Although Apple’s 40th anniversary got all the attention last week, T-Mobile’s Uncarrier strategy also celebrated a birthday last week – its third. As such, it seems like a good time to evaluate the impact of that strategy on both the company and the US wireless market. The first Uncarrier move was ending contracts for its postpaid customers three years ago. That move has been followed by many more, some of them significant, some less so, and the company shows no sign of stopping. Several of these moves have triggered significant changes across the US wireless industry, while others have barely made a dent. But there are also signs momentum is slowing for T-Mobile and that raises questions about the sustainability of its strategy.
The biggest moves – ending contracts and subsidies
Easily the biggest and most far-reaching move T-Mobile has made was its first – ending the classic two year contract and with it, the subsidy model. That change has been embraced by all the other major US carriers and has spurred further innovation, including the smartphone leasing plans introduced by Sprint. Each carrier has had its own take on the installment plan and leasing models but each of them now offers these models as their main or only option for buying smartphones and that’s entirely down to T-Mobile. Essentially, T-Mobile gave the other carriers the opening they needed to move away from a model they had mostly come to dislike and demonstrated that freeing people up from two year contracts wouldn’t dramatically increase churn.
As a result of these moves, the way people buy smartphones in the US has changed completely, as has the way they evaluate the costs of owning a smartphone. T-Mobile’s subsequent introduction of its JUMP early upgrade program also introduced more flexibility in how often people can upgrade, which a small minority of users now do much more frequently. At the same time, the way these plans have been introduced by other carriers have actually slowed down the upgrade cycle – something I’ve discussed previously.
The other big moves have been those which zero-rated certain types of traffic, notably music with Music Freedom and more recently video with BingeOn. Music Freedom, arguably, didn’t make that much difference to the average customer’s bill, but the perception was what mattered and that made it a success. It also laid the groundwork for the BingeOn move that came later, as T-Mobile experimented with the concept of zero-rating whole categories of content. Both initiatives came with their share of controversy, BingeOn arguably more justifiably, and it led to one of the big missteps of the Uncarrier era at T-Mobile. It was uncharacteristically opaque and consumer unfriendly but T-Mobile fortunately corrected it fairly quickly.
Other moves have been less transformative, for T-Mobile and the industry
However, many of T-Mobile’s other moves – free international calling and roaming, its various customer rights and contracts initiatives, and so on – have been less transformative, both for T-Mobile itself and for the industry. While there has been some imitation here and there from the other carriers, these moves haven’t been emulated nearly as broadly and the impact on the market has been far less meaningful. Of the sum total of around a dozen Uncarrier moves, only about four have been truly impactful.
Great dividends for T-Mobile
Aside from the impact on the industry, T-Mobile has itself benefited greatly from its Uncarrier strategy, especially in terms of growth. T-Mobile had lost its way before John Legere took over and was losing subscribers but, after the Uncarrier strategy was implemented, subscriber growth took off:
That growth far outpaced a US wireless industry which has very much entered its mature phase over the last few years and it’s the single biggest outcome of T-Mobile’s Uncarrier strategy. It’s a tremendous achievement, no less so because the growth has come almost entirely from postpaid phones, a category that has grown only modestly overall.
Signs of slowing momentum
I deliberately left the last year out of that chart, because the story starts being a lot less straightforward about a year ago. Here’s that same chart extended to include 2015:
Things haven’t exactly fallen off a cliff during the last year but the rate of growth has first stalled and then begun to slow during that period. The main reason is that T-Mobile has been adding fewer of those postpaid phone customers over that timeframe, as its more recent Uncarrier moves fail to have the same dramatic impact as earlier ones. For each of the last two quarters, phone net adds were lower than a year before. The highest net adds over the past two years were in Q1 2014, two years ago this quarter. T-Mobile hasn’t had over one million postpaid phone net adds in a year and it will be interesting to watch what happens this quarter:
With Uncarrier turning three, the big question is whether there are really more Uncarrier moves which can jumpstart the growth again or whether T-Mobile’s growth rate is destined to continue to slow down. It’s arguable that T-Mobile has, at this point, pulled the main triggers available to it from a competitive perspective. The other carriers have responded to some of its biggest moves in kind and to others in ways that neutralized T-Mobile’s advantage to some extent. AT&T has been the most vulnerable of the big four carriers to postpaid phone losses but even there they’re limited to a few hundred thousand a quarter. There simply isn’t that much growth left in postpaid phones and the remaining subscribers are going to be harder and harder to peel off. Meanwhile, T-Mobile’s largest competitors have refocused on other device and subscriber categories where there’s more growth, including tablets, connected cars, and machine-to-machine endpoints. It’s been a great three year run, but I’d be surprised if the next three years go as well as the last three.