Sprint Corporation (S) Deutsche Bank 2018 Media, Telecom & Business Services Conference March 7, 2018 8:50 AM ET
Michel Combes - President and Chief Financial Officer
Matthew Niknam - Deutsche Bank
Okay. If everybody can please go ahead and take their seats. We are going to go ahead and get started with our next keynote session. We are very pleased to welcome brand-new CFO of Sprint, Michel Combes. Michel, welcome.
Thank you, good morning.
Good to have you. So maybe just to start, I think it's been about two months since you joined Sprint. But after three decades in the industry in Europe, can you give us your high level view, and I know it's only two months, but high level view of the U.S wireless market and some of the biggest surprises for you since joining the Company.
So, first of all, thanks to host me today. I have been part of this type of event in the past, but that's my first time as President and CFO of Sprint. so that's my first conference. I hope the questions will be nice for me I think it's my first one.
Very excited let's say, to be there and to be with Sprint. I have been involved in the U.S. market in the past few years when I was at Vodafone. and we have these, let's say wireless joint ventures. So that's not a market that I don’t know and I have been very close to Marcelo in the past few year as well.
So we have exchanged a lot in the market. What I might share with you let's say maybe a few comments just on the industry as a whole. I’m very surprised or impressed by the level of competition that we have in this market right now.
A few years ago when I was comparing Europe and the U.S, it was clear for me that U.S market was much more competitive than the [U.S.] (Ph) one. In my past two months, it's obvious to me that this market has become extremely competitive and mainly, by the way, on the device side rather than surprise plan, which is a little bit strange and which we didn’t have in Europe when I think about the BOGO or LOGO, so all those free offers of devices.
If I look at strength, which is probably the most interesting piece of my discovery in the past two months. First, I have been impressed by turnaround which has been implemented by Marcelo in the past two to three years, I guess that figures speaks for themselves, meaning when you look at the growth acceleration, when you look at net adds which have improved by more than two million in between 2013 and 2017.
When you look at the cost extraction which has been on let’s say achieving more than 1 billion in the year best four years, which means that this Company has became much efficient. When you look at the EBITDA and/or let’s say the cash generation, this Company was burning cash and you will see that we are turning the company positive.
So, I think that the work which has been done, means that we have today a great platform to build out, of course not everything is finished, but I mean that we have a good platform to let’s say operate. So, first, let’s say the discovery, great turnaround achieved by market.
Second one is the spectrum. Spectrum, I have been in this industry for ages, as you know, as telco and/or as a vendor and I have never seen a company with such a rich spectrum and with the spectrum of to the five which is a sweet spot for 5G, I guess that gives us a tremendous opportunity for the years to come. So that’s really the good timing to join Sprint, because the platform is great with this 5G spectrum.
And the last, but not least comment is that in the past two to three years SoftBank has accelerated its investments in many different companies which are very connected to 5G. So my strong belief and my strong discovery is that probably Sprint is very, very well placed in order to take the benefit of 5G and I’m sure that we will come back on this one in later questions.
We will, yes certainly. So, if we sort of take that as the backdrop, what are some of the top priorities for Sprint this year maybe building on some of the success Marcelo has had turning around the business in recent years. What are maybe some of the milestones you are looking for to track progress toward these goals in 2018.
I guess Marcelo has been very local on what has to be achieved. At the end of the day, we want to deliver the best customer experience, leveraging the best product and services and being able to generate cash and good profitability.
When I look at the main pillars of our strategy or where our priorities are, first and foremost network. In this industry and I’m sure that’s let’s say you listen to the other players before or after, network is our product. So that means that it's a non-starter if you don’t have the right network.
And what we have announced in the past few is our intent to increase very significantly the level of investments that we are putting in our network in order to get to best network of - let’s say to get great network in the country leveraging the spectrum that we have.
So, we have said that we would increase the CapEx. To start with, there was a little bit of skepticism on let's say, our ability to do that. I’m very happy or proud to - I was listening to some of the comments which have been made by the tower companies in the past two days in your conference. I guess that they all said, well, we see now strength is really ready to invest. They are real, they are going to invest in their network.
So that’s the first priority and I’m sure that we will come back in more detail on what are the plans there, because they are extremely well, they are very clear milestones and what we have to achieve and I will be happy to report in the next coming quarters on the achievement there to get these networks right.
