On Tuesday, 13 May 2025, T-Mobile US Inc (NASDAQ:TMUS) presented a strategic overview at the 53rd Annual JPMorgan Global Technology, Media and Communications Conference. The company’s Chief Financial Officer, Peter Isvaldik, highlighted T-Mobile’s competitive advantages and growth prospects, while addressing challenges such as increased churn. The discussion emphasized T-Mobile’s commitment to innovation and shareholder returns, despite a mixed market environment.
Key Takeaways
- T-Mobile reported strong growth in postpaid subscribers, service revenue, and free cash flow.
- The company raised its service revenue guidance to a 6% year-over-year increase.
- T-Mobile’s digitalization efforts and strategic investments are positively impacting performance.
- Churn increase is attributed to rate plan optimizations, expected to stabilize post-Q2.
- T-Mobile aims for substantial growth in fixed wireless subscribers and broadband expansion.
Financial Results
- Q1 service revenue growth was three times that of the nearest competitor.
- EBITDA in Q1 was double the peer group average.
- The service revenue guidance increase is split equally between organic growth and contributions from recent M&A activities (Vistar and Bliss).
- ARPA is projected to increase by 3.5%, primarily through organic growth.
- Vistar and Bliss contributed approximately $75 million to the EBITDA increase.
Operational Updates
- T-Mobile’s postpaid phone guide reached its highest level ever.
- Q2 competitiveness is expected to mirror Q1 and 2024 trends.
- Year-over-year growth was observed in gross adds for both April and May.
- The T Life app, with over 50 million downloads, focuses on enhancing customer experience.
- Fixed Wireless Access (FWA) continues to grow robustly, with over 400,000 net adds per quarter and a 50% increase in speeds year-over-year.
Future Outlook
- T-Mobile aims to have 12 million fixed wireless subscribers by the end of 2028.
- The Lumos joint venture targets 3.5 million households passed by 2028, while Metronet aims for 6.5 million by 2030.
- Share repurchases will continue steadily in 2025.
- The company is exploring strategic adjacencies to leverage its existing assets.
Q&A Highlights
- T-Mobile views the US as a converged market and focuses on organic growth rather than large-scale convergence deals.
- The T Satellite offering is positioned as a unique extension of the terrestrial network, aimed at driving upsell to premium rate plans.
For further details, readers are encouraged to refer to the full conference call transcript below.
Full transcript - 53rd Annual JPMorgan Global Technology, Media and Communications Conference:
Sebastiano Petty, Analyst, JPMorgan: Good afternoon, everybody. I’m Sebastiano Petty, I cover the telecom cable and satellite space at JPMorgan. I want to welcome T Mobile CFO Peter Isvaldik. Peter, thanks for being with us today.
Peter Isvaldik, CFO, T Mobile: Thanks for having us. It’s always fun.
Sebastiano Petty, Analyst, JPMorgan: Of course. I think do you have a safe harbor?
Peter Isvaldik, CFO, T Mobile: I think they were going to put it up, to the extent that they that they oh, there it is. So, you know, everybody please look. We’ll be making forward looking statements and referencing non GAAP metrics. Refer you to our filings for all the associated disclosures.
Sebastiano Petty, Analyst, JPMorgan: Awesome. Alright. Well, Peter, last fall, T Mobile outlined an aggressive multiyear business plan to transform T Mobile from challenger to champion in the wireless ecosystem, underpinned by continued postpaid share gains. Can you take a step back and help us think about T Mobile’s relative position in the industry, confidence in the growth levers from here and where you see the greatest opportunities in the medium term?
Peter Isvaldik, CFO, T Mobile: Yes, absolutely. Thanks. And if I take a step back and just think about the industry, it really is a backdrop of a growing industry. Whether you’re looking at service revenues or profitability, fun fact, from 2022 to 2024 this industry grew free cash flows by 50% while also delivering more for consumers. Of course, within that whole timeframe, T Mobile has consistently out executed and out delivered from a customer growth perspective, service revenue, free cash flow generation.
