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 forty sixth 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 great. How are you?

Don Kellogg 0m24s

I'm good. So, Roger, there's been a flurry of investor conferences recently. We thought there were some good tidbits there, so figured we'd do a show on them. Who do you wanna start with first?

Roger Entner 0m34s

Well, I thought a couple of them were interesting. There was one from, like, May 13 when Jeff McAlfresh talked at the JPMorgan conference. What was interesting here is most of it was basically staying on the message with what they said at their Analyst Day and reiterating that mindset. But I think what was very interesting was when he talked a little bit about the guarantee, because friend of the show, Sebastiano Petty, and I hope he will come on the show sometime. I know he is listening.

Roger Entner 1m9s

Sebastiano asked him, is guarantee just a brand campaign? He said, it's not a brand campaign. And how they build it up, right? From a basis of having a great network. And here, he literally says it's built on three fundamental pillars.

Roger Entner 1m24s

The first one is a network that you can depend on. The second is that you, as a customer, have access to the deals that you want. And the third is that you get the service that you expect that you deserve. And that's a really good foundation for everybody. But here, he really spells it out of how they were thinking about it.

Roger Entner 1m39s

The other thing that I thought was very interesting here is he acknowledged that AT&T has been slow to five gs. And he said like, that was a deliberate choice. We've always said, and I said this to Jeff personally, good enough isn't good enough, right? Here he elaborates that they waited for the right capabilities and the right equipment to come along. And so I think what he alluded to, he didn't spell it out in that investor call, is the dual mode radios for 3.45 and C band that they have.

Roger Entner 2m17s

And I think this is a game changer for them. And it turns out with a lot of strength and capabilities. And I think one of the things that we are seeing also is a lot of us, you and my favorite inside joke is that I told you when we first got worked together in, when was that, 2007 or something like that? Way, way, way back when. I was like, you know, Don, you have to look at XR and AR, this is where things will go.

Don Kellogg 2m47s

Still waiting.

Roger Entner 2m48s

Still waiting. Still true. True.

Don Kellogg 2m51s

Yeah. Still waiting as well.

Roger Entner 2m52s

And I I think a lot of carriers were relatively careful that if this happens, it will have a massive impact on the network.

Don Kellogg 3m2s

Well, AT&T in particular, I mean, I I remember looking at when the first iPhone came out and it was, you know, taking down their network on two g. Right? Yes. You know, this is before apps even existed.

Roger Entner 3m13s

And the funny part or not the funny part, the painful part is that the year before they cut down CapEx because they thought like, oh, the growth rate is predictable. When we know one thing in wireless, growth rates are not predictable. It looks like right now that yes, our handset based growth is slowing down, right? It's like 5% because basically everybody who has a cell phone has a cell phone. Everybody who wants to watch it on cellular is watching it.

Roger Entner 3m42s

The growth is coming from people that are going from standard definition to HD or even on four ks. That's where we're seeing this. But the other massive growth is FWA. I think AT&T was skeptical and hesitant on FWA because they were afraid of a double whammy of like AR suddenly being a hit and it kills the network while they have it with FWA clocked up like the other guys. They didn't want to be caught with their pants down.

Roger Entner 4m13s

So I think there will be coming more. And I think we saw it already in the numbers that they've gotten more. The other thing that I thought was really, really interesting in the call, he talked about the business segment. Typically, the business segment was like that Fawlty Tower joke about don't talk about the war. Because it's such an unmitigated

Don Kellogg 4m33s

Challenge. It's a challenge.

Roger Entner 4m34s

Exactly. Because business has been in free fall. It was like falling down an elevator shaft in the darkness and you didn't know when you're hitting the ground or if there is or how the ground looks like. And Melissa Anoldi has been taking over their business from our friend Rick Welde. Things are turning not turning turning around is probably too strong a word.

Roger Entner 4m58s

But it's slowing down. And there's like a hope of a rebound. They're seeing progress in their numbers, which is awesome. Because my question was always like, for both AR and a business turnaround, it was like waiting for Godot, right? It didn't show up.

Roger Entner 5m14s

But it looks like here, the business segment is starting to turn, which is encouraging for everybody in the market. That was the AT&T call. Then we had Frank Bulben talk at a conference.

Don Kellogg 5m27s

Frank Bulben from Verizon.

Roger Entner 5m29s

Yeah, Frank Bulben. And Frank pointed out that he felt like the things are turning around when it comes to cable's massive growth.

