T-Mobile’s Business Push, Technology Advantages, and 5G Slicing with Daryl Schoolar

Full Transcript

Don Kellogg 0m10s

Hello, and welcome to the two hundred and twenty fourth episode of the week with Roger, a conversation between analysts about all things telecom, media, and technology by Recon Analytics. I'm Don Kellogg, and with me as always is Roger Entner. How are doing, Roger?

Roger Entner 0m23s

I'm good. Happy New Year.

Don Kellogg 0m24s

Happy New Year. So, Roger, 2024 was a pretty big year. And as we usually do near the end of the year, the beginning of the New Year, I thought we could talk about the year behind us and also the year ahead. What do you think?

Roger Entner 0m36s

Let's do it.

Don Kellogg 0m37s

So let's start with the MNOs. Maybe we could go in alphabetical order here. So tell us how did AT&T do in 2024 and what's kind of the outlook for 2025?

Roger Entner 0m47s

AT&T had a good year. You know, their Analyst Day was extremely successful. Their execution in 2024 was really good. They continue to have lowest churn in the industry, mobile. Their fiber growth was very respectable.

Roger Entner 1m7s

They just upped the numbers of what they are going to roll out in the future, will be biggest fiber provider in the country. Mobile, they're still growing very respectable numbers, you know, solid number two when it comes to growth. Santa will be good to John Stankey and to Jen Robertson too and Jeff McGall first. You know, Santa will be good to you.

Don Kellogg 1m32s

Yeah. I thought it was a good year. I thought that the fiber call out in terms of increasing the targets was good. They're still not very bullish on FWA, but I think that makes sense given their fiber aspirations. Yeah.

Don Kellogg 1m43s

To the extent they've decided to go straight to fiber, whereas I feel like a lot of other providers are planning on kind of taking a two step where they go FWA to fiber. AT&T has the assets to go straight to fiber, and I think that makes sense for them.

Roger Entner 1m55s

It's a philosophical approach. And AT&T takes the long view. In the long run, they're absolutely correct. Fiber is the superior technical solution to FWA. Just as Maynard Keynes said, in the long run, we're all dead.

Roger Entner 2m11s

In the interim, there's a lot of FWA money that you can pick up. The other two guys are picking it up. AT&T is picking up a little bit. But it's their healthy skepticism about the long term viability of FWA, which is contingent to the availability of spectrum. If you think more spectrum is going to come, FWA has a lot more headroom.

Roger Entner 2m35s

When you look more into rural spaces, FWA has a lot more headroom. I'm not sure we'll talk about it with Verizon. 70% of Verizon's FWA customers are in urban markets. I don't know how much more headroom there is. On the other hand, not that many are in rural America.

Roger Entner 2m53s

I think that's where the headroom is for FWA for Verizon. It's a philosophical conversation. I always say numbers in fact still make decisions. People make decisions. And this is a classical example of how they all look at their assets, and they're making different decisions, which is a good thing.

Roger Entner 3m11s

Otherwise, it would be boring. We would be Europe, right? Race to the bottom on price, no differentiation. And then they're like, why is this such a horrible industry? Well, because you killed all value.

Roger Entner 3m25s

Price and value are two different things. In The US, we deliver value.

Don Kellogg 3m29s

Well, speaking of Europe, T Mobile is largely owned or significantly owned by Deutsche Telekom. Let's talk about T Mo. How did T Mo do in '24?

Roger Entner 3m38s

T Mo did extremely well. Fastest growing postpaid operator, they bought enclosed mint, fastest growing prepaid operator, they grew extremely quickly in FWA, they tipped their toes into fiber. You know, I think Santa brought two packets to our friends in Seattle to Mike Sievert, John Fryer, Kelly Field and Mike Huts. This was hang up year. You know, we both were at their investor event where the two biggest Silicon Valley rock stars came and raised them with their personal attention, and not just the video, right?

Roger Entner 4m20s

It's like, this was a bang up year.

