The highs, lows, and uncertain future of T-Mobile as the ‘Uncarrier’

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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.

However, in America we already have some of the highest cell phone service costs in the world. There’s a reason that wireless companies have extremely high profit margins in the telecommunications industry. In other countries, like the UK and France, paying for higher-priced cellular service gets you discounted phones every 12 months — and we’re talking about iPhones, not bargain-bin gadgets.

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.

John Legere, CEO of T-Mobile US, Inc.
John Legere speaks at T-Mobile’s Un-carrier 4.0 press event on Wednesday, January, 8, 2014 in Las Vegas.

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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