And really the fundamental reason for that is thoughtful, durable advantages that we’ve built over time, broadly categorized in our minds around three kind of segments. One is best network, the best value, and customer experiences. And when you take those three elements that kind of never before have been brought together in the telco space and you couple it with as we’ve discussed before kind of broad under penetrated market segments that have been a tailwind for growth but continue to have significant growth vectors in front of us for years to come. That’s really what continues us and having the ability to outsized returns and delivery. So it’s a fabulous place to be both within the industry but exactly where T Mobile’s built itself up to be.
And in the midst of all that, not only share taking and revenue growth opportunities but as we think about customer experience and value, we’re going through a digitalization and a revolution in there that will allow us to take customer experience to the next level again. So across all of these areas, we’re tremendously excited about the future.
Sebastiano Petty, Analyst, JPMorgan: Great. Yeah, we’ll touch on a lot of those topics here. But starting as you touched on with the postpaid ecosystem and subscriber growth,
Peter Isvaldik, CFO, T Mobile: a lot
Sebastiano Petty, Analyst, JPMorgan: of focus coming out of the first quarter on churn and gross ad activity. But AT and T Mobile posted record 1Q gross ads in the quarter. How would you describe the second quarter competitive environment in switcher pool quarter to date? And any update on what you’re how you’re thinking about the twenty twenty five postpaid subscriber expectations relative to what you outlined a couple of weeks ago?
Peter Isvaldik, CFO, T Mobile: Yes. No, we continue to be very confident. And what really is at this point in time, our highest ever total postpaid guide as well as our highest ever postpaid phone guide. And when you think about Q2 to date or Q1 and competitiveness, it really feels very similar to what we saw in Q4 or all of 2024. And remember this is T Mobile as the net share taker in the industry.
Not only did we create and bring competition way back over a decade ago but we continue to thrive in competitive environments because it creates consumer consideration and switching. And that’s when they go around, they ask their friends, they do research and this unprecedented member combo of the best value, best network and experience is why we win the switcher decision. So to me, Q2 to date looks exactly like Q1 and 2024. Remember, the best growth year in T Mobile’s history and all of that vaulted history was 2024. And to your point, in Q1 we demonstrated yet again not only our highest ever postpaid gross and net additions but also delivered once again outsized financial returns.
And when you think about service revenue it was three times the next closest peer. On EBITDA it was double the peer group average. And we continue to maintain a completely differentiated proposition in terms of ability to translate service revenue into free cash flow which is really the all important value creation metric. So Q2 to me, going exactly as planned. I know there’s been questions around gross adds.
So from an April perspective, gross adds were up year over year. From a May perspective, May to date, gross adds are up year over year, in fact a little bit more than they were even in April. So everything is that’s really what underpins our ability to continue to have confidence in our highest ever guide. And again it goes back to the differentiated and durable advantages we’ve created and the underpenetrated market segments.
Sebastiano Petty, Analyst, JPMorgan: That’s very helpful. And as we look at the year over year pickup in churn though in the first quarter, have you been able to disaggregate maybe the impact from what was idiosyncratic in terms of the price up relative to maybe industry dynamics? Any way to break out or discern? Yes, for sure. What we saw and we continue to see now is that the vast majority of the churn increase, which by
Peter Isvaldik, CFO, T Mobile: the way was still the lowest churn increase in Q1 on a year over year basis, was attributable to the rate plan optimizations that we did. Remember that was notifications happened in March. The actual bill changes happened in April and May and impact a larger percentage of the base than in the past. So much like we said, nothing really has changed since our earnings call and that we anticipate this will continue into Q2 as part of the value creation, but then will subside.
Sebastiano Petty, Analyst, JPMorgan: Okay. And then as we look at the prepaid to postpaid migrations in the quarter, somewhat pretty relatively low relative to the last couple of years here. Any impact? Or is it indicative from population immigration growth, competitive issues?
