Is T-Mobile losing its edge?

"It seems as though the only way to move forward is by being the complete opposite of the competition," said T-Mobile's former CEO, John Legere.

Legere was speaking to Investor's Business Daily in an interview of his creation of the operator's "uncarrier" branding. Legere told the publication he spent his early days at T-Mobile, in 2012, listening to customer complaints.

"I needed to hear what was wrong firsthand in order to fix it," he said.

And that was when he said he came up with the notion of an "uncarrier."

"We didn't quite know what that meant yet, but we knew we had to make a major change and be different," Legere explained of his early days as T-Mobile's CEO.

Today's T-Mobile, headed by Legere's protégé Mike Sievert, doesn't appear to be guided by the same principles, at least based on the company's efforts to drum up interest around the newest iPhone and its new midband 5G network.

Specifically, the company is mostly treading ground already stamped out by its rivals.

iPhone promotions, just like its competitors

"T-Mobile used to be the promotion leader. This was the uncarrier way," wrote the analysts at LightShed Partners in a recent post to investors. "In 2020, T-Mobile closed the Sprint deal and became the follower. It was caught flat-footed on the 2020 iPhone launch day with no promotion as AT&T was grabbing headlines (and criticism) for its aggressive promotion."

And 2021 is mostly the same, according to the analysts.

"This year, T-Mobile matched AT&T's headline $1,000 iPhone 13 Pro trade-in offer for both new and EXISTING customers. It also topped AT&T for the iPhone 13. There's a catch. T-Mobile's offers require the high-end Magenta Max plan."

However, there is one fresh element in T-Mobile's iPhone 13 promotional efforts: a new program called "Forever Upgrade" that puts up to $800 toward new iPhones every two years.

But the LightShed analysts pointed out that even this new effort represents a bit of a callback to T-Mobile's former competitors. "This sounds familiar to Sprint's 2014 'iPhone for Life' promotion, which offered annual and bi-annual upgrades. That promotion was targeted at Sprint's phone lease program, which T-Mobile is currently disassembling," they wrote.

In general, financial analysts don't seem to be very impressed with T-Mobile's new upgrade program. "We also expect limited excitement for its up to $800 Forever Upgrade offer," argued the financial analysts from Cowen in a recent note to investors.

Overall, T-Mobile's iPhone 13 promotions received a "ho-hum" from financial analysts.

"T-Mobile appears less aggressive" than its rivals, wrote the Cowen analysts.

"T-Mobile's best promotional discounts for the iPhone 13 are roughly comparable to last year's, but this year's offers require customers to take the top-tier Magenta Max plan to get the full value of the offer, while last year the standard Magenta plan qualified as well," wrote the financial analysts with Evercore. "Without taking Magenta Max, trade-in credits max out at $500, vs. up to $1000 for customers taking Magenta Max."

A midband 5G lead, but for how long?

Perhaps even more concerning, T-Mobile's efforts to separate itself from the competition using its new midband 5G network also aren't deviating from the norm either. "iPhone 13 and iPhone 13 Pro will let T-Mobile customers know when they are in an area with fast speeds with Ultra Capacity 5G!" tweeted T-Mobile's networking chief Neville Ray. He said users will now see a specialized icon – 5G UC – to denote their connection to the speedy 2.5GHz midband 5G network T-Mobile is constructing across the country.

However, T-Mobile's new 5G UC signal icon is simply a different version of the "5G UW" icon that Verizon has been using for years to indicate connections to its "Ultra Wideband" 5G network.

Moreover, T-Mobile's lead in the deployment of valuable midband spectrum for 5G might not last long, according to some analysts.

"T-Mobile's competitors have been on a spectrum buying spree since the Sprint deal was approved. ... T-Mobile's spectrum lead has shrunk, primarily due to the C-band and CBRS spectrum auctions. That gap could close further, following yet another auction of midband spectrum this year," wrote the LightShed analysts, pointing to the spectrum Verizon and AT&T purchased in the recent CBRS and C-band spectrum auctions. Moreover, the FCC's upcoming midband spectrum auction in October – dubbed the "Andromeda auction" by Light Reading – promises to release even more spectrum.

The LightShed analysts warned that the situation could "limit T-Mobile's ability to offer a differentiated wireless service offering."

A financial slowdown

Already, there are indications that T-Mobile's trajectory is slowing, even as it enters the critical fourth quarterly holiday shopping season.

"T-Mobile's net [customer] adds for 3Q21 were impacted by the recent hack," wrote the financial analysts at New Street Research in a note to investors this week. T-Mobile disclosed that the hack affected millions of customers and noncustomers. "We lower postpaid phone net adds by 350,000 in 3Q as a result [of the hack]. We also slightly lower 4Q21 net adds as our estimates were likely too aggressive."

The New Street analysts now expect T-Mobile to notch 3.3 million postpaid phone net customer additions in 2021, down from a prior estimate of 3.9 million.

Indeed, T-Mobile's financial situation may have already slipped. "T-Mobile's stock has notably underperformed the S&P 500. It's currently underperforming AT&T year to date, if dividends are included. That underperformance has now caused the stock to underperform the S&P 500 since the Sprint closing, even though it has outperformed AT&T and Verizon over that period," noted the LightShed analysts.

The new third quarter customer estimates from the New Street analysts come one day after T-Mobile CFO Peter Osvaldik admitted that the hack into the company's systems affected T-Mobile's business during the third quarter.

"As it relates to the quarter and financials, we definitely saw some temporary customer cautiousness, as you would expect, both in terms of gross adds as well as churn immediately following that breach," he said this week during an investor event.

However, he said that in the subsequent weeks "consumers have moved past it," and that "our flows are beginning to normalize." He also sought to placate T-Mobile investors by adding that the operator has a "sizable cyber insurance policy" that should cover "certain expenses" including potentially class action lawsuits and regulatory fines.

While it's worth noting that T-Mobile also suffered a major hack during Legere's tenure, the company also during that time transitioned from a trailing fourth player in the US and into a major competitor to AT&T and Verizon. Legere's T-Mobile did so via innovative marketing and pricing initiatives, as well as new offers such as free Netflix subscriptions.

"The solutions became known as the 'uncarrier' moves," Legere told Investor's Business Daily. T-Mobile "ultimately forced the other companies in our industry to follow our lead, making the entire industry better overall."

In 2021, that doesn't appear to be happening.

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Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano

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