it over to John Legere. John?

All right, with that exciting opening, good morning, everyone. Welcome to T-Mobile's fourth quarter and full year 2018 earnings call and Twitter conference coming to you live from Washington DC. We pre-released our record breaking custom results on January 9, and the financial released today are just as strong. Let me quickly touch on the highlights, then Braxton can jump into the details and we'll get to your questions. First, let me – let's start my takeaways in the quarter. T-Mobile delivered another record breaking quarter in Q4, yes another one, despite the work underway to close the merger with Sprint we continued to drive our business beyond expectations and I could not be more proud of our T-Mobile team. We had the highest total customer net additions ever in Q4 and we followed that up with record breaking financials, which is a winning formula for our shareholders. T-Mobile led the industry in postpaid phone net adds for the fifth year in a row and we posted a Q4 record low branded postpaid phone churn. Both service and total revenues hit record highs in this quarter while adjusted EBITDA was our best Q4 ever. Our 2019 guidance shows our confidence for the standalone outlook for T-Mobile. We continue to meet the needs of wireless customers and translate that into incredible results. I feel good about the state of our business going into 2019. So, let's dive into the numbers. I'll focus mostly on Q4 to keep it brief, but you can see all the numbers in our earnings release fact book and our Form 10-K. First, I've got to highlight our very strong financial results. Service revenues hit record highs reaching $8.2 billion growing by 6% year-over-year. Total revenues increased by 6% year-over-year to $11.4 billion, also a record high. Net income was strong at $640 million and a fully diluted EPS came in at $0.75. We hit a Q4 record high with adjusted EBITDA of $3 billion up 10% year-over-year with a 36% adjusted EBITDA margin. For full-year 2018 adjusted EBITDA amounted to a record high $12.4 billion towards the high end of our increased guidance range of $12 billion to $12.5 billion. The customer results as you saw in on January 9, were record-breaking. We added a record 2.4 million total net customers extending our winning streak to 23 quarters in a row with more than 1 million, and we added over 1 million branded postpaid phone customers capturing over 50% of industry postpaid phone growth including cable and delivering 56% more postpaid phone net additions than our closest competitor Verizon. And our growth in postpaid phone nets accelerated again benefiting from the investments we have made in our network, marketing, and the continued focus on underpenetrated segments such as new geographies 55+, Military and T-Mobile for Business, all of which contributed to our great quarter. We also had strong total branded postpaid net additions of 1.4 million supported by continued strong growth in wearables. This means we added 4.5 million branded postpaid customers in 2018 smashing through our increased guidance range of 3.8 million to 4.1 million. These wireless customers are coming and staying longer than ever before. In Q4 we had our lowest ever branded postpaid phone churn for fourth quarter of 0.99%, down 19 basis points year-over-year. This quarter was by the way the first time ever that T-Mobile's churn was lower than AT&T's, a might major milestone for both of us. Branded prepaid net customer additions came in at an industry best to 135,000 driven by Metro by T-Mobile, a significant acceleration from Q3. We continue to be a leader in prepaid and continue to find a way to deliver growth quarter after quarter. Our engineering team is hard at work furiously building out our 600 MHz and setting the stage for America's first real nationwide 5G network next year. Our aggressive build out is on 5G ready equipment and we have made rapid progress in just one year since getting our hands on the spectrum. 2700 cities and towns in 43 states and Puerto Rico are live on 600 MHz and we already have 29 600 MHz capable devices in our lineup today including the new iPhones. We have standards based 5G equipment deployed to six of the top 10 markets including New York and Los Angeles. We believe the 5G revolution should be for everyone, everywhere, and not just the few intense areas. While the other guys hyped 5G we continue to focus on real 5G using global standards based equipment, 5G NR that will light up and deliver for customers across the U.S. How has the competition responded to our plans? Well, AT&T responded by trying to rebrand 4G as 5GE and we know the customers see right through their bullshit and Verizon by the way, their current standard pups, pre-standard 5G footprint covers what they even themselves call limited areas in four cities, while our 5G capable 600 MHz network already covers hundreds of thousands of square miles. Also we continue to expand our 4G LTE coverage and deliver industry leading network performance. Our network now covers more than 325 million Americans with 4G LTE effectively matching Verizon's population coverage. We now have 600 and 700 MHz low band spectrum deployed to 301 million people across the country and we continue to lead the industry in 4G LTE speeds. In Q4 our average download 4G LTE speed was 33.4 Mb per second once again ahead of all the competitors. We remain very confident in our outlook for 2019 and this is reflected in our guidance. Our outlook calls for 2.6 to 3.6 million branded postpaid net customer additions and adjusted EBITDA of $12.7 to $13.2 billion excluding the impact of the new lease standard. Cash capx is $5.4 billion to $5.7 billion excluding capitalized interest and by the way our three-year free cash flow CAGR remains unchanged at 46% to 48%. Now we're using today's call to focus on our incredible Q4 and full-year results. But before I hand it over to Braxton, let me give you a quick update on the progress of our pending merger with Sprint. The combined company will create an aggressive competitor in wireless, broadband, and beyond, which will result in lower prices for consumers and will create jobs starting on day one. American consumers will benefit from a nationwide 5G network that is both broad and deep and we can't wait to get started. We continue to work through the regulatory review process with humility and respect for all parties involved. A number of major milestones have been completed and we remain optimistic and confident that once regulators review all the facts they will recognize the significant pro consumer and pro competitive benefits of this combination. We continue to have a productive dialogue with both federal and state regulatory authorities. A few milestones in last earnings. On December 17, we received approval from both CFIUS and Team Telecom proving that regulators are ignoring the noise and conducting a fact-based review. And on January 29, the FCC shot clock resumed again after the government reopened. At state level we have received 15 of the required 19 State PUC approvals. Marcello Claure and I look forward to our hearings next week with the House Committee on Energy and Commerce and the House Judiciary Committees. Our integration planning is well underway and we're making great progress. As part of our integration planning, on January 30 we announced plans to build five New T-Mobile Customer Experience Centers with Overland Park Kansas as the first location chosen and Upstate New York being the second location which will create an average of 1000 new jobs each. And when we announced the merger in April, we said the New T-Mobile would deliver a dramatically improved network experience and consumers would pay less while getting more. Critics of our merger, largely employed by big telco and big cable have principally argued that we are going to raise rates right after the merger closes. I want to reiterate unequivocally that prices will go down and customers will get more for less. We're entering the final stages of our regulatory review process and it's an important time to document the commitments that we've made from day one. This is another example of T-Mobile putting its money where its mouth is and backing up what we said in our public interest statement. In summary, I am very, very pleased with the progress we've made on our merger and the process so far and I continue to expect regulatory approval in the first half of this year. Okay, to wrap it up I also couldn't be more excited about the performance in 2018 and our guidance shows continued momentum in 2019. The combination with Sprint means that we will be able to create a future that is even more exciting for American consumers. Okay, Braxton will take us through our financial results and the details of our guidance. Let's take a closer look Braxton.

