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

Full Transcript

0m10s Speaker 0

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 Antner. How are doing, Roger?

0m23s Speaker 1

I'm good. Happy New Year.

0m24s Speaker 0

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?

0m36s Speaker 1

Let's do it.

0m37s Speaker 0

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

0m47s Speaker 1

AT and 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.

1m7s Speaker 1

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.

1m32s Speaker 0

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.

1m43s Speaker 0

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 and T has the assets to go straight to fiber, and I think that makes sense for them.

1m55s Speaker 1

It's a philosophical approach. And AT and 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.

2m11s Speaker 1

In the interim, there's a lot of FWA money that you can pick up. The other two guys are picking it up. AT and 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.

2m35s Speaker 1

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.

2m53s Speaker 1

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.

3m11s Speaker 1

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.

3m25s Speaker 1

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

3m29s Speaker 0

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?

3m38s Speaker 1

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?

4m20s Speaker 1

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

4m22s Speaker 0

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.

4m41s Speaker 1

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.

5m2s Speaker 0

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.

5m18s Speaker 1

And 60% plus are picking the premium plans.

5m22s Speaker 0

Absolutely. But

5m23s Speaker 1

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.

5m53s Speaker 1

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

6m5s Speaker 0

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.

6m13s Speaker 1

Very much so.

6m14s Speaker 0

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.

6m28s Speaker 1

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.

6m42s Speaker 1

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.

6m58s Speaker 0

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.

7m10s Speaker 1

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 and T and T Mobile surprised Wall Street with how big of a war chest they will have going forward.

7m25s Speaker 0

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

7m30s Speaker 1

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.

7m56s Speaker 1

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

8m6s Speaker 0

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.

8m17s Speaker 0

Right? So Yeah.

8m18s Speaker 1

We don't know.

8m18s Speaker 0

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

8m21s Speaker 1

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.

8m40s Speaker 0

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

8m43s Speaker 1

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.

9m11s Speaker 1

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.

9m20s Speaker 0

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.

9m30s Speaker 1

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

9m35s Speaker 0

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

9m43s Speaker 0

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.

9m48s Speaker 1

Verizon and AT and 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?

10m22s Speaker 1

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.

10m35s Speaker 0

Nobody knows about it, right?

10m37s Speaker 1

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?

11m10s Speaker 1

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.

11m24s Speaker 1

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.

11m45s Speaker 1

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?

12m2s Speaker 1

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.

12m11s Speaker 0

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.

12m20s Speaker 1

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.

12m58s Speaker 1

Yeah. I think the issue there

13m0s Speaker 0

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.

13m15s Speaker 1

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

13m19s Speaker 0

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

13m23s Speaker 1

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.

13m39s Speaker 1

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.

14m8s Speaker 0

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

14m12s Speaker 1

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.

14m24s Speaker 0

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?

14m32s Speaker 1

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.

15m11s Speaker 1

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.

15m35s Speaker 1

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.

16m7s Speaker 1

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.

16m36s Speaker 1

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.

17m17s Speaker 1

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

17m20s Speaker 0

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.

17m29s Speaker 1

It's another great year.

17m30s Speaker 0

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

17m33s Speaker 1

Many more.

17m34s Speaker 0

Happy New Year.

17m34s Speaker 1

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

17m39s Speaker 0

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

17m42s Speaker 1

Thank you. Bye bye.