Mike Sievert
President & Chief Executive Officer at T-Mobile US
Okay. Thanks, Jud. Hi, everybody. It's so great to be here to share this quarter's results with you. And as you might have noticed, we're entering the home stretch for 2021, and our team is feeling more confident than ever. We've exceeded not only Wall Street expectations, but even our own targets at this stage of our integration journey; in terms of customer growth, profitability and synergies. And with that success, we are once again increasing our guidance expectations across the board today.
The Un-carrier is about solving pain points. And you may remember that when we closed our merger last year, we said that our combined assets meant that we would end the biggest pain point of all, that age-old problem, having to choose between the best network and the best value. We said we'd be in a unique position as the new Un-carrier with our unique assets and financial position in the 5G era to end that trade-off and deliver both.
Well, let me tell you. This differentiated playbook that has never been done before in wireless is already contributing to our results and creating market-leading profitable growth where it counts in top-line postpaid customers and revenues and in cash flows at the bottom line. Only T-Mobile provides the best value proposition with truly unlimited plans, fairly priced on the best 5G network and with award-winning service. This combination is differentiating our model from the other guys and uniquely positioning T-Mobile in significant ways that have long-term implications.
In Q3, we led the industry in postpaid net adds and postpaid service revenue growth, again, just as we've done every quarter since we closed the merger. We also led the industry in core EBITDA growth and free cash flow growth. Let's talk about a few of the highlights that are driving all of this growth.
Smaller markets and rural areas are already contributing about one-third of our new accounts and brand equities are up across the board. And we're still in the very early innings of our distribution expansion and Ultra Capacity build out in smaller markets. In enterprise, we delivered our highest ever gross adds and net adds because organizations really understand our 5G leadership better than anyone. For 5G high-speed Internet, we delivered our highest ever net adds in Q3, more than double Verizon's, and two-thirds of our net adds came from urban and suburban markets. In other words, cable territory.
All right. Coming back to my point on how T-Mobile is uniquely positioned in our industry. I understand that many of you have raised questions about the promotional environment and also about the source and sustainability of recent industry growth. And some have actually questioned whether 5G really matters to consumers. While I do believe this is a healthy and growing industry, I understand that the actions of some of our peers may have soured sentiment on our category for some. So today I'm purposely focused on addressing these perceptions head-on and sharing my view of how our approach and competitive position is differentiated, both for customers and for T-Mobile's business.
The first question I'm sure is top of mind is the promotional intensity in this industry. Listen, as I've said before, at T-Mobile, we actually like healthy competition because we historically win when customers start shopping around. Our competitors are leaning into device offers. And while I can't really explain what they're up to, I can't imagine it's out of abject fear that were coming to take all their customers, because they don't have compelling pricing or a competitive 5G network or significant underpenetrated growth factors like T-Mobile has. So they're trying to temporarily buy down churn, while they sell off assets and come up with a plan.
In contrast, our competitive push into device offers is strategic. Listen, we have a once in a decade opportunity to leap ahead and stay ahead of everyone else as customers embrace 5G. We're years ahead on 5G, as you know, and we're positioned to stay ahead. And we're therefore incented to get people on 5G so they can experience that advantage. Every time we upgrade a customer from 4G to 5G, we take them from a device that works similarly on all three big networks to a device that works way, way better at T-Mobile. And secondly, we're laser-focused on completing our merger integration ahead of schedule. This is huge because of the significant churn opportunity that we have, which is why we're putting device offers in place to bring Sprint customers to T-Mobile as quickly as possible. And unlike some, we generally pay for all of this in our P&L as we go along.
Meanwhile, AT&T and Verizon are running expensive promotions to put 5G devices in their customers' hands, even though they are unlikely to find a much faster 5G signal or notice a difference in speeds most of the time. In fact, every time they upgrade a customer from a 4G device to a 5G device, they're playing right into our strength and spending a fortune to do it. In AT&T's case racking up billions of dollars of future impacts on their balance sheet.
How do their customers feel when they take that shiny new 5G phone home only to realize that most of the time it works just like their 4G phone. At T-Mobile, those devices work demonstrably better with Ultra Capacity 5G reaching more than half the country today; rocking speeds of 400 megabits per second on average. Every one of those competitive customers being upgraded to 5G at great expense is a potential future T-Mobile customer.
