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.