Light Reading
The 'uncarrier' manages to add 2.4 million total customers, but lost $151M in the first quarter.

T-Mobile Sacrifices Costs for Customers

Sarah Reedy
5/1/2014
100%
0%

T-Mobile's "uncarrier" moves paid off in the first customer as it managed to add 2.4 million new customers, including 1.3 million postpaid subscribers. But the additions came at a cost.

T-Mobile US Inc. lost $151 million, or 19 cents a share in the first quarter, as it stepped up its promotional efforts, compared to a $106 million profit at 20 cents a share in the year-earlier quarter. Its shares, however, were up 7.5% to $31.50 in early market trading on Thursday.

The share climb was a reflection of the net additions, as well as the revenue bump T-Mobile received from closing its purchase of contract-free operator MetroPCS. Revenue in the first quarter grew 47% to $6.9 billion. Without MetroPCS's results in the mix, revenue would have risen 19%. T-Mobile also managed to add 465,000 prepaid customers with help from MetroPCS.

The first quarter was T-Mobile's fourth consecutive quarter with over 1 million net additions, and the first time it's ever passed the 2 million mark. It was clear from Verizon Wireless and Sprint Corp. (NYSE: S)'s earnings last week that the promotional moves in the market being made by the self-proclaimed "uncarrier" were having an effect. Only AT&T Inc. (NYSE: T), its biggest target, has yet to feel the squeeze. (See Sprint: LTE TDD Speed Boost Coming Soon, Verizon Loses Its Postpaid Net Add Crown, and AT&T Gets 81% of Subs Off Unlimited Data.)

T-Mobile is now approaching 50 million customers, closing the gap on potential merger partner Sprint, which ended the first quarter with 54 million customers. T-Mobile says it plans to add 2.8 to 3.3 million branded contract customers by the end of the year. (See T-Mobile Pours Cold Water on Sprint's Spark.)

— Sarah Reedy, Senior Editor, Light Reading

(10)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View
JCfti
50%
50%
JCfti,
User Rank: Light Beer
5/1/2014 | 1:49:05 PM
Re: Sprint merger?
The network side is the crucial piece to me.  With no-contract service plans, the customer can too easily switch if it isn't happy with the coverage. Just pay off any device contract and take that phone to AT&T or sell it and get a new one from VZ or Sprint.  Their churn rate is down which speaks well to the work on that front (or customer confusion on device vs service contracts). They have little margin for error, but so far it appears to be working

 
SarahReedy
50%
50%
SarahReedy,
User Rank: Blogger
5/1/2014 | 1:40:46 PM
Re: Sprint merger?
Good points, JC. I think the spectrum acquisitions from Verizon and MetroPCS will really help it as it finishes out its LTE buildout and improves the network. Once it gets all its customers on LTE, that will improve their experience for them, helping with retention, and help with costs since it's more efficient.
JCfti
50%
50%
JCfti,
User Rank: Light Beer
5/1/2014 | 1:36:55 PM
Re: Sprint merger?
If the short-term customer acquistion costs are more related to paying off ETFs and offering trade-in incentives versus discounting plans, the hope would seem to be that over time TMO recoups these costs and gains customers 'hearts and minds."   So when a customer's new device contract runs outs or they want to buy a new phone or tablet they would choose TMO. That seems to be the gamble that they are making.  On the network side, they are making strides in providing customers a good experience, and have plans to address its biggest hurdle, the ubiquity of its network coverage (see its plans for the 700 MHz A Block it just closed on and the 2G Edge to 4G LTE conversion plans, as well as expected participation in 600 MHz)  

