T-Mobile US, Inc. (NASDAQ:TMUS ) J.P. Morgan's 50th Annual Global Technology, Media and Communications Conference May 23, 2022 12:30 PM ET

Mike Sievert - President and CEO

Hi. I'm Phil Cusick. I cover the Comp Services and Infrastructure Space as well as media here at JPMorgan. I want to welcome Mike Sievert for the first time here, I think, President and CEO of T-Mobile. Mike, thanks for joining us.

Thanks, Phil. Appreciate it. Everybody knows you by the way. You don't have to introduce yourself at these things. You know, right?

No. This is a habit. This is a habit. So listen, I really appreciate you coming. You had an announcement this morning about enterprise. So let's start with enterprise. It's probably a little different than we usually go. And just talk about where T-Mobile has gone from -- I think of it as a majority of consumer business and building up to really working with sort of Fortune 50, Fortune 100 companies and the depth of the relationships there.

Well, it's the natural result of our 5G leadership. As you know, when we created the combined company two years ago, the big goal was to lead the industry in 5G and to have the biggest and highest-capacity 5G network in the country and to establish a substantial lead based on our superior assets and spectrum, a lead that would endure.

And one of the business outcomes of all that leadership is enterprise. We -- as a consumer company at stand-alone T-Mobile -- and on the wireless side, at stand-alone Sprint, it was also largely true that we were way underpenetrated. Combined market share, 10%-11% right now and in the large corporate liable, enterprise and government accounts.

And so for us, this is a huge growth vector for us as we think about a company that in the top 50 cities in this country with consumers, we're number one. We aren't number two or number three. We are the number one provider in the largest cities in this country. And yet with enterprise, we're a 10 share, while having the largest 5G network by far and a substantial 5G lead on speed and capacity. And so it became a big focus area for us.

And what we reported in the 1Q was that it's just unfolding exactly as we had anticipated. So what we had talked about was moving from a 10% share to a 20% share by 2025. And that's of a growing market. I think post-COVID, we see CL [ph] lines potentially continuing to grow. And that's tracking. So our market share gains have been sufficient for us to be able to achieve that goal at our current run rates over the past four quarters. So that's terrific to see.

But it's really just the beginning. And one of the things that we know we need to do as a non-incumbent in the enterprise space is to win much more strategic relationships with the corner office, the CIOs, the CEOs. Whereas to get that 10 share, frankly, we had been focused much more on just simply bidding some RFPs. And as a small non-incumbent, what they would do is they do an RFP, we'd come in with a good network and a great value and they toss us some in order to partly reprice their AT&T and Verizon deal. Typical thing.

Now when we're winning bids, we're winning the whole kit and caboodle. And in order to do that, you have to have a relationship. And 5G ANS, Advanced Network Services, which we announced this morning, some of our progress on, is a big step towards us having a strategic relationship with the corner office.

Now 5G Advanced Network Services, like mobile edge compute, like dedicated networks are an important business on their own with their own returns that we think will be incremental to the business plan that we launched with you at our Analyst Day last year.

But on the other hand, it's a kind of a two-for because while building a business in 5G Advanced Network Services, we also have the opportunity now with the more strategic relationships to win an outsized share of the smartphones and tablets being deployed by government and corporations. So that's why we talked about it this morning.

We're in active deployments and trials with a substantial minority of the Fortune 50, double-digit number of the Fortune 50, very significant, not early science projects, but deployments going on with major airlines, with hospitality, with a major entertainment company in Florida, with -- we announced sale GP, which is a really neat torture test to show what the most advanced and highest-capacity 5G network in the country can do. And so on. So we're really pleased.

And we haven't had the tendency in this space to do these little kind of fake press releases where every one of those companies, you say, hey, we're kind of looking at things together, kind of as a maybe, why don't we do a press release? And so that's why we decided this morning to start to talk about it in a more formal way.

