The stars are beginning to align for T-Mobile. And the company's management team knows it.
"I have to give Verizon credit: At the dawn of the 4G era, in 2010, they jumped out in front of everybody," explained T-Mobile CEO Mike Sievert at a recent investor event this week. "And that established the brand pattern that they were able to feed on for a decade, through the entire 4G era. They had the world convinced that they had the best network. Through much of that era, it was absolutely true."
Continued Sievert: "That's our opportunity in the 5G era. We're way out in front."
Sievert isn't the only one convinced that T-Mobile is positioned to build an early lead in 5G.
"T-Mobile is the industry winner here. And they are already pulling away," wrote the financial analysts at MoffettNathanson in an August note to investors.
However, T-Mobile's Sievert so far has been playing things relatively safe. Now may be the time for him to get a little frisky.
A leading position in spectrum and pricing
"It is simple," wrote the financial analysts at New Street Research in a May note to investors about T-Mobile's future. "The company has close to 50% of the industry's capacity with just 30% of the industry's revenue. Moreover, they ought to have a strong network advantage for the next few years at least, and that advantage will drive share shifts as the first 5G iPhone emerges later this year. The impact of the advantage ought to be heightened by the fact that T-Mobile prices their service at a 20% discount to the two companies with 70% of industry revenues [AT&T and Verizon], particularly as we wade through a recession."
Added the New Street analysts: "Better product, at a time when product differentiation will matter to consumers. Lower price, at a time when households are growing more cost conscious. Seems like it should work."
T-Mobile's biggest and clearest 5G advantage is its spectrum position: The company owns more than double the low- and midband spectrum than Verizon. That's important considering spectrum ownership is directly related to network capacity and a provider's ability to sell speedy services on the cheap.
And Verizon knows it. "T-Mobile's low- and midband spectrum holdings give it such a 'material advantage' in the marketplace that its 'competition doesn't have a path to match for some time,' " Verizon complained in a filing to the FCC recently, as reported by FierceWireless. Verizon was quoting T-Mobile network chief Neville Ray, and is asking the FCC to limit the amount of spectrum T-Mobile can own.
Ray joined Sievert at the investor event this week and offered an almost gleeful view of T-Mobile's 5G position: "Our competition, I think, is terrified of what we're going to bring."
Ray added that T-Mobile has been updating its 5G network with Sprint's 2.5GHz midband spectrum holdings at a rate of almost 100 cell tower sites a day.
So how exactly is T-Mobile going to take advantage of its 5G moment as Apple prepares to release a 5G iPhone? T-Mobile's 5G network "allows us to put offers out there that our competitors just won't be able to match. It's just going to be so exciting," Sievert said, noting that the "new" T-Mobile created through the merger of Sprint and T-Mobile can offer both the nation's best 5G network as well as its cheapest 5G services.
However, he did not specify exactly what kind of "offers" T-Mobile might put on the table.
The company's options span the gamut. T-Mobile could offer an iPhone service plan like EE is doing in Europe, or it could follow the lead of its parent company Deutsche Telekom and launch a cloud gaming service. It could also debut its new TV service.
According to July survey findings from the financial analysts at Cowen & Co., the stage is set for T-Mobile to succeed, if it decides to make a new play. Roughly 49% of Sprint respondents to the firm's survey were happy with T-Mobile and said they would stay through the merger. Just 3% said they plan to leave.
Perhaps even more importantly, Cowen's survey found that just 49% of T-Mobile's customers use an iPhone, but that a record 61% of respondents indicated they would get an iPhone.
"To the extent a 5G iPhone is well received, we believe this could be a share-stealing opportunity for iPhone as well as be a service revenue growth opportunity for the Big 3 [network operators] as we'd note iPhone users all-in bill size have typically been higher than smartphone non-iPhone users," the Cowen analysts wrote.
But Sievert this week urged persistence rather than aggressiveness.
"Brands are stubborn. They're more stubborn than the facts. It takes a while. We're going to have to be patient," he explained while dodging a question about whether T-Mobile would update its challenger, "uncarrier" marketing message given that it's now the nation's No. 2 provider. "Our job is to convince people to buy T-Mobile because of our network superiority."
A problem for marketing
The job of tailoring T-Mobile's 5G network messaging in a 5G iPhone season falls to Matt Staneff, who took over the CMO role from Sievert upon the departure of the architect of T-Mobile's "uncarrier" revival, former CEO John Legere.
Staneff counts over 17 years at T-Mobile, where he's acted as a chief commercial officer, SVP of product and customer management and SVP of customer loyalty. It's unclear what he might come up with.
Many had expected Staneff and T-Mobile to come out of the company's merger with Sprint swinging. "T-Mobile will relaunch the brand with an integrated offering sometime in the summer, we suspect in August," the New Street analysts wrote in May. "This will likely entail a big marketing campaign – "Uncarrier infinity" – that touts the company's strong 5G network advantage. If the message is compelling – and it should be – this will be a positive catalyst."
However, T-Mobile has so far remained relatively calm on the marketing front this year, likely due to a pandemic that has upended the retail sector. But as the fall launch of the 5G iPhone nears, the window for aggressive, eye-catching tactics is rapidly closing.
For their part, T-Mobile executives this week pledged rational strategies rather than an all-out 5G pricing war.
"We will grow this business in a consistent and disciplined way," Sievert said, explaining that shareholders shouldn't worry. "We're not suddenly going to become drunk happy on growth."
"It's always about profitable growth, balancing growth with profitability," added T-Mobile CFO Peter Osvaldik at the same investor event. "There's periods when we could go faster in a quarter, but we're always balancing things in the right way to deliver the ultimate value creation for the enterprise."
While "value creation" isn't the kind of braggadocio investors came to expect from T-Mobile's former, more colorful, CEO Legere, it's not necessarily a bad thing. But Sievert is still living in Legere's shadow following the successful merger of the nation's third and fourth largest wireless network operators. What he does next will define T-Mobile's place in 5G, and his in company history. It might soon be time for Sievert to get a little more carpe diem and a little less soporific.