Good afternoon. Welcome to the T-Mobile US First Quarter 2019 Earnings Call. Following opening remarks, the earnings call will be open for questions via the question line or via Twitter. [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 very much. Welcome to T-Mobile’s first quarter 2019 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 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 and our quarterly reports on Form 10-Q. 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 this, let me turn it over to John Legere.

Okay. Well done, Nils. Good afternoon, everyone. Welcome to T-Mobile’s first quarter 2019 earnings call and Twitter conference coming to you live from Bellevue, Washington. T-Mobile’s off to a fast start in 2019 and I could not be more excited about the state of our business and the opportunities ahead. We have a lot to cover today. So let’s start with our incredible results. The two carriers reported earlier this week and one of the big cable giants reported this morning. So most of the cards are on the table for Q1 and I have to say, I really like our hand. In a quarter where Verizon had 44,000 postpaid phone losses, and AT&T lost 55,000 postpaid phone customers for a total combined loss of 99,000. Comcast added 170,000, the low expectations I might add. And even with Charter and Sprint left to report. T-Mobile still took an estimated 88% of the industry’s postpaid phone growth. We also put up a customer growth number that accelerated year-over-year, extended our streak of more than 1 million total net per quarter to six years and delivered an all time record low postpaid phone churn results of 0.88%, by the way, that churn number is better than AT&T and within 4 basis points of Verizon. On top of that, we delivered our best ever Q1 financial results. So if I sound a little fired up about my team and about my business, it’s because I am. I’ve seen certain comments recently about our business. Can the momentum continue? Can they keep their eye on the ball and manage the business while planning for a massive merger? Can they take care of customers and deliver incredible results? My friends, the answer is yes. I’d also like to give a big shout out to our…

Thanks, John. And I’m so excited to be here for another amazing quarter at T-Mobile. Net income amounted to $908 million and diluted earnings per share at $1.06, up 35% and 36% year-over-year respectively. Net income benefited from higher operating income and lower interest expense. The effective tax rate amounted to 24.5%. The tax rate was lower in Q1 due to the higher excess tax benefits related to our equity compensation and lower state taxes. For 2019 as a whole, we continue to expect the effective tax rates in the range of 26% to 27%. Note that, net income and EPS were fully burdened by the Sprint merger related costs of $93 million and $0.11 per share after taxes respectively in the first quarter. These costs $113 million before taxes are excluded from adjusted EBITDA. Adjusted EBITDA amounted to a record $3.3 billion, up 11% and included leasing revenues of $161 million versus $171 million in the prior year. The adjusted EBITDA performance as a reflection of strong cost management. Cost of service as a percentage of service revenue decreased by 170 basis points year-over-year, despite the rapid rollout of 600 megahertz spectrum. The year-over-year decrease was primarily due to lower lease expense associated with adoption of the new lease standard and lower regulatory program costs, offsetting the higher costs from the network build. While costs of services decreased this quarter, we still expect significant increases in future quarters, due to the ramp up in our 600 megahertz build out. SG&A as a percentage of service revenues increased by 110 basis points year-over-year, excluding the Sprint merger related costs, SG&A decreased by 30 basis points year-over-year, despite the headwind from the amortization or commissions from the new revenue recognition standard relative to last year. Free cash flow decreased by 7%…

Thank you. [Operator Instructions] We’ll take our first question from Philip Cusick with JPMorgan.

Two simple ones, if I can. Mike, can you talk about where we’re in the process of expanding the 4G network and distribution in the areas where you don’t have 700 megahertz spectrum? And then Braxton, can you talk about just simply what was EBITDA growth on an apples – thus for ASC 606 and lease accounting? Thank you.

Phil, on the first one, I think we’ve reported in the past we’ve done a major distribution expansion, it is generally followed the expansion of the network. It’s fairly agnostic to low-band versus mid-band. What it looks at is whether or not in that marketable area. We have sufficient coverage and enough households to be able to get two wall indoor coverage. And if we have enough households in that area with very high quality coverage, then we launched distribution and that can be through low-band, mid-band or a combination thereof. And so the POP coverage close and then the distribution coverage close. We’ve now got distribution coverage to well north of 265 million people. And that’s a big milestone from when we started talking about this a couple of years ago and told you about geographic expansion. And that says two things, number one, the geographic expansion starting to work, because this is an initiative that we’ve been talking about for some time. We told you it takes 12 months to 18 months for those stores to become productive. We’re starting to see some of the results of that, which is terrific. And second, there is a lot of runway left. As we create more and more conditions where that’s the case, particularly in the context of the New T-Mobile where we can create a game changing experience in more rural areas, there’s lots of runway left in both scenarios.

