T-Mobile innovations drive huge signup gains
Today T-Mobile announced its third-quarter sales results, which significantly exceeded analysts' estimates. Quarterly sales totaled $6.69 billion, up 8.7 percent over the prior quarter after adjusting for the company's recent acquisition of MetroPCS.
The numbers are a clear vindication of T-Mobile's new and unconventional strategy to attract mobile subscribers and its aggressive approach toward giving customers lower-cost options when it comes to their cell phone plans. Its boldest move came in March 2013, when it jettisoned the traditional "two-year contract" that most carriers require and launched its "Simple Choice" service, a month-to-month plan that starts at $50 for voice, text, and data service. It's also one of the few companies that still offers an unlimited data service option ($70 per month).
In addition to Simple Choice, T-Mobile also pioneered a monthly subscription plan called T-Mobile JUMP! that lets phone users upgrade their devices far more frequently. By paying $10 a month, users are able to upgrade twice every year, qualifying for the same promotional pricing that new customers get. The other major carriers have followed suit and now offer similar programs.
Customers have responded to all of this by signing up with T-Mobile in droves, with 648,000 new subscribers in total joining the company last quarter. This year, the company forecasts that it will add 1.6 million to 1.8 million new subscribers in total, a jump of up to 80 percent over its initial forecast. Wall Street has also responded to the moves by continuing to send the stock skyward. Bloomberg notes that as of yesterday, shares had climbed 72 percent since May 1.
Compared to the competition, T-Mobile's strategies are paying off. Its quarterly subscriber gain is nearly double that of AT&T (363,000 new subscribers), the number two mobile carrier in the U.S. Verizon maintained its lead with growth of 927,000 subscribers. Sprint (#3) lost 360,000 subscribers. The trend now puts T-Mobile in striking distance of overtaking Sprint to become the #3 wireless carrier in the U.S. within the next few years.
But more importantly, T-Mobile's recent success raises the question of whether its premium-phones/no-contract strategy will overtake the existing industry paradigm. It offers much of the same hardware as everyone else, including the Qualcomm Snapdragon-powered Samsung Galaxy S4 and Nexus 5, but at a considerably lower cost and without the requirement of a lengthy contract. The company has also taken pains to upgrade its network footprint nationally, and while it may still lag behind some of the bigger carriers, coverage in most major metro areas seems to be sufficient enough for most users. In a market where loyalty to a service provider is rapidly becoming a thing of the past, what would it take for you to make the switch?