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 tenth episode of the week with Roger, conversation between analysts about all things telecom, media, and technology by WeakAnt Analytics. I'm Don Kellogg, and with me in person this week is Roger Antner.

0m23s Speaker 1

Awesome. Right? It took us only 210 episodes.

0m26s Speaker 0

I know. I think

0m27s Speaker 1

this the

0m27s Speaker 0

first time we recorded sitting next to each other.

0m30s Speaker 1

It's awesome.

0m30s Speaker 0

You're in town in the Bay Area where I live. Yesterday, we both attended the T Mobile Capital Markets Day in San Francisco. I thought they shared quite a lot about their strategy moving forward. They do this every three or four years. What were your thoughts on the event?

0m44s Speaker 1

I was very impressed. They delivered a cohesive message and story for growth. I thought they articulated it well, even though most of what they articulated was not news. Right? But they rearticulated it that they have ample growth runway in business.

1m6s Speaker 1

Doesn't come as a shocking surprise, but Kelly Field, you know, threw down the gauntlet and said like, we're going to expand out of micro into mid market. Yep. Which I think is the right way to do, but it is harder than it sounds, right? You can ask cable about how hard it is to expand into mid market, and they are extremely strong in small business. Small markets, rural areas, their acronym SMRA for 40% of the country, right there like 20% there.

1m41s Speaker 0

Yeah. They said they were winning their win share was twice their market share. Right? So if Yeah. You kinda back it into a market share of nine, ten, 11%

1m50s Speaker 1

Probably more. Like Maybe a little more. Fifteen, twenty. Right? Fifteen, twenty.

1m54s Speaker 0

So they're making progress there. And historically, they've not competed really in the small markets, rural areas, right? So there's, I think to multiple folks point room to run.

2m4s Speaker 1

Yeah. And they also put down a new growth target for FWA customers, 12,000,000 by 2028. This will really heighten up the competition between cable and the wireless providers. I think Verizon will also increase their goal to probably roughly round the number, give and take, a little bit above, a little bit below. I wouldn't be I would be surprised if Verizon will not double it to, at least 10,000,000.

2m40s Speaker 1

What was really also interesting is, you know, they expect about $7,080,000,000,000 dollars of free cash flow, 10,000,000,000 goes to the current investments in Lumos, MetroNet

2m55s Speaker 0

And other little journeys there. And

2m57s Speaker 1

U. S. Cellular, right? 50,000,000,000 goes back to shareholders, of which the German government should be extremely happy, because 50% is owned by T Mobile and then a very good chunk of that is owned by the German government, which will help them close their budget woes. Germany has a balanced budget amendment.

3m20s Speaker 1

For people who are fans of budget amendments, they should look at Germany of what happens. I'll leave it

3m25s Speaker 0

at that. That's a pretty

3m26s Speaker 1

good answer. Let's leave

3m28s Speaker 0

it at

3m28s Speaker 1

that, right? Yeah, okay, fair enough. But that's how the fate of a US carrier is playing with German politics. 50,000,000,000 to shareholder, that's about 25,000,000,000 to Deutsche Telekom, and I think roughly a third is owned by the German government directly, indirectly. So it's like $10,000,000,000 to the German budget.

3m47s Speaker 1

And then they have $20,000,000,000 for

3m52s Speaker 0

Whatever may

3m53s Speaker 1

come up. Whatever may come up. And if they can't come up with a good idea, then the German government will be even happier and the investors, right? Stock went down a couple of bucks, which I thought was very shortsighted because I always say like nothing changes until something changes. Everybody articulated their growth story.

4m15s Speaker 1

The T Mobile one didn't change that much because they said like, oh, we have nobody on the list to further buy in fiber.

4m23s Speaker 0

Surprising.

4m24s Speaker 1

Which is surprising. There are plenty of ideas, and if you do it, you want to do it right. And fiber like everything is a scale game. On the other hand, there are not that many pure play fiber players out there, and

4m38s Speaker 0

They do they want to do kind of drew this line where they said, at this point, we're only interested in pure play fiber, which eliminates, you know, like the frontiers, the CenturyLinks of this world, right, that still have a lot of copper at the ground.

4m50s Speaker 1

Yeah. Copper is a major pain. All the carriers wanna shut it down and replace it with modern technology to run fewer networks. And that's easier said than done. We could fill multiple pods on this.

5m7s Speaker 1

It is an extremely complicated topic. But yeah, you know, we were like blown away in the beginning with Sam Altman and Jensen Huang.

5m17s Speaker 0

Yes. They had some pretty blockbuster guests, I mean, in the Bay Area. Probably the two most desirable speakers you'd want at your conference are Jensen Huang, the CEO of NVIDIA dropped in to talk about NVIDIA's new kinda AI powered RAN, which is an interesting concept. Right? The idea being that you have the RAN functionality being optimized via AI and machine learning and things like that.