So, yes they have short-term hurt, but it seems with a longer-term plan in place. If it will work is still an open question. Also could be a ploy to be a more attractive take-over purchase.  They appear to have a good game plan either way at this point. 
Ariella
50%
50%
Ariella,
User Rank: Light Sabre
5/1/2014 | 12:50:39 PM
Re: Sprint merger?
@Sarah I'd go with short-term landgrab on this.
SarahReedy
50%
50%
SarahReedy,
User Rank: Blogger
5/1/2014 | 12:04:54 PM
Re: Sprint merger?
But, might add, wouldn't exceptional growth like this suggest T-Mo doesn't really need to combine with Sprint? It's already encouraging competition in the market, something it is very proud of. I guess it goes back to what Carol and Phil have brought up, whether its pricing moves are sustainable or if this is just a short-term landgrab.
SarahReedy
50%
50%
SarahReedy,
User Rank: Blogger
5/1/2014 | 12:04:00 PM
Sprint merger?
Legere was, of course, asked about consolidation in the industry, and he said it's a matter of when, not if. This comes right after a report in Bloomberg last night that Sprint is getting its finances in order to announce an acquisition this summer. Here's the article: http://www.bloomberg.com/news/2014-04-30/sprint-said-to-plan-t-mobile-bid-after-pushing-banks-for-funding.html

And, here's what Legere said (paraphrased): 

"This is the start of competition, and, again, don't confuse yourselves, the big are still the biggest. These are big huge people who are probably calculating ways they can protect their 55% in growing EBIDTA margins...

 

It's matter of when, not if. It's not just among the 4 you see, but multiple other tangential players sitting on the periphery of the industry looking in. we've been consistent on that with no clear statement on timing. Otherwise, there are multiple paths we need to look very hard at from the standpoint of capital and deployment. But when you are growing like we are, we think it's a good hand to play."
Phil_Britt
50%
50%
Phil_Britt,
User Rank: Light Sabre
5/1/2014 | 11:16:10 AM
Re: Q1 call
I have to agree with Carol. Businesses cannot win by continuing to discount prices -- look at the airlines. They would try to undercut each other to win additional customers, only to declare bankruptcy multiple times.

Now they only rarely cut prices -- and charge for things that used to be free -- and are profitable. Telecom is a different industry, but business is business.
SarahReedy
50%
50%
SarahReedy,
User Rank: Blogger
5/1/2014 | 10:50:20 AM
Re: Q1 call
That is certainly a valid concern and came up on the call, but T-Mobile CMO Mike Sievert says it's not so (of course): 

"There are plenty of cynics including our competitors that will convince you we're buying growth in a non-economic way, but the opposite is true. Bringing in the highest quality customers in our history at a marginal cost that is a little higher as well. High quality customers with great returns."
Carol Wilson
50%
50%
Carol Wilson,
User Rank: Blogger
5/1/2014 | 10:45:13 AM
Re: Q1 call
Okay, showing my age here, but once upon a time, upstart long-distance competitors essentially "bought" customers and grew themselves almost into bankruptcy. Is there any clear strategy for how T-Mobile avoids that trap?
SarahReedy
50%
50%
SarahReedy,
User Rank: Blogger
5/1/2014 | 9:40:12 AM
Q1 call
Q&A time on the earnings call. They are mainly talking up the growth -- more than all the other carriers combined, Legere says.
Educational Resources
sponsor supplied content
Educational Resources Archive
Flash Poll
From The Founder
It's clear to me that the communications industry is divided into two types of people, and only one is living in the real world.
LRTV Interviews
The New Wave of IP + Optical Integration

11|21|14   |   04:29   |   (7) comments


At the Alcatel-Lucent Technology Symposium, Heavy Reading senior analyst Sterling Perrin talks about how SDN has reshaped the discussion around packet and optical integration.
LRTV Huawei Video Resource Center
Huawei Highlights at BBWF 2014

11|20|14   |   3:40   |   (1) comment


Broadband World Forum is one of the world's largest telecoms, media and technology events with over 7,800 senior executives from across the globe converging on Amsterdam every year to identify the Next Big Thing. BBWF is an exciting place to meet the entire industry under one roof and identify the latest in network innovation, service optimization and customer ...
LRTV Huawei Video Resource Center
How Will BCMS Stimulate Margin for Broadband Operators?