Don Kellogg 5m38s

Well, said he thought that cable had peaked.

Roger Entner 5m40s

Well, maybe the peak growth rate has peaked. And then that's just a function of the law of big numbers. It's much easier to grow by 100% if you have one customer than if you have seven or 8,000,000, right? So if we interpret it like that, I would agree with it.

Don Kellogg 5m58s

I still think it's a little optimistic, but

Roger Entner 6m1s

I think it's very optimistic, right? It's going to be very interesting to see, right? There's still headroom. But what was even more important and more interesting was Sam Perth's Conversation at Bernstein. And I would recommend everybody to read this one.

Roger Entner 6m17s

And I think Sam Perth even I think he probably gave away too much here. Because he really goes through a lot of the rationale. And he points out that to a certain extent, cable gets it a little bit wrong thinking of FWA as a subpar offer, which it is not. It's the right product for the right usage. Because let's be honest, not everybody needs a gigabit of service.

Roger Entner 6m44s

On the other hand, as we always point out, it's extremely hard to argue that faster isn't better. But for some things, you don't need it. There's a segment for people who don't want to pay fiber prices, and that's what FWA is for. And with FWA, they're able to undercut cable, especially with an entry level mobile offer. And on the top end, they're going to attack it with fiber.

Roger Entner 7m9s

And so cable is stuck in the middle. This sounds better than it is because I think there's still a ton of fight left in cable. This is all supertanker territory here.

Don Kellogg 7m20s

Yeah. Thought DOCSIS four was gonna save everybody. Right?

Roger Entner 7m23s

Yeah. And that's why and that's why cable

Don Kellogg 7m26s

Speaking of waiting for Godot. Right?

Roger Entner 7m27s

Well, No. If DOCSIS four point o is coming, and the cable rhetoric is very good around DOCSIS four point zero. But still, when you look at the actual numbers between, what is it, 49% of cable is actually being served by fiber. Because all new markets that cable builds is actually fiber. My thing is fiber, yes, it's very good.

Roger Entner 7m56s

But fiber isn't everything. It's how you treat the customer. I think even with DOCSIS four point

Don Kellogg 8m2s

o I mean, it's just something as simple as the router too. I mean, there's a lot of legacy routers out there on cable connections that are also not great.

Roger Entner 8m10s

And they suck. And they suck. Right? And the biggest gift that cable could do to itself is, like, change out all these routers. Here's my free, you know, McKinsey level $2,000,000 consulting advice.

Don Kellogg 8m23s

Eliminate the equipment that causes the issues. Right?

Roger Entner 8m25s

Yeah. Exactly. You know, no shit, Sherlock. And we have the numbers for it, by the way, dear cable. But I don't think that's it, right?

Roger Entner 8m32s

It's also how you treat your customer. And I'm particularly encouraged with Comcast, with that new price brand, we went over it, right? My question is like, will they stick with it? They have like a gene that's like, you know, we want exploding prices. So the question is, is this just

Don Kellogg 8m50s

People love a great deal, but they hate it when it goes away. Right?

Roger Entner 8m53s

Exactly. When it broke people

Don Kellogg 8m55s

the door, but then you cause a churn event a year or two later.

Roger Entner 8m57s

Yeah. And they're addicted to that, and I fundamentally disagree with it. And I think our work with AT&T Fiber proves us right. But anyway, yeah, they have to beat this. But to talk more about Sam Perth and his conversation, they clearly did buy Frontier for more convergence, right?

Roger Entner 9m15s

It's gonna be very interesting, you know, was copper retirement worth it? What he also talked about is like the high FICO scores of FWA, which is north of seven twenty. But that's more a function of Verizon than it is of FWA. It has high things. But what he really pointed out was that for the people who have both mobile and fiber, that their churn was less than 1%.

Roger Entner 9m41s

Now, what Laurent Yoon didn't pick up here is that the moving rate is around that. So if I take the churn, when he said like it was less than 1%, and I subtract from it the moving rate, which is a forced disconnect, the first churn in all likelihood with Fios, then their churn is like near zero. That's what I read into this, right?

Don Kellogg 10m4s

Well, who doesn't love a super fast connection that never goes down, right?

Roger Entner 10m7s

Yeah, exactly. As I said, I'm a personal customer on Fyres, and my fiber connection went down four times in seventeen years. And one of those days I was not at home. So, you know, I'm not going to change, and Verizon treats me well here at home. But, yeah, that was like the big standout.

