T-Mobile US started its war on the conventional American carrier back in 2013 with the launch of the Uncarrier branding. Here was a carrier that was determined to shake up the industry by releasing less expensive plans and putting choice back into the customer’s hands. T-Mobile US were a carrier first and foremost and weren’t to be distracted by offering other services. We can imagine the boards of the other three national American carriers - AT&T, Sprint and Verizon Wireless, thinking to themselves “how cute” that America’s smallest and weakest national carrier were trying to do something different. However, since then T-Mobile US’ aggressive marketing and vociferous Chief Executive, John Legere, has certainly caught the industry’s attention. We can only imagine the monocle-dropping horror of the investment analysts considering the impact on T-Mobile’s profits at the thought of reducing charges so as to put the customer first, and the bigger two carriers, AT&T and Verizon Wireless, scoffing that T-Mobile US’ unlimited data plans were unsustainable when the company’s network was under utilized.
In 2015, T-Mobile US overtook Sprint to become the third largest national carrier. This is only part of the story: over the last couple of years, T-Mobile US has been acquiring more and more customers than the other carriers in both the prepaid and postpaid markets. AT&T and Verizon have been biasing their offerings towards “high value” customers, which to the cynical might mean “those customers willing to pay their high prices.” Meanwhile, T-Mobile US has been advertising and publicizing its less expensive offering. Furthermore, where T-Mobile have changed their business, their competitors have followed. 2016’s holiday season demonstrated how T-Mobile US’ promotions forced the other three carriers to up their ante by releasing their own comparable promotions. Let’s not even talk about T-Mobile’s One plan - Verizon still maintains that customers don’t really want unlimited data, but found a way to offer the service by offering time periods of unlimited Internet access.
However, AT&T and Verizon Wireless are different businesses compared with T-Mobile US. The two larger carriers have other interests: AT&T is busy offering its DIRECTV service, relatively recently bought a Mexican carrier and has plans to buy Time Warner. Verizon is buying, or might not be buying, Yahoo’s media business, and they own AOL. The two larger companies are branching off into other services and while the diversification might be useful, senior management appear to be losing their focus on the cellular network business. The signs are mixed: America’s largest carrier, Verizon Wireless, for example, reversed an early decision to widely ignore the prepaid market about a year ago and has been making inroads by improving its prepaid service, introducing HD Voice, and improving how much its plans offer for the dollar. AT&T has also improved its prepay plans, but here DIRECTV is a key focus of the company - so much so that the company now offers an unlimited data plan for customers who are also subscribing to DIRECTV. The two larger carriers are offering a wider selection of bundled products for the customer in an attempt to keep people interested, whereas T-Mobile US are only trying to offer a competitive cellular service to keep people interested.
AT&T and Verizon’s senior management may be taking their eyes off their cellular market and so things are looking good for T-Mobile US. However, let’s take a look to see where things might go wrong for T-Mobile, and firstly it may be that AT&T and Verizon Wireless’ other benefits could strike a chord with subscribers. Traditionally, carriers have a poor track record of building their own compelling in-house offerings to keep customers interested, but at the risk of citing four of the most expensive words in history, perhaps “this time it’s different.” Secondly, T-Mobile US are concentrating on offering one core service and offering it well - a cellular data network. We’ve already seen how T-Mobile US has no plans to offer a fixed line 5G service and this makes perfect sense: T-Mobile US would need to come up with a service to use this technology. However, it does mean that T-Mobile US may be slower to roll out an effective mobile 5G network because they will not have as much experience as the two larger carriers. It’s possible that T-Mobile’s focus on giving customers what they want today and tomorrow, they might miss what customers want in a few years time and perhaps AT&T and Verizon will have an advantage here. This point might be especially relevant if T-Mobile US has plans to be sold or merge with another carrier, which now seems more likely than before under the Trump administration rather than the Obama administration.
We have seen something broadly similar before: Nextel Communications offered a very compelling service for enterprise customers for a long while but the company had ignored developing its proposition; the other carriers were catching up. By the time Sprint purchased Nextel, there were signs that the upstart Nextel would start to struggle against better-prepared competition. It seems incredulous to believe that a carrier offering what many people want - coast to coast coverage with a fast, modern, reliable cellular service - could struggle. But we must also remember that the world changes very fast. A decade ago, Nokia and BlackBerry scoffed at the quaint Apple iPhone, costing many hundreds of dollars plus an expensive plan, but today the iPhone was one of the most discussed devices of all time. Apple have had their fair share of hiccups, from “you’re holding it wrong” to “bendgate,” but the product remains one of the most desirable in the market today. And Apple would love it if all carriers concentrated on their core business and went back to being a dumb pipe.