As I’ve said before, I’m not optimistic that there’s customers that are paying monies on BEAD supported infrastructure builds that impact the 2024 financial plan. I think this is going to be a 2025 plus thing when you kind of look at the aggregate portions of the build, the private capital that comes in, and ultimately customers that come on the network and start buying services that might not have been buying services before.
Simon Flannery: Great. Thanks a lot.
Operator: Our next question will come from the line of John Hodulik of UBS. Please go ahead.
John Hodulik: Great, thanks. Two, if I could. First, first on wireless. Churn was flat sequentially despite the typical seasonality and continues to come down annually. I mean, just, John, just, what are you seeing in the competitive market? Obviously, a lot of concern about what’s happening from cable and through other MVNOs. So just trends that you’re seeing there and maybe does that suggest that the strength that we typically see in 4Q subs will continue? And then one more if I may on the free cash flow, looking out to ‘24, not looking for guidance at this point but anything you can tell us about the piece parts that will drive free cash flow versus the ‘23 levels next year like CapEx or anything you can tell us about working cap, EBITDA or even DIRECTV or tax payments would be great? Thanks.
John Stankey: I’d be happy to have Pascal give you the non-answer on guidance for free cash flow next year, but — I’m just kidding, John. We’ll give you a little texture on it, I guess. On the wireless side, look, I think at the second quarter call last year, or last quarter, when we talked about where we were on our momentum in the market, we articulated what had occurred. We pointed back to specifically one particular account that we had had some churn and that drove a little bit of an anomaly. We indicated to you that we felt pretty good about our momentum in the market and that we expected a normalized third quarter in our performance. And I believe you can look at the tail of the tape here and see that there’s a normalized third quarter in our performance and nobody else is reported, but from the best of what I can glean in our sensing mechanisms that are out of the market, we’re kind of back into a ratable share position and I think that’s actually a preferred position because the way we think about this is I’m actually more interested in growing our share of revenues as opposed to just our share of raw number of customers.
And I think we’re doing as good a job of that in the industry as anybody, we’re bringing on highly accretive customers and we continue to see our share of industry revenues improve at a better rate than the share of our actual subscriber counts, which tells me that I think we’re focused on those profitable customers and bringing in the right customers. I would tell you the churn numbers as you indicate them, we’re very happy with them. They’re very strong, they’re very solid. So despite what’s being reported by MVNOs or cable, our base is incredibly stable, and you can see what’s happening on our growth side that’s ultimately driving the net numbers. If you step back and think about that in aggregate, if we’re growing ARPUs, and if we’re growing accretive customers, and if our churn is stable, look, I think I’m okay with what’s going on.
I think that’s a good formula. And when I think about where we get ready to approach the fourth quarter, we’re kind of right on plan of what we expected to see happen. We’re optimistic about the quarter. We think we’re set up well in terms of our staffing levels, our positioning in the market, resources and supplies that we have. We think the product is a relevant product, so no matter what the economic environment is, I don’t see anything that’s going to necessarily impact the category. I think it’s a very popular category for gift giving and what needs to go on. So I would expect we have a strong seasonal fourth quarter like we typically have in the industry and I don’t see that changing right now. Pascal, do you want to give us some texture on free cash flow?
Pascal Desroches: Sure thing. John, here are the things to keep in mind. We’ve said this all along. We’re trying to build a franchise that is producing sustainable growth in both earnings and cash. We’re confident we’re going to be able to do that in 2024. So when you think about earnings, here are the piece parts to keep in mind. We continue to expect to grow our Mobility business very nicely as well as continue to drive growth in our fiber broadband business. Our cost takeout efforts the last couple of years have shown that we are committed to creating a really efficient cost structure. So all those things will help drive EBITDA growth and you couple that with a step-down in CapEx from the elevated levels we’ve been at in ‘22 and ‘23.
Those are going to be the big growth drivers to drive both free cash flow growth next year. Offsetting that, we would anticipate DIRECTV contributions to decline along, consistent with the secular decline of that business. But I would say, keep in mind that that, DIRECTV probably — it’s probably more resilient than many have expected and the team is doing an incredible job managing that asset. And then we also expect with the phase-out of the 2017 tax incentives, bonus, appreciation, interest limitations, we’re going to pay more taxes next year. Those are the big piece parts.
John Hodulik: Got it. Thanks for the color, guys.
Operator: Our next question will come from the line of Phil Cusick of JPMorgan. Please go ahead.
Phil Cusick: Maybe under the category of pushing my luck, on CapEx, it’s been trending down through the year. The last few years you’ve actually had lower CapEx in the fourth quarter and vendor comments are that things are going to slow more. Should we be looking for a big bounce in the fourth quarter for some reason to get to $24 billion or maybe that is a little high at this point?
John Stankey: Yeah, Phil, I’d be disappointed if you didn’t try to push your luck, but I think we gave you guidance that said our CapEx for the year was going to mirror kind of what we did last year and I still think that’s going to be our guidance. Our CapEx for the year is going to mirror what we did last year. So you should expect you’re going to see something in the fourth quarter that delivers a number that reflects something very similar in the neighborhood of what we did last year. I’ve been telling you, I think, for several quarters that our goal is to get to a little bit more ratable construct around how we operate the business. We’ve been working hard to do that, meaning we smoothed some things out. We’re not quite where we need to be in that regard yet, but we’re getting better.
So I think you need to be careful leaning extensively on seasonality because if we’re doing our job right and we’re doing all the right things and managing our working capital and those kinds of things, which I think we’re getting progressively better at based on the comments that we gave you earlier, you may see seasonality start to adjust a little bit.
Phil Cusick: If I can, one more. On the fiber side, how are you finding the business doing in terms of shaking customers out of cable given the low-move environment? Are you doing anything different to pull customers away or is this just sort of steadily working?
John Stankey: We — what I would say is, I’ll maybe reframe your question. We’re constantly evolving our tactics and our approach for how we take share. And we’re constantly — I think we’re getting better and props to the marketing team that does this and the operating team that does the build. It’s really a team effort frankly that occurs in these markets. There’s no better way to sell the product than having — digging up somebody’s front yard, so to speak. So it builds awareness and then our job is to capitalize on that awareness and build excitement around it. And we’ve done an exceptional job at the front end of making that happen and we continue to fine-tune our tactics around that and that’s what’s led to faster rates of penetration.
