Friday, February 24, 2012

T-Mobile: Back to the Future with a Twist

T-Mobile announced its 4th quarter earnings and it plans to make adjustments after the AT&T merger failed. Needless to say they have their work cut out for them, but they did make some positive adjustments and will have to think creatively about how they are going to succeed without the iPhone.

T-Mobile did what they had to do on the network side:

They announced a plan to adopt LTE in the AWS bands in 2013 in order to be competitive with the other players in terms of throughput and customer experience. They will have 50% of the covered POPs with 20 MHz and will likely need more spectrum in the future. T-Mobile may benefit as they have in the past by rolling out technology late when the prices have come down and the technology is more efficient due to lessons learned or advancements.

T-Mobile is also shifting some of its HSPA+ capacity to its PCS spectrum to gain more international traffic. The company also plans to work with various worldwide alliances to offer attractive worldwide roaming plans to customers.

The good news about the break up was that T-Mobile is receiving a break- up fee from AT&T of which they are using part of for a $4 Billion to upgrade their networks. If they are able to hold their position and grow their business additional funding is likely to be required for network capacity and additional spectrum.

No iPhone Issues Still Exists

The iPhone continues to be a halo product which carriers can use to create excitement among customers. Despite its high price the iPhone has penetrated the mid- tier market which is T-Mobile’s bread and butter. One of the reasons T-Mobile has had flat to declining subscriber numbers in 2011 is that they do not have an iPhone. They will have to deal with this issue in creative ways. One of the ways is to promote the Windows 7/Nokia phone as an attractive alternative to the iPhone. This can be done via better integration with mobile web services and the phone for consumers, and better integration, control and faster application development using .Net for the enterprise. T-Mobile will need to be a primary distribution channel for Windows 7; and on the flip side Microsoft and Nokia need a supportive distribution outlet for their product in the US.

Still Squeezed in the Value Play:

T-Mobile is still squeezed between a rock and hard place in terms of value from companies like Metro PCS, Leap, and Tracfone who offering attractive deals which are often better than T-Mobile’s. On the higher end they face competition from companies like Verizon for better network coverage and all three of its larger competitors who have the iPhone. T-Mobile continues to offer service at a competitive rate and tries to out advertise its lower end competitors. They also provide value at the fringes for people whose iPhone contract has run out or to international carriers looking for better rates than AT&T.

Business Market is Needed but Not Gotten.

T-Mobile has always lagged the other carriers in enterprise adoption. T-Mobile competed by offering lower service charges and better customer relationships than their competitors. This focus on the business market was put on hold during the AT&T merger negotiations because of the service uncertainty and the need to continue to maintain a subscriber base as the merger approval process continued. It was a much more straight forward proposition to focus on their strength in the consumer market. T-Mobile has reinvigorated it enterprise effort by hiring 1,000 new sales people. T-Mobile success in this market will go hand in hand with convincing enterprises that the Window Phone 7 is a better enterprise choice than the iPhone.


T-Mobile continues to be a patchwork of strategies in order to get revenues and stay afloat in the competitive US market. The good news is that T-Mobile still has a good reputation among consumers. They will make some network adjustments to remain competitive and gain additional revenues. If they can gain the iPhone then they will be in much better shape, but this is not likely to occur until they prove they have long- term staying power. That long term staying power is likely to depend on how efficiently they are able to rollout their network plans and how capable they are in promoting the Windows/Nokia phone as a strong alternative to the iPhone.