Well, thanks John and I'm so excited to be here today talking about first of all our record 2018 highlighted by record low churn and the acceleration of growth year-over-year. Second thing I'm very excited about is sharing with you details of our 2019 guidance. You know our playbook, extremely conservative, extremely measured and was we execute throughout the year we consistently raise that guidance during the year. To highlight that in 2018 we actually increased growth guidance and EBITDA guidance every quarter going into year end. I'll also focus on Q4 of my remarks most otherwise noted. Net income amounted to $640 million and diluted earnings per share of $0.75. As you recall, Q4 2017 had a significant net tax benefit of $2.2 billion or $2.50 per share related to tax reform. Excluding this benefit, net income would have grown by 21% year-over-year and diluted EPS by 23%. Adjusted EBITDA amounted to $3 billion up 10% and included leasing revenues of $168 million versus $160 million in the prior year. Note that adjusted EBITDA included a negative impact from the hurricane costs of $14 million and a positive impact from the new revenue recognition standard of $83 million. Excluding the combined impacts from hurricane costs, the new revenue standard and gains on the disposable of spectrum in 2017 adjusted EBITDA would have increased 12% year-over-year. The adjusted EBITDA performance is a reflection of strong cost management. Cost services as a percent of service revenues excluding the combined impact from the hurricanes in the new revenue standard decreased by 90 basis points year-over-year despite the rapid rollout of 600 MHz spectrum. SG&A as a percentage of service revenues excluding the combined impacts from the hurricane, the new revenue standard and Sprint merger related costs decreased by 70 basis points year-over-year despite the acceleration in growth. Free cash flow increased 7% year-over-year to $1.2 billion. This was driven by a 10% increase in net cash provided by operating activities compensating for a 29% increase in cash CapEx. Please note that the net cash outflow from securitizations amounted to $36 million in Q4 and an outflow of $179 million in 2018. Therefore, free cash flow did not benefit from any net proceeds from securitization. Despite these headwinds, full year 2018 free cash flow amounted to $3.6 billion, up 30% year-over-year. Branded postpaid phone ARPU amounted to $46.29 in Q4 up 0.3% sequentially as we signaled in our last earnings call and down 0.2% year-over-year. Full year 2018 ARPU was $46.40 down 1.2%. Excluding the impact of the new revenue standard, the year-over-year decrease would have been 1.1%. The year-over-year decrease was primarily due to the growing success of new customer segments and rate plans such as T-Mobile for Business, T-Mobile ONE Unlimited 55+, T-Mobile Military and T-Mobile Essentials. The impact of the ongoing growth in our Netflix offering decreased postpaid ARPU in full-year 2018 by $0.32. In addition the year-over-year reduction was also due to a reduction in certain nonrecurring charges. For full-year 2019 we expect branded postpaid phone ARPU to remain generally stable compared to full-year 2018. Even with the year-over-year ARPU decrease service revenues grew by 6% year-over-year due to strong customer growth. Even more impressive, growth in branded postpaid revenues accelerated to 8% in Q4 compared to 6.6% growth in Q3. Please note that starting in Q1 2019 we plan to discontinue Average Billings Per User or ABPU which is a metric that we developed to provide transparency during the transition from Classic to EIP rate plans but has lost relevance now that we are effectively all EIP. In terms of customer quality, our results from the fourth quarter were very strong. Total bad debt expense and losses from sale receivables were $118 million or 1.03% of total revenues compared to $147 million or 1.37% in the fourth quarter of 2017. Now let's come to our exciting 2019 guidance. We expect branded postpaid net customer additions to be between 2.6 million and 3.6 million. This guidance takes into account our long-term strategy to balance growth and profitability, a continuation of the lower switcher volume that we've seen in recent quarters, and our pursuit of growth adjacencies. We expect adjusted EBITDA to be in the range of $12.7 billion to $13.2 billion excluding the impact of the new lease standard. This guidance takes into account leasing revenue of $600 million to $700 million in 2019. It also takes into account our network expansion, in particular the 600 MHz and 5G rollouts, driving up cost of service by $200 million to $300 million year-over-year. When comparing this guidance to 2018, please consider that our 2018 adjusted EBITDA benefited from positive impacts of $398 million from the new revenue standard and a net $158 million from hurricane reimbursements. We expect a lower positive impact from the new revenue standard in 2019 about half of the 2018 benefit. Adjusting for these factors, namely hurricanes and the new revenue standard, our adjusted EBITDA guidance for 2019 implies a high single-digit growth rate. We believe there is significant operating leverage still to be realized despite the increased investments we're making in our network in 2019. Pre-close Sprint merger costs are expected to be $350 million to $500 million in 2019 depending on timing of a potential merger close. These costs will be excluded from adjusted EBITDA but will impact net income. Our effective tax rate is expected to be between 26% to 27% for the full year 2019. And we target cash CapEx of $5.4 billion to $5.7 billion excluding capitalized interest which is expected to amount to approximately $400 million in 2019. Similar to prior years we expect cash CapEx to be front end loaded with Q1 2019 in the range of $1.7 billion to $1.9 billion. This reflects the tremendous work and momentum that Neville and the team have in place given our rollout of 600 MHz and 5G capable radios. Finally, we continue to expect free cash flow to increase at a three-year CAGR of 46% to 48% from full-year 2016 to full-year 2019, unchanged from the prior range even with higher cash CapEx in 2019. Our free cash flow guidance does not assume any material net cash inflows from securitization going forward. During the same period we expect the underlying net cash provided by operating activities to increase at a CAGR of 17% to 21%, up from the prior range of 7% to 12%. This increase reflects a higher adjusted EBITDA compared to earlier plans and also results from a change in our securitization facilities that led to a geographical change with the proceeds related to beneficial interests and securitization transactions line in the cash flow statement, but they don't change the overall free cash flow. In this regard, there are likely more changes coming this year and we will adjust the guidance accordingly in future quarters. In addition, we expect the following impacts from the adoption of the new lease standard: a positive impact of $140 million to $180 million on net income, a negative impact of $40 million to $80 million on adjusted EBITDA, and significant increases in assets of $9.1 billion to $10 billion and liabilities of $7 billion to $7.5 billion with a corresponding positive equity adjustment of $2.1 billion to $2.5 billion. Again, please see the earnings release fact book and the Form 10-K for full details. Now let's get to your questions. As during last quarter's call, I would like to ask you to focus your questions on our operating results. Also we cannot answer any questions related to the current millimeter wave auctions due to the quiet period around these auctions. You can ask questions via phone, Twitter or Facebook. We'll start with a question on the phone. Operator, first question please?