Right. So you announced with Nokia, Ericsson and Dell this morning. So -- but you talked about two things there. One is you talked about getting the smartphone and tablet business, which is that sort of 10 share goes to 20 share. But what I'm always curious about is the progress of T-Mobile in moving up the stack with enterprises, whether it's helping out with their private 5G networks or really helping them run their national sort of data network. Where are you there? And what's the progress overtime?

Well, CIOs everywhere are interested in this now. Because in a world where everything has gone as a service over the past few years, networks have been stubborn. Enterprises are owning and operating networks, and that's a complexity that they don't need. And what owned networks are able to provide with Wi-Fi is inferior to what we can now provide with advanced 5G services.

And so everybody is interested in this topic. And that's why you see all these deployments going on with us and our competitors among the Fortune 100.

And they're interested for a reason. They want more secure networks. They want dedicated capacity. They want dedicated spectrum, which means they understand the throughput. They want service level commitments, and they want it all as a service. And we're able to provide that in a unique way. Today, our competitors are working on this, too. But remember, we're still the only ones today with a stand-alone 5G core. And most of the advanced 5G services require a 5G core, not an LTE core. That's a big lead.

We've had that now for almost two years, which means we're not just the only ones with it, it's rapidly maturing in our ecosystem. And you see that in our deployment of advanced technologies like advanced carrier agg, multiple carriers at a time, like voice over 5G radio, VoNR, et cetera, where we lead the industry.

And CIOs know this. And so they're seeking us out in ways they never did in our 10 share past. And they're asking us to sit down and to talk about this, and we're jointly planning a potential future. And what happens is, as I said, there's a potential two-for because not only can we meet their needs in this area, but we -- again, a relationship that also results in us being able to pick up some progress in our core business in smartphones and tablets at the same time.

So speaking of that, that $60 million sort of corporate liable, I mean, I've worked in different companies where at one point the company was responsible for my phone. And those days are well past us. But is that a growing ecosystem? Or are you going to be taking share within what's otherwise a stable or shrinking market?

It is. I mean, with hybrid workforces, companies are doing more to enable your connections outside the office. And so we see corporate liable as a growing space because there's -- companies are scrambling to find ways to demonstrate to employees that they embrace a hybrid future and that they're going to set you up for success. And so subsidizing some amount of your home connection is a trend, and subsidizing wireless is a trend that we see. It's been growing, but we see the potential for ongoing robust growth in the CL space that maybe we wouldn't have been as bullish on before COVID.

That's interesting. Do you think that's part of what's driving a faster growing sort of postpaid ecosystem than many of us expected?

Well, that's a dynamic. The other dynamics that we see in the industry are an ongoing economically driven transference from prepaid to postpaid. And so a lot of the postpaid growth is coming from prepaid. And you might say, well, wait a second. Well, why am I not seeing that on the prepaid side? Because you see a more diverse set of connections on prepaid now.

So while transferring some relationships to postpaid, prepaid is starting to look more like former postpaid, meaning more tablets, more watches, more connected devices happening to compensate for some of the smartphones coming over. So that's a dynamic.

And then the other thing is it's just purely on math. You can see that particularly at our competitors agg lines are driving industry growth. If you look at Verizon, for example, which has had no account relationship growth for the last year plus, but plenty of net adds to report, it's just math. That means that, by definition, they're coming from adding lines to the base. And so that's a dynamic that you see across the industry.

We were more focused there a couple of years ago when we first combined with Sprint. We saw an under penetration of lines per Sprint household and kind of went after that. But as you can see in our Q1 results, 348,000 net new account relationships, the highest Q1 ever in our history. Our focus, as we started telling you about a year and half ago, was on accounts and on switching, and we're winning the switching game.

Is there anything that happens when a customer or an enterprise or a small business moves from the Sprint side to the T-Mobile side that sort of increases that account number? Or is that all sort of clean?

