Tech Talk: T-Mobile Is Poised For Excellent Growth In 2017

There are currently four American national carriers offering coast to coast coverage. In subscriber number order, these are Verizon Wireless, AT&T, T-Mobile US and Sprint. Of these four carriers, there is one that is more often appearing in headlines thanks in part to an outspoken Chief Executive and also to how the company has marketed and operated: T-Mobile US, and CEO John Legere. T-Mobile US calls itself the “Uncarrier” and in the last few years has changed the way it conducts business, and by so doing so has forced the other carriers to change their ways. We’ve seen equipment installation plans all but replace traditional contracts and carriers forced to offer customers more for their dollars. In the latest Uncarrier announcement during CES this year, T-Mobile US announced it was going “all in” with plan charges and is ending the additional taxes and surcharges that many competitors place over and above plan costs on monthly bills. At the same time, Legere also announced solid results showing another gain in subscribers. T-Mobile US is on something of a roll, gaining subscribers quarter after quarter.

The company is, however, paying for this high customer growth. According to data as at the third quarter 2016, T-Mobile US has the lowest ARPU (average revenue per user) figure of the four national American carriers. AT&T had the highest revenue, at $59.64, closely followed by Sprint at $58.03. Next is Verizon Wireless, with $47.52 but the company includes what the business calls “lower value connections such as IoT and tablet devices,” which the other carriers remove from this data. Finally, we have T-Mobile US at $48.15: essentially, the business is funding customer growth by aggressively marketing and reduced charges and as such the revenue generated by each user. The ARPU is one metric that carriers are measured in. Another is the service revenue, that is, the money generated by a business for providing the service. T-Mobile US has witnessed an increase in service revenue for several years now. In the third quarter 2016, its three national competitors saw a drop off in service revenue. Verizon Wireless saw a 5.2% decline, Sprint witnessed a 6.8% decline whereas AT&T’s drop was only 0.9%. However, during the same time, T-Mobile US managed a 13.2% increase in service revenue. T-Mobile US is expecting a double digit increase in service revenue over 2017. Let’s take a look at the reasons why this should be the case.

Firstly, T-Mobile US keeps adding customers. It stands to reason that all things being equal, adding more customers is a sure fire way of adding regular revenue. The company added 8.2 million customers in 2016 and of these, 3.3 million are described as “extremely high-value” postpaid subscribers. The company claims to have added over 100% of net subscriber additions since 2015, helped here by acquiring large numbers of dissatisfied customers leaving other carriers. Second, let’s talk about T-Mobile US’ 2017 Uncarrier announcement: “All In.” This arrangement, which takes effect from the 1st of February, means that customer taxes, fees and the $5 “autopay” discount are included into the headline price. The other side to all in is that the company are also removing Simple Choice plans from their portfolio and are only offering customers the “One plan,” which offers unlimited airtime, minutes and importantly, data. This has the effect of putting all new customers onto the one plan even where they might not necessarily need so much data. T-Mobile US released the One plan late the third quarter 2016 and during this time, with only one month of the One plan being available, the company reported a 2.2% rise in average revenue per postpay subscriber. In other words, customers adopted the higher priced plan. Going forward, the simpler pricing structure should be good news for the business and the net effect of bundling up taxes and fees, together with effectively removing the $5 autopay discount, will cancel themselves out.

T-Mobile worked hard to increase its network coverage during 2016, but it has not been able to grow its number of retail stores as quickly. The company has plans to open another thousand retail stores by the middle of 2017. As T-Mobile US markets itself on a national level, the business already has significant brand recognition, which means that the new retail stores will not have to work so hard to establish themselves. The company’s estimates are that these additional stores will reach another “30 to 40 million potential customers,” which should help the company increase its customer base. The final part of T-Mobile US’ strategy for 2017 is to increase their exposure to the enterprise market, where currently the two bigger operators - AT&T and Verizon Wireless - have the majority of contracts. Currently, T-Mobile US have under 5% of the enterprise or big business market as they have concentrated their efforts on the consumer side of things. There are a number of reasons for this disparity in customer bases, such as customer inertia: many big companies do not move service providers quickly and if an existing arrangement is working, often do not see a reason to change. However, T-Mobile US has worked on improving its network coverage, which had been a weakness of the company’s enterprise offering, and has now started marketing towards business.

With so little market share, it has a long way to go but given such a relatively small number of enterprise customers, T-Mobile US could manage very respectable subscriber growth here. There are substantial differences between the consumer and enterprise markets and it remains to be seen how well T-Mobile US manage this, but an improvement here should be good news for driving the service revenue up. We can expect T-Mobile US, and its outspoken Chief Executive, to generate headlines during 2017 but under the surface, the carrier is working hard to generate service revenue. It will be interesting to see what new Uncarrier initiatives the company offers during the year and how the competition is forced to change their own offerings to stay competitive.

You May Like These
More Like This:
About the Author
2015/07/b3c77426-3c33-4e58-aab1-23e9a0bfa03d.jpg

David Steele

Senior Staff Writer
I grew up with 8-bit computers and moved into PDAs in my professional life, using a number of devices from early Windows CE clamshells and later. Today, my main devices are a Nexus 5X, a Sony Xperia Z Tablet and a coffee cup.
Android Headlines We Are Hiring Apply Now