Don Kellogg 10m29s

I mean, think it'll be interesting to see I mean, obviously, the Frontier acquisition indicates that they are interested in fiber again outside of the ILEC. But Verizon has been so hot cold on fiber over the years. Yeah. In contrast to how consistently hot AT&T has been on fiber over the last three, four years, I think it'll be interesting to see how they treat it.

Roger Entner 10m51s

But here's the thing. As I always say, people make decisions, not numbers and facts are making decisions. And you can almost tie it like, Verizon being hot and cold on fiber, you almost can tie it back to Denny, Denny Strygall. When he was like president there, he left at when? 02/2009, I think.

Roger Entner 11m11s

That's when they went cold on fiber. And Lowell was taking over and they worked cold on fiber. And now with Sam Perth being in the lead for consumer, they're becoming warm and hot on fiber. And I see Sam Perth taking a lot out of Danny's playbook. And I know the two of them don't know each other because I asked both of them if they know each other and they said no.

Roger Entner 11m34s

They should know each other. But I see so much potential in Sam for becoming Danny, because he picks up so many pieces of that playbook. And if I would be the other guys, I would be afraid and I would look back in history and see like how Danny basically ran the industry and do that. I think Sampath is still quite a way to go. The horizon of today is not the horizon of then.

Roger Entner 11m57s

And Sampath literally said on that call, deep segmentation execution focus, but we think an opportunity for long term growth. And it's really that execution focus. So it's it's pretty cool. And then they talked about, you know, that they finally turned around the ship on prepaid.

Don Kellogg 12m14s

Well, I think a lot of ships on prepaid are turning around right now.

Roger Entner 12m17s

Well, you know, we talked about it, and prepaid has consistently grown. It was not gangbuster growth, but they eked out 100,000 in the last couple like growth. We all look at postpaid because Wall Street is so focused on postpaid, postpaid, postpaid. And so much of prepaid is it's not unreported, but it's really hard to find. So prepaid, I look at it, it's the hardest to cover market by far.

Roger Entner 12m44s

And it's the guy who has the least money, which means there's virtually no research. I think we were the only ones who have a really good grip on the prepaid market. But even for us

Don Kellogg 12m55s

It takes over a million sample to get there too. Right?

Roger Entner 12m58s

So Yeah. Exactly. But even at the very long tail, we're not that good, if we're really, really honest. But like the medium sized prepaid, we can tell.

Don Kellogg 13m9s

Well, the other thing I think that's interesting about prepaid though is the flux in and out with Lifeline. Yes. If you think of it like a spectrum, like Lifeline being somewhat reported, but there's a lot of issues about getting that data till March in line. And then the prepaid folks and then the postpaid folks, in good times, people come out of flows. Keep come out of lifeline into prepaid, and bad times, they go back out of prepaid into lifeline.

Roger Entner 13m32s

And then there was the ACP disturbance in the force, right, that jumbled everything up. It's a really, really tough market where people typically can't afford good research. And we just said like, we look at the overall market and that means the small guys. We're gonna get even better in the small guys as we ramp up our sample to like 12,000 people a week. That's just like monster.

Roger Entner 13m57s

I'm still looking forward to that when we do that. And then you can really go into the long tail. But yeah. So I thought it was really, really interesting.

Don Kellogg 14m5s

Well, I mean, I think these events or conferences are always a good data point. Right? Because you either a lot of these execs do them on an ongoing basis and they either you know, when you listen to all of them like we do, you pick up, are they saying the same thing that they said last time, or is there something new here? Right?

Roger Entner 14m20s

Yeah. Oh, the other thing that he talked about is, like, his convergence number in the Fiverr footprint is, like, north of 40%. He's, like, 45, 50 ish. So that was the other interesting thing here that he talked about.

Don Kellogg 14m33s

Right. Oh, I mean, that's also their strongest market. Right?

Roger Entner 14m37s

Yeah. And and they have, you know, what is it, 18 of run rate, if not longer. Whereas to AT&T's great credit, essentially fiber, they have like seven years, and they're almost at the Verizon levels, and that's really impressive. Both of them are really, really impressive. But yeah, fun industry, fun week.

Don Kellogg 14m57s

Well, we'll keep an eye on it, and I'm sure there'll be more tidbits Oh, I'm sure there will be. Later. Alright. Thank you, sir.

Roger Entner 15m3s

Alright. Talk to you next week. Bye bye.