Thank you. [Operator Instructions] We'll take our first question from John Hodulik with UBS. Please go ahead.

Great, miracle questions for Neville on 5G, Neville can you talk a little bit about the capabilities of the network right out of the gates with the 30 MHz and the 600 MHz spectrum that you're employing and talk about the availability of phones that can utilize the 600 MHz spectrum? When do you expect to get them to the year? And then lastly, maybe something on pricing side do you expect pricing for 5G to be similar to 4G or do you hope to get a premium for the faster service? Thanks.

All right, so why don’t the rest of you come back at 9 o'clock. Neville, go ahead, Neville.

I'll be brief. No, so let's – I'm going to pass the pricing over to you Mike when we get there, but super quick. So let's go over rest of it, so handsets John second half for the 600 look to be strong possibilities now with millimeter wave, you know handsets in first half, but no dates confirmed, but that's kind of the rough breakdown. We're excited about what we see coming in you know via multiband device in the second half of the year to meet the – obviously the footprint that we're working through. And then in terms of performance and capability super excited with what we see on the 600 MHz an hour and the software is firming up really nicely, performance is strong, speeds are going to be on top of LTE. You can see an aggressive competitive response against 5G NR victory lap on the fastest LTE. AT&T especially trying to figure out how to not be second or third in that race for the coming couple of years. We're going to be adding 600 MHz spectrum to the fight, both with LTE and with 5G NR and speeds and performance are going to continue to increase on this network into 2019 and materially more so in 2020 when we can reach our nationwide ambition on the 600 MHz 5G deployment.

So, on pricing, the short answer would be, we have big aspirations for incremental revenues and growth from 5G, but not through pricing, through our current smartphone plans. So the incremental revenues come from more and more users picking wireless technologies instead of other technologies for their conductivity. There is a big broadband business that we expect to build, there are big enterprise opportunities, there are IoT opportunities, there more devices per users, there are new capabilities being developed, all of which we can monetize with revenue growth. But we don't have plans for the smartphone plans that you see today to charge differently for 5G enablement versus 4G LTE.

Got it, thanks guys.

Yep.

Our next question will come from Michael Rollins with Citi. Please go ahead.

Hi thanks for taking the questions, two if I could. First, can you talk about the macro industry environment and what you think has driven the acceleration in category postpaid phone add and how sustainable that is? And then second, and maybe related to that, can you talk a bit about the competitive landscape in terms of what you're seeing from cable, what are you seeing from your competitors for bundling video and application into the rate plans and how do you expect that to evolve in the coming year? Thanks.

You want to start Mike?

Sure, postpaid versus prepaid the two subcategories, what we've seen and you've seen this over the last several quarters Mike is that there's been better growth in the postpaid side than on the prepaid side, and there are couple of big trends there. One is, these subcategories, the distinctions between them continue to fall away. Postpaid and prepaid offer very similar things and you know it really is a matter of do you want to pay your bill at the beginning of the month and maybe some simpler product lineups or do you want to pay the bill at the end of the month and have some increased options in terms of how you buy family plans financing et cetera. And as the distinctions fall away as a category we've seen more growth on the postpaid side as the subcategories have converged. Secondly the economy is very strong and as the economy continues to be strong more people have been buying on the postpaid side and so that piece certainly would flow with the cycles. So overall it's been I think a very good trend for the industry. In respect to T-Mobile we have a very, very strong prepaid position, and know if the category dynamics change we're well positioned either way.

And I think, let's make sure that we don't jump over some of the pertinent items that are part of kind of what's taking place in the industry. And it very, for me it's exciting to see that in whatever the competitive environment is, including now that we've added cable players into the mix, that T-Mobile continues to perform at rates that would be described by for example, the postpaid porting ratios for this quarter were 1.91 over to with AT&T up against everybody, greater than 50% of the postpaid additions across everybody, including the cable players. And just for a matter of reference, so 1.91 is one of those, that's a very strong postpaid porting ratio and frankly it is the same or better so this quarter. So it's – the machine is moving very well. It's also important to note that the cable players are aggressively coming in to the wireless space, but so far aggressively means, as you would probably expect players of this size, that they are spending massive amounts of money would negative cash flow and negative EBITDA to attain small amounts of customers. I think charter had about $304 million negative free cash flow for just over 100,000 postpaid net. So it's a very clearly it's disruptive in the industry, but it's really something that is probably difficult to look forward and see how that they will do it. I also am a little puzzled as to how with such an important item that I believe Comcast has decided now to not be transparent and put their wireless results inside of cable. So these are interesting aspects. I'm very, very pleased with what took place on the prepaid side, 135,000 prepaid nets in an industry that before we see TracFone shrunk. So it continues to show that we are strong and aggressive on both sides and these results this quarter really are a great statement at how well the T-Mobile machine and brand are moving along.

And Mike, the last part of your question was about cabling convergence. Yes, we think these offers that give customers options to look across wireless and media are popular and that's one of the reasons why we led the way with our un-carrier move centered around Netflix. We've partnered with the most popular brand in the space and it's been a big part of what customers like about T-Mobile ONE and they rely on us to bring them not only unlimited streaming which we pioneered, but great media choices as well. So we have a nice start in that space. Relative to what AT&T is bundling in and relative to old-school cable that the cable guys are bundling in. So it's an interesting space, it's changing rapidly and we feel well positioned within it.

Thanks.

We'll take our next question from Philip Cusick with JPMorgan. Please go ahead.

Hey guys, I guess first to start Mike with what you just mentioned. On the Layer3 strategy I think it has been great to partner with Netflix, that seems to be working really well, does it still makes sense to create your own video bundle?