Peter Isvaldik, CFO, T Mobile: Yes. No, I think you probably saw some temporary artifacts in Q1 and why the number was a little bit lower. By the end of the quarter, it was going back to normal. And I think Q2 you’ll see again very healthy movement from prepaid to postpaid. And for us that primarily comes from customers that have entered into the prepaid space, are tenured and are then looking to move up the brand and the value proposition.
And so it’s a really healthy way to grow the brand and grow postpaid as well as grow the relationship with customers.
Sebastiano Petty, Analyst, JPMorgan: Got it. And so last month, shifting to the five year price lock, last month you revamped your T Mobile brand offers, you introduced the Experience More, Experience More Beyond, which now include a five year price lock on talk, text and data. I guess, one, what pain points is the company trying to address with these new offers? And how do you measure the relative success of these new offers, whether it be churn, gross adds?
Peter Isvaldik, CFO, T Mobile: Yeah, you’re going to see it across a number of factors. I mean when you really think about what we do with rate plans and the value that we pack into them, it kind of goes to the central pillar of the three that I talked about which is customer value leadership. And continuing to innovate on customer value leadership. What you saw us do is number one, make it more comparative particularly as we see more digitalization and do an apples to apples comparison for consumers so that they can see the amount of savings they can achieve on a monthly basis with the rate plan. So that was part of it.
You saw us on the better plan actually reduced pricing by $5 a line. And then you saw particularly in our very highest top tier plan, including value elements that are hard for others to copy. And in this case, one of the things that we incorporated in the very top tier plan is t satellite. And you know that’s a very unique offering. I’m sure we’ll get into that a little bit later and the obfuscation that’s happening out there versus the reality of what this offering is.
But our job is to continue to pack unique value elements into the rate plan structure, continue to innovate there and continue to make them things that are harder to copy.
Sebastiano Petty, Analyst, JPMorgan: Got it. And then you touched on in the open about your three growth segments, right, top 100, SMRA as well as enterprise. How much runway do you have left in each of those? Can maybe zoom out a bit?
Peter Isvaldik, CFO, T Mobile: Yes. And if you go back a little bit in history at our first Capital Markets Day post merger, we outlined a lot of these. We talked about smaller markets in rural areas, which for us is everything beyond the top 100, so 40% of The US population. We talked about particularly enterprise and government as being an opportunity area for growth, of course fixed wireless. And we continue to grow in all those areas.
What you saw uniquely introduced incremental to all those at our last Capital Markets Day was this concept of growth in top 100. And when you look at top 100, we kind of disaggregated it into three cohorts. The first where we’re market share leaders, all the way down to the third, which actually looks a lot like smaller markets in rural areas for us. And what we have been delivering, and we delivered yet again in Q1, is year over year growth against all of those categories, whether it’s in the top 100 and the first, second or third cohorts, smaller markets, rural areas, enterprise, which had its best ever quarter, Government, which continues particularly there to see the benefits that the network capability leadership brings, like key priority, for example, and for first responders and the announcement with New York there. And of course, fixed wireless growth that’s happened.
Well, one reason that top 100 and the cohort where we’ve already led continues to grow is the best network proposition. As we’ve made the leap from four gs to five gs and have become the network leaders, we’ve seen a whole category of customers that we call network seekers. But basically the category of customers that look for network performance above all else. They’re willing to pay premiums to get the best network and that’s driving growth even in markets where we had the leading market share, we see more growth as a result of that.
Sebastiano Petty, Analyst, JPMorgan: All right. And then thinking about the rural opportunity, the U. S. Cellular acquisition is still pending. But does that augment your small markets rural opportunity?
And I guess maybe relatedly, where are you in terms of distribution there? And how important is that in the small market rural area to your longer term efforts?
Peter Isvaldik, CFO, T Mobile: Yes. Well, just to remind everybody in terms of the U. S. Cellular or all of the pending acquisitions, when we laid out our ambitious multiyear plans, what we did was include the capital outlay, but we didn’t include any of the benefits. Meaning for U.