Can you help of filling some of the impact there, Mike for the quarter, over the last few quarters?

Only to say it’s contributing. And that it takes 12 months to 18 months for those stores to start producing. And that our experience has been that’s a most productive expansion investments we’ve made have been in Greenfield areas, pretty intuitive, small towns, suburban fringe, those areas have out produced, the expansions, we did to add density in the urban cores. Our urban cores are our most productive areas by far, but of course there’s cannibalization effect as you add distribution density in those areas. And so from a future investment standpoint, you’ll probably see us focused more on suburban fringe and Greenfield markets.

Okay. Braxton?

Yes, Phil. I think one of the things that we really pride ourselves transparency and providing investors with all the tools to truly understand the underlying momentum of the business. The new lease standard is fairly de minimis to the overall results. And rev rec, certainly has several moving items with it, but not overly material. I would just point you to our Q and to our Factbook for quantification of those items.

Thank you.

Operator?

Thank you. We’ll take our next question from Michael Rollins of Citi.

Thanks. Two if I could. First, talk a little bit more about what you’re seeing on the ARPU front and the competitive environment for pricing more broadly. And second, can you give us an update on how you’re thinking about bundles within the category, especially in the context of your current Netflix promotion and what you’re starting to launch with Layer3? Thanks.

So couple things, one is overall, this was another quarter of pretty good competitive intensity. And everybody has different lens on it. I can tell you that in a quarter where we think we took 88% of all of the postpaid phone net adds and help to drive AT&T and Verizon both in the negative territory. It shows that whether it’s a – you define it as a more modestly competitive quarter or whether you define it as a more intensely competitive quarter. I would imagine it sure felt intense over there at those places. For us, it was just another quarter of delivering what you’ve come to expect us to deliver regardless of the condition. So I’m really pleased with that. And then Mike, you had a second question, it was about bundling. Listen, bundling, it depends on what you mean by bundling. If what you mean by bundling is that will give you a decent deal on the core product only if you buy a bunch of other stuff, you don’t really want. No, we’re not going to do bundling. That’s the game plan that AT&T pursues. You can only get a fair deal a lot of the time depending on how they post their promotions. On their core wireless product, when you take a bunch of prep on satellite TV that you don’t want. Now on the other hand, if you’re asking are we going to plunge ourselves into home broadband with a disruptive offer in the New T-Mobile absolutely we are. Are we going to augment that with TV offers that range from full line cable TV replacement, some more disruptive lower price offers? Absolutely, we’re going to do that. We’re going to offer those in concert with wireless and create value propositions that are attractive to consumers. Yes, that’s what the uncarrier does. So it all comes down to what do you mean by bundling.

Well, he was confused. He was referring to what AT&T does, which is bungling. Hey Mike, let me add a couple things on the ARPU. I think first and foremost, you’re seeing very clearly that we’re reiterating our guidance, relating to ARPU. And if you look back to last two years, we’ve been at the low end of that guidance obviously. And the underlying theory here with the uncarrier we have much more terminal value on lock by not trying to monetize the existing customer base, but by scaling this business, which we’ve done exceptionally well at over the last six years and ultimately that’s what’s creating value. The progress in service revenues and the significant increases in service revenues, you would not be that if you had a strategy of monetizing and raising ARPUs, you’re certainly going to have less volume. And the way that we translate that into profitability and then free cash flow, it’s a much more powerful way to build the business. And our strategy here has been the same strategy that we’ve been executing really through the whole life of T-Mobile. But it’s important to note that we’re bounding it. There’s always a balance between the growth and profitability. And that’s why I think the guidance that we just reiterated today on ARPU is so important.

Thank you.

Thank you. We’ll take our next question from John Hodulik of UBS.

