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T-Mobile US (NASDAQ: TMUS)
Q3 2024 Earnings Call
Oct 23, 2024, 4:30 p.m. ET

T-Mobile US Reports Strong Q3 Earnings Amid Challenges

Overview of Today’s Discussion

• Prepared Remarks
• Questions and Answers
• Call Participants

Opening Remarks

Operator

Good afternoon. All participants will be in a listen-only mode. [Operator instructions] After today’s presentation, there will be an opportunity for questions. [Operator instructions] Now, I would like to turn the conference over to Cathy Yao from T-Mobile US.

Please go ahead.

Cathy Yao — Senior Vice President, Investor Relations

Good afternoon. Welcome to T-Mobile’s third quarter 2024 earnings call. Joining me today are Mike Sievert, our president and CEO; Peter Osvaldik, our CFO; along with other senior leadership team members. Please note that during this call, we’ll make forward-looking statements that involve risks and uncertainties which could cause results to differ significantly from our expectations.

We encourage you to review our comprehensive list of risk factors in our SEC filings. You can find our earnings release, investor fact book, and reconciliation between GAAP and non-GAAP results discussed on this call in the Quarterly Results section of our investor relations website. Now, I would like to hand the call over to Mike.

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Performance Highlights from Q3 2024

Mike Sievert — President and Chief Executive Officer

Thank you, Cathy. Welcome to the Q3 call. We’re broadcasting from Bellevue today and I’m here with several members of our senior leadership team to discuss another strong quarter for T-Mobile. Following our recent Capital Markets Day, Peter and I will keep our comments brief so we can focus on your questions. First, I want to acknowledge our team for their dedicated efforts to assist our customers and communities affected by Hurricanes Helene and Milton. These storms were devastating, and I am proud of how our team responded with readiness and innovative technologies to aid recovery efforts.

Now, about Q3. It was a very strong quarter, showcasing the consistent execution we’ve emphasized as a key part of our long-term strategy.

To meet our goals, delivering strong, reliable results is essential. This quarter, we achieved our best Q3 postpaid phone net adds in ten years, thanks to record-low postpaid phone churn and growth in new customers. We continue to lead the industry in switching and household adoption, showcasing our strong network, value, and customer experience.

The digitalization goals we laid out at the Capital Markets Day are on track. In Q3, the portion of iPhone launch sales bought online increased by 40% year-over-year. For the first time, the majority of T-Mobile-branded iPhone preorders this year were digital. This reflects a growing trend among customers who prefer a seamless online shopping experience.

We also made significant progress in broadband, achieving 6 million customers in just three years, positioning us halfway to our target of 12 million customers by 2028. Our leading 5G network, which was recently rated as having the best 5G availability in the world by Opensignal, is crucial in attracting new customers.

In Q3, we demonstrated a strong ability to grow profitably, leading the industry in service revenue growth with year-over-year growth in postpaid service revenue nearly double that of our competitors. Our adjusted EBITDA increased by 9% against the competition, and once again, we achieved industry-leading free cash flow conversion.

To summarize, our strategy of focusing on smart, profitable growth is delivering results. We see plenty of opportunities ahead as we continue to work towards our ambitious plan. Now, let me pass it over to Peter for an update on our guidance.

Peter Osvaldik — Executive Vice President, Chief Financial Officer

Thank you, Mike, and thanks to everyone for joining us. As
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Strong Q3 Results Prompt Increased 2024 Guidance for Major Telecom Player

In a recent announcement, Mike said, “We delivered yet another fantastic quarter and are raising our guidance yet again.” Here’s a summary of the company’s expectations for 2024.

Customer Growth Projections on the Rise

The telecom company has increased its forecast for total postpaid customer net additions to between 5.6 million and 5.8 million, marking a rise of 150,000 at the midpoint from the previous estimate. The company now anticipates around 3 million postpaid phone customer net additions for the full year. Furthermore, it’s projecting a 3% year-over-year increase in full-year postpaid Average Revenue Per Account (ARPA). This growth is supported by an acceleration in service revenue, which is expected to outpace performance seen in 2023. The core adjusted EBITDA is forecasted to be between $31.6 billion and $31.8 billion for the full year, incrementally up by $50 million from earlier projections.