So that’s the first piece. Second is obviously, the value proposition. I guess that the Sprint was smart enough to be the first one to move to unlimited in the U.S. and they were used to unlimited offers, because as you know, Europe moved to unlimited a few years ago. So I know the game. I know what can be done with unlimited offers.
I think that Sprint can leverage the network, because with the 4G spectrum that we have literally placed our strength in terms of unlimited and we are probably the richest unlimited offers today in the marketplace. So that’s second pillar of our strategy to observe right value proposition in the marketplace in order to make sure that the customers get it and will come for it.
Third is around customer experience that can be delivered for our retail experience with a big investment in that space, we have already increased by 1000, our retail outlet in 2017, 500 for Boost, 500 for Sprint. We will continue to increase our retail exposure, because that drives share of gross ads and also let’s say turning into digital.
We want to leverage digital much more. That’s maybe another comment that I may do - I might make. I’m surprised by the fact that the U.S. industry is much less advanced than other countries in terms of digital transition. So we are all now probably, we are above double-digit in terms of digital sales, but even being above double-digit, that’s not yet huge.
I mean I come from country where some of the operators are fully digital just digital and the thing that it’s where we should, but digital is really something which will change the customer experience for our customers.
So that’s the third point. All of that being enabled by our fourth priority, which is transformation of the company, cross transformation. As I told you, let’s say we are in a genre there, which has already been started by Marcelo. I strongly believe that there is still a lot to extract to reduce our costs to become more agile to improve the experience for the customer and let’s say get the right financial resources from our operations that we invest in network, in value proposition and in customer experience.
Lastly, in this type of industry, you want to spend something for your customers. So once you have the network right, you have the value proposition right, you have the customer experience, which does work. You need to have something, which makes you a little bit different in the eyes of your customers. So, let’s say it’s a rationale for the customers to sell experience. And I strongly believe that we will be only differentiator around 5G. We can be the 5G company, leveraging our assets plus the sub-bank assets.
And that’s actually is a good segue. Can I ask you about differentiation? So it seems like 5G is really going to be the big sort of go-to-market selling point the next couple of years in terms of why wireless customers should choose Sprint and what is becoming a mature saturated and maybe for nationals who all are sort of a parity somewhat argue on a network quality basis. So it seems like 5G is the big selling point.
We believe in 5G, so let’s make it that way. And we believe in wireless services that’s what customers are looking for. So I hear a lot about 5G, but at the end of the day, what customers are looking for us best wireless experience. And we believe that 5G will deliver this experience. Yes, we are firm believer in 5G.
And I’m very happy to see that all our competitors now are also shifting gears to 5G. That's music to my ears because that really strengthens what we have said in the past few quarters. And I was in Mobile World Congress two weeks ago and it is all about 5G And now Sprint is a little bit of the center of these discussions because of what we have announced that we will have the first national wireless 5G network in 2019.
So we believe in 5G and we believe that we have the best assets in order to go there. We have let's say mid-band spectrum which is a sweet spot for 5G as 800 meg was a sweet spot for 4G, I guess that 2.5 is a sweet spot for 5G no doubt.
And on top of that, we have are the best in terms of spectrum. So we have all our competitors have one or the other. We have both mid-band and depth. So which means the ability to really build a national wide network, a 5G network.
Second is, everyone is ready. I mean vendors are ready in terms of run equipments, I mean handset manufacturers are starting to be ready, they would be ready beginning of 2019, chipset suppliers, you have seen this morning let's say some of the chipset suppliers were saying that in any case they want U.S. to first in 5G so whatever will happen in terms of consolidation or non-consolidation is obvious that everyone investing massively in 5G. So that's the right time.
And I see 5G for Sprint as let's say double opportunity. One, which is that it will really allow Sprint to change the perception of our customers vis-à-vis Sprint in terms of network. It's obvious that in the past few years we have suffered from a perception on our networks. The network was not always that great. We have invested in the work, so our 4G network is much better today than it was one year ago, but the perception is still not where it should be.
5G will allow us not only to bring the best network in the country, but also to change perception, which will give us opportunity probably to rewrite a little bit our plans. We are still the most aggressive players in the marketplace. We have to compensate a little bit for this bad perceptions by more aggressive pricing.