Great, thanks. Maybe two questions. First, one of the growth initiative, the Home Internet, anything you tell us in terms of the details of the product in terms of whether or not it’s more of a sort of urban based or rural, pricing or caps or any other details you can provide. And then secondly, there’s been some recent filings from Sprint suggesting the company is going through be struggling more than they appear to, I would say to investors. Do those filings suggest or temper your enthusiasm for the deal? Or does it suggest that the company may go through a rougher patch in terms of the integration if you guys are able to close the deal? thanks.

Take the first half Mike.

Yes, the first one Home Internet. Think about it as a trial program. What we’re doing is preparing ourselves for the New T-Mobile. The New T-Mobile has big aspirations in this space 5G and that particular capabilities of this New T-Mobile network will allow us to go after 66% or 66 million more than half of all households in the United States. And eventually we – our plan as John mentioned is to win 9.5 million of those that’s a big deal. That’ll make us one of the biggest broadband providers in the country. So we have to get ready for it and get the learnings even in this 4G era under our belt. So that’s what’s going on. It's really exciting. This is even today in 4G LTE, a 50 megabit per second service. And what we’re doing is essentially allowing customers in a capacity of wire way. So where we think we have the capacity to support very high quality services for them. We’ll accept the applications. And it’s been a very exciting. When they sign on, they save a lot of money. And of course, there’s no need for an in-home visit, no need to wait around all day for a cable tech, et cetera. So it’s very exciting and we’re looking forward to a lot more to coming on that front.

Yes. I guess on the second question, I guess the only thing I could say, not specifically about any filings that Sprint has, but I can say in the one year since we announced the deal, and all of the work that we’d done, all the due diligence we’ve done, all of the integration planning that we’ve done. Our enthusiasm for the opportunity is greater than it’s ever been. Our belief in the size of the synergy pool and the power of the network when you put them together, the impact on 5G for the country, the positive nature on jobs, the expansion into rural and in-home broadband has gone up. So if you take all aspects of what we’ve learned and done in our diligence as well as our work with the FCC and the DOJ. One year later, we’re more enthusiastic and more excited about the coming together of these companies than we were one year ago.

Got it. Thanks, guys.

Thank you. We’ll take our next question from Simon Flannery of Morgan Stanley.

Great. Thank you very much. Neville, I had a blog post a couple of days ago talking about the importance of low, mid and high-band spectrum you’ve talked a lot about the mid-band importance. But can you expound a little bit more on the 600? I think you said you’d have some 5G devices later this year. On a kind of go-to-market basis, what can we expect to see in terms of being a competitive 5G offering with the sort of spectrum position you have there. And maybe John, you can just update us on supporting activity you’ve seen recently. Thank you.

And I would just reintroduce Neville Ray as the adult in the 5G room.

Hopefully, you enjoyed the blogs on. So a few words on the importance of 600 megahertz and just to try and enable folks to understand where we are. John provided a lot of stats on the 600 rollout. And I remind you again that, as we’re rolling out 600 megahertz, we’re using 5G capable radio. So obviously we’re taking new software on a regular basis, the 5G softwares coming in heavy and fast. But here we are today, we’ve got over 1 million square miles of 600 megahertz LTE rolled out for across I’m working in 44 states and Puerto Rico. And we have a 100 million covered POPs on 600 megahertz LTE. So we’ve said that in 2020, we’ll have a nationwide footprint on 5G. And as we look at our launch environment, when we get the terminals in the second half of 2019, we’re going to be lighting up an enormous footprint on 5G, an enormous footprint on 600 megahertz. And we have a lot of spectrum as you point out. We were incredibly successful in the auction, which seems like yesterday, that was two years ago. And we intend to put down a very large three, four lane highway across the U.S. with 600 megahertz. And I think it’s going to be in stark contrast to the pockets of 5G that are out there today and very, very limited from AT&T and Verizon. And Verizon maybe doing more cities, but it seems to be a handful of sites in very urban environments with very limited range. And we’re not sitting there just throwing rocks at millimeter wave. We believe in millimeter wave, but – and we will launch millimeter wave services ourselves. But I can tell you now the software is not mature. We continue to work with the same equipment and software as the Verizon guys have decided to launch and even have the goal to ask their customers to pay $10 bucks more a month to access wherever they could find it. I believe they pulled that back today. They’ve pulled back the $10 price like they were trying to force on people, but comparing contrast tens of millions of covered POPs with 5G to handfuls. That’s the excitement and scale of what we love to do with 5G. Not in 2020, but in 2019. And as soon as we can get those devices onto – and into our customer’s hands, we will.