Oh it does, yes. If you think about our TV strategy there's two pieces to it. The first piece we've been talking to you about the home TV strategy, that's the one we were expecting to launch late in 2018 and that we now expect to launch in the first half of 2019. As I mentioned to you on the last call, we're not date-driven when it comes to the home part of the strategy, we're quality driven. We did launch in four cities a predecessor product under the Layer3 TV brand. We're getting great learnings from customers, great feedback about features they'd like to see and we decided to develop those features and some additional quality improvements before rebranding and rolling out a home product. Principally because our business aspirations in that place are highly tied to something that's still in development anyways, which is our home broadband strategy. So those two can operate independently of each other, but they really operate well in concert in our future plans and particularly in the context of the New T-Mobile where we have very ambitious home broadband plans. So I'm very excited about what's happening there. We have some great things in the works and I expect to be able to bring redefined and rebranded product to many, many more places across the country in the first half of this year. What you're asking about though in addition is a mobile strategy and we believe there's a space for us here. Customers, you know have incredible array of optionality today through the massive expansion of OTT services that are available. It's subscription palooza out there. Every single media brand is, either has or is developing an OTT solution and most of these companies don't have a way to bring these products to market. They're learning about that. They don't have distributed networks like us. They don't have access to the phones like we have. And we think we can play a role for our customers as I've been saying in the past at bringing these worlds of media and the rest of your digital and social and mobile life together. Helping you choose the subscriptions that makes sense, building for those things, search and discovery of content. We think there's a big role for our brand to play in helping you. And as I said in the past, we actually, and to the premise of your question Phil, we don't have plans to develop an undifferentiated skinny bundle out there. There are plenty of those, but we think there's a more nuanced role for us to play in helping you get access to the great media brands out there that you love, and to be able to put together your own media subscription in smaller pieces $5, $6 $7, $8 at a time, it's an exciting future for us. So there's two big pieces to it and most of the fun starts this year in 2019.

Good luck with that. Thanks.

Okay, thanks.

We’ll go next to Simon Flannery with Morgan Stanley. Please go ahead.

Great, thank you very much. On the subscriber guidance for 2019, can you just talk about where you see the biggest opportunities amongst the various segments 55 and over Military geographic expansion, et cetera, how far along those opportunities are you in terms of penetrating them and is there any big change in the contribution in '18 versus '19? And then Neville, there is some disclosure around your small cell build out and systems, perhaps you'd just update us on where you are today on the network build out from that perspective and what we should be looking for in '19? Thanks.

Let me start with the segments, it's early days is the short answer and we're very excited about what we're seeing in our day-to-day flow. But when it comes to our market share in these underpenetrated segments, they're underpenetrated and so that's really exciting. We continue to have a significantly lower share in suburban prime families. We continue to have a significantly lower share in Military and over 55 and particularly in Business. Despite our flow share which is exciting, day in, day out we're winning more than our fair share and that means we have a growth opportunity. So, and by the way, there are more of these segments out there and I think we've demonstrated that we can simultaneously execute on our core while expanding our brand to more and more audiences. And you're seeing that in the – not just the activations that we're able to deliver right now, but in the outstanding churn performance. Some of these customers that we're winning are customers who have been with their prior carrier for years and years. So the network improvements are contributing to churn, but so is the makeup of the customers that we've been acquiring over the last year, more prime, more stable customers that were at their last carrier for many years and have made the first switching decision in a long time to switch from someone else to T-Mobile.

And Simon, let me pick up on the small cell piece, so just over 21,000 small cells in play today. We plan on continuing our march on small cells another 20,000 or so plan to come off as we exit '19 and into '20. And we continue to densify this network to prepare for obviously a tremendous capacity and performance future. Biggest focus right now is, as we've reference multiple times here is the 600 MHz build, that's going to be the biggest and largest and most transformative piece as we move through '19 and into '20. I mean thousands upon thousands of new sites with 600 MHz capability coming on air, but we do not take our eye off the ball at all on capacity and performance. We're at the best capacity performance in our company's history right now, lowest congestion figures we've ever seen. We love to be that way. The proxy for that in the marketplace is our fastest speed performance. And as I mentioned earlier, we continue to win on that front and look to maintain that lead. On the small cell piece, we are starting to see and introduce license assisted access, so LTE in the 5 gig space we're seeing very positive results and returns from those investments and so a lot of opportunity to grow capacity in the urban calls. We're not taking our eye off that ball, but big, big most major improvements coming on the 600 MHz side this year.

Great, Thank you.

Our next question will come from Brett Feldman with Goldman Sachs. Please go ahead.

Thanks. Braxton, during your comments you talked about how there's still a lot of opportunities for the company to achieve more operating leverage and I also believe you spent some time talking about SG&A because actually last year your SG&A as a percentage of revenue went up just a little bit as you put into the release. So all of this EBITDA growth you've been achieving has been happening despite the fact you really haven't achieved any operating leverage to that cost item. What do you have embedded in your assumptions for 2019 in terms of SG&A and really what's going to have to happen to get to the point where maybe as a percentage of revenue that cost item starts to decline more than we've seen in the past? Thanks.

Sure, I think that, let back to the item of two pieces. I mean we have the back office piece of SG&A where we're actually seeing some very nice scaling. But when you look at the selling part of the equation, please keep in mind that we've had a significant acceleration of growth year-over-year and the reality of our model is it's an acquisition based model, a cost to grow and a cost to grow more. And that acceleration of growth is ultimately through the conversion of the revenue, EBITDA and cash flow the driver of value. And if you look at a scenario where our growth was actually lower and if you really study our guidance on subscribers, look at where we guided last year, look where we ended up, and look at the significant increase in the range that we provided this year over the initial guidance last year, it's very, very, very, exciting. If our growth was to moderate, which is not what we're executing towards, Mike talked about this tremendous multiple year growth potential in many of our growth adjacencies, our segments, before we get to really exciting things that 5G is going to bring to the table, that acceleration of growth plays into this factor. If the growth actually went down we would have a significant expansion of our EBITDA margins, but that's really not what we're executing towards. I hope that makes sense, but on a very macro level that's really what the driver is.

So, just in terms of this year's guidance, is it fair to say that you're probably assuming SG&A continues to kind of grow in line with revenue because your growth strategy is staying that way or is there some other nuance now when you think about it, you gave us some color on costs of service, I'm just trying to dig into other line items a little more.

Yes, they'll be a little bit of scale, but obviously we have significant growth aspirations for the next year, so you've got to take that into account.