It's obvious that once you change the perception, we would be able to close the gap in terms of pricing, so which will give us some support to reignite growth for our wireless revenue. So that the first piece, which is a easy get for us, which is not the same for the others, but which is an easy get for us.
Then second it's obvious that 5G unlocks new type of services, wireless services, thanks to the speed, thanks to the latency you will see a ARV applications kicking in, and I have shared a lot of those applications when I was in Mobile World Congress and on top of that, of course, all the new wave of IoT and new data services in the enterprise space on the consumer space.
So I see a double level in order to let's say strengthen our growth, for to reignite growth just thanks to the ability to close the gap in terms of pricing and then acceleration of the growth thanks to the new services. So that's why you see us so excited in this 5G journey and we believe that we are just at the beginning of this journey.
You talked about national launch, that's a word I want to just go back to, look if there is anybody who has the spectrum, maybe yourselves or one of your peers who maybe has a little bit more in terms of lower mid-band to be able to blanket the country, but how broad of a coverage area are we talking about? And how do we think about the timing. When in 2019?
So, first just let’s say - we have very strong competitors and I guess that they are all very good. So, no doubt in my mind and you will never hear me criticizing any of the competitors. Fact-based, it is obvious that we are the only one went to have both, mid-band and breadth, and the depth of the spectrum.
When you have an average 160 megahertz available to the type just for 5G, I guess that many people would love to have it. I have heard some my competitors saying if you have less than 100, you cannot really deliver a 5G experience. I didn’t say it was some of my competitors. Again music to my ears, so which means that fact-based, we are the best one.
From timing point of view and what do we expect to do; we expect to roll out 5G on the national wide basis. We have announced few plans, a few projects in order to make it work. First, expand our macro sales sites.
So we have said that in the next coming years, we will expand our macro sales types roughly 20%, fix bit of timing obviously to do that because we don’t build any sites in the past few years. So, we have to reunite the machine to ramp up, but definitely away, so that will catch up to more late 2018, 2019 rather than let’s say early 2018.
Let’s say bringing all of our spectrum on our site, meaning today we have sites which have only 800 or 1,900 up to the site. Only 50% of our sites today has 2.5. So, we are in a massive upgrade plan. We are talking to almost thousands of sites in order to bring all the spectrum on all the sites. The intent is to bring all three bands on all of the sites as quickly as possible. That’s a massive 2018 program, to finishing 2019, but to most of it will be achieved in 2018.
On top of that, we have small cells program in order to ramp up our small cells with said 40,000 small cells that we want to achieve. That has also started this program takes a bit of time, because as you know it’s not always that’s easy to build site in the U.S. I would like to let’s say what has been on let’s say what SEC has said in the past few days that they want to help the carriers in order to make it smoother and less expensive.
so that should accelerate our ability to roll out small cells. Then on top of that, also our programs with the cable operators, such as with LTEs, a company which I know a bit and let take curves, where we have made some gear for them in order to do - mountain sites, so leveraging the infrastructure in order to roll out some additional small cells.
Then with our magic books program, which is about bringing sales in fact at home with a dual exposure in inside and outside, so that’s a good complement to the network. We have a plan which is to reach more than 1 million books there, we have already packed 100,000 and I’m proud also to reboot that we won let’s say an award that’s mobile were converting in terms of technology award most innovative type of steps for the network.
And last but not least, Massive MIMO. Massive MIMO is let’s say a technology that we are going to introduce that I know it’s quite well, because it was invented in fact by Alcatel, a company which I know also a bit. So, Massive MIMO is let’s say a way to really improve quality of the network in terms of speed 10 times.
Obviously the speed in terms of rich meaning extending the coverage and in terms of bandwidth, the edge of the sale, so which means a much better experience for the customer. So there we intend to starting Q2 this year to roll massive plan of massive MIMO. The idea is to bring Massive MIMO in lot of our sites that let’s say we operate today in order to get these extents.
Massive MIMO has two advantages for us. One is that is that it helps us to improve 4G. And as we are using what we call a split load in Massive MIMO it will allow us to introduce smoothly 5G, meaning that as soon as 5G and our software will be available probably by the end of the year, we will be able let’s say from the software point of view just to switch onto 5G our Massive MIMO sites.
So which means that our intent is to have national 5G network in first half of 2019, so which is ideal, because we will have the network and fits will come there. We will have also some mobile broadband equipment kicking that very same date. So which means that we will have the right set up in order to get the benefit of 5G first half of 2019 what Marcelo highlighted already a few weeks ago.
