Light Reading

T-Mobile Not Stealing Customers… Yet

Sarah Thomas
4/3/2014
50%
50%

Are T-Mobile's "uncarrier" ways helping it steal customers from its competitors? If you follow the boisterous claims of its CEO, you'd think US consumers are chomping at the bit to tear up their contracts and join the magenta movement. But the numbers suggest that's not the case, or at least not yet.

According to the latest consensus estimates for wireless subscriber growth, which T-Mobile US Inc. provided to industry financial analyst Craig Moffett as part of its quarterly survey of sell-side estimates, the industry as a whole gained 800,000 postpaid customers in the past three months.

So where are these nearly one million customers coming from? For now, some could be from the smaller operators, upgrading to a smartphone and a tier-one provider for the first time. Others are likely tablet subscriptions or other non-mobile postpaid users. But, increasingly, these customers have to be coming from other big carriers, which means additions can't stay that high for long.

In fact, I'm surprised they have so far. The level of promotions in the wireless industry has to be at an all-time high. In the past week alone, Verizon Wireless dropped prices on its More Everything plans to match AT&T Inc. (NYSE: T)'s offer of four lines and 10GB of data for $40 per line per month, and today it's offering up 1GB of free data to tablet customers on the plan. (See AT&T Joins Verizon in the Shared Data Pool.)

When you add in Sprint Corp. (NYSE: S)'s Framily plans, and T-Mobile's device financing, lower international rates, free tablet data, early termination fee offer, and the other three's responses to nearly all these moves, it's hard not to foresee a lot of customer grabbing going on. (See T-Mobile to Pick Up 'Evil' Family Fees, Sprint Launches No-Sharing 'Framily' Plans, AT&T Lures T-Mobile Subs With $450 Promise, Look Inside T-Mobile's 'Uncarrier' Transformation, T-Mobile Kills Contracts, Launches LTE Network, and T-Mobile Zeros In on Tablets.)

That said, it hasn't yet erupted into an all-out price war. While the operators have tweaked their offers and repackaged how they price, the actual prices haven't come plummeting down. Their earnings haven't been affected yet either. But going forward, they will likely come at the expense of subscriber growth, if not revenues. (See Verizon's 4G Strength Keeps It Above the Fray.)

Moffett says that consensus expectations for 2014 post-paid net adds have fallen at Verizon from 3.53 million nine months ago to less than 3 million today, and from 1.4 million six months ago at AT&T to 1.2 million today. For Sprint, postpaid subscriber losses in 2014 have more than doubled over the past three months to 617,000. T-Mobile, meanwhile, continues to grow -- from 1.3 million three months ago up to 2.9 million additions expected today. Incredibly, a year ago, T-Mobile's estimates were only for 50,000 postpaid subscriber additions this year. (See T-Mobile Leads, Sprint Suffers in Pricing Wars.)

That growth has to come from somewhere. But as Moffett points out, the estimates have to be off base. He writes, "At Verizon, consensus estimates for churn has ticked up by 2 bps [basis points] over the past three months, AT&T’s has increased 3 bps, Sprint’s, 8 bps, and T-Mobile’s fell by 4 bps. Street estimates, in other words, seem to imply that the TMUS’s subscriber gains are largely coming out of thin air, and that the big four’s recent promotion wars have really only resulted in, well, more customers for everyone."

At some point, that can't last, and it might just take an all-out price war to tip the scales. T-Mobile has made moves in that direction, and Sprint's new boss, SoftBank Corp. CEO Masayoshi Son, has promised one if he's able to acquire the Uncarrier. So far, there's more of price squabble in the US, but as T-Mobile's consensus estimates prove, a lot can change in a very short amount of time.