All right, thank you.

You’re welcome.

Operator, before we go to the next question I want to be cognizant of how many questions are coming in, in the various forms and somebody that's always been very patient and deliberate in posting questions via Twitter as Bill Ho and Mike maybe you and Braxton can talk about this one, but Bill's got a question along with a chart and since his bars were so nicely put in magenta, I think it's something that we should answer. 4Q '18, can you discuss postpaid 4Q upgrade trending over the years now that this quarter is at an all time low, validate that subject keeping handsets longer and low upgrade promos, outlook to get base prepaid and postpaid on 600 capable devices and for 5G coverage '20 and '21, so it's kind of a upgrade rate story?

Yes, I can start on it. Bill, you're right, I mean the upgrade rate was 6% this quarter and that was marginally lower than, I think it was 7% this quarter last year. And what we're seeing is an ongoing category trend. Smartphones are getting more and more expensive. Some of the phones are well over a $1000 now and they have capabilities that is still relevant to consumers a couple of years out. And so between the costs rising and the capabilities being able to do what they want to do on a smartphone, they're just keeping them longer and that's not a trend we see changing anytime soon. It's not a bad trend for our business, although I will say that when you're switching phones it's a great moment to switch carriers and so we always take advantage of these big phone moments to remind people they're with the wrong carrier and it's time for them to switch. So and despite that slowdown you've seen we've been able to overcome it by having an acceleration to the point of the last question in our growth rates. So we've been able to manage through it very nicely in a period where there's lower churn partly driven by slower upgrade rates in the category and yet we're outgrowing our past and that's something that we feel very good about. By the way this last quarter was a great quarter of phone launches. We feel very pleased with how the new iPhones performed on our network and remember these are all 600 MHz compatible phones, so these are driving increases in customer satisfaction, given the rollout that Neville and team have done in 42 states across 2,700 cities and towns on 600 MHz. So we're delighted with what's happening with phones, but it's a trend that we don't see really changing any time soon unless what we see from the OEMs begins to change.

And I'm and I'm not sure whether there will be a large hoard of people running out now to get phones that will show 5GF or fake on them. And I have two opinions on that. One is please tell me not that many people are fooled by the fact that this is total bullshit and what it is of course is something that it's 4G LTE Advanced. I mean it's carrier aggregation 4 x 4 MIMO, it's 256-QAM. It's things that Neville did so long ago he has to go back and remember what they are. So, but if people really want to have a phone that flashes that on, we are your team, I mean we can we can get to that. In fact I will get you a little sticky thing and put it right on your phone right now. So let's see how it plays out, but I don't think it's going to be a major upgrade trend, but if it turns you on we're ready for you, 5GE all the way. All right let's take the next one on the line.

And we’ll move next to Jonathan Chaplin with New Street Research. Please go ahead.

Thanks. Two quick ones if I may, so with your churn now lower than AT&Ts you clearly got a product from everybody's perspective that's at least as good as AT&T and Verizon's. But there's a huge gap in your pricing and the gap is widening as they take price up and you guys give more and more value to your customers. If the deal with Sprint didn't go through, wouldn't there be an opportunity for you to take up price from where it is now without really giving up anything on subscriber growth? And then the second question is, just on SOGA with the footprint expansion and with you attacking new attacking new verticals, I would have expected SOGA to start inching up particularly with your comments around the investment in SG&A that you made in response to an earlier question and it's actually been pretty stable. Why aren't we seeing your share of gross adds in the industry inch up as you're attacking markets? Thanks.

You want to start?

First of all, there's a lot of different measures on SOGA. Our measures show that it is growing. So, you know we look at variety of different data sets including data that looks well beyond porting data which is the underlying source for a lot of SOGA. We look at switching data which can use digital fingerprinting to figure out what switching looks like in the industry from a variety of vendors and that data shows us that SOGA is on the rise at T-Mobile. And then to your point churn is at an all time low and to think that three or four years ago that we would surpass AT&T or Verizon in overall churn given their very established incumbent advantages of long term penetration of older customers who churn less, prime customers who churn less, enterprise customers who churn less and yet despite all those incumbent long term advantages our churn was lower than A&T's for the first time ever this quarter. And we continue to be bullish about the prospects for churn for the reasons I've described, so that's terrific. You asked about pricing. Look we have an established success model on pricing and we would be loathe to change it. Our brand is based on it. Our success model behind it is proven and we're generating incredible development of shareholder value executing that strategy with all time record cash flows for example and very ambitious guidance financially for the year and beyond. So it's a strategy that works for us and it's a strategy of growing revenues by taking the other guy's customers, not a strategy of growing revenues by trying to be a price leader and that's something that our brand relies on heavily. Now you're asking about differences in standalone versus New T-Mobile. One of the differences is the capacity that New T-Mobile will have relative to standalone and it's important to understand it. The core tenet of New T-Mobile is that by bringing these companies together, you get something very different from the T-Mobile you know today plus the Sprint you know today, very different. The combination has a multiplicative effect on the total available network capacity and that's very exciting because pricing in the industry is a function of your costs and it's a function of your capacity. And our costs in New T-Mobile are going to go down dramatically when it comes to what it costs to produce a gigabyte of data and that's going to allow us to continue executing this strategy of being a disruptor, a low price provider, that's finally able to do something that the premise of your question addresses, which is break down this traditional tradeoff that customers have always been forced to make, which is do you want a good deal or do you want the best network? Which one do you want? Choose one, and the New T-Mobile will be positioned uniquely to give you both.

You know, Jonathan, let me add you've talked about the potential to monetize. When we tumble the numbers and you'll remember our focus is 100% on value creation and cash generation of this business, that we create much more terminal value on executing in a generally stable which we just reaffirmed today for '19, ARPU environment because we still lack the scale on a standalone business. So the unlock and the value creation versus a short term game of monetizing and reducing that organic scale, it makes all the sense in the world to play it and to execute like we're playing. And I think Mike very, very clearly made the argument about that brand and who we are in the end carrier. John?