Stable Capital Expenditures and Growing Free Cash Flow

For capital expenditures, the expectation remains unchanged at between $8.8 billion and $9 billion, with long-term projections continuing to fall between $9 billion and $10 billion annually as discussed during the recent Capital Markets Day. The anticipated adjusted free cash flow, which accounts for merger-related costs, is expected to be between $16.7 billion and $17 billion, reflecting a $50 million increase at the midpoint, driven by margin expansion and capital efficiency.

Path to Transformation: Challenger to Champion

Before closing, Mike highlighted the ambitious plan laid out at Capital Markets Day to evolve from a challenger to a champion. This transition hinges on consistent execution. The results from Q3 serve as evidence of this journey, showcasing the strong customer appeal of the company’s value, network, and experiences. The call was then handed over to Cathy Yao for the Q&A segment.

Questions & Answers:

Cathy Yao — Senior Vice President, Investor Relations

Let’s move to your questions. [Operator instructions]

Operator

The first question comes from Simon Flannery from Morgan Stanley. Please proceed.

Simon Flannery — Analyst

Thank you. Mike, could you discuss the company’s stock buyback activity? It seems like there has been more action in recent weeks, though Q3 appeared quieter. What’s the strategy going forward? Additionally, Peter, could you provide insight into the wholesale segment and the impact from external factors such as ACP and Mint Mobile?

Mike Sievert — President and Chief Executive Officer

Thanks, Simon. I will let Peter address both questions, but first, I want to congratulate you on your retirement. Your contributions to the investment community have been invaluable.

Peter Osvaldik — Executive Vice President, Chief Financial Officer

Thank you, Simon. Our approach to buybacks evolved after observing an unexpected rise in share prices. This prompted us to refine our strategy, resulting in more measured and consistent execution moving forward. Now onto wholesale, we anticipate 2025 to be the lowest point for wholesale and overall service revenue. Excluding ACP and the transition of Tracfone, we are poised for growth beyond 2025.

Simon Flannery — Analyst

Great, thank you.

Cathy Yao — Senior Vice President, Investor Relations

Operator, please proceed to the next question.

Operator

Next, we have John Hodulik from UBS. Please go ahead.

John Hodulik — Analyst

Thank you. I have two questions. First, regarding your spectrum strategy, can you clarify any recent market moves, particularly around spectrum trading? Are you considering acquiring more spectrum? Also, could you provide an update on the 800-megahertz spectrum?

Mike Sievert — President and Chief Executive Officer

Let’s focus on the digitalization efforts first. At Capital Markets Day, we presented an ambitious plan targeting significant value creation. By 2027, we expect a core adjusted EBITDA increase of about $10 billion compared to 2023. This growth will be driven by both revenue increase and operational improvements, achieved through enhanced marketing precision and reduction of customer issues. We have mapped out this strategy in detail over the past two years, setting clear benchmarks to monitor our progress.

T-Mobile’s Future Plans: A Deep Dive into KPIs and Strategy

The journey from ambition to achievement has been a focal point for T-Mobile as it shares updates on milestones and strategic goals.

Setting Ambitious Goals

Reflecting on T-Mobile’s plans from 2021, many observers considered the targets overly ambitious. However, the company managed to achieve these goals due to meticulous planning. While T-Mobile does not always reveal its internal strategies, it maintains a degree of transparency that surpasses many industry peers. Essential markers have been set, like reducing person-to-person customer service interactions by 75% and shifting the majority of activations to digital platforms. Notably, the company recognized that achieving all Key Performance Indicators (KPIs) isn’t necessary for success.

Striving for a balanced approach, T-Mobile aims to be realistic yet ambitious, fostering a culture of innovation within the industry. This is part of their vision, transitioning from a Challenger to a Champion, which emphasizes transformative strategies that reshape the marketplace.

