T-Mobile’s aggressive Un-carrier strategy continues to alter the postpaid market landscape and will drive company revenue and subscriber growth through H2 2014.
T-Mobile’s long-term initiatives including its LTE network build, Un-carrier strategy and the addition of MetroPCS will help the operator improve its financial and subscriber position through H2 2014. A focus on rapid total subscriber growth through inexpensive plans, regardless of the impact to ARPU, will remain a key strategy to improve long-term revenue and margin growth.
T-Mobile will continue to have success in the postpaid market with its Simple Choice plans, though due to lower tablet sales and its smaller LTE network, T-Mobile was surpassed by AT&T and Verizon in postpaid net additions in Q2 2014. T-Mobile is also excelling in the prepaid market through its MetroPCS brand, which helped drive total revenue growth of 15.4 percent year-to-year.
T-Mobile is remaining innovative and aggressive in the postpaid market.
T-Mobile experienced its fifth consecutive quarter of postpaid subscriber growth in Q2 2014 as the carrier gained 908,000 postpaid net additions. T-Mobile continued to drive subscriber growth through its innovative Un-carrier strategies.
The Un-carrier tactics indicate that in the short-term, T-Mobile is willing to forsake ARPU growth to broaden its postpaid subscriber base as evidenced by postpaid ARPU declining 7 percent year-to-year in Q2 2014.
Despite the drop in ARPU, T-Mobile continued to grow revenue and improve margins. T-Mobile’s strategies will prove lucrative in the long-term as revenue generated from its larger subscriber base will begin to offset price cuts in its service plans and customer acquisition costs, including paying for early termination fees.
T-Mobile’s aggressive pricing strategy to procure subscribers is exemplified by a limited time Simple Choice promotion launched in July that offers a family of four unlimited talk, text, and 10 GB of data for $100/month through the end of 2015.
The plan directly targets AT&T and Verizon’s shared data plans and are significantly less expensive. The plans, which will be available for customers to enroll in through September, will help draw in postpaid subscribers in Q3 2014 but will have a negative impact on ARPU as the programs are $60/month cheaper than comparable plans offered by competitors.
T-Mobile will increase the MetroPCS footprint to continue to gain momentum in the prepaid market in H2 2014.
Expanding the MetroPCS footprint will allow T-Mobile to drive higher prepaid revenue, subscribers and ARPU in H2 2014. MetroPCS subscribers bring in a higher ARPU than T-Mobile’s other prepaid offerings. The prepaid market is currently open for T-Mobile to capitalize on in H2 2014, as the other Tier 1 operators lost prepaid subscribers in Q2 2014. T-Mobile already expanded the MetroPCS brand to over 30 new markets since the acquisition was finalized in 2013.
Eric Costa, telecom analyst, Technology Business Research
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