CES 2014 was an event filled with exotic smartphones, wearable technology, and even window washing robots. However, for one company it was a platform to announce it’s latest move, further cementing it’s place as the consumers best friend.
When John Legere took the stage in Vegas this past week, we were all pretty sure that behind the cussing, belittling of AT&T, and batman references, we would see T-Mobile make another move as they reinforced their position as the worlds favorite wireless carrier. That move turned out to be a whopper, as T-Mobile announced that they would pay any customer from AT&T, Sprint, or Verizon their entire early termination fee, along with a credit for your existing device if you decide to move to T-Mobile.
Before we break out the champagne it’s important to realize that T-Mobile is a public company and that it’s first priority is to make money for it’s shareholders. Doing a little math, we quickly realize that Tmo’s newest move may not make the business sense its meant to. If we assume that T-Mobile doesn’t make any profit on it’s device sales, and we create a fictional family of five porting out of AT&T with the $350 early termination fee, and signing up for the base 5 line plan for $110, we will see that the family would have to stay with T-Mobile for 16 months before the company see’s any money in the green. Couple this with T-Mobile’s elimination of contracts and you could see the company losing money if the customer decides to bail before the 16 month mark. Add in the operational costs of maintaining a network, and paying employees and we see that this is a very deep hole to dig out of. Now there are definitely cases where the ETF is lower, or the customer signs up for a higher price plan, but the fact is that T-Mobile is sacrificing a lot to get you on their network.
Given that T-Mobile isn’t poised to make much, if any, money on this influx of new customers, why would they offer such a deal? The obvious answer is customer numbers, and the market evaluation they provide. With the Softbank/Sprint rumors, and Dish’s interest in entering the wireless market, Uncarrier 4 seems oddly like an attempt to pump up the sale price of Deutsche Telecom’s least favorite subsidiary. In any potential wireless acquisition the two most important value indicators are spectrum holdings, and subscriber numbers. With this move T-Mobile is practicing what some would call reckless business, in order to boost that second number. The difference between a 35 million and 45 million customers, could be an extra $2-3 Billion dollars in Deutsche Telecom’s pockets, so its only fair to ask, is this ETF buyout for the customer, or for the parent company itself?
Is it possible that this is just another move to compete against the behemoths of the wireless industry? Sure, but when we look at the numbers, this move doesn’t quite make the business sense you would expect for a public company.
The past decade has been vicious to the American wireless consumer but the emergence of the Uncarrier has given us hope in a brighter future where the paying customer is valued above the extra dollar. Let us now hope that Uncarrier 4 is not a ploy to end the Uncarrier itself.
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