Not that long ago, T-Mobile was the laughing stock of America’s wireless telecommunications industry. Its network was still stuck in the pre-smartphone era, its customer service was considered shoddy, and its handset line-up was woefully inferior to those of its rivals (incredibly, it wasn’t until last April that the company even began selling Apple’s wildly popular iPhone.)
How quickly things can change. Suddenly, T-Mobile is back in fashion, with both consumers and investors. Its share price has nearly doubled over the past 12 months, in part driven by expectations it will soon be bought out by Sprint and its Japanese owner, Softbank, or even the satellite company Dish Networks, but also because of its improved performance. As the below chart from Morgan Stanley shows, after 10 straight quarters of mass customer defections, it’s now adding new subscribers hand over fist.
To what does the company owe this remarkable turnaround? A mixture of luck, clever marketing, and the kind of CEO salesmanship rarely seen in the relatively boring world of telecoms.
The luck (for wireless customers and not necessarily T-Mobile’s owners) came in late 2011 when rival carrier AT&T’s bid for the company collapsed under the weight of regulatory opposition. T-Mobile walked away with $6 billion in break fees (payments made by a bidder when a deal falls through) made up of $3 billion in cash, and $3 billion worth of spectrum, the airspace needed to transmit data over mobile networks, which would later prove handy in the company’s resurgence.
Things began to change dramatically when John Legere, heretofore a staid and unremarkable telecoms executive best known for running wholesale network operator Global Crossing, was hired as CEO in September 2012.
Within a month the company had agreed to merge with the equally struggling MetroPCS, giving it even more spectrum to beef up its network capacity. In March last year, Legere unveiled a bold set of new strategies, which he cleverly branded under the “Uncarrier” moniker – which tries to position T-Mobile as the anti-telco, and the phone company of choice for the youth market. The company switched on 4G LTE services in major cities(T-Mobile was the last of the big four carriers to activate the superfast mobile technology incorporated into most modern smartphones), started selling Apple products, and crucially, simplified its pricing.
Legere explained his pricing philosophy in an interview with the New York Timeslast year, saying that his aim was to remove the lack of transparency in phone bills caused by hidden subsidies for handsets, the unpredictability stemming exceeding from data caps, and the inflexibility that comes from two-year contracts. Now, in T-Mobile’s new plans, the cost of a smartphone is entirely separate from the cost of data and calls. Customers aren’t locked into two-year contracts and can depart for another carrier at any time. Finally, calls, texts and (technically) even data are unlimited, so that people don’t get nasty shocks when their monthly bills come in. (T-Mobile plans still feature data allowances, but once they are exceeded, download speeds are “throttled”, or slowed down, rather than extra charges being levied).