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 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 Antner. How are doing, Roger?

0m23s Speaker 1

I'm great. How are you?

0m24s Speaker 0

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?

0m34s Speaker 1

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.

1m9s Speaker 1

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.

1m24s Speaker 1

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.

1m39s Speaker 1

The other thing that I thought was very interesting here is he acknowledged that AT and 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.

2m17s Speaker 1

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.

2m47s Speaker 0

Still waiting.

2m48s Speaker 1

Still waiting. Still true. True.

2m51s Speaker 0

Yeah. Still waiting as well.

2m52s Speaker 1

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

3m2s Speaker 0

Well, AT and 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.

3m13s Speaker 1

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.

3m42s Speaker 1

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 and 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.

4m13s Speaker 1

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

4m33s Speaker 0

Challenge. It's a challenge.

4m34s Speaker 1

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.

4m58s Speaker 1

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.

5m14s Speaker 1

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

5m27s Speaker 0

Frank Bulben from Verizon.

5m29s Speaker 1

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

5m38s Speaker 0

Well, said he thought that cable had peaked.

5m40s Speaker 1

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.

5m58s Speaker 0

I still think it's a little optimistic, but

6m1s Speaker 1

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.

6m17s Speaker 1

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.

6m44s Speaker 1

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.

7m9s Speaker 1

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.

7m20s Speaker 0

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

7m23s Speaker 1

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

7m26s Speaker 0

Speaking of waiting for Godot. Right?

7m27s Speaker 1

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.

7m56s Speaker 1

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

8m2s Speaker 0

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.

8m10s Speaker 1

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.

8m23s Speaker 0

Eliminate the equipment that causes the issues. Right?

8m25s Speaker 1

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?

8m32s Speaker 1

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

8m50s Speaker 0

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

8m53s Speaker 1

Exactly. When it broke people

8m55s Speaker 0

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

8m57s Speaker 1

Yeah. And they're addicted to that, and I fundamentally disagree with it. And I think our work with AT and 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?

9m15s Speaker 1

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%.

9m41s Speaker 1

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?

10m4s Speaker 0

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

10m7s Speaker 1

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.

10m29s Speaker 0

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 and T has been on fiber over the last three, four years, I think it'll be interesting to see how they treat it.

10m51s Speaker 1

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.

11m11s Speaker 1

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.

11m34s Speaker 1

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.

11m57s Speaker 1

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.

12m14s Speaker 0

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

12m17s Speaker 1

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.

12m44s Speaker 1

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

12m55s Speaker 0

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

12m58s Speaker 1

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.

13m9s Speaker 0

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.

13m32s Speaker 1

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.

13m57s Speaker 1

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.

14m5s Speaker 0

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?

14m20s Speaker 1

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.

14m33s Speaker 0

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

14m37s Speaker 1

Yeah. And and they have, you know, what is it, 18 of run rate, if not longer. Whereas to AT and 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.

14m57s Speaker 0

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.

15m3s Speaker 1

Alright. Talk to you next week. Bye bye.