I just editorialize, I’ve been doing this a long time, I’ve never seen a team move as fast to deploy spectrum as an excellent team that moved on this 600. Yes, we use to think that we are now across 3,500 cities and towns in 44 states and Puerto Rico, 1 million square miles of territory with 600 and all of that already 5G compatible. We talk about being the first one to be nationwide next year, a lot of times that’s defined as 200 million, maybe we’ll march past that. But here we are in April of 2019 already having accomplished that kind of a milestone. It’s amazing. So the second half of the question, I’ll just – brief on one of our agile the pieces of data that we pull at each quarter in belt, postpaid porting is a piece of data that’s just a small part of the way we look at our business. But a very positive one, it was about 1.89, call 1.9 for the quarter up 20 basis points year-over-year. So that should – and so that part of the question.

Great. Thank you.

Thank you. We’ll take our next question from Craig Moffett of MoffettNathanson.

Hi, thank you. Neville, if I could, I’m going to stay with the spectrum related questions for a minute. First in John’s comments when he was talking about the speeds that you could achieve with your 600 network, correct me if I’m wrong, but I think that was including the 2.5 gigahertz spectrum. Just based on the rollout of on the 600, what kind of speeds do you think you can deliver with your 5G network on your existing spectrum? And then in the event that the merger didn’t provide you with the 2.5 gigahertz spectrum, how do you think about satisfying the need for additional mid-band?

Yes. So a bunch of questions within the question that Craig, I mean clearly there’s nobody more excited in the room than me around what we can achieve with a combination of Sprint and T-Mobile in the New T-Mobile. And I talked the lengths are about what we can do with 600 megahertz and obviously, as we light up, think about just on a standalone basis, lighting up 30 megahertz nationwide on top of the assets that we’ve deployed today. So speeds are absolutely going to move from the 30, 35 net averages, they that exist in the network today, into the 60s and 70s peak speeds are going to move well north probably not quite doubling where we are today, but into the hundreds of megabits per second. That’s achievable, right. As you combine an aggregate, the 600 megahertz in with the mid-band spectrum that we have. So that’s a very interesting proposition. But it fails in comparison to what we can do with the New T-Mobile. And the rollout that we can achieve with 2.5 gigahertz and especially the amount of spectrum mid-band spectrum that we can push into 5G early, and address this need of mid-band 5G, which the world – the rest of the world is running with. Craig as you know, here in the U.S., we have this mid-band dilemma. We can solve that with the combination of T-Mobile and Sprint, and really move forward with a tremendous 5G experience with breadth and depth and all of the data and the fact points that John pointed out earlier in the messaging. So that’s the piece I’m focused on. Obviously on a standalone basis, it’s a different world. But then that’s us and AT&T and Verizon and everybody else trying to figure out how do we move to that next level of performance with 5G in a world where the mid-band spectrum that’s needed to really drive that is not coming from auctions or from other sources in any real timeframe that’s comfortable for anybody. But the combination of T-Mobile and Sprint creates that mid-band opportunity in a way that cannot be created in the U.S. marketplace over the coming years. That’s what’s so unique and exciting about the opportunity. And Craig, that’s where I spend my time. I’m thinking about that piece. I know we’ve got a very strong network. I’m adding a lot of 600 megahertz, a new spectrum to the asset that we have. So a lot of confidence there, but the excitement and the thing that we long for and look forward to is this combination of the Sprint.

All right. Very clear, thank you.

Thank you. We’ll take our next question from Jonathan Chaplin of New Street Research.

Hi guys, it’s Vivek Stalam on for Jonathan. Two if I could. First, how do you think about a potential deal structures where it’s really focused on the network side and maybe the separate retail assets continue to exist? And then on the standalone company, I mean, how low can churn go? And should we still think about you guys eventually reaching those old Verizon like 70 basis points churn numbers or is there some other benchmark you’re looking at?

