We have said it here before, the wars going on between T-Mobile, and AT&T and now Sprint, will benefit the consumer greatly. Now, Wall Street is taking notice, and they aren't happy with what they are seeing, however, who cares?
As long as us, the consumers benefit, we really don't mind what Wall Street has to say about it. We love watching as T-Mobile CEO John Legere, works the system, and turns everything upside down. Even more so, is how it is working, how Legere is able to get the industry to make big changes to keep up. All of the things T-Mobile is doing, the paid family ETF's, ending contracts, JUMP, not to mention all of the public mockery of competitors, have actually been paying off. They released their Q4 earnings report, and those numbers show, nothing but growth over the past three Quarters. Go back far enough, and you will find that T-Mobile has grown rapidly, compared to just one year ago. In fact, go back even further, and you will see that the company has had over four years of down fall, until Legere started rocking our world.
Then there was AT&T, the company had really no choice but to fire back at T-Mobile. They offered cash to customers who left T-Mobile, and signed up with them. Giving them the headlines for a few days, until Sprint stepped in, with an offer of their own. Though Sprint didn't get much press about their offer, because T-Mobile stepped back into the light with the "break-up letter" and then some. Still Sprint's offer was discounts for groups of people coming in, though there was plenty of things needed to qualify for their discounts, which could be why we didn't hear much about it. Seemed more like a normal sale, than an attempt to fight back against T-Mobile and AT&T.
All of that going on has done nothing but give us reasons to switch back and forth, get new devices, take advantage of new deals, and gave Wall Street reason to bite their nails. Reuters reports that investors of AT&T and Verizon didn't think much of T-Mobiles threats and deals, simply because, according to AT&T, T-Mobile's deals will only attract the consumers who can't afford AT&T anyway. Of course they said it in more of a nice way, but we know you can handle the truth. An analyst over at Jefferies, Michael McCormack, says he is more disappointed that "AT&T is reacting to T-Mobile." and questions how long it will be before Verizon fires back as well.
The investors of the companies involved in the battle are holding most of the concerns though. Worried about market shares being properly balanced, now that T-Mobile is working their way up the ladder. This is where it might get a little messy.
The offers made by carriers, like AT&T for example, offering to give up cash for customers to switch from T-Mobile, McCormack says, those very ideals could deplete the profits made from customer additions which eats away at monthly revenue per user. McCormack went further into detail with this idea, saying that if AT&T added 1 million subscribers, it would increase Earnings Before Interest, Tax, Depreciation and Amortization(EBITDA) by only $852 million, and a 1% increase in Average Revenue Per User(ARPU) would increase EBITDA by $1.14 billion. So in people words, if the ARPU is lowered due to discounts, that lowers EBITDA.
Legere was definitely the people hero, when he said that he is not concerned with matching the profits of his rival companies, instead Legere said he was in this for the consumer. Legere continued to say "We can be very profitable," continuing with, " but I don't think you need to make 55 points of EBITDA margins."
The numbers that Wall Street seems to really be concerned about, is a number Legere dreams about. Legere took the revenue numbers of his competitors, and calculated that if everyone switched to T-Mobile,consumers could save around $20 Billion each year. That's where Wall Street gets really nervous.