S. Cellular, when the transaction closes, we’re very excited about that and that will be upside to the multiyear plan, but included again in the capital envelope. And certainly it will help and benefit certain areas of smaller markets and rural areas. So with that also comes some incremental spectrum that we’re very excited to put to work. We’re famously known for being able to rapidly deploy spectrum for the benefit of customers including U.
S. Cellular customers. So it will definitely have a benefit in certain geographies of the country from a smaller markets and rural areas perspective. In of distribution, really what we’re guided by is the customer. Meaning as we continue to build the network in smaller markets and rural areas, remember this is a year where we’ve pivoted to now thousands of new macro sites will be built including in smaller markets and rural areas.
We tend to bring the distribution at the point at which the network is at parity or better and that starts the growth cycle. And that distribution, particularly in the digital age, can come in the form of physical, national retail partnerships, or more and more so digital outlets as well, particularly in smaller markets in rural areas. But it will continually be guided by how the customer wants to be served. That’s the focus point.
Sebastiano Petty, Analyst, JPMorgan: And I guess relatedly to that, you unveiled the TLIFE app at your Capital Markets Day. And you highlighted on the call, I think, that the number of postpaid phone upgrades completed digitally had doubled quarter over quarter, well over 50% of gross adds at the end of the quarter. So just remind I guess remind us what the team life or taking step back T Mobile’s digital roadmap overall including T Life and how you plan to unlock value there and scale that.
Peter Isvaldik, CFO, T Mobile: Well, it’s one of the things we’re very excited about. And from a digital journey perspective, I broadly categorize it in a few things. One is how do you make the customer experience better, more simple, yet more personalized? How do you predict and prevent problems? And of course, how do you run your business more efficiently including how do you actually more effectively deploy capital.
And we can get into that with something unique called customer driven coverage on our behalf. So the tea life element of that was meant to really address the first couple. So we knew the first thing you had to do is of course create a fabulous digital property and get it in the hands of your customers. And it started from nothing a couple years ago and we ended the year with over 50,000,000 downloads on TLIFE. And then the journey from there was going to be let’s start with upgrades.
Simplify, digitalize, personalize the experience. Then add a lines and then new prospects. All powered of course with the ability to utilize data and be AI enabled in a way that you couldn’t have been a couple years ago. And so upgrades was the first journey. For those that are T Mobile customers that have lived through upgrade experiences years ago, next time you upgrade I definitely suggest you try this slick new experience.
It’s really, really great. Makes it much more smooth. And it allows the ability as we deploy more and more features to personalize it. And so the view, and this is the difference, is a lot of companies approach digitalization, AI, automation with how do I take costs out of the system. How do I deflect more calls?
I don’t want to deal with customers. I want the AI to deal with customers. For us, much like the ethos of this company has always been, how do you put customer centricity at the forefront, make their experiences better? And when you do that, of course cost will naturally come out of the system. If you envision a future world, some of which underpinned the Capital Markets Day multi year guide, where you have much more digitalization of transactions.
That means you have a different retail footprint and like a global care footprint, those kinds of things which benefit costs. But that’s a secondary consideration for us. Got it.
Sebastiano Petty, Analyst, JPMorgan: And now shifting gears to broadband. T Mobile introduced new five gs broadband pricing and packaging in late twenty twenty four that has not only broadened the aperture or the TAM to more price sensitive subscribers, but also resulted in, I think you highlighted lowest ever churn, record broadband ARPU growth each of the last couple of quarters. And then in 1Q twenty twenty four, you once again led the industry in broadband net adds. So are you continuing to see tailwinds from the pricing and packaging changes? And maybe help us think about volume expectations from here in FWA.
Peter Isvaldik, CFO, T Mobile: Absolutely. I mean there’s a number of things that continue to drive the success of that business. And you’re right, it’s been years now, not just quarters but years now where we’ve been over 400,000 net adds a quarter. We’ve continued to lead the industry. We had our lowest ever churn quarter and our highest Q1 from an ARPU growth perspective.