Insights on the Spectrum

Switching focus to spectrum discussions, President of Technology, Ulf Ewaldsson, provided updates on T-Mobile’s network building. The company is focused on developing a robust 5G multilayer network, capitalizing on its sub-6 gigahertz spectrum for enhanced capacity. Ewaldsson highlighted that the 3.45 spectrum is not part of their current plans, but ongoing approvals for transactions are in process. The completion of the auction for the 800 band, albeit without qualifying bids, offers T-Mobile new strategic options moving forward.

Addressing Ownership and Performance Targets

Chief Executive Officer Mike Sievert responded to inquiries regarding Deutsche Telekom’s (DT) ownership interest in T-Mobile. DT aims to increase its stake from current levels into the high 50% range. Although the exact timing remains uncertain, Sievert noted that T-Mobile has maintained a solid governance structure under DT’s leadership. The alignment between T-Mobile’s growth and DT’s interests fosters a collaborative atmosphere that benefits both parties.

Future Guidance and Year-End Targets

When asked about the target of acquiring 3 million postpaid phone net additions for the year, Chief Financial Officer Peter Osvaldik acknowledged the typical seasonal activity in the fourth quarter. T-Mobile remains cautious in issuing guidance, given two vital months lie ahead. However, both Sievert and Osvaldik conveyed confidence in their performance metrics, citing strong trends that align with their expectations.

Maintaining Momentum Amid Challenges

Sievert’s acknowledgment of the frequent questioning around fourth-quarter guidance reflects common concerns among investors. The company’s historical cautiousness at year-end is not unfounded, as the most significant parts of the quarter are still unfolding. Encouragingly, recent trends have indicated progress that aligns seamlessly with T-Mobile’s strategic plans.

Next Steps and Open Questions

As the call progressed, Cathy Yao, Senior Vice President of Investor Relations, opened the floor for more inquiries, underscoring the firm’s commitment to fostering dialogue with analysts and investors alike. The next round of questions continues to probe the company’s strategies and market positioning, leading to thoughtful conversations around T-Mobile’s ambitious goals and their execution.

T-Mobile’s Growth Strategy: Successes in SMRA Markets and Business Ventures

Update on Market Expansion in SMRA Regions

Could you share the current status on expanding T-Mobile’s presence in the SMRA markets and the business sector?

Strong Growth in Postpaid Phone ARPU

Additionally, it appears that postpaid phone ARPU saw a year-over-year increase of 1.8%. Previously, expectations for the latter half of the year had been around 1% growth. Could you explain the factors contributing to this strong ARPU performance? What insights does this provide for upcoming quarters?

Mike Sievert — President and Chief Executive Officer

That was a multi-part question, so I will ask three different speakers to answer briefly. Jon will discuss SMRA, Callie will touch on business, and then Peter will address ARPU, though he might pivot the discussion to ARPA.

Jon Freier — President, U.S. Consumer Group

Thank you, Mike. To highlight, SMRA represents 40% of the market, reaching 140 million people across 50 million households. We are thrilled with our growth in these areas.

In Q2, we recorded our highest win share quarter ever, and in Q3, we surpassed that achievement. Our momentum is strong as we continue gaining market share in smaller and rural regions.

At Capital Markets Day, I mentioned that our Net Promoter Score in these markets is now top-ranked, standing 20% higher than our closest competitor. This positions us well for ongoing customer loyalty and growth while we also pursue new accounts in the top 100 markets. Driving substantial growth in these underserved areas remains a focus for us.

Mike Sievert — President and Chief Executive Officer

While you didn’t ask, I’d like to add that the same dynamics in smaller markets are also present in many of the top 100 markets, where we see significant potential for growth. Regardless of our rank – whether first, second, or third – we are expanding throughout these areas, indicating that our strategy is effective across the board.

Callie Field — President, T-Mobile Business Group

Thanks, Mike. The TFB team is excited about our progress. We consistently outperform our main competitor in postpaid phone net adds, overall net adds, and invoice churn. Our growth is robust, and we have declared our ninth consecutive quarter of positive trends across all segments.

