It’s Not Complicated More Transparency Is Better. AT&T vs T-Mobile

Full Transcript

Don Kellogg 0m10s

Hello, and welcome to the two hundred and eighty fourth episode of week with Roger, 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.

Roger Entner 0m21s

How are you doing, Roger? Hey. I'm good.

Don Kellogg 0m24s

So, Roger, I thought today we could talk a little bit about disclosures. There's been some changes in terms of the way a few of the carriers are reporting their data, and I think it's notable and noteworthy. We had talked a little bit about this last week, and we had friend of the show, Steve Wysak, send us a note and update us on some of the reporting that's actually happening out of AT&T in terms of they're now fully reporting accounts. So I thought that was notable, and and there have been some other changes too. So why don't you

Roger Entner 0m51s

walk us through it? Yeah. So we were amiss that, you know, in the fourth quarter earnings documents, AT&T finally disclosed accounts and about 40 additional metrics. So we were delighted by that because more data is always better. It builds trust.

Roger Entner 1m11s

It gives transparency. Ultimately, it will lead you know, when you have a good story to tell, it leads to higher stock price. You know, I remember AT&T traditionally, under Randall Stephenson and John Stephens, were like the most egregious offenders here, where it felt like they were like deliberately changing the metrics every quarter just to make people's life more difficult. And under John Stankey and Pascal Desroches, it is a remarkably different environment where they're disclosing more and more numbers, and it becomes more and more transparent. I think this will help the stock price because it helps tell a good story, right?

Roger Entner 1m53s

You have nothing to hide. The moment you take numbers away, the knee jerk reaction is always, what are you trying to hide? You know, what was really cool is looked at the numbers, then we ran the analytics. One of the things we do, as the people on the show know, we run these huge surveys. One of the analysis that we do behind is basically walk this for what people tell us, how many lines they have, and we know people are at times confused, they get things wrong.

Roger Entner 2m23s

We put like pretty sophisticated math that took me weeks and months to do, and we apply that and look forward. And then the AT&T numbers came out, and I looked at what our analysis showed and what AT&T disclosed, and we were 0.02 lines away from actual. We knew we were close because AT&T never told us what the real number was, but they looked at our numbers when they like, all the carriers are kicking our tires and as they should. You know, we got, like, a hint, guys, you're really close. I didn't know we were that close.

Roger Entner 3m3s

I'm like, wow. Made me very, very happy. You know? So I think this will help AT&T. On the flip side, T Mobile is now gonna take the lines away, and we'll just report, like, account level churn.

Roger Entner 3m18s

Account level churn is lower than line churn. So, A, what do you think that will help you, right, when you provide less data, less insights, make yourself less comparable to everybody else.

Don Kellogg 3m32s

This is against the backdrop of T Mobile historically having what I would classify as the most easily readable quarterly earnings documents. Right? They're the most straightforward. They have an appendix where they define everything and every document. You know, it's much easier to read than some of particularly the legacy AT&T documents.

Don Kellogg 3m49s

Right?

Roger Entner 3m50s

Oh, yeah. No. Back when when AT&T tried to buy T Mobile, they changed numbers every quarter, and I restated their numbers and published it in one of the I don't remember what the outlet was, but I restated their numbers like every quarter, and it drove them up the tree, and they called me like, why are you doing this? You know? Why are you pissing in our cornflakes?

Roger Entner 4m12s

I'm And like, I'm not pissing in your cornflakes. This is what you should do because one of two things is gonna happen. Either AT&T is gonna buy you, and they will appreciate the clean numbers no matter how bad, or it will not happen, and you will be forced to succeed. And if you have then clean numbers that document how bad it really is, you can show how much progress you can do. And they took that to heart, and Niels Perlman at the time created a very, very clean document.

Roger Entner 4m44s

It became a little bit less transparent when John Ledger left and Mike Sievert took over with the merger when they no longer showed the wholesale lines. So what? You know, we can back it out. Same way we can back out the numbers for Verizon that they don't report. There's a nice amount of cushion.

Don Kellogg 5m4s

Well, Verizon reports consolidated numbers, and they have a lot of detail on consumer, and then you can just back out the business numbers they don't explicitly report because they give you the totals.

Roger Entner 5m14s

Yeah. But there are also a bunch of there are a bunch of numbers that they yeah. But then they don't report, like, the wholesale lines and things like that. There's padding in that number, And the padding is bigger than people think. Or put it different, the number that they don't report is bigger than what people think.

Roger Entner 5m30s

On the other hand, as we talked about, you can argue about, hey, why are we still using archaic numbers like ARPU and and things like that?