— Sarah Reedy, Senior Editor, Light Reading

(29)  | 
Comment  | 
Print  | 
Threaded  |  Newest First  |  Oldest First        ADD A COMMENT
SarahReedy
50%
50%
SarahReedy,
User Rank: Blogger
4/3/2014 | 3:04:53 PM
Uncarrier moves
Going back through to add all those links on past T-Mobile moves reminded me just how much it has done in such a short period of time. A lot of its pricing changes were more about changing the structure and promotions, but there were also some significant price drops in there. It'll be interesting to see how the market continues to evolve in pricing and plans going forward. 
SarahReedy
50%
50%
SarahReedy,
User Rank: Blogger
4/3/2014 | 3:07:24 PM
Next pricing trend?
Any thoughts on what the next big pricing shake up or trend will be? My money is on more toll-free/sponsored data-type partnerships.
mendyk
50%
50%
mendyk,
User Rank: Light Sabre
4/3/2014 | 3:28:16 PM
More fun with numbers
If churn is up at competitors but down at T-Mobile, doesn't that suggest that there's more than thin air at play? Also, the fact that competitors have lowered expectations for net adds while T-Mobile is increasing its net adds also indicates something positive is happening.
SarahReedy
50%
50%
SarahReedy,
User Rank: Blogger
4/3/2014 | 3:31:08 PM
Re: More fun with numbers
True, it's just not happening as much as you might expect yet. Adding 800,000 in total is still pretty good for the industry. It'd be lower if they were just trading customers.
mendyk
50%
50%
mendyk,
User Rank: Light Sabre
4/3/2014 | 3:40:28 PM
Re: More fun with numbers
The subscriber war of attrition is a less violent but equally pointless analog to trench warfare in World War I. Gain two points, lose three. Gain two back, lose one. Etc.
SarahReedy
50%
50%
SarahReedy,
User Rank: Blogger
4/3/2014 | 3:43:19 PM
Re: More fun with numbers
That could change with a real price war of the likes Son is promising. "Let's fight back! Let's fight back!"
mendyk
50%
50%
mendyk,
User Rank: Light Sabre
4/3/2014 | 3:47:43 PM
Re: More fun with numbers
Winning customers through unsustainable pricing rarely works as a long-term strategy. So the question is whether there's enough real margin in current prices to sweat things down. I will guess that any too-good-to-be-true price plan will be exactly that -- a lowball bait price that will require a good portion of hidden extras.
TaraSeals
50%
50%
TaraSeals,
User Rank: Light Sabre
4/3/2014 | 4:51:56 PM
Re: More fun with numbers
I agree, Mendyk, and I also think that unlike long-distance or home phone service, wireless from an infrastructure perspective of course has a completely different cost structure, so the race to zero specter really isn't feasible. That said, my prediction is that going forward voice will always be the loss leader...while video and plans oriented around accessing video (to your point about app-oriented plans, Sarah) will become more and more attractive.

I think T-Mobile's genius  is in its positioning as being above the AT&T-Verizon fray; it's a little younger, a little hipper...and definitely has more whimsy than Sprint (and incidentally, that Framily campaign bothers me to no end--next thing you know it will introduce a multilevel marketing element).
SarahReedy
50%
50%
SarahReedy,
User Rank: Blogger
4/4/2014 | 9:06:17 AM
Re: More fun with numbers
I think T-Mobile has copped a different attitude than AT&T and Verizon, but I'd say Verizon is the one that's been above the fray. It has responded to some of T-Mo's moves, including most recently with its Share Everything adjustments, but so far has just ignored it or dismissed it as an annoying pest. AT&T has given in a bit more. At any rate, it's been fun to watch!
Phil_Britt
50%
50%
Phil_Britt,
User Rank: Light Sabre
4/3/2014 | 6:50:27 PM
Re: More fun with numbers
Agreed, Mendyk. 

 

The price wars of the airline industry were unsustainable, but the airlines though that was the best way to lure customers. They had plenty of customers, but also plenty of red ink. Now the airlines are making a lot of money -- at the customers' expense and inconvenience.

Airlines, telecom carriers and other businesses can only go so far with price wars. And cheaper (price) service usually means cheaper (quality) service.
mendyk
50%
50%
mendyk,
User Rank: Light Sabre
4/3/2014 | 7:23:50 PM
Re: More fun with numbers
We also should remember that Mr. Son lost a boatload of money in the first dot-com bubble. Fortunately for him, he had three boatloads, so no big worries. But his business decisions are not infallible.
SarahReedy
50%
50%
SarahReedy,
User Rank: Blogger
4/4/2014 | 9:08:04 AM
Re: More fun with numbers
I understand that his outrage over the unfair wireless prices in the US is just posturing, but he'll have to make good on his promise of lowering prices if the acquisition goes through in some respect or another. What kind of changes in wireless pricing do you see happening that are actually sustainable?
mendyk
50%
50%
mendyk,
User Rank: Light Sabre
4/4/2014 | 9:22:52 AM
Re: More fun with numbers
Sustainability comes down to acceptable profit margins, and also has to take into account corporate factors like debt service. Every company's margin requirements are slightly different, but within a specific industry they tend to aggregate at a more or less common point (at least for the publicly traded companies). That's why it's hard for me to see any effort to differentiate on price as more than a temporary and incremental strategy. But I'm not a multibillionaire with a messiah complex.
SarahReedy
50%
50%
SarahReedy,
User Rank: Blogger
4/4/2014 | 9:25:38 AM
Re: More fun with numbers
True, and even though it's starting to affect subscriber numbers, it hasn't affected the financials of AT&T or Verizon at all, so there's little incentive for anyone but probably Sprint to do so.
SarahReedy
50%
50%
SarahReedy,
User Rank: Blogger
4/4/2014 | 9:25:39 AM
Re: More fun with numbers
True, and even though it's starting to affect subscriber numbers, it hasn't affected the financials of AT&T or Verizon at all, so there's little incentive for anyone but probably Sprint to do so.
danielcawrey
50%
50%
danielcawrey,
User Rank: Light Sabre
4/7/2014 | 1:22:06 PM
Re: More fun with numbers
I have a hard time seeing any changes in wireless subscriber pricing. 