And part of that was definitely kind of mirroring the philosophy we have in the wireless space. Kind of a good, better, best philosophy from a rate plan perspective. One with an entry level rate plan you can drive interest and traffic in. And then typically when consumers see the incremental value from higher tier rate plans, they self select up. And that is just like it’s driving it in the mobile phone space, it’s driving it in the broadband space as well and helping to grow ARPU.
That said, from a volume perspective, we’re very comfortable with everything underpinning our guide to get to 12,000,000 subscribers by the end of twenty twenty eight. And the product is performing and resonating really well. When you think about things that are important to customers around this product spaces, am I getting the speed and reliability that’s necessary for me? Our product, if you just look at Q4 to Q4, third party reports recently released, speeds have increased by 50%. Q4 versus Q4.
So in a year we’ve increased speeds by 50%. We continue to win customer satisfaction recognition from multiple, multiple third parties. So it’s a product that’s resonating, it’s durable and that’s what’s continuing to drive the growth and the lower churn and the higher ARPU.
Sebastiano Petty, Analyst, JPMorgan: Great. And then on the T Fiber side, Lumos JV just closed. You have Metronet’s pending. But the Lumos JV has ambitious build targets. I guess how quickly can the team scale that build?
And what gives you confidence in hitting your target of 3,500,000 passings by 2028?
Peter Isvaldik, CFO, T Mobile: Yeah. I mean part of the reason we chose MetroNet and Lumos was yes, pure play fiber and a way to disrupt much like T Mobile has disrupted wireless over the decades. That’s the plan in fiber as well. But we chose it with partners that have demonstrated ability to build and scale. We released Metronet during Capital Markets Day.
We said their peak year or month of build, sorry, was about $70,000 a month. Now that was in summer, of course. That’s your peak month. Lumos equally has started to scale significantly. And these are management teams that can scale the build.
We’ve got great capital sources for them as part of the JV. We’ve got great partners both in the management teams but the PE firms. So we’re very confident in the ability for Lumos to reach 3,500,000.0 by 2028 and then MetroNet once it closes to continue their build and scale further and reach 6,500,000 households passed by 02/1930.
Sebastiano Petty, Analyst, JPMorgan: And do you still have limited appetite for fiber M and A at this point? Or is it more about just integration and scaling? The
Peter Isvaldik, CFO, T Mobile: philosophy hasn’t changed there. I mean we’ll continue to look at are there value accretive fiber opportunities? Probably more in the pure play fiber space. We’ve kind of shown our cards there with Lumos and MetroNet. That’s our preference because that’s our ethos.
That’s what we know how to do. There’s probably limited numbers of targets in that space that are available. We’ll continue to look at them. It would have to be much like the first two, the right partners at the right value creation opportunity for us. So, you know, you’d expect us to continue looking.
Nothing to announce here, but to the extent something meets all that criteria, we we would be interested.
Sebastiano Petty, Analyst, JPMorgan: Yeah. And so I think at a at a conference earlier this year, you mentioned that you don’t necessarily need a quote, unquote big deal to compete. But we do still constantly kind of get that question. I guess, how do you update us, I guess, how you and the team are looking at convergence in The U. S?
Because obviously AT and T was here this morning and lots of focus on broadband and build fiber builds and so scaling their locations past. So I guess help us think about that.
Peter Isvaldik, CFO, T Mobile: Yes. I mean our view on convergence really hasn’t changed. It’s been very consistent. Nothing we’ve seen would change that view. And that is that really The US is already a converged play.
I think a lot of times investors ask what’s happening with convergence, informed a little bit by well what’s happened in Europe and hasn’t Europe converged. And actually if you look at the biggest markets in Europe, The UK and Germany, it’s a significant minority of customers that are converged. You know I think it’s somewhere in the 25% range. And the reason behind that is there’s no real functional utility increase for the customer from a wireline wireless bundle. What it does is a discount.
Well in The US, One thing you’ve seen is over five years now, over 85% of customers have had the ability to buy wireline and wireless from the same provider. So to the extent that convergence has happened in The US, it’s been in the run rate for five years. And the reason is in The US we have other ways. Bundling is a way to drive churn down. Bundling is a way to drive discounts as a result.