In the enterprise sector, we achieved record activations, driven by significant customer wins like American Airlines, for whom we’re developing BTS solutions. New logos include New York Life Insurance, where we are ensuring secure voice communications, and in government-related segments, we’ve seen double-digit growth, largely due to wins like the Spiral 4 contact with the Fed.

We have partnered with various sectors, including the Army and Air Force, and our high-speed internet (HSI) business is flourishing with strong net adds in fixed wireless. Noteworthy new customers like Lowe’s and PetSmart highlight our expanding market reach, and we continue to solve connectivity issues for major school districts nationwide.

Mike Sievert — President and Chief Executive Officer

Excellent job, Callie. Now, let’s shift our focus back to ARPU.

Peter Osvaldik — Executive Vice President, Chief Financial Officer

The recent ARPU data indeed shows underlying strength. Initially, we had projected a modest 0.5% year-over-year increase, and it now stands at an estimated 75 basis points. The complexity of ARPU stems from its reliance on mixed metrics. Therefore, while segments with lower ARPUs like those described by Callie contribute to revenue, metrics such as Average Revenue Per Account (ARPA) tell a more revealing story. Notably, we’ve projected a 3% year-over-year increase in ARPA.

Cathy Yao — Senior Vice President, Investor Relations

Thank you, Mike and Peter. Operator, please take the next question.

Operator

Our next question comes from Jonathan Chaplin from New Street Research. Please go ahead with your inquiry.

Jonathan Chaplin — Analyst

Thanks for taking my questions. Ulf, I’m curious about the challenges you’ve faced regarding the use of PCS spectrum for your direct-to-device service with Starlink and whether you view the 800 megahertz spectrum as a viable alternative. Mike, I also want to ask about AT&T’s surprising comment about potentially opening their fiber network for wholesale. Would this present an opportunity for T-Mobile to leverage that network for bundled product offerings?

Mike Sievert — President and Chief Executive Officer

Great questions. I’ll address both, and I’ll let Ulf provide additional details as needed.

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T-Mobile’s Strategic Insights: Fiber Expansion and Future Device Upgrades

The company is making headway in its direct-to-sell strategy.

T-Mobile is optimistic about launching its beta program. During recent hurricanes, they successfully sent out hundreds of thousands of messages, reaching people who wouldn’t have received them otherwise. With over 200 satellites deployed, T-Mobile anticipates progress despite regulatory challenges with the FCC.

Concerning 800 MHz spectrum, CEO Mike Sievert explained that T-Mobile is no longer required to sell it due to a lack of qualifying bids, providing them with greater flexibility. He emphasized that any proceeds gained from a future sale would be an additional benefit, as it is not currently factored into T-Mobile’s financial plans.

Sievert also highlighted the significance of this spectrum, calling it valuable, and urged stakeholders to stay tuned for updates on its potential use.

Discussing fiber optics, T-Mobile is eager to compete in a highly competitive market. Recognizing the collaborative landscape among cable operators, Sievert expressed excitement about their fiber plans and their commitment to being a leader in fiber services. By collaborating with leading industry players, T-Mobile aims to deliver exceptional service swiftly.

Cathy Yao — Senior Vice President, Investor Relations

Thank you, Jonathan, for the question. Next question, please.

Operator

Our next question comes from Craig Moffett from MoffettNathanson. Please go ahead with your question.

Craig Moffett — Analyst

Thank you. First, let me wish Cathy a happy birthday today.

Mike Sievert — President and Chief Executive Officer

Yes. Happy birthday, Cathy.

Cathy Yao — Senior Vice President, Investor Relations

Appreciate it.

Craig Moffett — Analyst

Let me ask about the low handset upgrade rates you and your peers are experiencing. It seems the expectation for a significant upgrade cycle may already be decided. Given manufacturer expectations for a stronger AI-driven upgrade cycle next year, how do you view this situation, and what preparations are you making to leverage potential market share gains?

