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Friday, February 21, 2014

The T-Mobile Juggernaut

T-Mobile was in trouble. With the introduction of the iPhone in 2007, T-Mobile began to lose customers to larger carriers. The iPhone, exclusivity offered by AT&T and later Verizon, made Sprint and T-Mobile irrelevant to customers looking for the latest and greatest experience. It was such a problem that Sprint, in 2011, signed a $20 billion dollar deal to purchase at least 30 million iPhones over the next 4 years from Apple. Sprint finally got its hands on the best selling phone on the market leaving T-Mobile as the only network without Apple’s golden goose. After rolling out its 3G network, T-Mobile had no clear path to 4th generation network technology (LTE). Investments in building out its network were deemed unwise due to the consistent loss in customers and profits. Its parent company, Deutsche Telekom, was now looking to get out of the US market.

On March 20, 2011, Deutsche Telekom accepted AT&T'S $39 billion stock and cash offer for T-Mobile USA.

On August 31, 2011, the United States Department of Justice sued to block AT&T's merger with T-Mobile on the grounds that it would “substantially lessen competition” in the wireless market. Further reports indicated that the Federal Communications Commission (FCC) would likely oppose the merger as well.

On December 19, 2011, in the face of this heavy resistance from the U.S. government, AT&T CEO Randall Stephenson, announced that the company had officially withdrawn its $39 billion bid. Had the merger gone through, AT&T would have had over 130 million subscribers, making it the largest wireless carrier in the United States.

After the failed merger with AT&T, T-Mobile USA, and more importantly Deutsche Telekom, was wondering what the future would hold for the struggling carrier.

The future looked bleak for T-Mobile but certain events would begin to turn things around and arguably forever change the landscape of the mobile wireless industry. The following events would ultimately lead T-Mobile to where it is today:

1. The Break-up Fee - Due to the failed merger, T-Mobile was awarded a breakup fee of $3 billion dollars and over $1 billion dollars worth of spectrum from AT&T. On February 23, 2012, T-Mobile announced a $4 billion network modernization and 4G evolution effort, which will improve existing voice and data coverage and pave the way for long term evolution (LTE) service in 2013 using all the money and resources acquired via the breakup fee.

2. Under New Management - John Legere was appointed as the new CEO for T-Mobile USA in September 2012.

3. The Merger - On October 3, 2012, T-Mobile USA merged with MetroPCS Communications to form T-Mobile US. The acquisition gave T-Mobile access to more spectrum financial resources to maintain competitiveness and expand its LTE network. Combined, the subscribers now total some 43 million people, a 9 million increase via MetroPCS customers.

4. The Promise - On January 8 2013, at CES 2013 T-Mobile holds a press conference with CEO John Legere and CTO Neville Ray. Legere calls T-Mobile the “Un-carrier” and vows to get the message out.

5. On March 26, 2013, T-Mobile launches the beginning of the Un-carrier Initiative with CEO John Legere at the forefront exclaiming “Stop the Bullshit!” in regards to the complex phone contracts of US carriers. LTE is launched in 7 markets and the iPhone finally makes its way to T-Mobile but Legere’s vernacular and personality is the highlight of the event. Contracts are abolished, plans are simplified, and phones are financed.

6. Un-carrier 2.0 - On July 10, 2013, T-Mobile US unveils JUMP!, which enables customers to upgrade their phone when they want, up to twice a year as soon as six months from enrollment for an extra $10 a month. Handset protection insurance is also included in the program (A $7.99 value). 4G LTE network to reach 157 million people in 116 metro areas across the United States.

7. Un-carrier 3.0 - On October 9, 2013, T-Mobile US delivers free unlimited global texting and data in over 100 countries. Calls are a flat 20 cents a minute, free unlimited texting, and free 2G data speeds with high speed pay options. 4G LTE network is now nationwide, reaching more than 200 million people in 233 metros across the United States.

8. Un-carrier 4.0 – On January 8, 2014, exactly one year since declaring itself the Un-carrier at CES 2013, T-Mobile eliminates one of the last remaining obstacles for individuals and families wanting to switch from AT&T, Sprint or Verizon to the Un-carrier by offering to pay off their early termination fees. With an eligible phone trade-in and purchasing/financing a new T-Mobile phone, T-Mobile will pay up to $350 in ETF fees and up to $300 credit for the phone traded in. This offer is permanent.