Two follow-ups on that. One, we just had Verizon up on stage. It's not - to Verizon. Verizon and AT&T talked about millimeter wave as really the cornerstone of 5G. Does Sprint need more? Would you be interested in more millimeter wave? Or are you very comfortable with the 160 megahertz worth of 2.5?
Well, we are really comfortable with what we have added to the site. Once again, when you have 160 to 200 meg that means that you can offer the 2.5 gig experience to your customers. So do we have what we need for foreseeable future that’s obvious. It’s clear as well that we are pragmatic, I mean we'll see what, let's say, especially we'll come for auctions and options, and there is interesting spectrum that we might add to our existing portfolio, we will always consider it.
But today, we have, let's say, largely enough with the spectrum that we have in our hand and assume that some of our competitors might let’s say feel that they need more of these spectrum because they don’t have such ownership on sub six gig bandwidth. So opportunistic assessment, but we have into right set up today.
What are your thoughts on fixed wireless maybe I know you talked about mobility as sort of the lead use case, but maybe as another flavor or use case for 5G?
You know Sprint has had some experience in the fixed wireless in the past, so we know about it. We are trialing it as everyone. So we believe that it can be a use case. But as far as we are concerned the main use case remains mobile what customers are looking for is wireless mobile experience. We are wireless player and we believe that wireless and mobility, wireless is superior to any other usage.
So that’s the reason why we are really determined or focused on wireless. That it means that we would not contemplate to do a little bit of fixed wireless, of course, it doesn’t mean that. I mean once again on opportunities basis we can always leverage these technology. Once again, we have spectrum that we have to that side. We have plenty of spectrum in order to do that if we want to do it some stage. But we strongly believe that 5G wireless.
Let’s talk about the business today; you mentioned some of the biggest - Sprint seeing some of the biggest improvements in postpaid phone volumes in recent years after years of losses that lasted through 2014. As you look forward, had you sort of balanced incremental volume growth in a competitive and mature market alongside profitability.
Well, I guess that we have proven back three years that it’s feasible and some of our competitors have proven the same. I mean you can find the right balance in between driving the number of customers up and let’s say meanwhile improving your profitability, look at what has been achieved with Sprint, I’m not going to take our competitors, but look at what has been achieved in this markets in the past few years by some of us.
I mean this ability to drive new connections and same tokens to an improved profitability, I told you that we have - let’s say we turned the company cash positive, where we were able to have cash losses in the previous years. We have improved significantly, our profitability as well. So that’s what you can expect from us moving forward.
To continue to keep this right balance, let’s say in-between driving the number of the lines up, because obviously, we need to continue to increase in above lines. Our share gross adds today is roughly around 20% for market share in the market, which is 12. So I guess that this is a good gap in-between our market share and in-between our gross add or share gross add, what we have to improve is churn, but let’s say, for share of gross adds, that’s fine.
So now with that, we need, let’s say if we want to really improve our growth profile, let’s say also not only about the network alliance but as I was alluded to it’s also around pricing, our ability to maybe reduce the gap that we have explained into that for the reasons that I have already mentioned.
Okay. And it sounds like that could be more of an opportunity in 2019, once you get passed some of the heavier lifting with network investments that you are engaged in right now.
Let's say what I have said I guess on previous calls a few weeks ago is that let’s say, we should expect to reach the turning point from the wireless service revenue by the end of 2018. So you are right back loaded in 2018 and let’s say we will start to enjoy this journey in 2019. When we will benefit from the fact that in the past few years, we have increased the number of lines, and when we will benefit from our ability to stop to reduce the gap as we have let’s say started to pilot it in the past few months, in order to make sure that we enjoy also a little bit of uplift from an ARPU point of view.
Okay. You talk about service revenues but churn you mentioned it’s been maybe a little bit of a sore spot the last couple of quarters. I assume network is at the crux of it, but can you maybe give us a little bit of a path, sort of clarity in terms of how we think about these network investments beginning to translate into lower churn over the course of this year and into 2019.
Let’s say this, I mean we have to be honest. We have the highest churn of the industry, so that's not the place where you like to be. So, as I have told you that one of the pieces that we intend to fix. If I look at churn and the reason why I’m comfortable on our ability to fix it; on one side, there is a piece of road show, which is sales inflected, meaning that we have made some choices which are triggering a little bit long-term. When you think about lease and lease on an 18 months maturity instead of what we’ve have previously which was IB 24 months maturity.