Mike Sievert — President and Chief Executive Officer

That’s a great question, Craig. Let’s hear from our Chief Marketing Officer, Mike Katz, about current upgrade trends and outlook.

Michael Katz — Chief Marketing Officer

Certainly. Upgrade rates remain low largely because our customers’ needs are met through our upgrade programs, coupled with the excellent performance of T-Mobile’s 5G devices—over 80% of our customers use these devices. Quality and longevity of smartphones are contributing factors, and many customers are satisfied with their current devices.

Looking ahead, predicting exact outcomes remains challenging as manufacturers often keep their plans under wraps. However, similar to the recent iPhone launch, T-Mobile is well-poised to capture market share regardless of the nature of the upgrade cycle. Historically, during upgrade booms, customers tend to switch, and T-Mobile has been positioned as a leader in capturing these transitions.

In the latest quarter, T-Mobile added 315,000 new accounts, outperforming all competitors in the industry.

Mike Sievert — President and Chief Executive Officer

Does anyone wish to add to this?

Ulf Ewaldsson — President, Technology

Yes, I want to highlight the advancements in device capabilities. Many new phones are equipped for enhanced connectivity, offering 30% faster download speeds and 15% quicker uploads on our network. T-Mobile’s stand-alone core, established since 2020, supports these innovations, leading to improved call quality and better spectrum usage.

Mike Sievert — President and Chief Executive Officer

This brings us back to customer experiences. When users enjoy exceptional service with their current devices, they are less likely to switch, and this low upgrade rate reflects that satisfaction. However, on the occasions that customers do decide to switch, T-Mobile is keen to capitalize on those moments, clearly demonstrating our ability to lead in customer transitions in the market.

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T-Mobile Outlines 5G Strategy Amid Growing Device Demand

As T-Mobile prepares for a potential super cycle in technology, executives discuss how current and future devices will impact network leadership.

Competitive Edge and Market Leadership

During Capital Markets Day, T-Mobile emphasized their intention not just to defend their leading position in the 5G network space but to extend it further. Currently, their superiority in the market is higher than it was two years ago.

One key factor driving this advantage is that many existing devices in customers’ hands do not utilize the full capabilities of the network. For instance, the new iPhone 16 has features that can be fully unlocked only when connected to T-Mobile’s network. As more customers obtain these advanced devices, T-Mobile expects to see a significant boost in network performance and user satisfaction. This will create a dynamic where customers are more likely to remain satisfied with their current devices, even considering future upgrades.

Seasonal Revenue Expectations

Peter Osvaldik — Executive Vice President, Chief Financial Officer

Osvaldik mentioned that T-Mobile anticipates similar seasonal trends for equipment revenue in the fourth quarter as they experienced in the previous year. With the holiday season approaching, the company expects to see a notable increase in sales compared to the third quarter.

Network Upgrade Plans for 2024

Craig Moffett — Analyst

Moffett inquired about T-Mobile’s strategy for wireless network upgrades in the coming year, seeking clarity on the focus between urban and rural expansions.

Mike Sievert — President and Chief Executive Officer

Sievert explained that T-Mobile’s planning strategy is data-driven, focusing on customer needs rather than just geographical trends. This approach allows T-Mobile to prioritize network coverage based on customer experience data collected from various sources.

Ulf Ewaldsson — President, Technology

Ewaldsson elaborated on their customer-driven coverage approach. With over 80% of towers equipped similarly, T-Mobile can build a consistent network across the board. Through advanced algorithms and AI models, T-Mobile evaluates billions of data points to assign values to service areas, identifying where upgrades will best serve customers. This refined approach enables T-Mobile to allocate capital efficiently for maximum benefit.

Regarding the 3 gigahertz spectrum, Ewaldsson noted that T-Mobile strategically selected 50 markets during recent C-band auctions to optimize their deployment plans. Although this spectrum can enhance capacity, T-Mobile currently sees no immediate need, as they have not maximized their mid-band spectrum supply yet.