I got one follow on, it is just, I think I'm awake now and Jonathan has always been one of my favorites. He's very, very thoughtful, he is not always right but he's very clear in his analysis and my question for Jonathan when I see him will be, since you are part of New Street are you forced to use as your input to regulatory process what comes out of the other side of your firm? Because I've never seen anything more comical than watching an environment with a complete lack of any indication as to what's happening, attempt to writer things every day. The sun is up, oh my God, that must be bad for the deal, it must be good for the deal. They clarified a pricing commitment, okay it must be going down. It is hilarious to watch. It's kind of shameful and I only hope that a New Street for example at the end of the year everybody should have to go back and kind of check against their predictions and then the money should flow to those of you that were rooted somewhat in reality. So Jonathan, if I can help I can tell you that all that noise is coming out of the other side is not the right smoke coming out of the chimney and you should get all the bonuses. And so with that I actually just say, I apologize to watching everybody have to struggle to look for signs of what has been so far I want to reiterate, an extremely deep, ongoing, well done process with the Department of Justice and the FCC, tens of millions of pages of documentation and modeling discussion that is going very well and a game that is pretty clearly if not in the bottom of the ninth inning it's in the late innings. And most of what you see going on are very good indications of a dialogue that's moving extremely well and I look forward to a time when the full narrative can be public and Jonathan then you can have a real input to go by on the regulatory outlook of the New T-Mobile. Okay, let's take the next question.

We'll go next to Craig Moffett with MoffettNathanson. Please go ahead.

Hi, two questions. First an operating question. Can you just maybe Mike update us a little bit on the mix story? You've talked for a long time about how your 600 expansion would operate through phases of improving the quality of the urban product starting to penetrate suburban outer rings and then eventually open new footprints in more rural areas. I wonder if you could just update us on how that mix is shifting over time in your gross adds? And then I guess, I'll come to the defense of the other side of New Street for a second. Having opened the topic John, can you just comment on was there in fact any precipitant to that led you to write the letter or to make the commitment about the price fees?

You want to do the second part first or?

Yes, so again, as I said from the very first day back in April going into the first week of May, I've been down here in Washington with the very same story that the 5G Network that's going to be built with the $40 billion worth of investment and the breadth and the depth is going to be something that the country needs and has yet to see, it's going to be super charging the uncarrier, capacity will go up precipitously and prices will go down and jobs will increase. And that's been a dialogue that has gone from sound bite to tremendous modeling and conversation and depositions and hearings. And every now and then in the process, it's seen as a good time to take a piece of the consistency of what we've said and document it for prosperity. Now I would clearly tell you that in saying that in year 1, 2 and 3 prices will not go up, there's no loophole. We were not saying, people will try to find what's that loophole. It's no loophole. By the way prices going down is the same as not going up, they are in the same boat. 5G creating a unit cost differential that we pass on and usage going up significantly by customers with customers paying less in the absolute, that's exactly what we're talking about. So I can't speak to every piece of the process that's going on with every state and every aspect of the government, but in some of those conversations things are better documented, things are better announced and sometimes you just say okay. If there is a piece of this that you want clarification on, I'm your man. Raise that right hand and I'll tell you exactly what it is. And that's what this is and it's good news. What bad conversation could be going on, when you're clarifying the statement that you made that this is good for the country, it's good for the consumer, it's good for competition. Jobs are going up, prices are going down, supply is going to increase and the nation's competitiveness in 5G is going to go up. So that's what it is and anybody who can glance in and try to find a negative of that better go find some happy pills, because it's a sad view that people are making their life trying to look and find ways to be an expert in a process that they can't see. Sorry but that's, I don’t know if that's helpful. It was helpful for me.

Yes, I thought the question was pretty straightforward about the day-to-day operations and look the bottom line is, you know I think we shared some of these numbers before. We moved our geographic footprint of our distribution from 230 million POPs when we began the expansion to about 265 million POPs directly addressed by our distribution and that's helping to support our growth. And as I said, and by the way it's a substantial portion of our overall nets now that are coming from the combination of our geographic expansion and our segment expansion. Segment expansion includes over 55, it includes Military, it includes suburban prime consumers, it includes Business where we had an all time record quarter in Q4. So when you add up the segment expansion and the geographic expansion, it's a substantial portion of our total nets. And I think it demonstrates that this management team is constantly on the look for, what do we need to be focused on in order to keep this growth trend growing one and two years from now. And we've put the investments in the ground ahead of time to get there. And we're starting to see now the benefits of all those things that we told you would deliver benefits. And it's one of the reasons why our growth is not only not slowing down as many predicted it would do, but is actually accelerating as you saw in the results for the full year '18 and for Q4.

Could I push you to try to normalize those kind of numbers in terms of market share, like what do you think your market share is in urban markets versus suburban versus rural?

Only that as I was saying earlier in the call it's very underpenetrated. So and I think I've shared before that we believe our market share in Business for example with large enterprises is sub 5% and overall business is sub 10% and that means 90% of the customers inclusive of all categories and business are with the other guys. Suburban prime over 55, rural customers these are all places where we're significantly underpenetrated. Prime customers, we remain underpenetrated even though we are seeing right now flow share that's fantastic on prime suburban families. So lots of upside still to go on these segments where traditionally our network didn't used to address their needs, years ago. Now that the network is there and is better than the competition in many respects for most people, we're starting to see these kinds of customers come in, in historic numbers and they're starting to fill into the base. But we have a long way to go when it comes to underlying market shares.

That's helpful. Thank you.

Operator, this is the part in most companies earnings call where they see that it's Walt Piecyk and they eliminate him from the call stream, but we are not that company. So let's take the next question.

Perfect. We’ll go to Walt Piecyk with BTIG. Please go ahead.

Actually John, it's really only Sprint that remains is the only company that won't take my question on their calls, everyone else has, including [indiscernible] by the way. Can you – and you talked about Layer3 a little bit, and I think Mike mentioned a home broadband strategy. Is the home broadband strategy part of the first half of 2019 target as well or is that just kind of, I mean is it integrated in terms of the payTV strategy, just a little color on that? And then I have another technical question for Neville afterwards.