The second question is around the source and sustainability of recent customer growth in the industry. This one would be easier to answer if everyone in our industry was as transparent as T-Mobile, such as disclosing accounts or what adjustments are being made, etc. What I do know is that T-Mobile has a diversified growth opportunity in underpenetrated and new markets that's unmatched in this industry.
One way to cut to the chase is to look at accounts instead of lines. Our postpaid net new accounts in Q3 doubled year-over-year with our highest Q3 account growth in seven years, even while in the thick of our integration. We're up more than 1 million net new accounts year-over-year. We did this while Verizon had no account growth year-over-year and AT&T didn't disclose accounts. And what's more, we see significant opportunities ahead in smaller markets and rural areas.
We're leading America into the 5G era as we march toward covering 300 million people with Ultra Capacity 5G by the end of 2023, a time by which others only aspire to cover 175 million to 200 million people. The difference in geographic coverage between 200 and 300 million people is huge, roughly five times the land area, giving us a big competitive advantage in smaller markets and rural areas.
Listen, as the Un-carrier in smaller markets, we are combining a suddenly much stronger network with disruptive value and the best customer service. Does that sound familiar? It should. Newly competitive network combined with disruptive value and customer experience. That's exactly the Un-carrier playbook we ran over the last few years in the top markets. We're bringing the same playbook to smaller markets and rural areas that took us from number four to number one in the major metros, except in the smaller markets, we're not just bringing a competitive network, our goal is to bring a superior one, anchored by our advantage in 5G. And let's not forget that in major markets, we have room to run. We're not just defending our castle. We got to our current leadership position without being perceived as having a network advantage. Now we have the opportunity to appeal to millions more customers in the larger markets as well, who shop primarily on network, reach, speed and capacity.
In enterprise and government markets, another big opportunity where our 5G leadership is already opening new doors. We've already seen an increase in our win share for traditional postpaid services. And we're well positioned to capture advanced 5G services with the most widely built out 5G network and the only standalone 5G core, which is exactly why many large enterprises are in active trials with T-Mobile for advanced capabilities like mobile edge compute and private networks. And let me remind you that these advanced 5G services represent upside to our plan.
Bottom line, our competitors are broadly distributed today. They're already in the smaller markets and rural areas, and they already have outsized share in enterprise and they're overpriced with little 5G to show for it, making it tough for them to defend their flanks when we come in with a better network and a better value. I say all of this not to bash anybody, but to make it clear that as competition heats up, you shouldn't paint us all with the same brush. T-Mobile is executing and demonstrating that these profitable growth opportunities are real and they're differentiated.
As part of that industry growth debate, I hear misperceptions out there that T-Mobile's growth has slowed relative to our pre-merger momentum, and I'd love to set the record straight on this one. What we look at proudly is our Magenta performance as a signal of our future success. We delivered our highest ever postpaid phone net adds on the Magenta brand year-to-date through Q3, our highest ever in company history happening now, this year, even after normalizing for Sprint transfers into Magenta. The Un-carrier strategy is in full force, and we're competing smartly and the result is high quality, profitable, industry-leading growth.
With our Magenta business firing on all cylinders, we're also working rapidly through the integration of the higher churning Sprint base. Just to put this in perspective, if the Sprint base had the same churn as our Magenta base, our phone net adds in Q3 would have been about 1.2 million, way ahead of anyone else in the industry. That shows you the potential future tailwind to our growth engine as we work to get Sprint churn down to Magenta churn levels. And it reinforces that our gross add flows are right where we want them to be, at least for this point in our journey.
While others are temporarily benefiting from elevated Sprint churn today, we're working to make that very short-lived with over half of Sprint customers, at least partly migrated. We continue to execute our playbook to finish the integration in a compressed timeframe, which does have temporary impacts, but brings forward the timeframes when both the customer experience and our business results have the benefit of integration being behind us. I am so proud of how the team is executing to get all of this done way ahead of schedule. And we're particularly encouraged by what we see from Sprint customers that have made the full migration to the T-Mobile value proposition as they already have churn on par with Magenta customers.