We can all sit around and complain about how expensive monthly fees are. But the reality is that we're all going to continue paying those fees.

It's expensive on an infrastructure and operating level for wireless companies to do all of this while making a profit. Actually, I think companies like Verizon make a whole lot more on the business side than anything else. 

Ultimately, I like how T-Mobile is trying to positiion itself as a consumer friend in the industry. But I have a hard time seeing how the company will actually cause long-term distruption or change for consumers. It's the same product just packaged slightly different. 
dstehle
50%
50%
dstehle,
User Rank: Light Beer
4/7/2014 | 2:20:42 PM
Re: More fun with numbers
I have 9 people on my AT&T Family Plan. Before last week, I was paying $30 per line with a $120 10Gb dataplan - $390 before tax.

I called in after seeing all those "Yup, yup, yup" commercials and I was pleased to get new pricing without having to sign up for a new contract. $15 per phone and a 15Gb data plan for $135 - $270.

A nice $120 delta.

I notice that Verizon has not matched this yet.

 

David
SarahReedy
50%
50%
SarahReedy,
User Rank: Blogger
4/9/2014 | 10:52:43 AM
Re: More fun with numbers
That's nice that you were able to change without a contract, but frustrating they didn't proactively reach out to you to suggest it! I guess that is asking too much...
SarahReedy
50%
50%
SarahReedy,
User Rank: Blogger
4/4/2014 | 9:09:40 AM
Re: More fun with numbers
I think the tradeoff of lower prices for poorer quality or some other kind of caveat is something a lot of US wireless users have proven they are willing to make. A number of MVNOs are basing their business on that kind of model. It may always be a niche play, but I think we'll see more business model experimentation. 

And, you're right, flying used to be so much cheaper! Now it's not only more expensive, but a pain with delays and issues every single time. blurgh.
SarahReedy
50%
50%
SarahReedy,
User Rank: Blogger
4/4/2014 | 11:11:17 AM
Sprint fires back
Like I said, moves are being made on a nearly daily basis. Sprint just fired back, matching T-Mo's offer to pay family termination fees up to $650.

Legere immediately shot back on Twitter (matching your point, mendyk) that T-Mobile's offer is for life, while Sprint's is just a one-time promotion to lure/trick you. Frucked up, he says.

http://s4gru.com/index.php?/topic/5721-sprint-to-pay-etfs-for-a-limited-time/
mendyk
50%
50%
mendyk,
User Rank: Light Sabre
4/4/2014 | 11:35:56 AM
Re: Sprint fires back
"Family terminaton fees" -- that means something different where I come from.
RitchBlasi
50%
50%
RitchBlasi,
User Rank: Light Sabre
4/4/2014 | 12:27:09 PM
Ups n Downs
Yeah mendyK, being Italian and coming from Brooklyn, that meant something else for me too.  :-)

I wonder if the big swing into postpaid could also be a result of adding a new family member onto a family plan instead of going for a pre-paid option.  At around $40 a person, the postpaid plans are rivaling those of MVNOs.  It always amazed me how carriers came up with their numbers, how each might have arrived at them differently, and how analysts projections were always a bit off based on a number of unknowns.  Maybe someone should come up with standards for reporting - like coming up with standards for NFV, LTE, yada, yada, yada.
kq4ym
50%
50%
kq4ym,
User Rank: Light Sabre
4/6/2014 | 6:46:39 PM
Re: Ups n Downs
The numbers aren't always going to add up when company PR folks put out their version of how great they're doing. But, it's still hard to keep customers satisfied and ironically sometimes hard to get them to jump ship to another company, adding to the difficultiy of predicting customer behavior and thus indivitual company profits.
SarahReedy
50%
50%
SarahReedy,
User Rank: Blogger
4/4/2014 | 2:05:43 PM
Clarification from Craig...
Moffett was in touch to clarify that he believes the estimates what is off base. He writes:

 "The point we were making is that the estimates reflected in T-Mobile's survey are probably simply wrong; they have come up for T-Mo but have not yet come down for everyone else, and are therefore likely much too optimistic for the industry as a whole...We meant that other forecasters aren't yet reflecting that T-Mobile IS taking subscribers, and that their forecasts are therefore simply wrong. Similarly, we didn't mean that churn hasn't gone up for everyone else, as you suggest.  We meant that forecasts don't yet reflect the fact that churn has undoubtedly gone up, and, again, are therefore simply wrong."
dstehle
50%
50%
dstehle,
User Rank: Light Beer
4/9/2014 | 11:00:47 AM
Re: More fun with numbers
Actually, they did reach out to me. AT&T has been flooding the TV networks with this ad:

 

http://www.youtube.com/watch?v=njENamous08

 

David

 

 
SarahReedy
50%
50%
SarahReedy,
User Rank: Blogger
4/9/2014 | 11:05:16 AM
Re: More fun with numbers
You mean you felt compelled to call in because of seeing that commercial, or they actually called you? Either way, good to see their marketing is working!
mhhf1ve
50%
50%
mhhf1ve,
User Rank: Light Sabre
4/10/2014 | 3:21:39 PM
T-Mobile stole me away from Verizon
Verizon has a lot of factors going for it -- its network reach is hard to beat, so while I was with Verizon, I almost never had no signal or a dropped call. However, VZW's prices are pretty easy to beat, and that's what got me to switch to t-mobile.

So far, I'm not so sure that "uncarrier" means what they say it means. T-mobile has certainly tried to make its customer service not suck like other carriers, but in the end, I don't think it's *that* different from its competitors. It's not like the difference between Tesla and the Big3 automakers. It's more like the difference between a local pizza restaurant and Pizza Hut.... 
SarahReedy
50%
50%
SarahReedy,
User Rank: Blogger
4/10/2014 | 3:52:20 PM
Re: T-Mobile stole me away from Verizon
Hah, that's a pretty good analogy. I guess most importantly (assuming the service has been on par for you), is it a lot cheaper now?
mhhf1ve
50%
50%
mhhf1ve,
User Rank: Light Sabre
4/10/2014 | 4:30:09 PM
Re: T-Mobile stole me away from Verizon

I guess most importantly (assuming the service has been on par for you), is it a lot cheaper now?

It's significantly cheaper, but more importantly, t-mobile's "unlimited" plans make its bills much more consistent for me. When I was with Verizon, my bills would fluctuate wildly depending on "overage" costs -- if I exceeded my alloted bucket of minutes per month, I'd have to stop using my phone... or pay an extortion-like per-minute rate for my voice calls until the end of my billing period.

Educational Resources
sponsor supplied content
Educational Resources Archive
More Blogs from Que Sera Sarah
P3's study of VoLTE in the DC area shows it delivers high-quality, crisp calling, but a lot of stars still have to align to be able to use it.
And Light Reading wants to help! We're proud to partner with Intel to identify and profile female and minority-led communications startups competing for the funding.
Chicago CIO and Women in Tech at BTE keynoter Brenna Berman explains why we need more women and minorities in the tech industry.
Support charity. Defeat Communism.
Marcelo Claure had some bold claims to share at the Recode conference, including that its network would be ranked No. 1 or No. 2 in every single market in the next 18 to 24 months.
Flash Poll
From The Founder
Network architects aiming to upgrade their networks to support agile, open, virtualized services in the 21st century need to consider new criteria when choosing between technology suppliers.
Live Streaming Video
BTE 2015 Sponsor Keynote: HP
Dr. Prodip Sen, CTO, Network Functions Virtualization, HP
LRTV Documentaries
IoT in Action

6|30|15   |   1:39   |   (3) comments


Two co-workers discuss the benefits of IoT technology.
LRTV Interviews
Ericsson Opens Up on OPNFV

6|30|15   |   14:16   |   (0) comments


Martin Bäckström, VP and head of industry area Datacom at Ericsson, talks to Light Reading founder and CEO Steve Saunders about the emergence of OPNFV, the importance of standards and Ericsson's OPNFV plans.
LRTV Custom TV
NetNumber Founder Discusses NFV/SDN Impact on SP Networks

