April 27, 2017
Brent Anderson, originally from Logan, Utah, switched to T-Mobile from AT&T in 2013. Since then, his bill has been about $20 cheaper per month. That adds up, especially for a college student.
“I’ve been largely satisfied with my coverage and speeds, and I think the other carriers are having to make concessions to prevent their customers from taking the jump,” Anderson said.
Anderson is not the only one who has made the switch. T-Mobile has grown significantly over the past two years because of a CEO and business practices and promotions many view as aggressive and unorthodox in the U.S. wireless industry. These unorthodox ingredients have combined to form a storm of change that T-Mobile’s major competitors have responded to in their own ways. The wireless carrier and its CEO are influencing the game of the U.S. wireless carriers.
Moving up from number four
T-Mobile reports adding around 4 million postpaid phone subscribers in 2014, or 8.3 million new subscribers including tablets and less-lucrative prepaid subscribers.
Verizon Wireless came in second with almost 1.3 million postpaid phone subscriber additions in 2014. Sprint lost postpaid phone subscribers.
John Legere, current CEO of T-Mobile, stated during an earnings call with investors that is enough to take the title of third-largest wireless company in the United States away from Sprint. Legere said Sprint counts inactive accounts from third-party resellers of its service 90 days after the service has gone inactive, and that 1.7 million of Sprint’s customers fall under this category.
Sprint officials have declared it is not important whether T-Mobile officially surpasses it in subscriber count, and that event would not significantly alter the plans of Sprint’s management for the company.
T-Mobile has not always been competitive like this, though.
AT&T wanted to buy T-Mobile in 2011. Back then, T-Mobile did not offer the iPhone, it did not have an LTE network built and it was losing subscribers—802,000 of them in the fourth quarter of 2011 alone.
Because the deal did fall through, T-Mobile received some parting gifts AT&T contractually agreed to pay in the buyout paperwork in such an event: $3 billion and wireless spectrum, the wireless frequencies that make cell phones work, valued at about $1 billion.
“For a company the size of T-Mobile, and with its financial constraints at the time, the breakup fee would have been very welcome,” Cam Bunton, editor of blog TmoNews, said. “That, plus the spectrum combined put the company in a position where it was able to start rolling out a more competitive network.”
T-Mobile started offering its LTE network to customers in 2013. The company also officially started offering the iPhone that year.
“Network expansion and upgrades are a huge part of T-Mobile’s success. It’s gone from no LTE coverage to 265 million people covered in the space of two years,” Bunton said.
Bunton also believes that T-Mobile’s purchase of MetroPCS, which closed in 2013 and added 9 million customers and more valuable wireless spectrum to its rosters, was another important milestone in T-Mobile’s growth.
An unconventional leader figure and the Un-carrier movement
John Legere, T-Mobile CEO
2013 was a transformative year for T-Mobile USA, and it was led by a new management team. John Legere and his team were put in office in September 2012.
Legere is not a typical executive. His hair is grown out, and he is known for his foul mouth. Legere is also known for belittling his competitors, battling with tycoons and communicating directly with followers on Twitter. He has ditched the traditional suit and tie for magenta t-shirts to go with T-Mobile’s official color scheme.
“His [Legere’s] voice and his persona, largely through Twitter, has become a way of allowing every customer on the planet to communicate with the head of the organization,” David Carey, T-Mobile executive vice president of corporate services, said.
''For a company the size of T-Mobile, and with its financial constraints at the time, the breakup fee would have been very welcome.'' Cam Bunton
Legere has implemented changes that go beyond his hair, wardrobe and attitude. He has made changes in company policies and pricing. Legere calls these changes part of an “Un-carrier” movement. These are offered to most postpaid subscribers.
The first Un-carrier move was announced in March 2013. This changed the way buying a cell phone works at T-Mobile. Traditionally, a cell phone company has subsidized the cost of a cell phone with a two-year contract, or made it so a customer does not have to pay the full cost of a brand-new phone upfront.
With the first Un-carrier move, T-Mobile began charging a lower monthly rate for the cost of service and stopped subsidizing phones. The company began offering an interest-free phone payment program, and many phones are offered with a $0 down payment. Once the full cost of the phone is paid off, the customer’s bill goes down until they decide to purchase another phone from T-Mobile. Customers who bring their own devices or opt for cheaper devices may take advantage of T-Mobile’s lower rates right away.
Two-year contracts were eliminated along with phone subsidies in March 2013.