I can start with the second one. We don’t guide on churn, but I can tell you in the context of the New T-Mobile, we have – there’s no reason to believe that ultimately when you have a superior network to Verizon, better customer service than Verizon and lower prices than Verizon, that we shouldn’t be able to ultimately achieve churn below Verizon. And this quarter, we were four bips away from them and below AT&T for the second quarter in a row. And that’s just where we are today as standalone T-Mobile. So we’re really excited about the prospects. We see an ongoing improving trend here as the network continues to be built out as well as we may continue to progress in underpenetrated segments, some of which churn at lower rates like older Americans, like large enterprises. And so there’s room left to go. And on your first part of your question, it’s hard to be clear. This deal as structured we believe is pro consumer and pro competition and as the regulators continue and finish their review process, that will be approved. So you’re referring to alternate universes are structures that I have no reason to think about at this point in time. I feel very good about the deal as its structured and as its being reviewed.

Got it, thanks.

Thank you. We’ll take our next question from Brett Feldman of Goldman Sachs.

Thanks for taking the question. You obviously had a pretty strong phone net add number in the quarter. I think what was interesting, not just that you cheated on cash flow churn, but obviously you didn’t need to have as high a level of gross adds in order to hit that. And I wonder if you could sort of talk through around that mean could you choose to be less aggressive in the market, because your churn had come down so much. And you said this is a great opportunity to grow, but to do it with more offering leverage or was the opportunity in the market just a little less attractive to you and it just sort of worked out that you still ended up having a great add number if you understand what I’m trying to get to.

Sure, Brett. Our strategy all along, Braxton said this for years I think, and so I’ll just repeating something he’s probably told you in the past, which is on every quarter since we’ve done this, we could have grown at a faster rate than we actually grew. What we always do through the quarter as we make real time game day calls as to what do we need to do to be able to deliver on the aspirations in our business plans. And we always keep growth and profitability and balanced, because we’ve been at this long enough that we believe that we need to be making financial progress at the same rate we’re making customer growth progress, so that our shareholders are benefiting from all this growth. And so that’s different than saying we were deliberate or thoughtful in advance and/or held back or something like that. It’s just saying day in, day out, we certainly have levers we could do that would grow faster, but we’re achieving our business plan, which is balanced, financial results and customer growth results.

I think we’ve said it many times, when you look at six years of adding more than a million customers all the time rooted in a brand that’s unparalleled right now. The brand, the people, the network, the customer care experience, the value proposition, it’s sort of like if you look at each quarter, we’re able to step up to the plate and it doesn’t matter if they throw a curve ball or slider or a fastball, we adjust and we not that ball out of the park. And I think we’re very proud of the various ways that the markets have been described by our competitors yet that are focused on our customers in our business consistently delivers with the right shareholder value. So we’re very proud of that.

Thank you.

Thank you. We’ll take the next question from Ric Prentiss of Raymond James.

Thanks, good afternoon, guys. I wanted to go back. John, you’ve mentioned the California Emerging Technology Fund had signed on with the deal. Can you talk to us a little bit about what they found interesting in the deal and what they wanted to see from you guys as far as what the deal might entail to help make California see success in it?

Is there any content you’re saying that, Mike.

Yes, we were – anybody can tell that we were able to reach agreement with them some weeks ago, and they’re looking at the public interest in the state around issues like, will you really built this network. Are we going to make investments in underserved communities in the state? What’s the picture look like on jobs in the state? So they’re trying to take a broad lens on public interest benefits and make sure that we put our money where our markets. And so we’re able to reach agreement about making investments in the state that benefit particularly less advantaged consumers in the state, and we also made firm commitments about what kinds of investments we would make in the network in order to accomplish the public good that this merger talks about, which is a broad and deep 5G network, it has more capacity and therefore serves California and better in drives prices down. So those are the general topics that we covered.

I think it’s been fascinating year and you’ve talked about California but the discussions with California very similar to the discussions that we’ve had with every constituent, including the Senate and the Congress, you enter an environment where the strongest proponents of the deal or those opposed to the deal are talking about the exact same issues. And they’re relative to – will you build the network out? What will the 5G network deliver for the country? What will happen with prices? What will happen with the offers that have on rural America? Will you really enter in home broadband? What will happen with jobs? And all of these are things that in our filings, in our business plans under oath and testimony, we have clearly stated benefits and in some cases, with the states, we’re working individually with them on the items that are very important for them. So the lot of constituents involved, but all of the questions and all of the concerns are easily answered by a transaction like this that has so much pro-competitive and pro-consumer output and something it’s just a matter of explaining that. And if need be, which we’re perfectly willing to do in many fashions commit to it.