Don Kellogg 4m22s

Yeah, I mean, thing that amazes me with T Mobile is they keep on doing this over and over, right? Like it's almost like a dead joke for us after the quarterly results where, alright, it's another beat and raise. They're gonna, you know, curb stomp everybody else. And they continue to do that, right? So I thought it was notable that they're now dipping their toes in fiber.

Roger Entner 4m41s

Well, the air is getting thinner. They're still executing extremely well. The air is getting thinner, right? They are now not the price leader anymore on postpaid, they're claiming value leadership because at least in one and two lines, which is the bulk of the business, they are now the price leader when you look at the rate card.

Don Kellogg 5m2s

I would push back on that. I would say that they have the widest range of prices available at almost all price points, right, on the postpaid side. So you could go with T Mobile Essentials, which is gonna be one of the cheapest or least expensive plans, right, or you could go all the way to go five g next.

Roger Entner 5m18s

And 60% plus are picking the premium plans.

Don Kellogg 5m22s

Absolutely. But

Roger Entner 5m23s

Oh, yes, they have a lot of cheap plans that nobody picks. Yeah. We see it in our numbers, the pricing advantage or pricing headroom that T Mobile had when you look at people who are with T Mobile more than a year is gone, which helped them really tremendously on ARPU. I look at it this way. T Mobile before John Leger and Mike Seaward was terribly run, horrible margins, and they had so much upside.

Roger Entner 5m53s

That upside has largely almost completely evaporated. So now the wind is no longer in '25 going to blow from behind.

Don Kellogg 6m5s

Again, I I would put my devil's advocate hat on here and I would say, you know, they're still under penetrated in rural markets. They're still under penetrated in business.

Roger Entner 6m13s

Very much so.

Don Kellogg 6m14s

And again, getting into fiber, they've got a whole another industry they can start beating up on, right, with cable. They've already been doing it with FWA. Right? But I think there's more upside there. But it's it's certainly gonna be from different corners than it's been from today.

Roger Entner 6m28s

Yeah, but T Mobile will not cover more than 20% of The US with fiber, period. No. Not happening. Maybe not even 10, right? If they're beating up cable, and they do beat up cable, it's with FWA.

Roger Entner 6m42s

It's almost inevitable because the economics are not there. Cable and two fiber providers in one market don't make money. It just doesn't work out economically. T Mobile is playing it right with fiber by buying only pure play fiber plays.

Don Kellogg 6m58s

Right. And they're taking a capital light model, right, which helps their dollar go further. I guess I would say I'm more focused on small rural markets and B2B penetration as a growth factor. There's upside there.

Roger Entner 7m10s

Yeah. But you know, when you do a lot of capital light, it becomes capital heavy. A lot of light things become suddenly heavy. But they have the money. And both AT&T and T Mobile surprised Wall Street with how big of a war chest they will have going forward.

Don Kellogg 7m25s

So let's talk about the other big dog in the room. Verizon? Verizon. Yeah. How did Verizon do?

Roger Entner 7m30s

Verizon did really well against the metrics it has set for itself, which are not necessarily the metrics that everybody else tells them that they should set. But I think they will live up to their commitment. By the way, their goals are wireless service revenue growth, EBITDA profit, and free cash flow. That's how they measure themselves. Not subscribers, not whatever.

Roger Entner 7m56s

They committed or they promised that they would be net positive for 2024 on postpaid subscribers. I think they will make it, right? Right.

Don Kellogg 8m6s

So I mean, at the time of this recording is obviously q four is not over. And typically, Verizon is most inflected towards q four. In late January. Yeah. Out of the out of the big three.

Don Kellogg 8m17s

Right? So Yeah.

Roger Entner 8m18s

We don't know.

Don Kellogg 8m18s

We don't know yet. Right? But signs are good.

Roger Entner 8m21s

But Verizon is a company that executes and if they say they will do it, they typically I bet money on Verizon doing things that they say they would do publicly. But yeah, so I think Hans, Stamper and Kyle have gifts for each other. You know, I'm not sure Wall Street is giving them too many.

