The Real News Behind T-Mobile's Latest Move
At the Consumer Electronics Show yesterday, T-Mobile officially announced its latest uncarrier move by launching a plan to pay the early termination fees for families switching from AT&T , Verizon Communications, or Sprint to T-Mobile.
For T-Mobile investors, this latest plan may be another smart move, but the real news is how many new subscribers the company added in the fourth quarter.
Terminating the status quo
Last year T-Mobile shook up the U.S. carrier market with its upfront pricing, lack of phone subsidies, free tablet data, and free international roaming. With its latest move T-Mobile will pay up to $650 per line -- with an eligible phone trade-in -- in early termination fees to customers who switch their plans from the top three carriers to T-Mobile. The incentive includes up to $300 for a device trade-in credit and up to $350 to cover the early termination fee from AT&T, Sprint or Verizon.
Aside from being a way to make headlines, T-Mobile is in the middle of an all out fight to grab customers away from its rivals. T-Mobile is the nation's No. 4 carrier, and has been battling back form years of subscribers losses.
T-Mobile has made competitors like AT&T nervous, and AT&T just launched its own plan to steal T-Mobile customers last week by paying them up $450 to switch to their network. That may or may not have lead T-Mo's CEO John Legere to crash AT&T's party at the Consumer Electronics Show earlier in the week.
More than just hype
While T-Mobile has certainly kept the U.S. wireless industry interesting with its latest moves, the bigger picture is that the company just released preliminary Q4 numbers that show significant customer growth.
T-Mobile reported that it grew its coveted postpaid subscriber base by 869,000 in Q4 2013, which is up from a loss of 515,000 postpaid subscribers year over year. That's in addition to the 1.3 million postpaid subscribers it added in the previous two quarters. T-Mobile's past three quarters of postpaid subscriber growth prove that the company's initiatives are more than just publicity stunts -- but there's still lots of work to be done
In Q3 2013, the company had a loss of $36 million, more than the $16 million loss from the previous quarter. While T-Mobile has made significant additions to its network and customer base over the past year, its average revenue per user for postpaid subscribers fell by $1.40 to $52.40 in the third quarter; T-Mobile hasn't released the official net income numbers for Q4 yet. At some point -- and sooner rather than later -- T-Mobile needs to get its ARPU up while it continues to boost postpaid subscribers.
In the long term, T-Mobile's future may depend a possible merger or acquisition and the additional postpaid subscribers is a great way to make the company more alluring to buyers. Sprint is reportedly interested in purchasing the company, and DISH Network may be looking to make a bid as well. The next few months may be an interesting time for T-Mobile investors as more details of these possible deals emerge. For now, investors should view T-Mobile's latest customer growth and new incentive plan as the right moves for growing the company If Sprint or DISH Network does want to buy T-Mobile, it's in the carrier's best interest to have the most customers as possible before that day comes.
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