I just have one dimension just underlying the statement on rural and that’s clearly been something of intense interest on how this deal can better serve the rural Californians and bring really great wireless service and through how broadband competition that’s been an area of in tensed our login. I think, we’re – as we’ve said, very excited about those opportunities and not just California, but across the nation.

I like the fun part, Neville, I would say what we have the opportunity to not just talk about the full integrated New T-Mobile, but what we have an opportunity to discuss pieces of it, to discuss with rural America specifically about them and their pieces, discuss with the state of California. This is truly the most exciting thing that they could hope for and so it’s not a matter of trying to hide anything, it’s such a compelling proposition for every component of this country and for the country in general, the compensations have all been not just good, they border on exciting.

Great. Thanks, guys.

Thank you. We’ll take our next question from Amy Yong of Macquarie.

Thanks. Maybe two questions if I could. First on service revenue, which grew nicely this quarter. How do we think about that trend going forward? I think, industry wide, it seems like that number is decelerating, throughout the year. And my second question is back on the bundle. Can you talk about TVision Home and your eventual plans for it? I think the price points that came outward a little bit high versus the comments that you just made. Thanks.

On the service revenue, Amy, again, it’s a testament to the fantastic momentum this business has from a gross standpoint. Any seasonal quarter, be it an intensely competitive quarter, be it a quarter were certain people aren’t quite as intense. We day in and day out deliver significant growth in service revenue, which is one of the few key foundational principles of the strategy that we’re driving. And that’s when the contacts of the ARPU guidance that we’ve given generally stable a plus or minus 1%. And that trend will absolutely continue in all expectations. And you also have to remember that when you’re looking at as a percentage increase, we’re not comping periods, where you had significant decreases. It’s an ever growing – ever increasing amount of service revenue that we continue to lead the industry in quarter-after-quarter for many, many years in revenue growth. That’ s one of the rural differentiated things about a T-Mobile. And with the strategies that are being deployed with the growth adjacencies, T-Mobile for business, we’re just hitting it on all cylinders. And when you – yes, that’s before we get to the promise of 5G and IoT and the amazing things that are going to come on that. So yes, our expectations are significant sustain long-term service revenue growth.

I was just intrigued by part of the question that was about industry decline in service revenue growth, when the industry outside of T-Mobile has been declining for three or four years. So they probably have one quarter of something positive, but there is no other player that has sustained revenue growth outside of T-Mobile. Was there a second?

Yes, you were asking about TVision. We’re really happy to get the journey started last month. And we are now in eight of the biggest cities across the country, San Francisco, Philadelphia, New York, LA, Chicago, Dallas, et cetera. With a full cable replacement product, it’s sort of where we’ve starting the journey. And that’s 275 channels of high def cable and 4K content and on demand content, personalized DVRs for each person in the family. Amazon, Alexa and Google Voice integration, social media integration, et cetera, et cetera, and it’s priced below what typical people at cable and satellite pay, when they’re beyond that first promotional year. They’re in year two of those multiyear contracts, where you sign up for something and it’s low at first and then you get slammed. And we come in with fair, rational pricing from day one, it saves the money right away versus year two and beyond in those crazy contracts. But it’s the beginning of the journey. And we have a lot more coming in this space, work in the integrated broadband space, because as I said, we’re going after broadband and big way and people need an integrated TV product in that space. So we’re moving down that path and you’ll see more working in concert with broadband. And then mobile and we think there’s a lot of room in mobile in the OTT space, fall through partnerships and through first party offers from us. And we’re very excited about that space. And as I said last time, we’ll have more to say about it later this year.

So those are the next question, operator. We have a board here, full of questions that are coming in Twitter. And I would just say two things about those. One, is that there is a question from Mike Dano, who said, John and Braxton, would you mind keeping the call today to now, they’ve got some tough schedule this afternoon. So I thought I’d hit that one right off the bat. Thank you for your depth of journalism there. And then I bring that up only because 80% of the rest of the questions are all from Walt Piecyk. So, unfortunately for us, he’s next in the queue, but he’s also dominating our boards. So I would say we take the next question operate and then we wipe this full board of Twitter questions off and move to the next. So operator, next question.