Future Plans and Investment Outlook

Sievert added that T-Mobile has a $9 billion to $10 billion capital investment plan aimed at bolstering and extending their 5G leadership. The company is committed to proactive capital allocation based on their advanced model, which informs a variety of future upgrade projects throughout the network.

James Schneider — Analyst

Schneider asked about any potential concerns regarding macroeconomic indicators or consumer behavior that could signal an upcoming slowdown in growth.

Overall, T-Mobile’s strategic approach combines robust technology and consumer insights to solidify their market position while preparing for future challenges.

T-Mobile’s CEO Discusses Industry Trends, Economic Indicators, and Future Growth Strategies

Mike Sievert — President and Chief Executive Officer

Thank you for your question. I’m not quite the right person to answer your two-part question effectively. T-Mobile, and perhaps the wireless industry as a whole, isn’t the best early warning system for macroeconomic shifts.

This is partly due to the essential nature of the services we provide. Our customer metrics show that, across different categories, customers continue to pay similar amounts and value our services consistently. There haven’t been any significant changes in behavior that are worth highlighting.

When it comes to overall industry growth, predicting trends has proven tricky. We’ve done well in forecasting our business’s performance, but anticipating broader market changes remains complex. There are elements impacting growth that are unpredictable, leading us to focus on switching customers from other providers rather than chasing uncertain new additions.

Our stable customer base, particularly those making the switch to postpaid plans, is vital to our revenue growth story. We’re focusing on those families who have been with us longer and making the transition from prepaid to postpaid. In fact, in the last quarter, we noted a strong transfer of 175,000 customers from our prepaid to our postpaid services. This trend has been consistent over the past five years and suggests that customers are increasingly qualifying for postpaid plans in this economic climate.

James Schneider — Analyst

Thank you.

Mike Sievert — President and Chief Executive Officer

Of course.

Cathy Yao — Senior Vice President, Investor Relations

Operator, we invite the next question.

Operator

Our next question comes from Peter Supino with Wolfe Research. Please proceed with your query.

Peter Supino — Analyst

Hi, and thank you. I have a long-term question regarding spectrum costs. Your stock valuation demonstrates strong market confidence in your growth potential. If you adopt an investor’s perspective, don’t you think another essential value driver is determining the cost of that growth?

I’m interested in your thoughts on 6G costs, especially considering that 4G and 5G each cost major companies tens of billions. Your partnership with Sprint in 5G was impressive. Could you share your outlook on this and whether your current strategies might lead to lower spectrum and RAN costs in the next cycle compared to the previous ones? Thank you.

Mike Sievert — President and Chief Executive Officer

That’s an insightful question, Peter. While it may be a touch early to delve deeply into this, there are reasons for optimism regarding long-term industry trends. During our recent Capital Markets Day, we highlighted our vision for the future beyond the current 5G cycle, specifically with AI RAN technology.

It’s clear that another significant cycle is ahead, but it might be more efficient than previous ones. The anticipated promises of Open RAN may finally come to fruition, allowing us to offset future costs more effectively. Our projections show that for the next few years, a capital expenditure area in the range of $9 billion to $10 billion is sensible. While this doesn’t cover complete 6G timelines, we’re excited about the potential benefits AI RAN could bring to our operations.

We expect technology advancements will enhance network performance while reducing costs associated with capital and operational expenditures. Compared to the substantial 5G cycle, the next cycle could be much more streamlined. The high costs associated with 5G were partly due to competitors aggressively acquiring mid-band spectrum, marked by the increased competition following our merger.

This competition has benefited consumers greatly, resulting in higher industry cash flows while providing higher speeds and data usage at similar prices to those several years ago. Consequently, both consumers and the industry stand to gain, and we’re optimistic regarding 6G prospects. Similar to our proactive stance in 5G, we aim to lead in shaping the future of 6G.

Our partnerships with Ericsson, Nokia, and NVIDIA are strategic steps in this direction, focusing on developing AI RAN technology to bring about forward-thinking solutions for our customers.