5m39s Speaker 0

But then when you're not using that, you actually have an edge AI data center basically, right?

5m44s Speaker 1

Exactly, you have it's edge compute. What was also interesting is the other two partners here, both Ericsson and Nokia, right, who are here in the mix. And then it was AI for like internal optimization. For both of this, I think this is not for immediate improvement. These are longer term bets that will win, but they will win in the long run.

6m14s Speaker 0

I mean, I think it's like a generational thing, right? This is like something you'll see six g and beyond likely, right, at scale.

6m21s Speaker 1

Well, we'll see, right? We're at the halfway point, but with yeah, no, six g because we're at the halfway point of five g, right, it's half time, and it's another five years until six g. And so, yeah, this will hit, like, around six g.

6m37s Speaker 0

Right. So NVIDIA had a little bit more to say than OpenAI, but Sam Altman was interesting, but, you know, the use case was primarily around, you know, solving care pain points, optimizing kind of the customer experience with AI. This is the same kind of stuff that, you know, years ago, somebody talked about personalization being able to solve for. Right? So I think I think it's interesting.

6m58s Speaker 0

I think it's less novel than having, you know, AI equipped edge nodes. Yeah. Certainly less details there. But it was interesting to hear both of them talk, and clearly, that's a lot of firepower for an Investor Day.

7m11s Speaker 1

Yeah. And, you know, I think the message that T Mobile wanted us to get away with is how customer centric they are, that they have the best team, best execution, outsized growth runway, and technical innovation. The other thing that was missed in these all many, many things is that Ulf Eweltson announced that they're going to do as the first carrier five gs advanced. You know, this is kind of a trend line of technical firsts of T Mobile's technical team. The network group has grown like, you know, I remember it like twenty years ago, and you know, our friend Neville Ray, who used to be the president of technology, really reshaped that organization from a technology laggard into a technology leader.

8m1s Speaker 1

And Ulf is standing here on the shoulders of giants, and he keeps going, right? But then they continued with a drumbeat of, we have the best network, we have the best network, we have the best network, why don't you believe us, right? And more people are starting to believe us.

8m17s Speaker 0

Right, we have some data that also suggests this trend. Yeah. Even with a lot of network superlatives, there are different ways to measure the speed of the network and the how good the network is. By many measures, T Mobile is number one. They presented some of those measures.

8m31s Speaker 0

But one of the things we see among the consumer base is a lot of people still think that whatever network they're on is the best network, right?

8m39s Speaker 1

Yeah. Well, there's the confirmation bias. I think there's also what's really interesting when you look at our data, when you look at satisfaction by tenure. And shocking surprise, the longer tenured you are with a carrier, the happier you are with the network, right? Because it's one of the major drivers of why you switch.

9m0s Speaker 1

And you're more closed in your opinion that whoever you chose is the best, or that Verizon is the best, and Verizon traditionally has been the best. By the way, all of the carriers have really good networks. The question right with speed, I think a very important measure is like, where do I get it? Increasingly, I think speed is less of an issue, because if I get an handset 100 megabits or 200 or 500, the only one that cares is speed test, right? We still don't have the use case for multiple 100 megabits to the phone.

9m41s Speaker 1

On the other hand, it is extremely hard to argue that faster isn't better, right? Because you would assume that a faster network is also faster in the times and in the places where your network is congested, like in a NFL stadium, in a MLB stadium, you name it, or wherever the closest party hotspot is. But I think that would be the more meaningful way to look at it is like how often do you have usable speed and how often do you have five gs availability or whatever the

10m15s Speaker 0

speed is. I think there's the current, you know, kind of base case, right, which I think illustrate well, which is most folks for 98 or 99% of applications are not gonna see a noticeable difference from a 100 to a 500 megabytes. Right? The future use case though, and some of it kind of drafts along with what NVIDIA was talking about is, you know, when you do have things like AI edge compute, maybe you're doing computer vision, something like that, then there's a real application for that.

10m41s Speaker 1

Yeah.

10m41s Speaker 0

But it's not here yet, Like, networks are always designed for the future.

10m44s Speaker 1

Yeah, but at the same time, that use case is at AR. And you like to remember me, like when we first started working together, what, twenty years ago? Yep. I said like, Don, you need to concentrate on AR. It's going to be the future.

10m59s Speaker 1

Still is the future. It still is the future, right?

11m2s Speaker 0

That's a fair point. That's a fair point. But I mean, I think that the takeaway is the network is good and fast for anybody who's on a network here. But it was a good it was a good event. The other thing I thought was interesting was they talked about kind of the first five g slice, right, within the context of, you know, they're going after some of the government market.

