T-Mobile has outpaced its competitors in postpaid subscriber additions, service revenue growth and margin improvement in Q1 2015.

T-Mobile generated the highest postpaid subscriber growth in the U.S. in Q1 2015 due to the appeal of the operator’s Un-carrier incentives and Simple Choice plans to cost-conscious consumers. T-Mobile has been the only carrier so far in the quarter to report postpaid phone net additions which TBR believes was primarily driven from AT&T and Verizon basic phone subscribers migrating to low-cost Simple Choice plans.

Phones accounted for roughly 91 percent of T-Mobile’s postpaid net additions in Q1 2015 which contributed to the operator also being the only carrier so far in the quarter to report year-to-year service revenue growth.

Contrary, AT&T and Verizon are driving the bulk of their postpaid subscriber growth through lower-value tablet additions that are lowering ARPU and are hindering the companies from achieving service revenue growth. Additionally, T-Mobile’s network investments are improving customer satisfaction and attributed to the company’s record-low postpaid phone churn of 1.3 percent in Q1 2015.

Despite the company’s aggressive pricing strategies, T-Mobile is the only Tier 1 operator so far to report improved wireless margins year-over-year in Q1 2015. T-Mobile’s OIBDA margin improved 210 basis points from Q1 2015 as revenue growth generated from the operator’s subscriber additions was able to offset higher operating expenses and the negative impact Un-carrier incentives are having on postpaid ARPU.

T-Mobile’s margins are improving in light of higher costs arising from Un-carrier initiatives such as the company offering to pay off customers’ early termination fees (ETFs) and the newly launched Data Stash program which attributed to postpaid ARPU declining sequentially in Q1 2015.

Un-carrier initiatives will help T-Mobile sustain subscriber growth in 2015 though long-term revenue growth is limited without market expansion

T-Mobile recently launched new Un-carrier incentives which will help the operator sustain phone subscriber growth. TBR believes these new incentives are extra measures to attract AT&T and Verizon customers as the carriers reported improved postpaid churn in Q1 2015 due to sticky services such as device financing plans and mobile share programs which are causing subscribers to become less inclined to change carriers.

T-Mobile launched Carrier Freedom in March in which the company is offering to pay off the account balance of customers on device financing programs offered by other carriers. This program will help attract AT&T Next and Verizon Edge customers as these customers would previously be reluctant to switch to T-Mobile if they still owed money on their existing devices.

Un-contract was also introduced in March in which T-Mobile is pledging Simple Choice customers that their rates won’t increase as long as they are customers. Additionally, T-Mobile began offering competitively-priced business plans in March, dubbed Un-carrier for Business.

Despite T-Mobile’s current success, AT&T and Verizon are presently better positioned to sustain revenue growth in the long-term due to their higher focus on expanding into markets such as the Internet of Things (IoT) and video. Un-carrier for Business plans will allow the company to gain headway in the enterprise segment and will help the company compensate for its lack of wireline business services.

Traction gained in the enterprise phone and tablet segments through Un-carrier for Business will position T-Mobile to introduce new enterprise IoT solutions that will help to drive device connections over the next five years. TBR also anticipates T-Mobile will launch new IoT services geared towards consumers in 2H15 such as a connected car offering.

Eric Costa and Steve Vachon, telecom analyst, Technology Business Research