Is the T-Mobile UnCarrier Effort Sustainable?
There seems to be no end in sight for T-Mobile's uncarrier events. The nation's fourth-largest wireless carrier just launched unlimited music streaming for multiple apps that won't count against data plans, a new partnership with Rhapsody to bring ad-free music streaming for free to unlimited data customers, and a new program to test drive the Apple iPhone 5s before buying it.
All of T-Mobile's efforts have been aimed at taking on rival AT&T and others, while building a case for a merger with Sprint . But can the company keep it up?
More music, same data
While many wireless carriers have offered their own versions of free music streaming, T-Mobile's new service allows any of its Simple Choice subscribers to access Pandora, Rhapsody, iHeartRadio, iTunes Radio, Spotify and others -- all without eating into their monthly data plans.
The company also said it's teaming up with Rhapsody to offer its own music streaming unRadio app, to bring ad-free music streaming to its unlimited data customers.
Both announcements are pretty significant considering streaming music can take up a substantial amount of data on wireless plans, and the fact customers can choose which music app they want to listen to.
Testing the iPhone
The second part of T-Mobile's latest efforts to woo new customers comes in the form of a test drive of Apple's iPhone 5s. Starting later this month potential customers can request an iPhone 5s from T-Mobile, use unlimited data and service nationwide for a week and then drop off the phone at any T-Mobile store once they're done, free of charge.
In a press release, T-Mobile said, "Nearly half (46%) of wireless customers say they've signed up with a carrier and then wanted to leave, and one in 10 have actually left within the first 30 days of making a switch." The new iPhone test drive allows users to try out their network before they commit.
Obviously, T-Mobile hopes people will keep the phone. The company expects at least one million people to sign up for the program within a year.
T-Mobile's uncarrier efforts have been massively popular with customers, and have helped spur millions of additional subscribers for the company. But all of that has come at a cost. In Q1 2014 the company added 2.4 million customers, but that number pushed T-Mobile to a loss of $151 million for the quarter. A year earlier, the company had a profit of $106 million for Q1.
Adding new customers is never going to come cheap, but the latest moves by T-Mobile brings into question whether the company's subscriber growth is sustainable. As a T-Mobile customer myself, I like the additional free data I've been given, and now data-free music streaming. But investors should be cautious. I think T-Mobile is amassing as many subscribers as possible as it looks for Sprint to make a bid on the company, and that's a big bet.
The aggressive strategy could work if Sprint makes a bid and the FCC approves a sale, but getting that approval is a big unknown. The FCC has been pleased with T-Mobile's latest subscriber growth and almost appears to be taking credit for T-Mobile's innovation after they struck down AT&T's bid to buy T-Mobile several years ago. The next few years could either bring a bid from Sprint, or a pullback on innovations from T-Mobile in order to save money. Either way, T-Mobile has to start making significant financial gains from its new customers, or change how it does business.
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The article Is the T-Mobile UnCarrier Effort Sustainable? originally appeared on Fool.com.Chris Neiger has no position in any stocks mentioned. The Motley Fool recommends Apple and Pandora Media. The Motley Fool owns shares of Apple and Pandora Media. 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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