Cathy Yao — Senior Vice President, Investor Relations

Thank you, Peter. Thank you, Mike. Operator, we can proceed to the next question.

Operator

The next question comes from Sam McHugh from BNP Paribas. Please go ahead.

Sam McHugh — BNP Paribas Exane — Analyst

Thanks. Following up on the consumer benefits stemming from the Sprint acquisition, what is the current status of the UScellular deal? Additionally, can you clarify the ARPU growth? Is it primarily due to a mix effect from gross additions, or is it driven by price increases? Thank you.

Mike Sievert — President and Chief Executive Officer

I’ll start with Peter to address the ARPU and ARPA concerns before handing it over to Mike Katz for updates on UScellular.

T-Mobile’s Strategic Moves Driving Growth and Customer Value

The recent discussions highlighted the continuous growth in T-Mobile’s customer relationships, especially with the introduction of 5G home broadband and various connected devices. The executives noted a significant expansion in their business customer segment and saw a notable 3% increase in average revenue per account (ARPA), primarily due to solid customer relationship growth rather than minor factors like rate plan optimization.

Mike Sievert — President and Chief Executive Officer

Turning our attention to UScellular, Metronet, and Lumos, there’s been considerable activity on these fronts. Can you provide an update on these mergers?

Michael Katz — Chief Marketing Officer

Absolutely. We are progressing well with several transactions. We anticipate closing the Lumos acquisition in early next year. The UScellular deal should finalize by the middle of next year, while Metronet is expected to close by 2025. The regulatory review process is ongoing, and it appears to be moving in a positive direction.

Mike Sievert — President and Chief Executive Officer

Mark Nelson, our general counsel, has insightful perspectives on antitrust matters related to these acquisitions. Mark, what are you observing?

Mark Nelson — Executive Vice President, General Counsel

We’ve successfully cleared the Department of Justice (DOJ) review for both Lumos and Metronet. Next, we await clearance from the FCC, which may take some more time. In the case of UScellular, we believe that these acquisitions will significantly benefit consumers by leading to lower prices, especially for UScellular customers, and improving network coverage overall.

Mike Sievert — President and Chief Executive Officer

We’ve initiated planning with UScellular since their integration will require more elaborate strategizing. The teams are motivated and optimistic about this collaboration, as it promises both enhanced network quality and competitive pricing for customers migrating to T-Mobile plans.

This situation exemplifies a clear win-win, bolstering our confidence as we navigate through the acquisition procedures.

Sam McHugh — BNP Paribas Exane — Analyst

Thank you.

Mike Sievert — President and Chief Executive Officer

You’re welcome.

Cathy Yao — Senior Vice President, Investor Relations

Now, let’s move to our next question, please.

Operator

Our next question comes from Kannan Venkateshwar from Barclays. Please go ahead with your question.

Kannan Venkateshwar — Analyst

Thank you. Mike, I’d like to discuss the current pricing trends in the industry. It seems that price increases are being absorbed well by consumers, given the lower-than-expected churn despite multiple price hikes from competitors. Do you think there’s a growing value gap in wireless that could provide further opportunities? Additionally, regarding your company’s volume growth, which exceeds the industry’s average significantly, could this shift the focus more toward pricing strategies moving forward?

Mike Sievert — President and Chief Executive Officer

Your question is insightful. Our strategy has remained consistent, focusing on value, which has yielded a strong postpaid service revenue growth that leads the industry. This quarter marked our strongest Q3 in a decade, contributing positively to our ongoing growth strategy.

While our expansion does involve challenges like managing working capital and equipment margins, we believe emphasizing value and customer experience will maintain our competitive edge. Although pricing changes may be possible, any adjustments will align with our brand’s commitment to delivering superior value to customers.

Cathy Yao — Senior Vice President, Investor Relations

Thank you, Mike. We will take one more question before concluding.

Operator

Our next question comes from social media. Peter, given the positive EBITDA trends this year, could you explain the factors driving this growth? Are we seeing significant contributions from rate increases, or are other factors at play?

