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  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
<<   <   Page 2 / 3   >   >>
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.
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.
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/
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.
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.
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 | 9:09:40 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 | 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?
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!
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.
<<   <   Page 2 / 3   >   >>
More Blogs from Que Sera Sarah
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.
Carrier deploys 12 small cells in Chicago's Grant Park to prepare for the more than 124 terrabytes of mobile usage expected at this weekend's Lollapooloza.
AT&T, like most network operators today, puts a premium on collaboration as one of the most important skills a potential or current employee can possess.
In what will be a weekly series, Light Reading talks to Ericsson's vice president of sustainability and corporate responsibility about being a woman in comms.
The capex and opex savings that C-RAN brings are by far the biggest reason to deploy the centralized, virtualized RAN system, the Light Reading community says.
Flash Poll
From The Founder
Anshul Sadana answers questions from Steve Saunders, Light Reading's founder and CEO, about Arista's CloudVision, a global cloud network controller for workload orchestration and workflow automation delivering a turnkey solution for cloud networking.
Live Streaming Video
CLOUD / MANAGED SERVICES: Prepping Ethernet for the Cloud
Moderator: Ray LeMaistre Panelists: Jeremy Bye, Leonard Sheahan
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.
Between the CEOs
Video Exclusive With Basil Alwan, Alcatel-Lucent

7|24|15   |   26:44   |   (5) comments


Basil Alwan, President of IP Routing & Transport at Alcatel-Lucent, discusses virtualization, cultural challenges, the capex crunch and more with Light Reading founder and CEO Steve Saunders.
LRTV Custom TV
VDF: Enable the Financial With Mobile Money

7|20|15   |   06:53   |   (0) comments


Ian Ravenscroft discusses how operators can expand to occupy the entire digital services value chain through service innovation.
LRTV Custom TV
Telefónica on OSS Transformation

7|20|15   |   06:01   |   (0) comments


Jose Gonzales discusses the details of Telefónica's operation transformation program.
LRTV Custom TV
Judi Achmadi on Huawei's Cloud Storage Solution

7|20|15   |   03:33   |   (0) comments


Judi discusses the key business goals of TelekomSigma's public cloud service and how Huawei's solution helps them address challenges.
LRTV Custom TV
KPN Enlightening Digital Business & IT Transformation

7|20|15   |   06:19   |   (0) comments


Rob de Beer discusses the changes that operators need to make with service innovation now coming from the Internet world.
LRTV Custom TV
Stratus Telco-Grade Cloud Solutions & NFV

7|20|15   |   07:34   |   (0) comments


Ali Kafel from Stratus Technologies addresses high-availability concerns within the telco industry with a solution that enables telcos to provide high-availability and stateful fault-tolerance using a software-based approach.
LRTV Documentaries
The Six Million Dollar Business Man

7|20|15   |   01:52   |   (0) comments


Steve Saunders, publisher. A man barely alive after an acquisition malfunction imploded the company he founded. Gentlemen, we can rebuild Light Reading. Better, faster, stronger.
Between the CEOs
CEO Chat With Anukool Lakhina, Guavus

7|20|15   |   38:51   |   (1) comment


Guavus CEO Anukool Lakhina talks to Light Reading founder and CEO Steve Saunders about the role of operational analytics in the communications services and networking sectors, particularly in relation to IoT.
LRTV Custom TV
IBM's Flash Storage With Intel QuickAssist

7|20|15   |   03:18   |   (0) comments


Intel's Bev Crair and IBM's Eric Herzog discuss how IBM's V9000 Flash Storage System has helped customers around the world. Featuring real-time compression powered by Intel QuickAssist Technology, the V9000 is a next-gen flash storage solution.
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
All Upcoming Live Events
Infographics
To keep up with consumers' increasing digital lifestyles, an IT system and operating model overhaul is required using a modern BSS, IES and analytics.
Hot Topics
Eurobites: Nokia Seals HERE Sale
Paul Rainford, Assistant Editor, Europe, 8/3/2015
Verizon Small Cells Ready to Rock in Chicago
Sarah Thomas, Editorial Operations Director, 7/31/2015
Cable Feuds With Senate Dems Over STBs
Alan Breznick, Cable/Video Practice Leader, 7/31/2015
Like Us on Facebook
Twitter Feed
September 22, 2015
Media Begins With “Me”
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
I was pleasantly surprised when Ericsson recently agreed to let me interview its CEO, Hans Vestberg. Traditionally, mega-companies like Ericsson (or Cisco) have kept ...
Basil Alwan, President of IP Routing & Transport at Alcatel-Lucent, discusses virtualization, cultural challenges, the capex crunch and more with Light Reading founder and CEO Steve Saunders.
Cats with Phones
Comes With Free Phone Stand Click Here
Who says cats don't have any skills?