No. That's just a straight transference. What happens is churn goes down and satisfaction goes up. And so as we talked about at the end of Q1, we now have 37% of the former Sprint accounts that not only are using the network, which is virtually everyone, but have moved their rate plans to a T-Mobile like rate plan and are on a T-Mobile or T-Mobile like phone plan. And when you have that recipe, the network, the rate plan constructs, the phone plan, that means you're taking advantage of our loyalty programs, T-Mobile Tuesdays, et cetera. 37% have come across. And of that cohort, their churn profile is exactly like Magenta, which over the past 2 years on average has been the lowest-churning brand in the industry.

So we're very bullish on the potential as we continue to move customers across. Just remember that, that particular statistic means that they have upgraded. So that part takes a little time. That's why we're only 37% on that metric as opposed to substantially all of the data traffic is now on the T-Mobile side.

Right. I want to dig more into that dynamic in a second. But two years, almost -- just a little bit over two years into the Sprint deal, and it seems like you're -- I don't want to exaggerate it -- but it seems like you're nearing the end of the hard part, which is easy to say from my side, I'm sure. But the network integration that's going to be done, the customer integration, a lot of that stuff has been done. As you look over the -- that couple of year period, have things been sort of better than you expected, a little cleaner than you expected? Have you been surprised by anything that sort of came out of nowhere?

Well, a year ago, almost exactly a year ago, we did our Analyst Day about a year after completing the merger and starting the new company. And at that time, we had seen enough progress that we were able to very bullishly assert that this aggressive $75 billion NPV-creating merger could be completed almost a year early. And that was -- a lot of people didn't believe us, but we just stood up there and set it based on what we were seeing.

Fast forward another year, that remains the case. And so this incredibly ambitious plan that we put out is unfolding exactly like we predicted for you that it would. As we sit here today, I'd say we're in the middle of the hardest part, but thanks for the credit. But we're far enough into it that we really can see the trend lines. And we know we are going to complete the network transition this year inside of this calendar year and decommission the Sprint network completely. And that's just huge because that is substantially the biggest piece of it. So this summer we'll be very active on that front.

But we already have a run-rate established that we understand our capabilities, and we don't believe there are big surprises ahead. Thousands and thousands of Sprint sites have already been decommissioned. And so that's just going terrifically well. We do believe we'll pull into the station end of this year with the substantial work behind us and just a few more months to go of some billing migrations and enterprise side migrations, et cetera. So we're absolutely delighted with what's happening.

The team had two years to plan this thing. And we didn't want two years to plan it, but we got two years to plan it. And the team is fantastic. We put together a terrific plan, and we are heads down executing that. And honestly, it's hard for me to be objective about these things, but it's one of the things that I think differentiates us as a management team.

Over and over again in this sector, we are the ones that future test for you some things that will happen one, two and three years in advance and then go get it done, exactly like we told you we would. We're not coming up with a new business model and a new plan and a completely new future every time you meet us. And that's one of the things that makes us different.

You took up your subscriber guidance recently. And we've had some different projections from some of your peers about whether the industry is slowing down or not given the -- sort of where we are in the economy. What have you seen over the last few months from the consumer? Anything in terms of bad debt or traffic volumes we should be aware of?

Yeah. Well, since you're asking me what I'm seeing and to future cast, it reminds me that the lawyers always tell me to mention that I'm making forward-looking statements in this presentation and actual results could differ and that we have a fulsome discussion of our risk factors in our public filings. You're welcome, lawyers.

The -- look, we think it's unfolding about like we had said last quarter. The market is a little more buoyant than a year ago. We're seeing overall -- and anybody can buy porting data for the industry. Overall, porting data is up marginally from last year. That means overall switching in the industry, which is the key thing we look at is switching. We are a share taker. We need switching. And by the way, if it doesn't happen, we do things to stimulate it and bring it about. And that's always been the Un-carrier strategy.