It’s obvious that when you turn from IB 24 months to lease 18 months, you trigger a little bit long-term, no doubt. But we believe that it was a right thing to be done for the Company from an economic point of view and from a financial point of view. So, we are happy to have done it, it has triggered a bit of these road shows.
Second, we have a network base, we have some customers which are still experiencing maybe prices which are higher than the most aggressive offers than what we have today in the marketplace.
We have decided up to now, not to opens a new offers to all our existing customers. So which means that by doing that, we believe that it’s better for our economy, it’s obvious that trigger a little bit more churn as well. So that’s what I would call sales infected which means that rational decision that we have taken which comment a slightly higher churn. So, that’s one.
Then the second, why am I comfortable in our ability to drive term down, because [indiscernible] which is mainly driven by network, experience and value proposition. As you know and what we have presented I guess few weeks ago as well. In the market where we’ve been able to improve the network, the network expense in the market where have over indexed in terms of distribution.
In the markets where we have increased our marketing spend, in the market where we have let’s say in process all this experience we have clearly seen a churn reduction. So, we are leveraging today a tool that we introduced a few months ago which is called a quality of experience on network, which means that we are scoring all our customers on individual basis on the experience that they get from the network.
So, it’s really something which is we give detail and depending on what type usage you make us a network, we are attributing you a score. I mean if you are a voice-only customer, you don’t give a - about data quality, so you can have a very high score in our network even if data wasn’t that great.
If you are an AV data user then of course what matter is the data experience that you get. So, we have scored our customers and there is a very big correlation in between these core and churn, which is today guiding our investment in network.
So, we have tools in order to really tackle these issues, so that’s the reason why I say well on one side we have let say one or two items which we have decided to implement any which have slight impact in churn.
On the rest, we have all the tools and capabilities to reduce churn. So what we said I guess in the call with the market on the other day is most likely our churn will peak in 2018 and then we will go down starting in 2019 and we will close to get with our competitors, this caveat of let's say we are not too structural to that we have done such as these.
Got it. Okay. You eluded to leasing, does that still make economic sense just given higher churn. I think, and I mentioned this in the context actually I believe it may have been in your predecessor or Marcelo. But leasing had been referenced as the churn killer.
Convergence is a good buzz word into our next question. So last years at the now we are seeing maybe with 18 months windows for refresh relative to 24 months and may be dragging a little bit of higher churns. So, how do you get comfortable that’s the right sort of - from an economic perspective, that’s the right sort of go-to-market?
I guess, let’s say, I have made a - once again on a seg base when you look at the financial and economies subject that it’s a good let’s say, outcome for the company. I’m comforted in this choice by the fact that looking around not only in the U.S., but in many other countries, many operators are turning to lease as well. So we are - it’s no more just like there are few players. If you would be their interest if you were looking at different countries by the number of let’s say, to payers, which are turning to lease.
I guess that to start with of course, we have to learn a bit about let’s say how to implement it for our internal people as well as for our customers when all the market is communicating around ID and we are the only one speaking about lease of course that takes a bit of time for customers to really get it and to understand the rationale and the interest for them.
So these leases will be the ability to upgrade let’s say, once you know those tests, they are already embedded value proposition in the service, which are great. So, I really believe that it’s a right, let’s say setup for today and moving forward, and so we intend to continue with our leasing proposition.
You alluded to your partnerships with Altice and Cox, can you maybe talk about some of the benefits Sprint receives from these agreements. And whether these types of agreements are maybe somewhat of a blueprint, you would maybe look to use when partnering with other cable tiers.
Well, the partnerships are slightly different.
That let’s take the one with Altice, which I guess fit up on both sides, which is when Altice is a benefit for both sides. But if I look at Sprint I mean the benefits are obvious on one side additional revenue for the MVNO agreements that we have reached with them. MVNO is good for us. Our market share is quite low, well let’s say those guys are operating.
So even if there might be some concern about are they going to compete against us when you have let’s say, not such a big market share into places where they do operate and to bring their customers on our network as we know that let’s say, in any case mobile is a scale again, that makes sense for us. So that’s a revenue at least which is nice and which will improve our profitability.