11|19|14   |   6:52   |   (0) comments


In BBWF 2014, Liu Shuqing emphasizes the value of FMC 2.0 based full service experience by throwing light on the BCMS solution. The underlying principle of this innovative technique is to create network robustness and driving network from connection oriented to ACE – BAND oriented infrastructure, in which applications, cloud, and user experiences will be an asset ...
LRTV Huawei Video Resource Center
SingleFAN3.0: Better Connected Experience

11|19|14   |   3:06   |   (1) comment


At the BBWF 2014, David Hu, the VP of Huawei Access Network Product Line, talked about the future of access networks – SingleFAN3.0: faster broadband, wider coverage, and smarter connection.
LRTV Interviews
Basil Alwan Interview: The Road to Cloud

11|19|14   |   09:09   |   (0) comments


Alcatel-Lucent's head of IP and Transport talks about the migration towards a web-like networking environment, the impact of the cloud, SDN and NFV, and the yet-to-be-announced FP4 chip.
LRTV Documentaries
FairPoint Makes a Fair Point About Analytics

11|19|14   |   1:56   |   (1) comment


The US-based communication service provider gets to grips with advanced analytics, tackling data and breaking down the silos within its own business.
LRTV Documentaries
Analytics Lets C Spire Get to Know Subs

11|19|14   |   3:01   |   (2) comments


It's all about the data for US operator C Spire as it uses analytics to personalize its customer service down to individual subscribers.
LRTV Interviews
Nuage Branches Out With SDN: CEO Interview

11|17|14   |   9:32   |   (0) comments


Sunil Khandekar, CEO of Alcatel-Lucent's SDN-focused unit Nuage Networks, talks about the opportunities and challenges of breaking out of the data center into wide-area networks.
Light Reedy
Telecom Analytics Grows Up

11|14|14   |   1:15   |   (4) comments


The big data analytics debate has moved on from a year ago, with some experts suggesting it's no longer a technology challenge.
LRTV Huawei Video Resource Center
Huawei Compass

11|14|14   |   3:17   |   (1) comment


At OpenStack Summit 2014, Shuo Yang, Huawei Principal Cloud Infrastructure Architect introduced Huawei Compass, the software tool for solving customers' problems on the journey of OpenStack Cloud.
LRTV Huawei Video Resource Center
Huawei's Cloud Strategy in European Region

11|14|14   |   2:56   |   (1) comment


At OpenStack Summit 2014, Dr. Gotz, CTO of Huawei IT in European Region introduced Huawei's cloud strategy in European region.
LRTV Huawei Video Resource Center
Huawei's Contribution on OpenStack

11|14|14   |   5:58   |   (0) comments


At OpenStack Summit 2014, Dennis Gu, Huawei Chief Architect of Cloud Computing introduced the relationship between OpenStack and cloud computing, and Huawei's contribution on OpenStack.
Upcoming Live Events
December 2, 2014, New York City
December 3, 2014, New York City
December 8-10, 2014, Reykjavik, Iceland
February 12, 2015, Atlanta, GA
April 14, 2015, New York City, NY
May 6, 2015, McCormick Convention Center, Chicago, IL
May 13-14, 2015, The Westin Peachtree, Atlanta, GA
June 9-10, 2015, Chicago, IL
Infographics
Irish Telecom outlines the rise of VoIP technology, including its adoption within businesses and their perception of its quality.
Hot Topics
Bell Labs Chief Slams 'Toy' Networks
Robert Clark, 11/19/2014
$38.3M: Ain't That a Kik in the SMS
Sarah Reedy, Senior Editor, 11/20/2014
Do You Have a 2020 Vision?
Dennis Mendyk, Vice President of Research, Heavy Reading, 11/21/2014
Google, AT&T, BT Unite on Network Data Models
Carol Wilson, Editor-at-large, 11/20/2014
The New Wave of IP + Optical Integration
Ray Le Maistre, Editor-in-chief, 11/21/2014
Like Us on Facebook
Twitter Feed