But what you see us doing, when we like the overall flows, you also see us every quarter delivering a plan that has a balance of growth and profitability. You don't generally see us knee jerks switch back and forth between being obsessed with profits and -- and then getting stuck on net adds and then the next quarter doing kind of like crazy town things. We execute our plan. And in the last quarter, we had the best overall Q1 ever in our Un-carrier history with 348,000 net adds, with 1.3 million postpaid nets, more than AT&T and Verizon combined. And we're good. We don't need more. We're happy with that flow.

And so -- and we could have had more. You noticed we posted a beat in EBITDA. We could have spent some of that beat on even more gross adds. But what happens is the nth gross add -- we were the gross add leaders. The nth gross add in this industry is more expensive to get. And so at a certain point, you just look at it and say, I like this level of growth. We're good.

And then I know my competitors have been here, and they seem good. They're good with what's going on in their companies. And so that -- it's a healthy industry. And we know, as a scaled provider in the industry now, we're stewards of that healthy industry. So we compete vigorously, and we execute our game plan. And right now across the industry, while it's very competitive, we like what we're seeing.

I mean, it's very competitive. John Stankey pointed out this morning that I don't think there's been a period where it wasn't competitive, where we all said, Wow, this is pretty easy, and how good can it last? But do you think that there is a sort of abnormal level of competition coming with cable coming up and DISH coming up? Do you think it's going to get worse here? What's your view?

I don't. I think we're seeing it now. Cable is doing very, very well. And -- but when you look at the sum of Cable and Verizon, most of cable businesses with Verizon, when you look at the sum of Cable and Verizon, that sum has been consistent. And so it does look like Verizon has been happy to seed some of their growth to their MVNO partners, which is probably very accretive to them and good business for them, and they seem comfortable with everything going on. But that total sector, when you combine them up, is the same.

AT&T has been consistent now for about a year. They have shown a willingness to spend an awful lot on upgrades, and -- but we've looked at all that and we like that, too. I mean if you look across the industry, everyone is funding, pulsing in and out and promotions, but everyone is willing to fund your iPhone 13, give or take, and that's different from a few years ago.

But what makes us different is that, once you sign up with us, we have much lower prices, always have, nothing new there. Same amount of price superiority we've always had, about as comfortable margin that hasn't changed overtime. And I think right now, that's becoming really important to consumers, again, not just because inflation is the biggest economic issue on consumers' minds.

And as that continues, I think that provides us with an opportunity to stand up and stand for the value leadership in the sector and remind people of our value position that has always made the Un-carrier famous. I think there's a big opportunity in this moment for that. But not by changing what we're doing, simply by reminding people what we do. And that's very, very important.

But we also may remind people that the carriers are going to carrier. I mean, you look at what AT&T and Verizon have both announced big price increases in the last month. Right here, right now in the heart of consumer anxiety about inflation, they are announcing millions and millions of people getting jacked up prices while under a device contract. And which means there's not much the consumer can do but take it.

And so for us, we launched in 2015, a famous Un-carrier move that we call price lock. At that time, we call it the Un-contract. And that means that, on your service plan, we got you. And this is a great time for us to remind people of that. Because remember, we don't need price increases in this business plan. For the first time in the entire decade I've been here we guided this last quarter to ARPU growth. We're guiding now to ARPU growth, modest growth, but ARPU growth, for the first time in our history because people are self-selecting up our stack. The majority of our selections now are Magenta Max, the best expression of the best 5G network. And only about 15% of our base is penetrated with that.

And so people are finding their way to our best products because the network is showing them it's worth it to spend up. And so we don't need to gouge people with pricing. What we might do is remind people that our competitors are.

It's interesting you mentioned 2015 because it was around that time that you were taking so much share from AT&T that they broke and they sort of dropped their service prices to be closer to in-line, and Verizon a year later did the same thing. How much time do you spend thinking about your carriers' response -- or your competitors' response to your taking share, right? So if you're taking share and cable is taking share, do you want to make sure that T and Verizon don't get back to that sort of '15-'16 period?