Don Kellogg 8m40s

Well, bought a gift for themselves too with Frontier, right?

Roger Entner 8m43s

They bought Frontier. There was a little bit of a ruffling in the waters. Only 63% of shareholders approved on the deal, but they got themselves frontier, which will hopefully close next year. They have more space to put fiber in there. But you know, in order to make I think their cash flow goals, they're going to go only the speed that Verizon would have gone standalone in its legacy footprint.

Roger Entner 9m11s

Now they're going to do it in the expanded footprint plus they have to go back and retire fiber. That's the onerous task. Right.

Don Kellogg 9m20s

Although in fairness, the large portions are almost the entire, you know, the legacy portion of the Frontier Fiber network was originally built by Verizon anyway, at least it was here in California.

Roger Entner 9m30s

Yeah. No. No. They spun it out and bought it back for about the same money.

Don Kellogg 9m35s

Right. Right. So we do have one player that we're saying goodbye to this year. It's US Cellular, Swan Song. Yeah.

Don Kellogg 9m43s

I'm not sure they've made a huge difference for a while, but, you know, here we are and this is the end of the road.

Roger Entner 9m48s

Verizon and AT&T and T Mobile are taking on some of the spectrum. T Mobile is also taking on the customers. And we'll see who will buy the rest of the spectrum, which is probably going to be the three nationwide operators, with probably a more friendly FCC with Chairman Carr, incoming Chairman Carr. Who knows, maybe I don't think DISH will buy more spectrum. It was a very topsy-turvy year for DISH, now Boost or EchoStar, right?

Roger Entner 10m22s

They changed their names, which just shows you how much turmoil there was for that. So then now called Boost Mobile continues to lose customers, even though they have a technically speaking great network.

Don Kellogg 10m35s

Nobody knows about it, right?

Roger Entner 10m37s

They just don't do well marketing. They had this whole refinancing thing that they compared to landing three jumbo jets on one very small runway. And, you know, they landed two, and then the third one crashed into the second one. But thank God, landing the one gave them several years more financial breathing space. But the sale of Dish satellite TV collapsed, it might come back, right?

Roger Entner 11m10s

And they had some other refinancing issues. But they got more money to fight another year. And so congratulations to them. Sandoz is probably gonna bring them a smaller gift, but at least there you live, right? Right, right.

Roger Entner 11m24s

And then we have the cable guys. Yeah, let's talk about the cable guys. Well, guys is the story of two cities or two parts of the business. They've been very successful on mobile by offering a low cost plan, continue to grow, where are they now? Eight and seven million last we spoke.

Roger Entner 11m45s

Very, very strong number. But they are struggling on broadband. And you know, it's fiber and you know, as long as they call it CPI, cell phone internet, they will continue to be beaten by FWA. It is what it is. Right?

Roger Entner 12m2s

Yeah. If you don't take your competition that beats you seriously and gives it derisive, non fitting names, you're going to get hit.

Don Kellogg 12m11s

Well, mean, I think cable has been kind of running roughshod on the wireless carriers for a while. Now that wireless carriers are doing it back with broadband, right? Oh, they are.

Roger Entner 12m20s

And I think they will do a lot better even next year on mobile. But I expect their CBRS networks to come on. And with CBRS, they will have super economics because they will offload the cheapest to cover, highest volume traffic, which is urban America onto their CBRS network, and buy the more expensive to cover mobile traffic from Verizon. They will have on mobile the best of all worlds. They will have a lower price structure than Verizon probably has on balance because it is such a low cost to cover urban America with CBRS.

Roger Entner 12m58s

Yeah. I think the issue there

Don Kellogg 13m0s

is the core broadband network though. Right? I mean, I think one of the things that we see in our research is, you know, disconnects and issues with broadband in general on DOCSIS are much more prevalent than what we see on fiber or FWA for that matter. Absolutely. Consumers have to be okay with that.