Second ability to access to their infrastructure in order to let’s say, roll out small cells, so which will improve the quality of our network in a very nice manner that we are let’s say contemplating to roll out thousands of small cells on their infrastructure; third, leveraging their infrastructure for backhauling not only the small cells, but our macro sales as well in those places for good economics. So that’s the three major benefits that we would get from these deals with Altice.
So now I mean we are just in the execution of these deals and my expectation is to move as fast as we can you know in order to make it working the next coming months and to get the benefit of it. So yes, that’s a nice framework that we have then extended to Cox, or part of it, not for all the bits and pieces and that we could extend to other cable operators.
But access to the networks seems like its key, or its one of the bigger points…
Access is a network meaning…
Meaning in terms of getting access to rights of way for small cell deployment or…
Yes, of course, that’s again. There is a revenue gain on one side and there is let’s say, a natural deployment gain on the other side helping us to roll out our small cell spectrum and getting access to tobacco. We all know that the name of the game when you turn to 5G is [indiscernible]. And we intend to leverage these fiber in faster where it does exist.
Cable operators are not the only ones to have this type of infrastructure, so we don't intend to get only with cable operators but let's say we intend to leverage these fiber infrastructures where they do exist and where it makes sense.
Convergence, it's a good buzzword segway into the next question so last year at the conference the industry was buzzing with M&A talk, 600 megahertz options were winding down, a year later I think both companies between yourselves and T-Mobile have been pretty public around discussions that didn't materialize in a deal. How do you think about the strategic future for the standalone Sprint and what I'm getting at it is M&A still somewhat of a near term option or for the next two years really about organic turnaround.
Well I guess that I have been quite explicit in all what I have presented to you today, I mean clearly we should be able to in order to implement an organic strategy and whatever you want to achieve, I mean to be best-in-class is always best to create optionally.
So the absolute priority obviously is to implement the framework that I have exposed to you, with a different pillar that I have presented. So which will give the base for Sprint to be a successful standalone player in this industry. Of course we all know that scale matters in this industry, there is no doubt. I had been let's say faced to this industry in all the countries in the world and we all know that scale matters.
Skill can be achieved in different ways in order to get it, and there is not only one way to get skill but skill matters. So it's also our duty to remain open to any strategic opportunity in the [indiscernible] so that's the way is see. Just make sure that you have the right foundation and you're really laser focused on your execution. Meanwhile keep the optionality open, because scale at the end will always matter.
One of the other in terms of scale obviously being part of the Softbank umbrella company can you talk to maybe some of the benefits Sprint derives being part of the Softbank organization and how you plan on maybe leveraging some of these in upcoming years.
I guess this has not yet been played, So let's be clear, because on both sides I mean probably Sprint was not ready in terms of platform and the move to 5G give a tremendous opportunity. Second, Softbank has invested a lot in the back 10 years but they have accelerated the investment in the past few years, in companies which really matters for 5G.
Think about what they are doing in right sharing, things about what they are doing with OneWeb, think about what they are doing with ARM, Alibaba, so I couldn’t in many, many companies which are very, very critical for the 5G world.
So once again it’s right timing now to really make sure that we are going to leverage those assets, they have also invested in artificial intelligence, in robotics so that we can use for our own usage or that we can deploy for our customers.
so there is lots that we can do and that's something in which we're invested a lot right now in order to leverage this ecosystem but just the thing about so let's say two things coming now together, I mean we are turning Sprint as a 5G company, the investments that SoftBank has done maturing.
so that’s the right time in order to create, not that easy, because let’s say SoftBank has minority or majority investments depending on the different companies, but if I look at the end of day, we have an equity sale, which is very, very unique and that we intend to leverage in order to create differentiation. So, you should expect from us in the next coming quarters to come we believe let’s say some unique IDs in that space.
Well, last question on the topic. And you alluded to this somewhat in the discussion around Altice and Cox, but do you think 5G is the ultimate catalyst that accelerates convergent between cable and wireless in the U.S.?
Well, I don’t know, I just noticed that let’s say many people are taking about convergent. I hear some of let’s say of the cable operators claiming that now they were a wireless company. So, it’s obvious that what matters at the end of the day is wireless. I mean customers are really looking for wireless services.