The other thing that happened in that time period is -- remember, Verizon after saying over and over and over again that nobody needs unlimited, went all in on unlimited.

I remember there was a CFO that changed about that time, too.

Right, right. That's what you got to do. So it's interesting. And by the way, there were years there where we were taking 100% of share, meaning all the net adds -- more than all of the net adds in the industry. That's not the case right now. And again, we could have taken more last quarter. You saw our beat on EBITDA. And we strike a balance. We've pulsed in and out with our promotions. We're comfortable with our superiority of our value proposition.

And listen, what's different now than most of this Un-carrier journey that's worked so well for us is that, in addition to having this consistent best value, we also have the best 5G network. And we have a lot of work to do to convince people of that, I understand, but we do have the best. And so -- and that's just different than we've always had. And that does give us some, I think, opportunity that we didn't have before to be able to go after real quality shoppers. And that means it's not about slashing your prices further.

Right. You mentioned the 1% ARPU growth earlier. And it's different than what had been sort of an 8-year trend of 1% ARPU decline, give or take, through that period. And the company has always been sort of a very focused on share. Do you think that there's enough sort of demand drive behind those upshifting to Magenta to continue that, give or take, ARPU upside from here?

Well, it's the majority of our flow right now is Magenta Max, and -- but we're only 15% penetrated. So it does suggest there's opportunity. How much opportunity? We'll have to see. I mean, we're very focused on making sure that Magenta MAX is not just our best product, but also our highest-value product, meaning when people switch to it, we want them to be delighted, so everyone wins. And we're seeing that.

So we like the dynamic there of how it's all unfolding. Again, they're self-selecting in, which I love. And the satisfaction rates are high, usage rates are high. We've got the highest-capacity network that's ever been built in this country on wireless. And so we love the fact that those customers are buying up and then using, which is a great insulator, because it means they're less likely to seek service elsewhere.

Yeah. One thing I think about when I consider your churn and Sprint customers churn is, if I want to leave T-Mobile, I've got to pay more, right? Unless I go to sort of an alternative provider, cable or prepaid or something like that. If I want to go to T or Verizon, I've got to pay more. And so as you -- it's interesting as you get those Sprint customers on the T-Mobile plans, we always consider them lower quality, lower credit. Is that the experience? Are they sort of lower credit, but they're still churning at the same rate? Or they really just look like T-Mobile customers across the board?

Well, again, the people that have come all the way across look like T-Mobile customers. And while it's true that over the years there was some gross add activity that I think was very opportunistic at Sprint, because of those customers' churn profiles, a lot of them are gone already. Gone. They're -- they've already churned out. And so I don't know entirely what we're going to see when we get it all done, but I suspect what we're going to see is very similar to what we saw on the T-Mobile side, which is a journey from worst to first on churn.

And the bottom line is, what the Un-carrier does is tackle pain points. And the biggest pain point of all in the history of this industry is the false choice between network quality and value. We're solving that. And because of that, our Magenta brand over the last two years has the lowest churn in the industry. And that's from a Magenta base of customers that people could have made the same critique about that you just made about Sprint customers. I mean Magenta was always a value provider, and yet we've made our way to the lowest churn on average over the last two years on postpaid. So that's terrific.

But look, unlike our competitors, we have significant growth tailwinds that are just different. And one of them that I haven't talked about much, you've heard me talk about small markets and rural areas. You've heard me talk about high-speed Internet, fixed wireless. You've heard me talk about enterprise and the big upside we see there. But in addition, where we're already number one, which is the big markets, top 50 markets, top 100 markets, we see -- we're not just defending our castle.

We are defending our castle, but we see a big opportunity to address the tens of millions of people in the biggest cities in this country like Boston, like New York City, where we're number one who shop on quality. Tens of millions of people have never given us a serious look because they're worried we're not the best. And now we are. And our burden is to prove that to people. And so quality shoppers in the top 100 markets, where we are on average are number one or tied for number one, is another big growth vector. And then, of course, Sprint churn is a tailwind in our business.