Peter Osvaldik — Executive Vice President, Chief Financial Officer

Thank you, Cathy. We have several factors influencing our EBITDA this time of year, particularly as we look toward Q4. Our raised guidance on total postpaid and postpaid phone adds significantly contributes to our positive outlook. We see an increase in the midpoint driven by various factors, including a noncash spectrum swap gain of $137 million, which is mainly offset by a slight decline in average customer price. Additionally, we are incurring costs related to hurricane recovery efforts to restore network services efficiently.

Despite these factors, we’ve seen a commendable increase of $50 million at the midpoint, and I remain optimistic about our trajectory.

T-Mobile Confident in High-Speed Internet Growth Despite Market Challenges

CEO Mike Sievert Discusses Company Guidance Amid Mixed Conditions

Mike Sievert — President and Chief Executive Officer

Every piece of guidance we provide is based on the fundamentals of our business. Each quarter brings its own unique challenges and opportunities, and this quarter is no exception. Was that a question from Cathy’s birthday online?

Analyst Inquiries Highlight Fixed Wireless Business Performance

Cathy Yao — Senior Vice President, Investor Relations

Thank you. We’ll now take our last question.

Operator

Our final question comes from Eric Luebchow of Wells Fargo. Please go ahead.

Eric Luebchow — Analyst

Thank you for fitting me in. I’d like to discuss your high-speed internet or fixed wireless business. You mentioned a target of 12 million customers at your Capital Markets Day. I understand this indicates a slight slowdown in net additions if we project straight, but you’ve consistently added around 400,000 customers each quarter. Is this number still realistic in the near term? Also, could you share insights on gross additions versus churn and any regional differences in your rollout?

Steady Customer Base Growth Amid Industry Competition

Mike Sievert — President and Chief Executive Officer

Most of our growth is driven by existing T-Mobile customers transitioning from cable. Overall trends remain stable. To continue our growth, we need gross additions to increase, even if churn rates remain steady. Unlike other quarters, every period presents its own dynamics, yet I’ve been pleased with churn trends as our customer cohort matures over the past year and a half. Maintaining a steady rise in gross additions is vital for us. This distinction helps to explain the difference between our current run rate and our target size by “2028.” Our net additions have consistently outpaced industry competitors, occasionally surpassing their combined totals.

What inspires our optimism is the strong customer reception of our product. By some metrics, it boasts the highest Net Promoter Score in the country, reflecting widespread satisfaction. Our average internet speeds align with cable standards and are continually improving. Currently, our average usage stands at 0.5 terabytes per month, a significant jump from three years ago. As we enhance our offering, we recognize that our product not only matches cable but also stands out against other fixed wireless services. We remain focused on enriching the customer experience, and so far, our efforts are paying off.

Wrapping Up with Investor Relations

Cathy Yao — Senior Vice President, Investor Relations

Thank you, Mike. That concludes our question segment, and we appreciate everyone’s participation today.

Mike Sievert — President and Chief Executive Officer

Thanks to all.

Cathy Yao — Senior Vice President, Investor Relations

We look forward to our next conversation. For any additional questions, feel free to reach out to our Investor Relations or media teams. Thank you.

Operator

[Operator signoff]

Duration: 0 minutes

Call Participants:

Cathy Yao — Senior Vice President, Investor Relations

Mike Sievert — President and Chief Executive Officer

Peter Osvaldik — Executive Vice President, Chief Financial Officer

Simon Flannery — Analyst

John Hodulik — Analyst

Ulf Ewaldsson — President, Technology

David Barden — Analyst

Michael Rollins — Analyst

Jon Freier — President, U.S. Consumer Group

Callie Field — President, T-Mobile Business Group

Jonathan Chaplin — Analyst

Craig Moffett — Analyst

Michael Katz — Chief Marketing Officer

James Schneider — Analyst

Peter Supino — Analyst

Sam McHugh — BNP Paribas Exane — Analyst

Mike Katz — Chief Marketing Officer

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