Hollywood isn’t the only industry looking to comic books for inspiration. Since John Legere became its CEO at the end of 2013, T-Mobile USA has been hard at work trying to turn itself into a folk hero straight out of DC Comics, fighting for justice in the wireless industry.
No, we don’t just say this because Legere put The Dark Knight on his Twitter Profile page. In the last 18 months, T-Mobile has received praise for its “Uncarrier” philosophy, which includes everything from paying off early-termination fees to ending overage costs for customers. Every couple of months, T-Mobile shows off new ways it will change the way we think about wireless carriers, praising its own Uncarrier ways and criticizing the competition.
But is the Uncarrier movement really a goal to change things forever, or is it just another marketing ploy? And have T-Mobile’s moves been all good for customers? Reservations in hand, we spoke with T-Mobile’s Chief Marketing Officer Mike Sievert and looked back on all of T-Mobile’s big announcements to see what they’ve done for customers. Does T-Mobile really deserves the title of Uncarrier?
Adding up T-Mobile’s Uncarrier moves
Before CEO John Legere and his team of new executives arrived in September 2012, T-Mobile played a quiet role in the wireless carrier wars dominated by AT&T and Verizon. While new data caps on faster LTE technology became the norm, the most we heard or saw of the magenta network was the T-Mobile Girl. Starting with a press conference in January 2013, things began to change. Now, Sievert says this whole Uncarrier movement with T-Mobile is about making good on the bad things that other carriers have done here in the U.S.
“We started this journey to fix a broken industry. The way to do that is by listening to customers. They will happily tell you what is broken,” Sievert told Digital Trends. When we last spoke with Sievert, the Uncarrier movement was just getting starting. Back then Sievert criticized the “utility company” way of thinking common in the wireless industry.
“We started this journey to fix a broken industry.”
“It’s been fascinating to watch the big, bloated, old guard carriers stumble as they try to respond to the change we are driving into this industry … We will continue to call out the crazy practices of this industry, and of our competitors. We’ll continue to shine a light on the restrictive practices of the industry to make sure consumers are aware of all the facts,” Sievert told us.
The things T-Mobile has done since Legere took over include more than a dozen changes; from network enhancements to pricing changes to generous offers to switch to T-Mobile — special perks that accompany switching. Even if T-Mobile has forced a lot of interesting changes to the market since January 2013, we remain skeptical, especially considering just how evil wireless carriers in the U.S. have been in recent years. We’ll look at all these general changes to the company and figure out — through the good and bad — what kind of company T-Mobile ends up looking like.
T-Mobile bets the house to win you over
If there’s one thing T-Mobile is now famous for, it’s a commitment to pay your early termination fees (ETFs, usually hundreds of dollars) if you switch from another carrier. Highlighted on Twitter with break-up letters between customers and their old carriers, T-Mobile has been paying out big money to bring customers over.
Sievert told us that, “[customers] want to switch, but until we launched ‘Contract Freedom,’ they couldn’t because of early termination fees and family members on staggered contract expiration dates.” In return for trading in your old smartphones to be refurbished or recycled, T-Mobile gives your account a credit up to $650 equal to whatever it costs to terminate your contract with your previous carrier, as well as a fair market value of your device. The concept has been done before, but never on a scale this big, where anyone can do it no matter how new their contract is with a competitor.
T-Mobile’s decision to pay the ETFs of new customers is a Pyrrhic victory — it comes at great cost. In its latest earnings report on May 1, T-Mobile reported a record increase in customers, totaling more than 2.4 million net new subscribers. However, the gains came at a $150 million loss compared to a $100 million profit this time last year. It’s clear that this move, even if it’s making waves, is costing T-Mobile a ton of money. The company admitted earlier this year that while this new plan will take a hit on its revenue at first, in the long run it does not see a threat to its revenue from this offer. T-Mobile ultimately sees the project as sustainable.
Next page: The big perks and big promises of the Uncarrier
A carrier full of big perks and big promises
In addition to practically buying out its customers, T-Mobile has unleashed a slew of new benefits for its subscribers. The biggest of these includes free international data and texting for T-Mobile customers in more than 120 countries, but other perks include free data for tablets, special discounts, and more.
No data overages: We’ve mentioned this before; data is a huge cash cow ever since AT&T and Verizon ushered in data caps to the U.S. a few years ago. At T-Mobile, data does come in different sizes, but instead of being capped and charged overage fees, the company instead throttles your data speed. This, along with the free data and texting all over the world, is a serious advantage that could save heavy-users and globetrotters a lot of money.