To think about the fact that we generated the most postpaid nets in the industry yet again in Q1 and the most account growth ever in our history for a Q1 while carrying around outsized Sprint churn that we know is temporary, and you get a two-for on churn, right? Because not only is that -- are those customers leaving us at higher rates than the industry while we work to finish the migration, but they're kind of a false feeder of growth on the other side as well.

They've been feeding AT&T and Verizon for a long time. And it will be interesting to see what the dynamic is, again, as that [multiple speakers] later in the year.

I think it would be really interesting. You mentioned the major markets where customers like me don't consider T-Mobile. And it's not necessarily a New York problem. It's say, when I go out of New York, those second and third-tier markets that you're building now are areas where I spend a lot of time. And so I imagine that defending a nearly 40% share in the major markets is not easy. Is it -- do you expect to sort of lose share in your core and yet defend your total with those higher-quality shoppers?

No, we see opportunity. Our customers in the top 100 markets are very satisfied. They know they have the best value and the network works for them or they wouldn't have the lowest churn in the industry. And so what we're looking at is whether or not we can achieve an upside by getting after quality shoppers, the people who shop primarily on network.

And there's lots of ways we can do this. Word of mouth is very important. Brand reputation is very important, but stubborn. But I also think like torture tests and third-party referrals are important. And today's announcement about Advanced Network Services is some of the most famous companies in the world who eventually will be more comfortable talking about all this when they're closer to scale deployments.

And I think when people see, oh my gosh, the biggest airline in the world or the big -- some of the biggest transportation and hospitality companies that are widely distributed and go to every town and handle in this country, they're picking T-Mobile. And they're picking T-Mobile after checking out 100 phones from all the carriers and deciding based on who's going to have the best connections. And those kinds of things matter.

Right. So as you think about that convincing customers, you talk about having the best 5G network. At what point do you have just the best network overall? Because you're very careful to say we have the best 5G network, but it's that sort of coverage and consistency that Verizon and AT&T have had a long time is why a lot of people are there. So do you see that?

Yeah. I give Verizon more credit than AT&T on that front. On square miles and a lot of the metrics, we've sort of caught AT&T. There are metrics I'm sure where there's still claim or something, but Verizon does have the most square miles covered in the country. And for us, what matters is being able to get signal to the places that have the torture test places. And this is sort of a relatively new priority for us. A couple of years ago, we were focused on population, just get the population covered.

But what Neville and Ulf have done is pivoted to model an algorithm that we use called customer-driven coverage. And what we're looking at is our core customers, where do they go that is a torture test moment? I was at Mount Rainier National Park this weekend, high on a mountain, 5,500 feet up, looking at the glacier. And we now have -- and I ran a speed test in the National Park Lodge. Someplace we had buckets two years ago. And I got 276 megabits per second right in the middle of that timber lodge, up in the highest level parking lot of Mount Rainier. As an -- but this -- Mount Rainier gets nearly 2 million visitors a year. Sure, it's highly remote. No one lives there. There are no POPs, but it matters. And these places that matter are now capital-focused for us. And when we come in, we don't just come in. We come in with the full force of our superior spectrum and scale, meaning when we come, we provide a differentiated experience.

So when you go to that beach or that trailhead or that airport or the distant place of the rural area, and you see that not only are we there, we're there so much better than the others. I mean we are still the only ones with a 5G strategy in smaller markets and rural areas. We will reach 260 million people this year with Ultra Capacity 5G.

Verizon has said they may get there in 2024. So when I made that quip that people thought was a quip two years ago that said we're two years ahead in the 5G race and two years from now we'll be two years ahead they agree by their own public disclosures.

Yeah. So to my question, is there a point where you see that coverage effort by Neville, the mountaineers and the ski lodges and the remote beaches, where you will be where Verizon is now in terms of square mile coverage?