Think about family plans in The US. There’s a reason that the second, third, fourth, fifth line is a lot cheaper than the first one. And that is you bundle things together, you get reduced churn and you get higher value on the account basis. Similarly when you bundle a iPad or a watch together with your mobile phone. And really what we’re seeing and continue to see is customers.
When you look at, again, third party analyst reports, not just us crowing about it, that look at what is a consideration for switching, whether it’s in the wireline space or the wireless space. And what are the factors that would drive customers to switch? And you kind of see the chart go like this. And when you get to, well, I want a wireline and a wireless bundle, you’re like down in the low single digits, right? Because what’s important, particularly for mobility customers, is network quality, reliability, price, value, all the things that you know make up those three pillars for us more so than bundling.
Now all that said and the reason we’re investing in fiber JVs is fiber in and of itself in our mind can be a really good accretive value creation. And the reason for that is of course we bring unique attributes like the brand, the distribution, customer relationships that would allow you to get either faster penetration, deeper penetration, or lower subscriber acquisition cost than a purely disinterested financial investor could do. So that’s how we get to great returns in that space. But it’s not a thesis of, well, convergence is coming and you have to worry about it. It’s been here for five years.
Got it.
Sebastiano Petty, Analyst, JPMorgan: So now shifting gears to financials. And you raised guidance most recently, late April. But help us maybe think about the guidance increase in terms of what portion of the service revenue upside was driven by just organic relative to maybe some of the acquisitions you closed. Help us maybe
Peter Isvaldik, CFO, T Mobile: help with Yes. So yes, that was a fun day to increase service revenue even more so than we said in the past, up to about 6% year over year increase. When I dissect that, M and A which really would be at this point Vistar and Bliss primarily is about half of that increase. So you know about half a percentage. We went from five to roughly six and the other half is all organic.
Switching to ARPA, Vistar and Bliss are actually not included in ARPA. So the ARPA 3.5% increase is really just all organic fundamentally. So it really speaks to the power of what’s happening there both from a deepening of relationships as well as a self selection of the rate card across all of our products.
Sebastiano Petty, Analyst, JPMorgan: I guess similarly on the core EBITDA side, some of the feedback we’ve been getting centers around the upside to revenue, but maybe not that much flow through down to EBITDA. And so maybe once again, kind of helping us think about the inorganic or organic pieces around EBITDA guidance. And what if any conservatism is kind of baked in given some of the macro and industry?
Peter Isvaldik, CFO, T Mobile: Yes. So the only inorganic portion of the EBITDA raise was Vistar and Bliss and that was about $75,000,000 of EBITDA that we flowed through and then there was an incremental amount that was organically driven. And it’s one of those funny things where only T Mobile could be called an investment year while still delivering out sized EBITDA and over 5% growth at the midpoint. But it fundamentally runs down to a few things. One, remember we are funding the highest ever customer net additions guidance in our history at this point of the year.
We’re also investing prudently in value creation to drive those ambitious multi year outcomes inclusive of thousands of new macro sites on the network as well as digitalization. So all of those things we talked about around upgrades, new prospects, add a lines, that’s all in the funding envelope. And also we had really good line of sight to service revenue because of the ARPA increases. So we gave you line of sight to that. But sometimes we don’t flow all the way through to EBITDA until later and we have line of sight to that.
Okay.
Sebastiano Petty, Analyst, JPMorgan: And maybe help us think about the macro environment and obviously, it changes very much day to day. But just thinking about that and then overall consumer sentiment, does inform or change how you view taking additional rate optimization opportunities from here? How are you thinking about that?
Peter Isvaldik, CFO, T Mobile: Yes. I mean, this isn’t the industry that is going to be the canary in the coal mine on the macroeconomic front. We’ve proven that through the pandemic. You continue to grow. And that is because of the critical nature of communications.