With all these changes and additions, T-Mobile added 4.4 million new customers in 2013 after losing over 515,000 in the 4th quarter of 2012. This makes T-Mobile the fastest growing wireless carrier in the United States.

Keep it simple, stupid
T-Mobile is taking this mentality and applying it to every facet of its business. The best example, in my opinion, is their website.

There are two simple tabs: Shop and Coverage. When you hover over shop, you can select between phones or plans. When you hover over coverage, you can enter your city or zip code to check T-Mobile’s coverage in your area. And that’s pretty much all that matters to the average customer. Both AT&T and Verizon offer more services and thus their websites are much more complicated. Everything is clear and concise. Customers don’t want to go looking for what they want. They want it to be easily accessible. 

Select the plan that fits your needs.

Plans are much cheaper than the other US carriers and are very clear in what is actually included. Talk and Text is unlimited and included in all plans. Data is offered in tiers of 500MB, 2.5GB, and unlimited. There are no overage fees and if you go over your allotted data, you are just reduced to 2G speeds until the start of your next bill cycle. Mobile Hotspot is also included as well (capped at 2.5GB for the unlimited tier). 

Location, Location, Location
T-Mobile’s network isn’t as large and prevalent as the other carriers so location is important for good coverage. T-Mobile hangs its hat on metro and city coverage as they are heavily populated. Service and 4G/LTE signal are excellent in these areas but outside of these areas, coverage and data speeds are greatly reduced. That’s why it is important to check the strength of the coverage in your area. In order for this to improve, T-Mobile must build new cell towers. In order to build more towers, they need more customers which provide revenue for the company.

Signal is strength is very good although it has some trouble penetrating older buildings since T-Mobile’s service is on a higher band frequency. T-Mobile provides free home signal boosters and has a WiFi Calling app on Android devices. It isn’t that big of an issue in my mind but it is something to think about.

Data speeds are excellent. When connected to LTE or T-Mobile HSPA+, speeds are equal to, if not better than AT&T or Verizon. In my home in Chicago, I get a consistent 22mbps download and 10mbps upload. I get almost double that when I’m out in the city.

Bring Your Own Phone and Cheaper Plans
Since there are no contracts, you are just paying T-Mobile for a service plan. This makes your monthly payment much lower. Smart phones cost more than the price they are actually sold to the consumer because it is a subsidized price on AT&T or Verizon. In order to be able to subsidize the phone price, they lock you into a 2 year contract and charge you a higher monthly fee. This allows you to get the greatest and latest phone for $200 albeit at a higher monthly rate.

The problem with this is that you are always paying more than you should and you need to continue to upgrade in order to recoup your money.

With T-Mobile, the phone purchase is essentially separate from the service plan. You put a down payment on the phone and pay the rest, with no interest, as a part of your monthly phone bill. Once you are done paying off your phone, your monthly cost goes down. That’s why many customers choose to buy their own phone from a third party like Amazon, eBay, or Google Play Store since it’ll be cheaper in the long run. You buy the phone at a cheaper, albeit higher upfront price, and get a cheaper service plan from T-Mobile.
My advice would be to sell your old phone when you are ready to upgrade and put that money into paying off your new phone. 

Do the Math!
The following is a recommended plan on each carrier based on services vs. cost
2 Year Cost
2GB(+$15 to 4GB)
$95 monthly + $200 phone
$2480 + tax
2GB(+$10 to 4GB)
$100 monthly + $200 phone
$2600 + tax
$110/$80 monthly + $200 phone
$2840/$2120 + tax
$70/$60 monthly + full $600 phone
Yes (2.5GB)
+ tax

Now once you factor in selling your old phone or buying a unlocked phone like the $349 Nexus 5, $329 Moto X, or the $199 Moto G, your cost will be much lower. Adding more lines also brings costs down even further so it is beneficial to enroll in a family plan. That is also clearly shown in their website.

With clever marketing and aggressive tactics, T-Mobile is now at the forefront of the industry. They're looking to make big changes and provide a much simpler experience to customers new and old. As you can see, this didn't happen overnight. It took over two years for T-Mobile to get to where it is today. I look forward to the next set of changes the Un-carrier will unleash on the stagnant wireless industry. If T-Mobile hasn't been on your radar before, now is the time to take a long and hard look on your current mobile carrier. This juggernaut shows no signs of slowing down or changing its ways anytime soon. 

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