Sure. In 2019 we are going to begin piloting home broadband offers and they're based on 4G LTE for some of this year, later we'll move to 5G and it's a pilot. So you're going to see us doing activity and it's for a reason. We expect in New T-Mobile for this to be a substantial part of our growth story. As we've talked to you about in the New T-Mobile plans, we see the opportunity for millions of households. We intend to market home broadband service in 52% of U.S. zip codes. We see a major opportunity to deliver a median speed across the country of 450 megabits per second which of course by definition means half the people are getting faster speeds than that. And to really bring competition to a category that is the definition of uncompetitive. 48% of American households have no choice when it comes to their home broadband and that is crazy. If you look at what our competitors are doing, they're rolling out millimeter wave to some parts of some towns to compete for those households. We see a much wider opportunity for that. And we can be very disruptive in the broadband space as the New T-Mobile because the costs of our network are paid for by the mobile business. We have to build a network with the capacity that we're planning in order to be the viable growing competitor in mobile that we intend to be. Having done that, there become places all over this country where you have the capacity to serve millions of home broadband customers without the extra burden of significant extra capital. What that means is in-home broadband we can be very disruptive, not just on reaching some people who never had a great broadband choice but on the price as well and still have a very profitable business. Now all that stuff most of our aspirations for that are in the context of New T-Mobile because it's capacity dependent and home broadband is very, very consumptive. Despite that, we're going to start testing it this year and in the first half of this year, so that we can get the learnings that are required to go to market and win. The last part of your question was integration between that offer and the TV, the home TV offer that is being relaunched and rebranded. The integration will come but in the early stages of those two initiatives we'll be testing them separately. Don't get confused by that because the ultimate strategy is for these to be home TV and home broadband to be a blended go-to-market approach.

Understood, thanks. And then Neville, can you just talk a little bit about the 600? I mean you have 30 MHz, in the press release you talked about - on page 7 you talked about 300 million POPs covered but you kind of threw 700 in there. So it's unclear what's 6 and what's 7, but more importantly, the 30 MHz is it enough to deliver, what you would consider or what most would consider 5G speeds to make a differential and when you flip that to 5G and R, does that take away the coverage benefits that an LTE customer would get who just bought a 600 MHz phone on their iPhone.

So just to be clear Walt, great question, but I mean we're rolling out the 600 MHz in LTE right, so we're putting down a 10 MHz layer there and that's you saw the 301 million POPs you know covered on low band, so that's a combination of 700 and 60000. We didn’t have that 700 footprint everywhere across the U.S. So customers are starting to see more low band coverage and all the benefits that brings in many new places. So the 600 LTE rollout has been going incredibly strong. We provided data around that. We have a national average of 30 MHz, so in some markets we have 40 and in a few places we have 50 MHz of 600 MHz and less in some than the 30. We're retaining the balance of that spectrum for the 5G rollout. We talked about the equipment that we're rolling out now is 5G capable, so as we get our software matured and ready for prime time, we will light up 5G services on those same radios that we've been deploying and are deploying across the country. So the 5G story is coming on super strong as we move through '19. And we'll be in a position to launch those services as we go into the second half and as I mentioned earlier on the devices come on board. Then in terms of speed I think it's a fascinating discussion in the U.S. right on 5G. And I'm very confident that we're going to continue to drive our speeds materially north. We're bringing a lot of spectrum into the 5G space and we, you know we're having all of that benefit of 5G spectrum efficiency and it's additional capabilities and I can compound that's been and performance with LTE. And so, I know as we move into the latter half of this year, our customers are going to see much faster speeds than they do today if they have a 5G capable handset compared to just being on LTE. Nobody loses on LTE Walt, right? But the 5G customers that adopt on those handsets are going to see faster speeds. And then I look at what's going to happen with our good old buddies in T and Verizon. And it's tough to imagine what they are doing this year. I mean AT& T if I can just double down on some of John's comments earlier on, on the 5G [ph] or 5GE whatever they're calling it, AT&T is desperate right now. We have a better network and so they fall in behind fascinating as they talked about this new LTE Advanced 5GE thing, we've been doing it for years. They're saying they're going to reach 200 million POPs by some point in time midyear '19. That's so far in my rearview mirror, I can't remember. So they are out there trying to tell people they've got something which is better than what they've really got. I love the fact they are going to now expand and show to people the limitations of their LTE network and their LTE Advanced network. So and in between what are they doing? Their little millimeter wave launch in a few cities, talking about speeds and performance, what speeds and performance, nothing. And then of course the Verizon story and we call it 5G WTF, going nowhere, some launches in a few cities last year, nothing happening, no mid band or even low band strategy emerging from Verizon on 5G. Tough to see what - anything that's going to happen from those guys in '19. AT&T starting to talk behind our 5G strategy saying they'll do low band now, multiband et cetera. So everybody kind of lining behind our strategy in the U.S., but they're all late and we're going to be the first guys putting down meaningful footprint with enhanced speeds in the 5G space and we won't be lying about what's happening on a customer's phone when we do it.

Well, so just to be clear, just a quick follow. If you dedicate something to 5G NR it can't switch dynamic to LTE, so if you're competitors have spectrum that they've deployed on LTE, that they say is 5G upgradable, it's either one of the others. You'd really need this clean block of spectrum to have a dedicated 5G NR. It can't be switching back and forth in your case 10 to LTE and 20 to 5G NR. Do I have that right?

That's right. Within low band that's right. Obviously, well the industry is working really hard on you know dynamic spectrum sharing right? You've probably heard the stone being bounced about. And the ability to actually move technologies across spectrum bands in a way that we haven’t been able to do as an industry that's not ready for prime time by any means. So your statement is correct as we move into 2020 and beyond.

Understood, thank you.

We'll take our next question from Ric Prentiss with Raymond James. Please go ahead.

Thanks for taking the question guys. It seems like overarching message in the call has been, get spectrum, build network, open stores and make sales. As we look at the... So as you look at your clearing of the 600 MHz I think you talked about doubling from like 135 million POPs to 207 million POPs. The CapEx front end loaded in '19 to Walt's question and Craig's question the footprint that you're marking to goes from 230 to 265. When should we expect the next wave of store openings and is it built into your '19 budget, is it in the '20 budget? But it seems like, yes there's usually another 30 plus million POPs of market too that could continue the footprint expansion. So just wondering what's the timeline, is it baked into guidance yet?

Just and will pass it to you Mike. But you had a great list of things people take as fundamentals that for granted, and one that wasn't in there that I want to point out, in addition to build a network, incredible network, one of the biggest variables that's improved our churn to now being better than AT&Ts is our customer care. What we've done with team of experts and what we're getting for feedback and accolades for not only the happiness of the employees, but the most satisfied nature of the customers when you combined both what's happening with network and what I think would be one of the harder things for anybody to duplicate is what's happening with care. And on top of that there's nothing that beats giving everybody a Taco every week. I think that is, it may sound simple, but Taco every week and a lift ride in the first week to go get it, now that's pure magic. So, we did burst all the records on T-Mobile Tuesdays this week.