Yes. Absolutely. And especially as it relates to the places that matter to customers. And it's -- to me, that's what we'll be prioritizing as we do customer-driven coverage. When you go into a market, there may be one stretch of rural highway that you can cover the town and even the suburbs all you want, but in a small market, if you don't have this one stretch of highway out to the factory or out to the next town, you can't win. You can't, unless you cover that. And so you have to know where those places are that matter to people. And that's what our focus is about.

Okay. As we come toward the end of the Sprint network integration, you've guided that your margin should start expanding pretty rapidly. As you look at AT&T and Verizon and their fiber sort of coverage nationwide and their larger infrastructure, do you see a substantial difference between their margins and your long-term margin potential?

Well, we have different geographies for sure. And so it makes -- and we have different levels of transparency. We're fully transparent. They both have different businesses that sort of obvious -- and so it's hard to answer. But what I can tell you is cash is king, and we have a more capital-efficient business model. And so we lease all of our spectrum -- sorry, we lease all of our fiber backhaul. They have capital-intensive fiber plans. And they say, well, that's a great return for us. And it very well might be.

But the real measure will be cash production per service revenue dollar. And we believe we're on a path where we will have the superior cash production per service revenue dollar in the industry, which sort of normalizes for all these geography differences. And that's why our focus last year at the Analyst Day was so much on demonstrating that this model translates into cash flow.

And you saw that yet again this quarter with major cash flow gains versus a year ago, increasing our cash flow guidance and then talking about 45% CAGR through the planning period and a reaffirmation that we expect to see up to $65 billion in cash flow '23-'24 and '25 that will most likely translate into substantial share buybacks. And so that's our model. That's what we're focused on.

Right. And that cash flow per revenue dollar, I equate to EBITDA percentage minus capital intensity, and so that spread is your ---

Yeah. And this -- again, because it's not just because we're not building out fiber to the towers. It's because we have a superior spectrum portfolio. And when you take it all together, we have a more capital-efficient business model. This year is sort of a peak capital year with well over $13 billion in capital, but it will go down now to support this business plan because we're through the major part of the integration, '23 capital will be lower. And you start to see EBITDA will be higher and you start to see the cash unlock start to take off. And it's already taking off. So there's a demonstrated track record against those promises that we made.

You've been asked this many times before, but you just got an S&P watch upgrade anyway, if not the full upgrade. What's the trigger we should think about for you to start returning capital? Is it the cash flow actually starts to come through? Is it a question of the leverage coming down? Is it the upgrade? What do you think?

Well, it's not a specific trigger. And I'll say the same thing I said before, which is the business model delivers cash and we see an aspiration for $60 billion in buybacks in '23-'24 and '25 with the possibility of starting sooner, and that's still the case today as we look at it. The board is looking at a lot of things as we deliberate on this. And there's no one trigger. But it was very nice to see that potential upgrade coming. We already have Fitch. S&P has us on a watch. So very nice progress on our path towards corporate family IG, which we've said is an aspiration, but it's not necessarily a predicate to being able to get started with buybacks.

If you look at our cash balances right now, we don't have $60 billion in the bank. And so we've always expected to be able to smooth out the buyback progress with some debt. And right now, the high-yield markets are different than they were a year ago. And so corporate family IG is a nice milestone, but it's not necessarily a predicate.

Have rising rates changed at all the math for you on getting to that sort of leverage target of $65 billion cash sort of allocated?

No. Because again, it's just a smoothing function. I mean the cash is there in our plan. And at '23-'24 and '25, as we said in last year, we saw our way and see our way to $65 billion in cash flow in those years. And so the cash is there in the plan. And what we've done quarter after quarter is take away the question marks that people may have had as we laid that out a year ago because of our execution. And so we're very pleased with where things sit on all that picture.

That's a good place to leave it. Mike, thanks very much.

Great. Thanks, everybody. See you.