Roger Entner 13m15s

Well, we will see if DOCSIS four point o will make a difference.

Don Kellogg 13m19s

Don't hold your breath. I mean, we've been holding our breath for a while on DOCSIS four point o.

Roger Entner 13m23s

Well, we'll see. The problem for cable is not to the cable head. It is from the cable head to the computer in the home. That's where the big problems are. Even though that they came out with a commitment, that commitment was pretty hollow.

Roger Entner 13m39s

Because they committed that your whole neighborhood will not go down, which is the cable head and the cable head is, you know, five nines reliability. And they live up to that. The whole neighborhood goes down maybe five minutes a year. Not even that. But we see these really exorbitant outage reporting from consumers what they think is an outage and in the end it's the eye of the beholder, you know, and it's a losing proposition to argue with your customer of what is an outage and what is not.

Don Kellogg 14m8s

Well, the customer wants to buy a product that works. They're not looking for guarantees on one part of

Roger Entner 14m12s

the product, right? Exactly. You know, I think it will be for both of them, they will continue to be very successful in mobile and they will continue to lose customers fixed. It is what it is.

Don Kellogg 14m24s

So I have one piece remaining, right? A little bit of regulatory. You wanna briefly talk on some of the changes that have happened at the SEC?

Roger Entner 14m32s

Well, you know, elections have consequences. You know, with the inauguration of President Trump, Brendan Carr will become FCC Chairman. Chairwoman Rosenwaldzil will leave the commission. The Republican majority will have to do a better job than the Democratic majority did four years ago, where for two years the White House couldn't present a candidate for FCC commissioner that would have the support of the then 51 Democratic senators. So for two years, the FCC under Chairwoman Rosenwitzel was paralyzed.

Roger Entner 15m11s

And then she spent time on gimmicks like net neutrality and overage issues, which Chairman Carr will promptly nix. And if he doesn't nix it, the courts will probably do it. But I would expect from the telecom side, a more supportive administration. Know, but it all depends on what happens on Capitol Hill. Right, there's the big battle between cable and telcos.

Roger Entner 15m35s

And we talked about it. Cable is fighting that there's no more licensed full power spectrum, because they are afraid and rightfully afraid that 50% Americans who want now FWA as their preferred wireless technology will get their way and run away from them. Whereas mobile industry needs more spectrum, especially in urban America, and they would like to offer these things that customers want. You know, in the last several years, this was deadlocked. The Department of Defense was not willing to give anything up.

Roger Entner 16m7s

Senator Cantwell was not that interested in the topic. We will have Senator Cruz run that committee in the next Senate. He is much more interested in it. He's also much more open to be forceful with the Department of Defense. We saw with the 3.45 spectrum that the White House was also playing hardball with the DOD and within a year, they were able to get 100 megahertz.

Roger Entner 16m36s

So it will be very interesting to see how the Republicans who have been traditionally much better executors of power will play this out. There's a continuing resolution for temporary spectrum authority to auction off the AWS three spectrum. But overall, you know, everybody's declaring there's no spectrum authority. But spectrum authority without a spectrum pipeline is bad, because you have nothing to do and there's no urgency. And so we'll see if when that AWS three spectrum authority expires, that there's more impetus on more licensed full power spectrum.

Roger Entner 17m17s

It can't get worse than it did under the democrats.

Don Kellogg 17m20s

Well, think that's some some good dramatic foreshadowing for some episodes I'm sure we'll have in 2025 here. As always, Roger, it's been a pleasure.

Roger Entner 17m29s

It's another great year.

Don Kellogg 17m30s

Doing the pod with you and then here's to many more.

Roger Entner 17m33s

Many more.

Don Kellogg 17m34s

Happy New Year.

Roger Entner 17m34s

Love doing this with you. I think the audience realized that we're having a lot of fun.

Don Kellogg 17m39s

Absolutely. Absolutely. All right. We'll talk next week. Thank you.

Roger Entner 17m42s

Thank you. Bye bye.