This Carrier Can't Get the iPhone Soon Enough
Of the four largest domestic wireless carriers, T-Mobile has always been the odd carrier out when it comes to being able to offer Apple's iPhone. That's set to change this year as the company has already officially confirmed that it has partnered with the iPhone maker to launch the device on its network later this year.
Over the years, management has directly cited the iPhone's absence from its lineup as a major reason why T-Mobile continues to bleed valuable postpaid subscribers to larger rivals that do carry Apple's smartphone.
T-Mobile has now reported fourth-quarter operating results, and the postpaid bleeding continues.
During the fourth quarter, T-Mobile lost 515,000 branded postpaid subscribers, which was worse than the 492,000 lost in the third quarter but better than the 706,000 it lost a year prior. Over the past year, T-Mobile has shed 9% of its branded postpaid subscriber base, which now sits at just 20.3 million.
The carrier has grown its prepaid subscriber base over the same time, which means that its customer mix continues to shift toward the prepaid segment.
Total postpaid customers
Total prepaid customers
It's not all bad news, though, as net customer additions were 61,000 since strong prepaid and wholesale growth helped more than offset postpaid customer losses. Branded prepaid subscribers were up for the sixth consecutive quarter, gaining 166,000.
The challenge is that postpaid subscribers are far more profitable than their prepaid counterparts, on average generating twice the amount of revenue.
Branded postpaid ARPU
Branded prepaid ARPU
On the horizon, T-Mobile is looking at two important catalysts in the near term: the merger with MetroPCS and adding the iPhone to its device lineup this year.
Say "I do"
T-Mobile said that the MetroPCS merger is on track to close in the first half of the year, and the transaction will be very beneficial since it will allow both of the smaller carriers to join forces to better compete with the big dogs. You might remember that T-Mobile famously failed to merge with one of those big dogs, AT&T, after regulators blocked the marriage.
MetroPCS has just announced the shareholder vote on the deal, which is included in its proxy statement heading into the company's shareholder meeting next month. The MetroPCS board is already on board, now it just needs investors to sign off, and regulators will likely approve it also since it will increase competition in the industry.
As far as T-Mobile's brave new unsubsidized world goes, it may be in for a sore surprise since customer reaction will likely be negative. Those same subsidies on high-end smartphones that T-Mobile is eliminating are exactly what are luring postpaid subscribers to larger carriers. As T-Mobile's customer base shifts further toward the prepaid segment, it will also find it harder to sell the iPhone that it hopes will turn the tables.
Leap Wireless was the first prepaid carrier to offer the iPhone on its Cricket brand last year, and it just disclosed that it's not selling nearly enough. Like many other carriers, Leap is subjected to a minimum iPhone purchase agreement, and the company only expects to fulfill half of its first year requirement. That goes to show just how hard it is to sell the iPhone to price-sensitive prepaid consumers without generous subsidies (Leap offers a moderate subsidy).
T-Mobile may suffer the same fate, though it seems that T-Mobile has some type of trick up its sleeve. In December, CEO John Legere said, "When [the iPhone] rolls out I can only tell you it will be a dramatically different experience, and I can only tell you that of all the reports that have been written about what's going to happen when it comes out, they're all wrong."
He hinted that T-Mobile could offer a financing plan to lower the upfront cost, but that still largely resembles the subsidy model anyways. I'd hardly call that a "dramatically different experience," but we'll see what T-Mobile is planning soon enough.
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The article This Carrier Can't Get the iPhone Soon Enough originally appeared on Fool.com.Fool contributor Evan Niu, CFA, owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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