Shots fired
T-Mobile’s main competitors noticed this change and began offering similar programs so customers could pay for their phone in installments and have lower service bills without signing two-year contracts.
AT&T began offering its Next program in December 2013. Verizon Wireless followed with its Edge program in February 2014. Sprint has a similar offering now as well.
Anderson says Un-carrier 1.0 is the main factor that convinced him to switch to T-Mobile.
“Knowing that I own my phone—and the zero percent interest—who can’t get behind that?—were huge for me,” Anderson said.
''In general, T-Mobile is a disruptive force that has pushed its competitors to react and remain vigilant.'' Phil Goldstein
“Unlimited music data is great,” Brian Stoll, a 25-year-old whose family switched to T-Mobile in February 2015, said. It is one of his favorite perks of being a T-Mobile customer.
T-Mobile’s competitors have not directly responded to Music Freedom by rolling out similar promotions, but Verizon Wireless and AT&T have increased data allotments since then.
Data Stash, or Un-carrier 8.0, is one of the latest major moves from the magenta carrier. With this feature, customers can keep unused data to use in later months after they have exhausted their normal high-speed data allotment.
T-Mobile announced Data Stash Dec. 16, 2014. AT&T announced a similar program, Rollover Data, on Jan. 7, 2015.
A summary of each Un-carrier announcement made up until now and some of the competition’s responses
“T-Mobile’s aggressive pricing and low pricing forced Sprint to drop its pricing in the second half of 2014 and has also spurred Verizon and AT&T to offer promotions and discount some their pricing,” Phil Goldstein, editor of trade publication FierceWireless, said.
In addition to offering new programs similar to those of T-Mobile, some of T-Mobile’s competitors have specifically targeted it.
In early January of 2014, rumor had it that T-Mobile would begin paying early termination fees, or the fine for breaking a two-year contract with a cell phone company, for new subscribers coming from other carriers. Before T-Mobile officially announced anything, AT&T promised it would give customers switching from T-Mobile up to $450 in financial incentives for doing so.
Additionally, AT&T-owned Cricket Wireless announced a promotion that would give switchers from T-Mobile and T-Mobile-owned MetroPCS a $100 credit in August 2014.
In January 2015, Sprint also took aim by guaranteeing a $200 credit for new customers who trade in a T-Mobile smartphone.
“In general, T-Mobile is a disruptive force that has pushed its competitors to react and remain vigilant,” Goldstein said.
Looking forward
2015 looks to be another year of growth for T-Mobile. The company originally forecast it would add between 2.2 million and 3.2 million customers this year, but raised its guidance to between 3 million and 3.5 million after adding 1 million net postpaid phone customers in the first quarter of the year.
Fewer people have been leaving T-Mobile, possibly indicating people have been more satisfied with their service. In the first quarter of 2015, churn, or the percentage of subscribers leaving the company, was 1.3 percent. That is down from 1.47 percent at the same time in 2014 and 1.73 percent in the fourth quarter of 2014.
Going forward, coverage may be one of the magenta carrier’s larger stumbling blocks.
Rachael Campbell, who lives in West Jordan, Utah, switched from Verizon to T-Mobile in 2014.
“I would say that Verizon has much better coverage,” Campbell said. “I can’t make calls at work with T-Mobile, but with Verizon I could have.”
T-Mobile is working to combat its coverage issue. Nearly every phone the company sells comes with the ability to make calls and send texts over Wi-Fi now.
Also, according to T-Mobile, 265 million people and 0.6 million square miles were covered by its LTE service at the end of 2014.
At the end of 2015, the company aims to cover 300 million people and 1.6 million square miles with LTE. According to maps the company has released, it will expand coverage to areas it does not currently serve.
“Our goal for coverage for 2015…is 300 million POPs [millions of people],” Carey said. “And then there’s only 330 million in the U.S., so let’s mop up the rest in 2016.”
Carey acknowledges that low-band spectrum, which allows wireless signals to better penetrate walls and go greater distances than high-band spectrum, will be a key component of T-Mobile’s expansion plans.
The company purchased some low-band spectrum in 2014 and hopes to buy nationwide low-band spectrum licenses in an auction held by the U.S. government in 2016.
Additionally, Carey does not rule out future consolidation of some sort, although he cannot elaborate on the matter.
“T-Mobile is an excellent carrier for my needs, and I’m very happy that I went with them,” Anderson said.
Especially if T-Mobile expands coverage, one thing is certain: 2015 and beyond is sure to be competitive for the U.S. wireless industry.