And communications have moved up priority of wallet for consumers dramatically so. And so we aren’t seeing anything that would indicate to me, at least in this category, I have something to be concerned about yet. Our uptake on the highest tier rate plans, our most premium plans continues to be over 60% of new accounts activating on those. Our bad debt levels second quarter in a row were the lowest in the industry. I’m not really seeing anything from a payment pattern perspective that would concern me.
So you know for us it continues to be the same impetus for what allowed us to increase ARPA. You know to the extent something changes in that space and people become even more conscientious of value than they are today and that drives even more switching consideration. Fabulous place to be when you have the best network and the best value combination. Got it.
Sebastiano Petty, Analyst, JPMorgan: As you think about the 60% take rates of your premium plan, is that just kind of what you touched, that driven by what you touched on earlier, just increasing value proposition within your offers? Is it what’s the silver bullet there?
Peter Isvaldik, CFO, T Mobile: I mean, that’s really you’ve seen us do this time and time again, introduce new rate plans, again, pack unique and valuable features, particularly into the top tier plan. And let customers self select up that rate plan. And that allows us to drive that 60% penetration rate. What’s also equally exciting is when you think about the base, the base is just over 30%. And so that drives a lot of upward momentum ability for long term ARPA expansion.
And that was underpinned in our Capital Markets Day guide as well. We anticipate continued ARPA growth year after year.
Sebastiano Petty, Analyst, JPMorgan: And I guess closing the loop on financials and ARPA before we pivot to the end of the conversation here. But the question we got coming out of results was very strong ARPA results in the first quarter, but postpaid phone ARPU was a little bit light in 1Q relative to your full year guide of 1.5%. Does that suggest anything about the free line contribution in the quarter so we should be thinking about it?
Peter Isvaldik, CFO, T Mobile: No. I mean our 1.2% year over year ARPU growth in Q1 was actually higher than the full year ’24 versus ’23. And then what you saw is us actually increase that guide because of the strength of adoption as well as rate plan optimizations to 1.5%. And the question of free lines, it’s interesting. And from time to time, we very strategically and in this case, very much coupled with rate plan optimizations on very tenured accounts may pulse in some smart loyalty offers.
To the extent that when I think about Q1, it’s a completely immaterial amount of gross ads. And to the point you just made, the fact that you couple that with ARPU and ARPA increases just demonstrates the actual quality of the base. And that’s how we can continue to deliver outsized service revenue and outsized free cash flow conversion.
Sebastiano Petty, Analyst, JPMorgan: Got it. And then on the 4Q call, you talked about in terms of shifting to capital allocation, talked about a steadier cadence of share repurchases in 2025. Is that still the expectation, just again, given the macro competitive environments as well as current deal pipeline? Is there any risk to that? Or is that still the right kind of level?
Peter Isvaldik, CFO, T Mobile: Yes. No, there’s two things when you think about the capital allocation philosophy. What we laid out at Capital Markets Day is this business and the free cash flow generation is going to create an $80,000,000,000 envelope from Capital Markets Day through the end of twenty twenty seven. And we initially allocated it in three tranches. One is to fund announced M and A, so about $10,000,000,000 there.
So outflows, yes, but actual the benefits not included in the EBITDA service revenue guide that we gave. The other thing was up to $50,000,000,000 in terms of total shareholder returns. That’s inclusive of dividends and share buybacks. And then we have that 20,000,000,000 strategic envelope within the context of our 2.5 leverage, which we continue to think is the right leverage. The comments around how shaping would be in share buybacks was in 2024.
You saw some starts and stops and we approached it a little bit differently for 2025. And certainly one of the things we always look at is are there other value creative opportunities, right? That’s the capital allocation philosophy we’ve always followed. So I’m not here to kind of comment on day to day share buyback activity. Of course, one of the things we look at is what is our assessment of intrinsic value of the company in terms of are we going to deploy share buybacks.
And yes, we are in the market. Okay.