Don Kellogg 5m39s

Right. So I I think the argument that T Mobile would make is that in a world where there are connected tablets and smartwatches and pet trackers and everything else, you know, hotspots, whatever you wanna call it, isn't the total value of the relationship at the account level a more accurate measure of success? And I could go either way on this, but, I mean, I think

Roger Entner 6m0s

You can argue it either way. Yes.

Don Kellogg 6m1s

Argue it. Yeah. Exactly. I mean, why not just give us both? Right?

Don Kellogg 6m4s

And, like, most of the folks have done. Right?

Roger Entner 6m7s

Yeah, exactly. What did you lose by giving us both, right? Especially for transparency. Ultimately, even that doesn't matter, because General Mills doesn't tell us, you know, how many boxes of Weetabix they sold and how many customers bought whatever cornflakes, right? So in the end, it's revenue that matters, it's profit that matters.

Roger Entner 6m30s

The problem is we have these historical numbers because for so long, the wireless industry didn't really wanna tell the story of, oh my god, we lost $3,000,000,000 again. Right? It's like, oh, and we're going we're going to lose even more money. But, hey, we got more customers. You wanna tell us growth story?

Roger Entner 6m47s

Now here, I think you have more more opportunity, transparency helps. You know? As I said when I talked to the T Mobile guys, the only thing you do is make the numbers harder for Wall Street guys and individual investors. We are sharing data with most of the sell side investment people on Wall Street anyway, and I'm happy to share the numbers we have. So what are you really gaining?

Roger Entner 7m18s

You're playing silly games. I see your numbers. I know I'm correct. I have now so many years of benchmarking data, and even when when I didn't have it, we got it within zero point zero zero point zero two lines. It was like, what was it?

Roger Entner 7m33s

2.78, and we got 2.76, something like that. It was like, you know, victory.

Don Kellogg 7m39s

Well, I mean, the issue with T Mobile has always been the third free line anyhow. Right? So even if you do report lines, the question is how many of those are free and how many of those are paid, you know, which effectively erodes the ARPU metric anyway. Right?

Roger Entner 7m53s

And we found a way of how to back this out too. Right. Exactly. Exactly. And we know pretty close.

Roger Entner 7m58s

Now the issue sometimes is the three seventh line and the three fifth line and all of that stuff. And they clamped down on this last quarter, and we see the little bit of number. Right? The quote, unquote miss, which I don't even think was a miss at all, can certainly be explained that. You know, we're seeing in some sectors line shaving, without a doubt.

Roger Entner 8m20s

And here, it was a deliberate shaving by T Mobile by making these ultra generous there are some people who have, like, 12 free lines on T Mobile.

Don Kellogg 8m31s

Yeah. If you go on, like, the T Mobile subreddit, there's, like, a bunch of folks that are gaming the system, and every time there's, like, a BOGO or a free line promotion, the stipulations leak, and then a bunch of people on Reddit go and get the free lines. Right? And there are people up there.

Roger Entner 8m45s

Yeah. It's like this board. You know?

Don Kellogg 8m46s

Ten, eleven, 12. Think 14 is the maximum you're allowed to have. It's pretty wild.

Roger Entner 8m51s

Well, I think it could feel. Yeah. But So thank you, Steven. Also, I'm remiss. I'm supposed to shout out to listener Jackie Counts.

Roger Entner 9m2s

Ahmad Rodriguez told me that you're listening and you love the show, so here's a shout out. Keep on listening. Reach out. Tell us a topic you want us to do, and we'll do it, which counts for anybody else too if you have ideas. We do this for you.

Roger Entner 9m17s

We don't do this for us. Well, maybe a little bit. But yeah.

Don Kellogg 9m21s

So we'll see if there are any other changes coming out. I was surprised to see this change from AT&T in q four in terms of reporting. Typically, a lot of these changes happen at the beginning of the calendar year. Yeah. So we'll we'll see if anybody else pulls any rabbits out of the hat or maybe put some rabbits back in the hat as the case may be in q one.

Don Kellogg 9m39s

If that happens, we'll definitely cover it.

Roger Entner 9m41s

Now that we have the AT&T numbers, we can dissect the Well, that's the other

Don Kellogg 9m45s

thing is they gave three years of back cast. Right? And so there's a lot of Kremlinology to be done Oh, yeah. In terms of how those numbers roll up.

Roger Entner 9m52s

I know what I'm doing. But yeah. No. And have a read on light reading, you know, print popcorn. I'm writing a rebundle to somebody who thought it was a good idea to give an opinion on something that our man Sanjay Mehwada wrote, to quote the late Robert Duvall, smell of napalm in the morning, Smell of victory.

Roger Entner 10m15s

Right? Yep. Anyway, should be fun. Get popcorn. Alright, Roger.

Roger Entner 10m19s

We'll talk next week. Thank you. Alright. Talk to you.