Thank you. We’ll take our next question from Walter Piecyk of BTIG.

John, I’m just trying to help everyone else with their questions so we don’t get another ForEx question on this call.

Do you want to add [indiscernible] stick with humor?

Just I want to go back to the gross add question, which is you can get churn lower and look, obviously service revenue growth accelerated, you’re trying to do this profitably. I’m sure, you can go lower as you pointed out. I think Mike pointed out, but I mean it’s questionable how much lower it can get. So at some point, you have to look at the gross adds right in part of this 600 investment in terms of the spectrum and the network. Again, we didn’t see the network expense this quarter, but I assume Braxton talks about this on the call about network expense going up. Shouldn’t we expect some type of return on those investments in the form of gross add growth. And if not, and we’re kind of diminishing marginal returns on churn, isn’t this going to impact your ability to do exactly what you did this quarter, which was accelerate your revenue growth. That’s the first question. The second one’s for Neville. Neville, you said in the comments you’re bullish about millimeter wave spectrum. I’m just curious if you can give us a little bit more color on that. What applications are you bullish? How far do you think this signal travels and when specifically do you think dynamic spectrum allocation can occur?

So TV is good, Walt. I think what you meant to say is $0.88 for churn is absolutely incredible. And pay huge dividends, but I’d also like to ask a question about gross adds, I’ll turn that to Mike. And secondly, you have to be careful because Neville simultaneously said he’s bullish on millimeter wave, but bullshit on millimeter wave as an overall 5G strategy. So as to clarify those two.

The essence of your questions, Walt, was where’s the return on all these investments. And you asked in the context of gross adds, I’d answered in the context of EBITDA, cash flow and profitability. This is another quarter of just blockbuster results on the EBITDA, cash flow and profitability front in excess of what people were expecting of us. And there’s a reason for that, because these investments that we’re making translate into a brand that’s strengthening and strengthening with customers that are more and more satisfied telling their friends at increasing rates, staying longer to the premise of your question. And that’s great for us financially. And that gives us optionality. And what we mentioned earlier to the – response to the earlier question is, we’ve got a plan that demands a certain amount of growth and we go chase it. And we get together every day and every week and we look at are we trending to that? And if not, we do some doing. And that’s how we make our game day calls. And generally speaking, our quarterly game plan, it’s tuned to the kinds of results you’ve been seeing and we go execute that plan. And with lower churn, we don’t need the same number of gross adds in order to deliver those kinds of blockbuster financial results. Neville?

Let me pick up. So real quick, on millimeter wave, so if you look at where 5G ends up, right. You’re going to need millimeter wave, you’re going to need mid-bands, you’re going to need low-band spectrum. And where does millimeter wave play well, because of its limited propagation and it sure is limited, right. It doesn’t penetrate walls, windows very well. It doesn’t go very far. I mean, we’re deploying, we’re seeing, you get much more than 500, 600 feet away from a small cell. You ain’t really see in much, right. But that said, when you look at the capacity and the types of opportunities we’re thinking about delivering with 5G, millimeter wave can play well in those dense urban environments and places within those dense urban environments. But it doesn’t solve the 5G story, especially not, in the 3 million-plus square miles of the U.S. and that’s where the need for mid and low-band spectrum comes in. That’s critical to set out around the rest of the world is really looking to figure out. Now how do we get out to this mid-band thing as we are with Sprint super, super fast? Because it’s way, way more economic to deploy mid-band 5G spectrum on existing cell grid. Then it is to try and deploy literally hundreds and hundreds of thousands of millimeter wave small cells to give you some form of contiguous coverage and experience. So millimeter wave, we starting to mature horizons just launched, way too early. I’m not sure what’s up with those guys. They did the fixed thing, the WTF stuff we call it, last year, it’s been consigned to the trash kind of history almost before they’ve even launched it. So now they’re back with 5G and R too early on millimeter wave.…

But Neville, would not let them then deal with the coverage issues that they have today in terms of 5G and R, where they wouldn’t need new mid-band spectrum, they could theoretically just flip it back and forth, use the mid-band to get the coverage that they’re lacking with this millimeter wave deployment.