You're right, there's a real opportunity for retail expansion that remains. In fact one of the learnings from the last expansion, not surprisingly is that the best performing new stores were the ones in Greenfield markets and so there are more Greenfield markets to go as your question suggested. I think for us the most prudent way to pursue that is to be thoughtful about the likelihood of New T-Mobile being here by the middle of the year. And so, as you've probably heard us talk about in our New T-Mobile plans, we plan to create one rationalized retail fleet across both the former companies and we plan to expand from there. We expect 600 or so additional stores in the New T-Mobile mostly in the rural and Greenfield markets, smaller towns et cetera, as our initial foray. But there may be opportunity even beyond that. So, but what we've got right now is working really well. Our new stores are still coming up the curve. We're swallowing that growth, executing really well and we're being thoughtful about getting this merger completed and then further retail expansion in that context. Should we remain standalone? Of course there's more opportunity and you know the data backs it up as your question suggests.

The other aspect, and it sure seems like digital is becoming more important as far as channels. Can you talk a little about what you're doing as far as digital sales channels and digital customer care?

Absolutely. First of all, we've just won exciting recognition for our application with JD Power recognition, we have the best app. Our customers are using it at historic rates. It's contributing to some of the cost improvements that we've seen. It's such a different and refreshing experience versus anything we were delivering two and three years ago. So if you haven't used it lately I can encourage you to check it out and it will remind you to get your Taco at the T-Mobile Tuesday’s app as well. Digital is a really important strategy for us and we're pursuing it a little differently than I've heard some of our competitors are pursuing it. Yes, we're interested in pure digital acquisition and we've done some amazing things on that front including being one of the only ones with a great all digital e-SIM activation process, taking advantage of new e-SIM capabilities. We have the highest ranked e-commerce platform in the category that we've quietly built and executed. We've seen growth in all digital which remains in the single digits by the way, but significant growth in all digital. But I think and we think the biggest opportunity near term in digital is to make the 90% more effective, meaning digitally accelerated retail. And most of our investments are in that arena making the retail experience better. What we've learned and all carriers probably have learned is that nearly everyone goes to the web or mobile platforms to research the category before showing up at retail. And so, the question really is, for digital is how do you use that existing customer behavior to create a great end-to-end experience that begins in digital and ends in a fantastic retail experience that's better for customers and lower cost for us. We've made some great strides in that arena and you'll see most of our dollars and most of our development behind the digitally accelerated retail concept.

Thanks Mike.

Yep.

We'll move next to Amy Yong with Macquarie. Please go ahead.

Thanks and good morning. Maybe if I could squeeze two in, can you talk a little bit more about service revenue which grew 6%, what are the puts and takes for 2019? And then maybe just a second one on the prepaid market, I think you elaborated or you mentioned that post is growing faster than prepaid, what are you seeing in terms of the market and competition and maybe if you could talk about the rebranding of mature by T-Mobile where are the results so far? Thanks.

Yes, when you look at the service revenue piece of the equation Amy, for years we've been no not only significantly outstripping the competition and growth, we continue to do that when you look at the fourth quarter. I think we're the only carrier that really grew total service revenues, but the underlying basis there is the ramping of the subscriber base. And remember we have a generally stable ARPU which really translates to that additional scale is what's driving that top line service revenue growth. And that's really the way that I would look at it and that's definitely the assumption going into 2019.

And then on prepaid Amy, this was a fantastic quarter for us, big sequential gain and of course we took more than 100% of the net adds in the category because we believed that some category of prepaid at least until we see tracked on the results was not growing and yet we delivered 135,000 net additions. And you asked about Metro by T-Mobile and I would say it's a big piece of why we're performing so well. Tom Keys and the team have delivered a terrific strategy that we've been considering for a long time, which is whether or not there's a way to very carefully bring the MetroPCS community closer to the T-Mobile brand because what they want is a great network experience and they want the simplicity and value of Metro and the convenience of Metro which is in their own neighborhood. And what we have found is a combination that's really starting to win and you saw a nice sequential improvement in the quarter. We launched Metro by T-Mobile and we're starting to see more network attribution among Metro customers understanding that they're a part of something really different than other prepaid brands might be able to offer them, so we're delighted with what we're seeing with the strategy that the team delivered so far.

Just say, what's happened with MetroPCS since we acquired them is a great example of something to look back on to show the credibility of what we plan on doing with the New T-Mobile. We heard quite a few things about problems with network integration, and what's going to happen to employees, what's going happen to customers and we were able to have now twice as many customers at MetroPCS than when we acquired them, three times as many employees, twice as many stores, five times as many cities and they are clearly getting way more at lower prices than what they were getting including fully loaded offers that include Amazon Prime and Google One, et cetera. So it's been a great, great, story associated with what we planned to do wiassessed wwanted et cetera so it's been a great, great story associated with what we plan to do with the New T-Mobile, great example. I think we're going to take one last question operator.

Thank you. And we'll take our final question from Colby Synesael with Cowen and Company. Colby your line is open.

I think we took our last question.

Colby, your line is open.

Can you guys hear me?

Yes. We sure can Colby.

I think Colby just wanted to say how awesome the quarter was and…

Do you hear me?

Yes.

So for Netflix they just recently increased their pricing. I'm just curious what you talked to us about, what you expect the impact to be and then the timing on that? And then Neville, CBRS team at beginning quite the momentum, just curious what your thoughts are on that in terms of timing and how you guys plan to deploy that as well? Thanks.

On Netflix it's generally what we said when the price increase came out which is we are not passing through an increase to our customers right now and in fact we did not receive a pass through from Netflix yet, so it's a great partnership we're working together to make a plan and we've announced that we won't have much more to say about it until May 1, between now and then no change for our customers, no change to the benefit.

And then super quick Colby on CBRS, obviously were engaged with testing, trawling. No, confirmed date yet for the option off the license spectrum and still uncertainty if that’s going to happen and in '19 or whether that would slide into 2020. So continued interest from us, but obviously, the spectrum volume that's available there especially in a license is pretty limited. And there are some power issues and so on to work through in terms of its propagation capabilities but we continue to look at the spectrum and evaluate and will see where the option timeline comes out.

Great, thank you.

Okay, well thank you everyone for tuning in. We look forward to speaking to you again next quarter. Operator?

Ladies and gentlemen this concludes the T-Mobile US fourth quarter and full year 2018 earnings call. If you have any further questions, you may contact the investor relations or media department. Thank you for your participation. You may now disconnect and have a pleasant day.