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.

More Blogs from Que Sera Sarah
Join us in Dallas as we discuss how to build a positive company culture at Light Reading's next Women in Comms breakfast on Sept. 16 ahead of NFV Everywhere.
As president of Partner Solutions for AT&T, McCorcle has helped transform how the organization works with enterprises, but also how it advocates for women in the industry.
Streaming video company says both new moms and dad can take unlimited parental leave, up to one year, without sacrificing pay.
T-Mobile was the big winner in the second quarter, as it surpassed Sprint in total subscribers, captured the postpaid phone growth and improved its financials.
Styf, Telecom Italia's VP of engineering and de facto 'idea woman,' shares her experiences as a woman in comms and advice for other women in the industry.
From The Founder
Against the odds, Huawei is growing its telecoms networking equipment business in the US -- that should be ringing some alarm bells for domestic vendors.
Flash Poll
Live Streaming Video
CLOUD / MANAGED SERVICES: Prepping Ethernet for the Cloud
Moderator: Ray LeMaistre Panelists: Jeremy Bye, Leonard Sheahan
Between the CEOs
CEO Chat With Jeff Miller, ActiveVideo

8|28|15   |   19:05   |   (0) comments


Jeff Miller, President and CEO of ActiveVideo, talks to Light Reading founder and CEO Steve Saunders about the impact of virtualization on the TV and video distribution market.
LRTV Huawei Video Resource Center
Vodafone: Mobile Money Is About Customer Trust

8|27|15   |   06.36   |   (0) comments


Light Reading spoke with Vodafone's Ian Ravenscroft about the unique responsibilities and opportunities facing operators handling customers' financial transactions over the network.
Telecom Innovators Video Showcase
Palo Alto Networks on Expanding in the Carrier/Service Provider Market

8|26|15   |   07:54   |   (0) comments


Alfred Lee from Palo Alto Networks tells Steve Saunders about their new chassis-based system, the PA-7080, and how it can benefit service providers compared to legacy firewalls.
LRTV Custom TV
Global Services Forum Preview

8|25|15   |   02:36   |   (0) comments


Light Reading's CEO and Founder Steve Saunders talks about Huawei's upcoming Global Services Forum with the help of Heavy Reading's Patrick Donegan and Teresa Mastrangelo.
Telecom Innovators Video Showcase
Infoblox on DNS Threat Index

8|19|15   |   04:39   |   (0) comments


Dilip Pillaipakam from Infoblox talks to Steve Saunders about his company's core network services.
Between the CEOs
CEO Chat With Ihab Tarazi, Equinix

8|14|15   |   20:18   |   (1) comment


Equinix CTO Ihab Tarazi talks to Light Reading founder and CEO Steve Saunders about the dramatic changes in the data center, cloud and interconnect markets and discusses the impact of SDN and NFV in the coming years.
Telecom Innovators Video Showcase
The Netformx Ecosystem

8|14|15   |   09:39   |   (1) comment


Ittai Bareket, CEO of Netformx, talks with Steve Saunders about the Netformx Ecosystem, which employs cutting-edge prescriptive analytics to help solution providers maximize profits.
Telecom Innovators Video Showcase
Versa Networks on Leveraging VNFs

8|12|15   |   07:37   |   (0) comments


Kumar Mehta, founder and CEO of stealth mode startup Versa Networks, talks with Steve Saunders about how providers can best leverage virtualized network functions (VNFs).
LRTV Custom TV
Transforming the Network Through OPNFV

8|5|15   |   7:09   |   (0) comments


Sandra Rivera, VP Data Center Group; GM Network Platforms Group, Intel Corporation, on OPNFV Arno and how the industry is coming together to accelerate the deployment of NFV and transform the network.
LRTV Huawei Video Resource Center
Huawei ONS Product Demo

8|3|15   |   6:01   |   (0) comments


Huawei shows at Open Networking Summit 2015 in Santa Clara how its SDN and NFV solutions embrace openness.
LRTV Custom TV
End-User or Enterprise Benefits to the New IP

7|30|15   |   04:27   |   (1) comment


Andrew Coward discusses what the New IP means to end users or enterprise customers. He explains compelling reasons, including how every customer can get their own network, from the transformation to the New IP.
LRTV Custom TV
Network Visibility & the New IP

7|30|15   |   02:23   |   (0) comments


Mukund Srigopal provides an explanation of what network visibility is and how it is essential as service providers transition to the New IP. In addition, the importance of the network packet broker is discussed.
Upcoming Live Events
September 16-17, 2015, The Westin Galleria Dallas, Dallas, TX
September 16, 2015, The Westin Galleria Dallas, Dallas, TX
September 16, 2015, The Westin Galleria Dallas, Dallas, TX
September 29-30, 2015, The Westin Grand Müchen, Munich, Germany
October 14-15, 2015, New Orleans Ernest N. Morial Convention Center, New Orleans, LA
November 5, 2015, Hilton Santa Clara, Santa Clara, CA
November 17, 2015, Santa Clara, California
December 1, 2015, The Westin Times Square, New York City
December 2, 2015, The Westin Times Square, New York City
All Upcoming Live Events
Infographics
Cisco's cloud and virtualization portfolio can increase business agility and innovation by building a more flexible network architecture.
Hot Topics
Verizon Hums a Driving Tune
Sarah Thomas, Editorial Operations Director, 8/26/2015
Gogo Approved to Speed Up In-Flight WiFi
Sarah Thomas, Editorial Operations Director, 8/24/2015
Could Market Volatility Hurt Tech IPOs?
Dan Jones, Mobile Editor, 8/24/2015
Sprint's Claure: '3 to 5 Years' to Turnaround
Dan Jones, Mobile Editor, 8/25/2015
Like Us on Facebook
Twitter Feed
September 22, 2015
Media Begins With “Me”
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
Jeff Miller, President and CEO of ActiveVideo, talks to Light Reading founder and CEO Steve Saunders about the impact of virtualization on the TV and video distribution market.
Equinix CTO Ihab Tarazi talks to Light Reading founder and CEO Steve Saunders about data center, cloud and the impact of virtualization in the coming years.
Cats with Phones
Cats Are a Smartphone's Best Friend Click Here
Whoever said cats didn't live to please their humans?