Well, they have to make a start somewhere on 5G, right. And the interesting piece is to get a dynamic spectrum sharing, you’ll deploy new radio. So I am yet to hear anybody in Verizon declare that they are deploying new radio in low band or mid band. There’s some very limited backwards compatibility on very recently deployed radio for DSS. And if you want to use DSS, you are effectively committing in the same breath to rolling out 5G in mid and low band. I haven’t heard that yet as a declared strategy for a Verizon. I think it’s the minimum and best set that they need to start with. Yes, it’s going to help the introduction of 5G services for everybody, especially those that don’t have spectrum and volume like we do, but in no way does that offset or match what we’re looking to do with new T-Mobile. We are going to dedicate tens into hundreds of megahertz of spectrum in mid-band towards 5G that does not exist in the Verizon portfolio and dynamic spectrum share and believe me does not get you there.

Also I’d like to add – thank you for asking an open ended network question.

Sorry. Sorry, thanks guys.

One takeaway I take from all that discussion is that it doesn’t matter if the new technology is there that lets you aggregate 4G and 5G. The experience just isn’t going to be great unless the mid-band layer is at 5G. And that’s what’s so differentiating about the new T-Mobile strategy.

Okay, operator, we’re going to take one final question, please.

Thank you. We’ll take our last question from Mike McCormick of Guggenheim Partners.

Hey, guys, thanks. And John, I love the biker jacket, we need to sell those in the stores. Anyways, Braxton, could you just sort of reconcile the sub-guide improvement versus the non-EBITDA guide improvement? Is that just reinvestment is being conservative? How do we think about that sort of conversion into EBITDA? And then secondly, I guess for Neville, maybe just reconcile your comments on the spectrum side because you made it sound as though the primary and secondary markets won’t come soon enough for you. And yet in the write up there is a comment about looking at both of those avenues. And then lastly for Neville just on the 600 megahertz build out, what’s the experience sort of the number of towers or nodes required and certainly comparing that against what 2.5 might require?

Yeah, so to start out, our playbook and we are conservative in our guidance. We have a history of stepping into higher and higher growth guidance as a year goes by. And the deeper we get into the year, there’s certainly opportunity and potential to step into higher EBITDA guidance. From a pure reconciliation standpoint, we’re not guiding by quarter. We’re giving you an annual outlook and when you look at the acquisition costs associated with bringing those net adds on, anything you do in the tail end of the year, you’re not going to get paid back. So it’s actually going to be decretive or dilutive to EBITDA. Now compare – on the other side, over performance at the very beginning of the year certainly pays back during the year. So it’s really the timing of when that happens. And again, we don’t take it down to that level of granularity, but I’ll just go back to the same statement I started with. We’ve played a conservative playbook, everybody knows it, states in and watched the further progression of development with the T-Mobile as we go quarter by quarter.

Okay, Neville?

Yeah, super, super quick. So on 6 – reverse order Mike, so 600 megahertz deployment, I mean we’re not quite doing a one on one overlay, but we are deploying pretty heavily. So, there’s literally tens – and tens of thousands of sites that will receive 600 megahertz, not all this year obviously. But we are doing a very heavy deployment on 600. On spectrum, my comments are looking at – if you look – again what we can do with Sprint and T-Mobile combined and the new T-Mobile and how quickly we can commit very large volumes of mid-band spectrum to 5G. There’s nothing on the primary secondary markets that can match that. If you look at the auction environments, yes, the FCC is working hard on new mid-band spectrum, the CBRS coming, but it’s got it sharing issues. It’s a small volume of spectrum. Rest of the world is pushing in 300 megahertz plus across three carriers, 100 megahertz a piece open now, right. If you look at Chinese market, Korea, that’s a lot of spectrum. And the only thing that comes close to feeding that would be the C-band and – as we all know that’s several years out. So, the real opportunities – the massive opportunity with our deal is to fill that spectrum gap, especially over the next two to three years and bring material 5G with that breadth and depth of experience that mid-band can deliver that can’t get delivered with the other assets.

Great, thanks guys.

Okay.

Sure.

I want to thank everyone for tuning in today for another great quarter at T-Mobile and we very much look forward to speaking with you again next quarter. Have a great evening.

Ladies and gentlemen, this concludes the T-Mobile Us first quarter 2019 earnings 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.