T-Mobile lays out 5-year plan
By Chris Ehrlich
BELLEVUE, Wash. — T-Mobile has shared the details of its mobile strategy over the next five years.
T-Mobile outlined the “ambitious plans” at its Analyst Day last month.
Since merging with Sprint in April 2020, T-Mobile has seen an industry-best total net additions and “higher-than-expected synergies” with the Sprint organization, according to the company. T-Mobile is now on a path to post financial results that exceed the three-, four- and longer-term targets in the merger plans.
A lineup of senior executives talked about using the assets and scale from the Sprint merger as well as the recent C-band, or mid-band, spectrum auction to continue its growth, building its 5G network and delivering the “best” experiences to U.S. business and consumers.
T-Mobile also has the financial position to lead the 5G era “into the next decade, if not beyond,” T-Mobile CEO Mike Sievert said.
“We’re already miles ahead in executing on our clear and consistent plan: building the fastest, biggest and most available 5G network with the perfect mix of spectrum,” Sievert said.
“Better yet, this network and growth is primarily funded by our massive synergies. I am incredibly proud of our team for driving faster integration and unlocking even more synergies than expected.”
T-Mobile’s 5-year plans
T-Mobile's short- and long-term goals are built on its 5G network. The company will continue to drive toward “a demonstrable and sustainable 5G leadership advantage,” which it expects to last “throughout the 5G era and beyond.”
T-Mobile invested in C-band to add to its Ultra Capacity 5G.
While its Ultra Capacity 5G will have the broadest reach and capacity, the added C-band will concentrate on urban and suburban areas, where it will make the biggest impact.
Securing 40 MHz of spectrum in top markets will augment and complement T-Mobile’s portfolio of multi-layer spectrum.
The company is targeting its 5G network build to be complete by the end of 2023. T-Mobile has been actively putting its varied spectrum portfolio “to work” to create a broad and dense network.
T-Mobile’s 5G network now covers 287 million people across 1.6 million square miles, with dedicated mid-band spectrum and fast speeds averaging 300 Mbps widely available. Its Ultra Capacity 5G, which uses the depth of mid-band (2.5 GHz), is covering 125 million people.
A wireless tower stands in the sky. Courtesy Adobe.
T-Mobile has less than 10 percent market share in the large enterprise and government markets, and the total business market is over 50 million corporate liable lines. The company's “growth opportunity is huge,” and it expects to double its market share in the next five years to about 20 percent.
Small and rural markets
There are about 50 million households in smaller markets and rural areas in the U.S., making up almost 40 percent of all households in the country. In those communities, T-Mobile’s market share is in the low teens, compared to its national average market share of about 30 percent.
The company plans to be near 20 percent share in those areas over the next five years. T-Mobile will serve consumers with mobile, home broadband and emerging 5G products.
T-Mobile will expand its physical footprint by building hundreds of new stores in those communities over the next five years, including over 200 new stores this year. Its products will also be available in nearly 1,000 Walmart stores in rural areas.
Billions in synergies from Sprint merger
T-Mobile expects the total net present value of merger synergies with Sprint to be over $70 billion — up more than 60 percent from the original merger guidance of $43 billion. The company is “unlocking synergies bigger and faster” than expected and achieving a lower weighted average cost of capital.
T-Mobile saw $1.3 billion of synergies in 2020 and expects to more than double that in 2021 by achieving $2.7 to $3.0 billion of synergies.
Moving forward, the company expects total run-rate cost synergies to reach about $7.5 billion a year — up 25 percent from the original merger guidance of $6 billion. This is largely driven by greater efficiencies in site costs and marketing expenses as well as additional information technology savings.
T-Mobile (Nasdaq: TMUS) is raising its mid-term and long-term guidance across the board with higher service revenue, higher core adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) and higher free cash flow.
Service revenue is expected to be $61 billion to $62 billion in 2023. Long-term, service revenue is expected to be over $70 billion by 2026.
Core adjusted EBITDA is expected to be $28 billion to $29 billion in 2023. Long-term, core adjusted EBITDA is expected to be more than $36 billion by 2026.
- Free cash flow is expected to be $13 billion to $14 billion in 2023. Long-term, free cash flow is expected to be more than $18 billion by 2026.