T-Mobile’s efforts to be disruptive are starting to pay off as the company surpassed expectations again Tuesday, adding over one million customers third quarter.
“T-Mobile’s Un-carrier approach is resonating with consumers,” stated CEO John Legere, “because we are fixing the things that drive customers crazy.”
T-Mobile Inc. added 648,000 post-paid net subscribers, well above the average expectation of 444,000 subscribers according to analysts surveyed by Reuters. The MetroPCS acquisition also added a large pool of pre-paid customers. T-Mobile, which is majority owned by Detsche Telekom, completed the MetroPCS transaction earlier in 2013.
T-Mobile surpassed AT&T Inc.’s 363,000 net addition and came in second after Verizon Wireless’ 927,000 net additions.
Excluding connecting devices like tablets, T-Mobile had added 643,000 phone subscribers, beating both Verizon Wireless and AT&T. AT&T would have reported losses without counting tablet, according to analysts.
T-Mobile started its “Un-Carrier” strategy this March, allowing customers to enroll in service plans with no annual contracts.
In July, T-Mobile announced its phone upgrade plan Jump, which allows customers to upgrade their phones as often as twice a year for a $10 monthly fee. The program has had 2.2 million net enrollments, T-Mobile stated Tuesday.
T-Mobile also added Simple Global Roaming, which allows customers free data in 115 areas globally, and 200 megabytes of free data on purchased tablets.
Entrepreneurial investor Reggie Middleton says the strategy’s success is no surprise. Middleton calculated the cost of a two-year contract across the four main carriers and the results say T-Mobile is the cheapest. AT&T and Verizon customers’ phone costs are over three times what T-Mobile users would be paying over the period of the contract.
However, T-Mobile’s average revenue per user (ARPU) dropped in the third quarter, as it did last quarter. The company reported a net loss of $36 million, down from the $7.74 billion loss in the same quarter last year, which was mostly due to a $8.1 billion write-off regarding the MetroPCS merger.
“One of the things they really need to focus on is the quality of the subscribers,” said Frost and Sullivan analyst Brent Iadarola.
The company has been attracting pre-paid and subscribing users due to competitive pricing, but because of that they tend to be low-end users.
This is not the only challenge, however.
“Network is an important component,” Iadarola said. “From a network perspective they have challenges, they have a long way to go.”
In terms of 4G and LTE performance, Verizon Wireless and AT&T both outrank T-Mobile in the United States. “[T-Mobile is] doing a very good job attracting customers via pricing,” Iadarola said. “[But] I don’t think they’re going to be able to compete in the US on network performance on 4G and LTE in the near term.”
Because of this, T-Mobile is looking for higher-end customers elsewhere. The free international roaming and pre-paid high speed passes are aimed at international business customers, while it continues to build out its network in the Unites States.
T-Mobile CFO Braxton Carter said during the call the ARPU continues to decline as they shift to new “un-carrier” plans, but the company expects this to level off mid-2014.
Yankee Group analyst Richard Karpinski said while they haven’t turned their ARPU around the success with subscribers may put pressure on its larger rivals, “perhaps forcing them into price cuts of their own.”
“That won’t help T-Mobile’s revenue picture, but it could close the gap with its rivals and have a big impact on the overall market,” Karpinski wrote.