Changing gears, I've seen some media articles and analyst notes commenting on how consumers should be indifferent between 5G and 4G given the limited availability and similar performance. Well, they're absolutely right when they look at AT&T and Verizon. Those companies have much more geographically distributed customer bases and only a small percentage of their customers are seeing big benefits from 5G and nor are a high percentage of them likely to see a benefit from their early C-Band deployments. At T-Mobile, 5G is a distinct differentiator.
Here's a fun fact for you. Over 75% of T-Mobile 5G customers are within our Ultra Capacity 5G coverage area. That now reaches 190 people, well over half of the country enjoying blazing fast speeds of around 10 times faster than 4G. Ask AT&T and Verizon, what percentage of their customer bases are in the footprint of their fastest 5G. And at T-Mobile -- and T-Mobile's 5G leadership is beginning to really matter to customers. We see this demonstrated in several areas.
The first area where we see our network leadership resonating is in perception metrics among non-customers or in other words, potential future customers. According to our polling, perception for overall network reliability has increased over 20% year-over-year and is now higher than AT&T's. Our recognition as the 5G leader among potential customers has increased over 80% from a year ago, 8-0%, matching Verizon, while Verizon's scores are flat to down and we scored 3 times higher than AT&T. Potential customers are taking notice of our lead.
The second aspect is the adoption of Magenta MAX, the best plan on the best 5G network. Take rates continue to exceed our expectations, and we now see more than half of new customers choosing the MAX. The engagement that we have seen just reinforces our belief that the 5G smartphone is the first killer app of the 5G era; from video calling, which is taken off as the primary means of communication to TikTok and mixed reality and emerging Medivir's applications, T-Mobile's network is unlocking a differentiated smartphone experience in this industry today.
We see this not only in the take rates that I mentioned, but also in the way that customers are taking advantage of this differentiated experience using 35 gigabytes a month on average when pairing Magenta MAX with a 5G smartphone, 35 gigs a month already. That's roughly triple the average 4G usage in the industry and an experience that AT&T and Verizon will be hard-pressed to support from a capacity perspective.
And did you see those new offers from the cable guys. Cable is constructing 4G offers in a 5G world and they will be challenged without wireless owners' economics, never mind the fact that they're on the smallest 5G network, Verizon's. They already automatically throttle anyone using more than 20 gigs on their quite limited so-called unlimited plan today. That might barely cut it with some consumers for a very short time, but not where this industry is quickly going.
And the final question I want to address is around the quality of earnings in this industry. Sure, there are geography differences and some may be aren't reflecting the full magnitude of their promotional spending in their EBITDA. At the end of the day, cash is key and real value creation should be measured by the conversion of service revenues into free cash flow. T-Mobile has unmatched potential because of our industry-leading growth and synergy-backed model, and we've guided to deliver a significant CAGR of 45% from 2021 to 2024. From our perspective, the current market valuation of our company based on our guided free cash flow would suggest that there is significant potential shareholder value, not yet reflected.
Before I wrap up, I do want to comment on the cyber attack we experienced last quarter. As we previously reported and updated in our filings today, we promptly located and closed the unauthorized access to our systems after becoming aware of this criminal cyber attack against T-Mobile and our customers. And we conducted a forensic investigation with the assistance of world-leading cybersecurity experts that's now complete. We also undertook extensive efforts to support and protect our customers and to further enhance our cybersecurity practices throughout this process.
Protecting our customers' data is a top priority for the company, which is why we've taken a number of steps to respond to this incident. And I've created the Cyber Transformation Office, reporting directly to me, elevating our cybersecurity team and this work accordingly. We're further building a security forward mindset into our work and our culture, and we're partnering with the best and the brightest like Mandiant and KPMG to help us do it right.
Now before I turn it over to Peter to take us through a few financial highlights and our outstanding guidance, I want to express how proud I am of this team. We executed another terrific quarter, leading the industry in postpaid customer growth, while delivering industry-leading growth in postpaid subscribers, postpaid service revenue, core adjusted EBITDA and free cash flow, all while further extending our 5G network lead and increasing our expected merger synergies for the year. Overall, our strategy is absolutely working and we clearly have the best hand to cards to win in the years ahead.
All right, Peter, over to you.