Free data for tablets: For tablet owners, T-Mobile’s recent push has been free data to all tablets — plus extra if you either buy a tablet or own a smartphone with the carrier. “Imagine a world where your smartphone was only connected via Wi-Fi, how useful would it be? That wouldn’t make any sense, and neither does a Wi-Fi-only tablet,” Sievert told us. So far all tablet owners with 3G or 4G capabilities can get 500MB of free data each month from T-Mobile. If you go over, the service shuts off and prompts you to buy additional data, which is better than getting overage fees. The 500MB isn’t much data for a tablet, but some competitors charge $20 or more a month for a similar offer.
Smaller deals: On top of the free data, T-Mobile has unleashed a number of little perks that pop up depending on what you’re looking for. BlackBerry owners were given special offers to upgrade to iPhones as part of a trade-in offer, though BlackBerry ended up feeling targeted and canceled its contract with T-Mobile over this whole debacle.
“We will continue to call out the crazy practices of this industry, and of our competitors.”
As T-Mobile has begun stealing customers, some of the other carriers decided to offer similar deals, but all have paled in scope to its offers. Still, as great as it is to get all kinds of perks, most people pick a carrier for more than the perks. The service we get from is even more important. So just what is T-Mobile doing to offer good cellular service?
T-Mobile’s network is improving, but still holds it back
Despite all the perks and free money to move over to T-Mobile, one serious problem remains at the heart of the magenta-colored carrier: its high-speed service. T-Mobile’s service is not competitive in some parts of the country, especially if your area has yet to receive LTE network improvements. But LTE enhancements aren’t its only problem. T-Mobile also has poor service because of the spectrum it’s transmitted on.
Even though they all call it 3G, 4G, or LTE, the four big carriers operate their systems on a slew of different frequencies between 700MHz and 2500MHz. These frequencies all have different speeds and coverage abilities depending on if you’re outdoors, inside a large brick building, or even in a basement. Higher frequencies are typically less effective penetrating buildings.
T-Mobile happens to be the only carrier among the big four to run the bulk of its network on higher frequencies. The T-Mobile 3G and 4G network run on the 1700, 1900, and 2100MHz bands. Verizon, AT&T, and Sprint each have some sort of coverage in the 700 to 800MHz spectrum, which has significantly better performance penetrating through buildings and other large structures.
Alongside this new spectrum purchase, T-Mobile continues an aggressive rollout of its LTE network, which didn’t even exist when John Legere took charge. Over the last 18 months, T-Mobile went from zero LTE coverage in the United States to covering more than 230 million people by mid-year. While still behind AT&T and Verizon, it is far ahead of Sprint and is actively continuing this roll-out, hoping to cover even more customers while implementing its new 700MHz spectrum by the end of the year. By mid-2015, executives hope to have LTE wherever it has 2G or 3G coverage today.
For customers (and potential customers) outside T-Mobile’s LTE-upgraded regions, the aggressive Uncarrier marketing of the company seems almost ironic. For example, I spend many months just 70 miles north of New York City, 15 miles outside of T-Mobile’s LTE network. The service, despite being rated as “Excellent 3G coverage” on the T-Mobile webpage, is sluggish 2G and often resorts to Wi-Fi Calling when indoors. Many customers on Twitter express similar sentiments in other areas where T-Mobile’s new LTE network ends. The outer limits of major cities often leave subscribers searching for signal bars, even in areas where competitors like AT&T and Verizon have full service.
Next page: T-Mobile’s Uncarrier missteps
Not all of T-Mobile’s “Uncarrier” changes have been good
As interesting as it is to watch the new and innovative ways T-Mobile is pressuring the wireless industry to change, not all of its Uncarrier moves have been positive, or worked out. The four most notable changes include its new Jump phone insurance/upgrade program, ending phone subsidies, cutting corporate discounts, and simplified billing.
Jump plan flaws: T-Mobile’s Jump program never made sense for normal customers. For $10 more a month, customers were given a full insurance plan for their devices that covered everything from theft to water damage. And after six months, you could trade in your phone and get the latest gadget on the market. It was such a shock to the industry that AT&T and Verizon made their own versions of the early-upgrade program to compete, but it never made financial sense for anyone who bothered to do the math. However, just six months after the program began, T-Mobile made radical changes that turned the interesting program into a full-blown bad deal. Jump users are now required to pay off at least half of their device before upgrading – and they still have to trade it in and pay $10 a month. This is such a bad deal that keeping your device and selling it on eBay can, in most cases, net you hundreds more than T-Mobile will pay.
Exposing a raw deal by ending subsidies: Another hit T-Mobile customers now have to suffer is the end of phone subsidies. This was part of T-Mobile’s plan for simpler and more straightforward pricing for cell phone plans. Instead of paying a strange price plus extra fees in return for a subsidized phone, customers buy their phone at an up-front price with a monthly installment plus, and then pay a separate monthly fee for cell phone service. There is no hidden math: You pay enough to buy the phone and you get service on top of it.
