T-Mobile positions to take its Un-carrier movement to the IoT realm, says Steve Vachon, research analyst at TBR, analyzing T-Mobile US third quarter result for 2016.
T-Mobile experienced its highest rate of year-to-year revenue growth (+17.8 percent) since 4Q14, driven by the launch of the iPhone 7 in September. The annual launch of the latest iPhone is a choice time to target new customers as many consumers are waiting for the new device to release before switching carriers.
T-Mobile capitalized on this opportunity through the launch of its T-Mobile One unlimited data program in August, ahead of the iPhone 7 launch in September. The subscriber and equipment revenue growth spawned by T-Mobile’s new offerings were able to outweigh negative factors impacting the operator’s revenue in 3Q16, namely, the sale of the company’s Wal-Mart Family Mobile MVNO business to Tracfone as well as the recall of the Samsung Galaxy Note 7.
The launch of T-Mobile One was a natural course for the operator as it has already been providing unlimited access to bandwidth-intensive video and music streaming services through its previous Binge On and Music Freedom offerings. The higher price point of T-Mobile One contributed to the company increasing postpaid phone ARPU year-to-year in 3Q16 (+0.3 percent), an anomaly within the current U.S. wireless market.
T-Mobile One will help to boost postpaid phone ARPU in the short-term as more customers transition to the program, though the offering will limit the potential for long-term ARPU growth as customers lack a more expensive data tier they can migrate to in the future. Though the operator may alienate some cost-conscious customers by eliminating its tiered data programs to offer T-Mobile One exclusively, the company has opportunity to target these customers through the more aggressive pricing promotions offered by MetroPCS.
TBR believes the launch of T-Mobile One will be the capstone of its Un-carrier incentives directed at phone customers as the company has a limited amount of other incentives it can offer subscribers within the segment. With this in mind T-Mobile has been preparing to attract the next generation of mobile customers through its ventures in IoT and 5G.
T-Mobile prepares for short-term and long-term growth in IoT
Though T-Mobile is in the early stages of testing 5G, the operator is taking a different approach than Verizon and AT&T, who are determined to launch a pre-standards form of the technology as part of fixed wireless platforms both carriers plan to start piloting in 2017. T-Mobile is taking a more upfront approach to 5G, informing customers the technology will not reach industry-standards and its full potential until the 2020 timeframe.
T-Mobile has begun marketing the practical use-cases its future 5G IoT solutions will provide consumers in areas such as virtual reality, 3D printing, mobile health and personal security. TBR believes T-Mobile’s long-term 5G IoT strategy will share the same core tenants that are behind its current Un-carrier phone strategies, which is a focus on alleviating consumer pain points and providing customers added value and convenience. T-Mobile’s successful marketing style will build anticipation amongst consumers for the company’s 5G IoT solutions as they start to become available over the next five years.
In the short-term, T-Mobile’s is focused on building its IoT base by capitalizing on the upcoming shutdown of AT&T’s 2G network in January 2017. T-Mobile plans to continue operating its 2G network through 2020 and is offering AT&T’s 2G M2M customers incentives, including free SIM cards and 50MB of free data. T-Mobile has the opportunity to target the remaining 2.8 million 2G connected device customers and 673,000 2G reseller subscribers remaining on AT&T’s network as of October.