Sebastiano Petty, Analyst, JPMorgan: And so on the M and A front, so we talked about Vistar and Bliss that was closed earlier this year. I think just last week you announced a partnership with IPG Mediabrands as well. Can you maybe level set where you are today in terms of your advertising capabilities, how the recent deals amplify what you’re doing and if you’re strategically complete in that area?
Peter Isvaldik, CFO, T Mobile: Yeah. One of the this is one of those areas where we talked about at Capital Markets Day of how do you take unique assets that you have that allow you to play in smart adjacencies and create disproportionate returns. And advertising is certainly one of those. Look, we are one of the largest advertisers in The US to begin with. So we acutely understand the ecosystem from an advertiser perspective.
Yet we also have a 1 plus billion dollar advertising business already. And that’s inclusive of a number of things, including our own retail media network and stores. But the impetus behind Bliss and Vistar were really two things. One is certainly with Bliss, there’s internal cost savings that we can generate with there. But can we create even a better platform, enhanced targeting capabilities, enhanced measurement capabilities on a Bliss type of platform?
All of this though starts with we want to make the consumer experience better. Ads chasing you around the internet that don’t feel relevant. How can we as T Mobile in the right way with customer centricity and privacy in mind enable advertisers to one, be more efficient but also more effective. So when you think about Vistar as an out of home and digital out of home, how do you take the ability in our customer relationships and actually create, again done with centricity and privacy in mind, better targeting, better measurement, and more effectiveness and even out of home. That was the case for Vistar.
So we’re very excited about that. I think there’s a lot of runway of growth there. Nothing else from an M and A perspective we’re looking at now. Could something come in the future? Perhaps.
But it would again have to follow the same value accretive methodology.
Sebastiano Petty, Analyst, JPMorgan: Is there any appetite to maybe invest in other adjacencies above and beyond advertising in the medium term?
Peter Isvaldik, CFO, T Mobile: Yeah, perhaps. Again, and it does really focus on how can you take those assets that I keep speaking about distribution, the brand, and can you convince yourself smartly that there are really adjacent businesses that you can disproportionately create value? And those would be ones you would look at. Remember that’s part of why we created a $20,000,000,000 capital envelope to begin with. Spectrum purchases, should they come up, this kind of type of potential investment.
We don’t have anything we’re looking at to announce immediately, but it’s something we’re going to be thoughtful about.
Sebastiano Petty, Analyst, JPMorgan: And as we wrap up here, on the 1Q call, and you touched on it earlier, you announced t satellite pricing of $10 per month, except for the Experience Beyond and Go five gs Next plans, which get it for free. And so how do we measure success of t satellite and then is this just helping a driver of migration to higher plans? Is it a brand halo thing? How are you thinking about that?
Peter Isvaldik, CFO, T Mobile: Yes, it’s going to be a number of fronts. I mean, the first, it’s really important to understand how distinct and differentiated T satellite is. I mean this is an offering that, it’s not the perfect analogy, but think about it as towers in space. And do you want to go after it with one or 10? Or do you want to have five fifty and growing?
I mean, that’s the same philosophy of capacity and ability. So it’s a very differentiated offering. You’ll see more education around that because there’s a little bit of obfuscation there. But it’s gonna drive a few things. One, on that best network pillar.
This is a great way to extend connectivity. Remember, we broadly think about connectivity as certainly the terrestrial network where we’re heavily advantaged. But also Wi Fi and planes, the unique things that we offer from an international travel perspective. And so this is a great way to augment and has been live in in beta form. And we’ve seen over a million text messages.
We’ve seen it save lives. I mean there is definite benefit to consumers on this as an extension of a terrestrial network. This is a seamless connectivity play. It works with the majority of modern devices. And so it will not only drive perception around the network and connectivity in whole, it’s paired in our very premium rate plan, so it drives upsell into those rate plans.
And it continues to be a customer value proposition that others can’t emulate. Well, Peter, I think
Sebastiano Petty, Analyst, JPMorgan: it’s a great place to leave it. Thank you for joining us today.
Peter Isvaldik, CFO, T Mobile: Thank you for having us. Always fun. Appreciate Thank you everybody.
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