T-Mobile's Uncarrier strategy isn't sustainable over the long haul

[Shawn Knight]

For all of the progress that T-Mobile has brought to the wireless industry over the past couple of years, it’d be a shame if it all ended in a merger with Sprint. While that end game seems highly unlikely under US regulators, it’s becoming clear that T-Mobile probably won’t be able to sustain its Uncarrier approach over the long haul.

During a recent chat with Re/Code, Timotheus Hottges, CEO of T-Mobile parent company Deutsche Telekom, admitted that he was intrigued by the idea of a merger with Sprint and being the super maverick in the market but conceded that it won’t happen under the current political environment.

Regulators appear to be dead-set on preventing any sort of deal that would reduce the number of major wireless players from four to three. It’s why AT&T’s attempted acquisition of T-Mobile failed and why Sprint decided not to test the waters.

Hottges, however, believes the issue lies not in how many major carriers exist but the concentration of wealth and spectrum owned by the two biggest players, AT&T and Verizon. Those needing proof of this should look no further than the ongoing FCC spectrum auction, he hinted.

The auction Hottges is referring to is for six blocks of spectrum amounting to 65MHz. The auction got under way on November 13, 2014, and quickly blew through presale estimates to become the biggest in FCC history. Just a week in, bidding had surpassed $34 billion. AT&T and Verizon are likely the two companies responsible for the insane bidding that hasn’t yet let up.

As for outspoken T-Mobile chief John Legere, Hottges said he liked people being disruptive and who are brave but his management style would never be adaptable to Germany.

Unfortunately for consumers (and good news for the competition), he admitted that the company’s disruptive Uncarrier approach is not sustainable. You simply have to earn your money back at one point in time, Hottges concluded.

Permalink to story.

https://www.techspot.com/news/59457-t-mobile-uncarrier-strategy-isnt-sustainable-over-long.html

 

[MilwaukeeMike]

Hottges, however, believes the issue lies not in how many major carriers exist but the concentration of wealth and spectrum owned by the two biggest players, AT&T and Verizon.

Well of course he believes that, it's what benefits him. While, it's true that Verizon and ATT are far bigger and richer than Sprint and T-Mobile... how many consumers know or care? From the consumer's point of view there are 4 carriers with national networks and top-tier phones. If two of them merge the choices go down to 3, just because the combination of Sprint/T-Mo would be smaller than either Verizon or ATT doesn't matter.

The counter argument would be though that the choices will go from 4 to 3 soon anyway because Sprint is hanging on by a thread. Perhaps the only way to prevent sprint from going under is to merge. Although I assume they'd bring this up if it were true.

And another thing... why would T-Mo want to merge with Sprint? Sprint is losing money and customers, and their phones don't use SIM cars like T-Mo phones do, so I assume the network isn't compatible either.

 

[RustyTech]

"Unfortunately for consumers (and good news for the competition), he admitted that the company’s disruptive Uncarrier approach is not sustainable. You simply have to earn your money back at one point in time, Hottges concluded."

Fuzzy math: somehow adding dozens of millions of new customers causes a company to...what...lose money? The wireless carrier have been shafting customers for so long, that these same customers feel the world is spinning out of control when they're not.

Congrats everyone, you've been conditioned!!
/s

 

[Guest]

It has nothing to do with people being conditioned. It has to do with T-Mobile offering plans that they aren't making any money on. Offering a product at or near cost is great in the short term as it brings in more customers but over the long haul it simply isn't enough to make a profit to grow your business.

 

[Guest]

So he is saying that even though his company earns money, other companies that exploit customers more than t-mobile and make more money per customer, then take that money and lock smaller players out of bandwidth auctions so they cant offer good service in many areas, effectively killing them (t-mob) someday??

so yay govt monopolies...

 

[NightAngel79]

And another thing... why would T-Mo want to merge with Sprint? Sprint is losing money and customers, and their phones don't use SIM cars like T-Mo phones do, so I assume the network isn't compatible either.

Sprint does use SIM cards on their 4g phones. But no, their networks aren't exactly compatible. Sprint/Verizon use CDMA technology, while AT&T/Tmobile use GSM. Though unlocked and global phones are becoming more prevalent. Newer phones can be unlocked and work on different carriers (though it is still rare)

 

[tipstir]

Verizon and AT&T are the ones that have the best signal range for rural areas. I live where there is no cities around me. So T-Mobile and rest I can't use enough those the HSN package I had with T-Mobile was a good deal but the connections kept on dropping while talking to friends and family. I didn't care for Verizon rates and charges. So I've stuck it out with AT&T and just upgrade my Windows cell phone. Keep it real simple.

 

[drjekelmrhyde]

It has nothing to do with people being conditioned. It has to do with T-Mobile offering plans that they aren't making any money on. Offering a product at or near cost is great in the short term as it brings in more customers but over the long haul it simply isn't enough to make a profit to grow your business.

All of this. I bet by next year investors will be up in arms at T-Mobile's parent company.

 

[davislane1]

Fuzzy math: somehow adding dozens of millions of new customers causes a company to...what...lose money? The wireless carrier have been shafting customers for so long, that these same customers feel the world is spinning out of control when they're not.

Congrats everyone, you've been conditioned!!
/s

Actually, Fuzzy Math, he is absolutely correct. One look at their financial statements tells the story. It's a shame the most recent copy of their 10-K statement wasn't used to further illuminate the nuances of that quote.

The only people suffering from "conditioning" are the ones who think millions of customers = economic viability, as if expenses don't exist.

 

[RustyTech]

Davislane1, you're probably correct.
I didn't account for the inflated overhead the automated computer systems change for processing the newly added customers' calls, texts, data, and monthly billings; because the additional overhead has to come from somewhere, right?

 

[Guest]

Millions of customers that pay monthly fees that actually cover t-mobiles costs for calls, chat, text etc.. But their profit from that business does not make ENOUGH to go up against the likles of AT&T and Verizon who are right now in a bidding war over all that freed up Television spectrum that can blast right through walls and junk and is going to fuel 5g or extraLTE or whatever they call it. And he is saying that his company, nor sprint actually, can compete in these current on-going auction wars because they dont get enough profit per customer to bid against those super-wealthy corps. He did not say he could not meet their current obligations. Just that t-mobile cant afford $40 bagillion for the next gen phone freqencies. and when those hit, his company is gonna get vaporized. Now you can speculate all you want about bottom lines, and profit per customer and expenditures and all that very important stuff, but this article is not about those things.