If there’s one thing T-Mobile is now famous for, it’s that the company will pay your termination fee if you switch over.
Ending corporate discounts: One idea T-Mobile had that it ended up doubling back on was ending corporate discounts. T-Mobile argued that corporate discounts (known as T-Mobile Advantage plans) extended to employees of certain corporations and government agencies were not about better prices but really about securing favor for big cellular contracts. Originally, all customers were going to lose the discounts last month, but T-Mobile changed its mind and is letting customers keep their discounts.
Sievert told us that, “[T-Mobile] made a business decision and then we heard from some customers and we took that feedback, and adjusted our plan. We can’t always do everything that customers want, but when we can – we do. That is our priority. Customers first. So everyone enrolled in the Advantage Program or who applied to enroll before April 1 is able to keep a rate plan discount as long as they work at a participating employer and remain on a qualifying plan.”
Raising data prices by $10: In March, T-Mobile disguised a $10 price hike to its plans as a customer benefit (not the most Uncarrier move). Unlimited plans on the carrier grew from $70 to $80. In addition to the price hike, the idea behind T-Mobile’s Simple Plan is that you get a straightforward price without any hidden fees or surcharges. However, the simple billing is not-so-simple if, like many first-time customers, you need to buy a smartphone, too. Once you add on the up-front fee, the activation fees, the monthly installment price, the state and local surcharges, suddenly T-Mobile’s “Simple” bill of $80 for unlimited talk, text, and data is much, much higher.
Would a combined Sprint/T-Mobile be an Uncarrier?
One final thought on our minds about T-Mobile is its future, and whether it will remain as the Uncarrier for years to come. Right now, we’re not sure because it looks like T-Mobile is about to be purchased.
Nobody’s 100 percent sure what will happen, but according to a number of reports several companies are interesting in buying T-Mobile, including Sprint. The third-place wireless carrier, now owned mostly by the Japanese wireless company SoftBank, has been very interested in T-Mobile and its eccentric CEO. The bid could reach as much as $24 billion or more, depending on how much further the company grows in the coming months. Sprint’s not alone: a slew of other companies have also expressed interest in buying out the 4th-place carrier, including Dish Network, which may bid, depending on how things go with Sprint.
If the FCC becomes critical of having just three carriers in the U.S. then the Sprint deal could very well fall through like T-Mobile’s previous proposed merger with AT&T. Sprint CEO Dan Hesse defends the purchase, noting that having two smaller carriers fighting AT&T and Verizon is worse for consumers than a single, larger carrier facing off against the big two.
If Sprint or another company purchased T-Mobile, it does not necessarily mean the end of the Uncarrier. Instead, the new company formed may be headed by John Legere because of his success in winning over customers, replacing Dan Hesse. With John Legere in charge, the Uncarrier way-of-life could very well continue, assuming the newly formed company thinks that is how it should proceed.
Until there’s a bid on the table, there’s no telling what will happen with T-Mobile USA in the near future. It does however cast doubt on whether the goal of the Uncarrier movement was to change the industry or to pretty T-Mobile up for a buyout. It’s hard to swallow that being the Uncarrier involves merging with the very companies Legere criticizes on Twitter. Historically, merging is a very pro-carrier thing to do.
The Uncarrier’s bottom line
Perhaps this is all just a big marketing move to win over the hearts and minds of frustrated wireless customers. Perhaps this is about changing the wireless industry in America for the better. Maybe John Legere really is The Dark Knight, a watchful protector.
Whatever T-Mobile’s motives are, investors are loving every minute of the Uncarrier movement. In the last year, T-Mobile’s stock has soared in response to John Legere’s changes, even in the wake of a loss in the first quarter.
According to Motley Fool Analyst Evan Niu, “[With] T-Mobile, the bottom line is that John Legere’s aggressive marketing strategies and big push towards greater pricing transparency are clearly resonating with consumers. The numbers speak for themselves … the larger rivals have been forced to respond to T-Mobile’s Uncarrier initiatives, so T-Mobile is definitely shaking things up.”
If being the Uncarrier means raising stock prices, then T-Mobile has succeeded.
However, if being the Uncarrier truly means putting customers first, we’ll leave that decision up to you. T-Mobile is definitely shaking the industry up and offering some impressive advantages to being a customer. However, it isn’t immune to hiking prices and launching its own somewhat deceptive programs, which leave us wondering whether T-Mobile’s Uncarrier status is sincerely about changing things forever or just about branding. In a sea of hated carriers, T-Mobile has proven there is big money in being the only carrier that’s considered “cool.”
Regardless of its motives, John Legere’s T-Mobile is pushing AT&T, Sprint, Verizon, and other providers out of stagnation and into a competitive mood. Whether T-Mobile will continue being an Uncarrier after the next fiscal year, we’re not so sure.
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