T-Mobile 2013: The Comeback Carrier

What a difference a few years make. Two years ago, T-Mobile was cast adrift in the wake of its botched merger with AT&T. At the time, the wireless carrier didn't appear to have any kind of plan B when the deal fell through, which executives confirmed.
Things didn't look good for T-Mobile in 2011: The company had a reputation for being a value-driven carrier fueled by the easy — but fleeting — money of prepaid customers, but it was hemorrhaging subscribers. Its contracts were relatively cheap, but T-Mobile's network didn't match the reliability of its competitors' offerings (it didn't even have LTE). It also wasn't able to sell the most popular smartphone on the planet: the iPhone.
The picture today is entirely different. Armed with new spectrum and cash it gained from the failed merger, T-Mobile picked up the pieces, and put together a good plan for recovery. It committed to rolling out an LTE network. It hired a new, outspoken CEO with a plan to upend wireless industry orthodoxy.

And yes, T-Mobile finally nabbed the iPhone.

And yes, T-Mobile finally nabbed the iPhone. "It's undeniable that all these things they've been doing to attract attention and land customers have been paying off," said Gartner analyst Bill Menezes. "Whether it's sustainable in the long-term remains to be seen, but 2013 is the year that, among the carriers, they took the pennant."
Customers have responded. The last two financial quarters have been favorable for T-Mobile, which is finally gaining subscribers again. Its May acquisition of MetroPCS, whose spectrum assets are now being integrated, will give its network a needed boost.

The Power of Mind Share

More importantly, T-Mobile now has good buzz and real mind share. This year, CEO John Legere led the carrier through a trio of status-quo-shaking changes. First, it abolished traditional wireless contracts in favor of equipment installment plans. Next, T-Mobile targeted influencers by introducing a way for customers to upgrade their phones much earlier than the usual two-year period. Finally, it shot down another pet peeve of smartphone owners: international roaming fees.
With these moves, T-Mobile labeled itself the "Un-carrier" since these are all customer pain points that are also considered sacred cows of the wireless industry. At events, Legere gleefully flogs his larger, more established competitors for clinging to customer-unfriendly policies, often with mild profanity. In public, he frequently wears jeans, t-shirts and leather jackets.
"They made it easy for people to buy their product," Menezes said. "This whole 'Un-carrier' strategy said, 'If you're willing to take a chance on us, we're going to make it easy for you to leave if you don't like it.' That's clearly resonated with a lot of people."
Legere sees himself as a rebel — a David among wireless Goliaths — but under his leadership, T-Mobile has put its money where Legere's mouth is. When he publicly promised T-Mobile would deploy LTE in New York City by summer 2013 (which wasn't part of the original rollout plans), his people delivered.
Now, with MetroPCS' spectrum added to the mix, T-Mobile's LTE network may soon outpace those of its rivals in some key areas. The fact that it already has a fairly speedy "4G" network based on HSPA+ helps, too. When you fall outside LTE coverage on T-Mobile, there's a good chance that you still have a fast connection, whereas on Verizon, AT&T and Sprint, the drop-off is steeper.

Interference Ahead

How often those drop-offs happen, though, has traditionally been one of T-Mobile's key struggles. Acquiring MetroPCS gave T-Mobile a healthy helping of customers (about 9 million at the time of the merger; T-Mobile now has 45 million total), but those customers are largely in areas that T-Mobile already serve. The acquisition will likely do little to expand the carrier's coverage map.

"The old expression about T-Mobile was once you leave the Interstate, chances are you're going to be roaming,"

"The old expression about T-Mobile was once you leave the Interstate, chances are you're going to be roaming," Menezes said. "The issue with T-Mobile has always been the scope of their coverage, and they're trying to address that, but they're still not quite there. If you look at the spectrum they acquired, it really focuses on larger markets." The biggest hurdle T-Mobile faces on its road to becoming a "big" carrier is its limited appeal to corporate customers, Menezes said. T-Mobile isn't like Verizon or AT&T, which have existing landline networks with big subscriber bases, and has struggled to build corporate customers willing to take a risk on the nation's fourth-place carrier.
Although T-Mobile's Un-carrier moves target consumers, one of them is of interest to corporations: cheap international roaming. While big corporations, with tens of thousands of lines, will probably be out of T-Mobile's reach for awhile, the promise of a more nimble traveling workforce is attractive to plenty of smaller and medium-size businesses — especially those who have all but abandoned landlines.

Can T-Mobile Really Change Wireless?

Judging from Legere's attitude and the company's recent financial success, T-Mobile is doing exactly what it set out to do with its Un-carrier approach: change the wireless industry as we know it.
Reality check: The carrier is in fourth place, and it's taking these risks precisely because it's the underdog, with much less to lose than the larger carriers. In truth, T-Mobile is going to need a long, steady trend of good results before the wireless industry breaks apart, and all two-year contracts fall into the chasm.
"It's still a peanut of a company," said industry analyst Jeff Kagan. "It's not an industry-changing company. Transforming the industry is a big job — too big for a little company to do. This little company is going to have to grow and become a bigger company before it has the power to even attempt to transform the industry."
Kagan's comments ring true, but you can't look at what T-Mobile's been doing over the past year — and how customers have responded — and not think it's onto something. It's hard to dismiss the "Un-carrier" label as just marketing when the company walks the walk: Wireless contracts are universally hated, so it killed them. Lots of people want to upgrade often, so it made that easier. No one likes roaming fees while traveling, so it took care of that, too. Want an iPhone? What color?
The question now becomes: Can it keep going? How many more Un-carrier ideas does it have? And do enough customers care for it to make a difference? What T-Mobile does in 2014 will answer those questions, and whether or not its fresh, populist approach will become the new norm or a wrong number.