So, I think we are uniquely positioned. I mean everyone dreams to go to wireless, not that easy to be a wireless player. It’s a completely different game, I have been on both sides, and I have seen also companies moving from one space to the other that’s not always that easy, it’s obvious that the end game what the customers are looking for is a wireless proposition meaning fibre in the pocket. So that will drive more and more probably convergent in-between those different players.
Cost savings have been a big area of success for Sprint in recent years. Very sharp focus I would say, from the company and offsetting maybe some of the top-line pressure do you see? With everything that’s been achieved so far, how should investors think about incremental cost savings opportunities in fiscal 2018 outlook?
So, cost savings cannot be a strategy, cost saving is an enabler and that’s what it has been in the past few years and it will remain. These cost savings had been achieved in the back few years, I have said more than €1 billion in the past four years, good news that there is still a lot to be done and coming with fresh eyes, coming maybe from markets, where the competitive pressure was so high that you have no other chance in order to reduce drastically your cost.
But when you do it you have to do it in a smart manner, meaning cost saving is about transformation, how do you make your organization more efficient, that what is we are doing right now - let’s say reshuffling is stop management team. I’m reshuffling all companies and although to be more agile in the way we operate. Still have cost savings to striking the network space back only end of June all that step that we still, that we can we have already done or not.
In marketing and commercial leveraging, but digital, I told you I believe that the industry as a whole inflate in this digital transformation. We have big plans there in order to invest in this area to a lot of additional savings as well.
So, there are different, let’s say different way I get that I will come back with more details when we will present our target for 2018. But I can tell you the good news is that there is still a lot to be extracted. Then the real only question is how much of those savings do we reinvest in our business and that’s what I intend maybe to shift a bit in order to reinvest more in our network, in our retail and in digital.
Okay. Network, obviously Sprint’s alluded to a bigger step-up in CapEx in fiscal 2018 and 2019. As you sort of embark on this figure CapEx cycle, how should investors think about your liquidity position and how you are planning on funding this? And maybe sort of a part two to this question, where you sort of see leverage for this business going, where you would like to be?
So we have been clear, I mean the next two to three years we are going to invest in the networks, no doubt. I mean we have a unique opportunity to regain leadership in network leveraging 5G so why should we waste it. I mean that’s - no, that we have to invest because we will enjoy a - of course our competitors at some stage will find additional spectrum or willing that massively even if they don’t have the best spectrum.
But over the next few years where we have a key advantage. So let’s play, so you can expect from us and that we have guided the market that’s where we will invest more in the next two to four years.
We can finance it, no doubt, I mean my predecessor has done a very good work in fixing the balance sheet and tapping all the different compartments of financing. So I have no problem there. As you have seen I’m continuing to manage actively the balance sheet. I have done the higher while in the next coming weeks and the additional spectrum refinancing. So I have all what is needed in order to do that.
So next two to four years spending expanding network and then later on in the years after we would come back to a level of the industry which is let’s say probably for us an average 5 billion per year or whatever so to be at the level of the industry.
I guess that we have CapEx efficiency embedded in what we are doing due to our spectrum once again. Because as we have mid-band spectrum and as we have massive amount of spectrum we need less densification of our network.
So at the end of the day I certainly believe that we can be more efficient from a CapEx point of view. Last but not least, it is also very good to invest earlier than later in 5G for two reasons. First it will support our unlimited offers so that will help us to continue to raise for unlimited where some of our competitors might be a little bit lower reluctant.
And second is reduce cost per megabyte, because let’s say with the spectrum that we have efficiency of 5G we can reduce our cost to operate network. So on one side we will continue to strengthen the organization, on second we will get the benefits of these 5G transition in terms of data of cost and that will give us a right position to deliver what I alluded to during these 45 minutes.
I just want to follow-up on capital expenditure. So 5 billion to 6 billion in fiscal 2018 and 2019, I just want to be clear so where do you see maybe more of a run rate.
That's what I told you. Let's say, we will be more on the top range of the $5 billion to $6 billion in the next coming two to three years and we should be back to the five or whatever, let's say, in the years after. If I look at the average of the industry because it's CapEx per subscriber, I mean if we were to be at parity with our competitors, that would give us let’s say some roughly around five. So that’s why I think [indiscernible] need no run can be maybe slightly smaller because of the efficiency of our CapEx spending.
Okay. I think we are just about out of time so wrap it up here. Thank you, Michel.