11m21s Speaker 1

Yes. Because T Mobile is the first carrier that has a five g standalone network, where they're moving or have most of it now, if not all of it, on five g standalone, which means that they can do network slicing. And they touted that they won city of New York, LA Fire, I think Chicago PD. So in the three biggest cities in The US, they have some kind of public safety. On one hand, it's impressive.

11m52s Speaker 1

On the other hand, yes, they're giving them a network slice. In all fairness, AT and T gives them a whole core, right? Which is a standalone core for FirstNet. T Mobile touted that it is five gs all the way and FirstNet is not five gs yet. They're getting there, right?

12m11s Speaker 1

The question is how mission critical is the difference? On the other hand, it is FirstNet, it's the one with the government seal, impressive win. On the other hand, how did they win it? I'm sure price played a role. And for T Mobile, first responder, the only way is up, right?

12m29s Speaker 1

The share is so small. At the same time, when you look at the first responder market, there are still a significant number of unallocated first responder agencies. Chicago, LA, and New York are not one of them. So this was a take from somebody. But there are still a lot of agencies that have not made a choice yet where they are expensing the device and the usage of their first responders.

12m57s Speaker 1

So everybody will probably for another year or two tout that we grew, we grew, we grew, and everybody is correct. They all will be growing. It is when all the first responder agencies have chosen a provider, and they should, expensing and forcing your first responders, no matter if that's police, fire, or ambulance services, to have their own personal device on this is ridiculous, right? This needs to be coming through the workforce. It will be interesting how now with this entrance of T Mobile into the first responder market, how that will mix up the market, and it will certainly make it more interesting, right?

13m43s Speaker 0

Yeah, and I think competition is good.

13m45s Speaker 1

Competition is never bad.

13m46s Speaker 0

Sometimes the US government spends a little bit too much money on things, right? So there's multiple providers, I think there's gonna be more rational pricing and such, right? And that's actually historically a role that T Mobile's played in kind of b to b enterprise in general in terms of helping everybody honest in terms of pricing. So I think it's positive. Congratulations to them for, as you say, winning first responders in the three largest markets.

14m10s Speaker 1

Yep. The other thing that I thought was really interesting, and that was like almost a footnote there, is when we look at FWA. They have new FWA routers coming that are going from four antennas to eight antennas, which is expanding the addressable market for FWA and is increasing the speed. All of that not necessarily good news for cable. At the same time, and I'm sure we will talk about it in another episode, Charter made an announcement around network guarantees or promises and pricing, which I'm sure they didn't do in a vacuum.

14m50s Speaker 1

But it shows, if I use that sideline, how Charter has changed under a new CEO. Chris Winfrey is certainly changing the organization. And I'm always saying the fish starts stinking with the head, And the CEO is setting the tone for the entire organization and how the organization behaves and how the organization, what they prioritize. And they take their CEO as the guiding light here for the good and bad, right? And so it's not just in a vacuum.

15m23s Speaker 0

But I mean, think, to kind of wrap it up a little bit, I think we see at least from T Mobile kind of continued leadership across a number of different fronts. They continue to push, know, the question was always gonna be, when is their next kind of five year plan to come out? Is Five years? This is their version of that. Well, it's actually on the three and a half, four year cycle.

15m42s Speaker 0

Right? You know, this is their plan for the next three and a half, four years. It makes sense. It's kind of a straight line continuation of where they've been, you know, increasing targets, increasing goals, and so forth.

15m53s Speaker 1

And Mike Sievert said that they have been working on these plans for the last one and a half, two years. Right? But what's also very interesting, if we do a greater arch, is how T Mobile has matured under Mike Sievert. For the good and bad, the frantic pace of Un carrier announcement has noticeably declined. And I think Mike correctly pointed out, it's a lot harder to be a disruptor as a champion, as a leader, than it is as an insurgent.

16m26s Speaker 1

By the way, if you want to have a backdrop, I would remind you about our Business 23 podcast with Denny Strygel about how you can be a disruptor as the market leader, which is really hard. And so I would encourage T Mobile maybe to be more risk willing and step up more in carrier moves. By the way, I would encourage AT and T and Verizon to do the same thing in their flavor, right? Because disruption is good and nothing will change unless you and until you make a meaningful change. All right, well

17m3s Speaker 0

I think that's a good place to leave it. Yeah. It was a great event. It's great to hang out with you in person here.

17m8s Speaker 1

Yeah. No. That's good.

17m9s Speaker 0

And we should do this more often.

17m10s Speaker 1

Yeah. No. Thank you. Alright. We'll talk next week.

17m13s Speaker 1

Bye bye.