6|26|15   |   4:15   |   (0) comments


NetNumber Founder Doug Ranalli examines why SPs need a new network infrastructure for service agility. While NFV and SDN are the tools, the old ways of thinking about signaling control are inhibitors. Doug provides his recommendations.
LRTV Custom TV
Orchestrating NFV vCPE Services Across Multivendor Networks

6|26|15   |   5:46   |   (0) comments


Nirav Modi provides an overview of vCPE, the fastest-growing NFV use case, showing how Cyan's Blue Planet orchestrates vCPE services across a multivendor infrastructure to rapidly deliver new managed services for business customers.
LRTV Custom TV
ZTE at LTE Summit Amsterdam 2015

6|26|15   |     |   (0) comments


As one of the leading global telecommunications providers, ZTE presented its cutting-edge technology at LTE World Summit 2015 in Amsterdam. On display at ZTE's booth were the latest R&D achievements in wireless, 5G development, HetNet, deep convergence of FDD and TDD, and RCS/IMD/iSDN/vCN.
LRTV Documentaries
OPNFV Director Opens Up on Women in Tech

6|25|15   |   3:25   |   (0) comments


Heather Kirksey, the director of the OPNFV, gets real about the gender disparity in open source and standards and discusses how we can change both the conversation and the gender dynamics.
LRTV Custom TV
Symantec's Service Provider Security Strategy

6|24|15   |   7:06   |   (0) comments


Didi Dayton explores Symantec's emerging enterprise security strategies for service providers. Highlights include 'killing the password,' self-defense, advanced analytics and adaptive response in a service provider architecture.
Between the CEOs
Debating Network Evolution With Cisco's Cedrik Neike

6|23|15   |   12:54   |   (2) comments


Cedrik Neike, SVP of Global Service Provider, Service Delivery, at Cisco, talks to Light Reading founder and CEO Steve Saunders about solving service provider customer problems in a virtualized, DevOps world, including multivendor support and the future of network procurement.
LRTV Documentaries
Vodafone: What's Good for Moms Is Good for Business

6|23|15   |   3:04   |   (3) comments


Megan Doberneck, the general counsel for Vodafone Americas, discusses her company's progressive maternity policy, explains why promoting women in tech is good business and offers some some good advice for any women in the industry.
LRTV Interviews
NFV: Ready for Prime Time

6|23|15   |   05:09   |   (1) comment


At BTE 2015, Vip mobile CTO Dejan Kastelic talks about how NFV is ready for the real world and how Telekom Austria is introducing centralized resources for its group operations.
LRTV Documentaries
Tykes Talk Tech

6|22|15   |   02:30   |   (9) comments


What does optical fiber look like? When will 5G arrive? What's the WiFi password at Ikea? Light Reading sat down with three 8-year-olds to answer some of the communications industry's most burning questions...
LRTV Huawei Video Resource Center
Huawei Partners With TDC for World's First Early DOCSIS 3.1 Field Test

6|22|15   |   3:06   |   (0) comments


In a move to enhance user experience, Denmark's TDC aims to become an early adopter of DOCSIS 3.1. In partnership with Huawei, TDC recently ran the world's first field tests on its coax network that reached speeds nearing 1 Gbit/s.
Upcoming Live Events
September 16-17, 2015, The Westin Galleria Dallas, Dallas, TX
September 29-30, 2015, The Westin Grand Müchen, Munich, Germany
October 6, 2015, The Westin Peachtree Plaza, Atlanta, GA
October 6, 2015, Westin Peachtree Plaza, Atlanta, GA
October 14-15, 2015, New Orleans Ernest N. Morial Convention Center, New Orleans, LA
All Upcoming Live Events
Infographics
Hot Topics
Staying Productive With My Office-in-a-Bag
Mitch Wagner, West Coast Bureau Chief, Light Reading, 6/25/2015
Who's Feeding Fiber to LinkNYC Hotspots?
Mari Silbey, Senior Editor, Cable/Video, 6/29/2015
Redknee Snaps Up Troubled BSS Vendor
Ray Le Maistre, Editor-in-chief, 6/24/2015
What's in Your Office-in-a-Bag?
Mitch Wagner, West Coast Bureau Chief, Light Reading, 6/26/2015
Like Us on Facebook
Twitter Feed
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
Casa Systems has been going from strength to strength over the last couple of years. In 2013, it became the first vendor to ship an integrated CCAP device -- the ...
Cedrik Neike, SVP of Global Service Provider, Service Delivery, at Cisco, talks to Light Reading founder and CEO Steve Saunders about solving service provider customer problems in a virtualized, DevOps world, including multivendor support and the future of network procurement.
Cats with Phones