The T-Mobile US is part of an elite club of telecom operators that have been able to thrive despite being late to their markets. I know very few telecom operators that have managed to do well despite not being an incumbent. SoftBank of Japan and Free Mobile of France are two other examples. A key reason for T-Mobile’s success has been John Legere and his marketing. There are very few CEOs who have made use of Twitter as well as John Legere has. What really made me appreciate T-Mobile was the way they unveiled Uncarrier 12. Before I get into that, a little background about what Uncarrier is. Uncarrier is basically what John Legere has termed as T-Mobile’s way of fixing the wireless industry. Every uncarrier announcement tries to resolve a particular pain point for the wireless industry. Every move brings something special with it. Some uncarrier moves are more popular than others, but they are always greeted with a lot of fanfare. Uncarrier 12 was T-Mobile’s latest move. It’s a great way by which T-Mobile had increased its ARPU while making it as less obvious as possible. Before I explain how Uncarrier 12 increased T-Mobile’s ARPU, it’s necessary to review the offerings of T-Mobile before Uncarrier 12 was unveiled.
Binge ON and Music Freedom
Music Freedom was something that T-Mobile unveiled in June 2014, while Binge ON was unveiled in November 2015. Both of these were launched before Uncarrier 12, which was unveiled in August 2016. Music Freedom is a T-Mobile program that lets any T-Mobile customer on a Simple Choice plan to stream music from a host of music streaming services without counting against their 4G data allocation. Not every music streaming service is enrolled by default on Music Freedom, but the catalog of streaming services is pretty vast with even Saavn making it to the list. Net Neutrality backers had said that Music Freedom violated Net Neutrality rules but T-Mobile defended itself by saying that any music streaming service that was interested in being part of Music Freedom could apply and be a part of it. In simple terms, Binge ON is basically same as Music Freedom, but for videos. In the case of Binge ON, video streaming services that are part of Binge ON are zero-rated and the resolution of the video stream is reduced to 480p. Just like Music Freedom, T-Mobile got a lot of heat for Binge ON from net neutrality backers. T-Mobile gave the same explanation that any interested party could be a part of Binge ON by meeting some technical standards and enabling customers to turn it off and on. Initially, Youtube wasn’t a part of Binge ON but considering that Youtube primarily monetizes through ads and that the ad revenue depends on volume, it made financial sense for Youtube also to jump on the Binge ON bandwagon and it did. While Binge On is pretty much Music Freedom for videos, a key difference between both is that while Music Freedom is available for every single Simple Choice plan, Binge ON is available only for Simple Choice plans that are 3GB and above. Once you combine Binge ON and Music Freedom, then you already have an unlimited data plan at your hands. The biggest data consumers are video and music consumers. Apart from video and music, other forms of content such as text, pdf, gifs, images etc consume negligible data. So once you have T-Mobile’s 2GB data plan, which is priced $50/month/line you are already on an unlimited data plan. Initially, many had feared that providing video even at scaled down resolutions like 480p would make T-Mobile’s network crash, but T-Mobile’s dense network and extensive ethernet backhaul made it easier to deal with the video traffic. Binge ON didn’t have any adverse effect on T-Mobile’s network performance. Binge ON combined with Music Freedom had already made data plans 2GB and above unlimited data plans.
Uncarrier 12
Just nine months after announcing Binge ON, T-Mobile announced Uncarrier 12. It has made great strides as T-Mobile proposed to do away with data caps and have unlimited data. There is just one plan called T-Mobile One which starts at $70/month/line with autopay. T-Mobile once again took a jab at competition saying that tiered data plans aren’t good for consumers and that unlimited data plans should be the new normal. T-Mobile said that it had reduced its pricing as previously unlimited plans were $95/month/line and now priced at $70/month/line. But the reality was that T-Mobile had actually increased the pricing of its plans by $30/month/line Although T-Mobile One is unlimited, it had the same restriction as that of Binge ON whereby video would be reduced to 480p. When Binge ON and Music Freedom are combined, then even the $40/month/line 3GB Simple Choice Postpaid plan becomes unlimited because the end user only has GIFs, images and text deducted from his 3GB bucket and content that’s not part of Binge ON and Music Freedom, but honestly all popular audio and video streaming services are already part of Binge ON**. Also of note here is that with T-Mobile One, the company will soon completely do away with plans that are priced below $70. Not only T-Mobile is charging more for the same old plans ($40/month/line Simple Choice was already unlimited) under Uncarrier 12 but is also able to increase the entry point by $20 ($50/month/2GB plan was removed***). All these price hikes were masked by saying that T-Mobile was providing unlimited, but in reality, it had been providing unlimited at a lower cost for quite some time now. This is where the marketing genius of T-Mobile comes into play. Had it been some other telecom operator like Verizon or AT&T, then people would have easily detected the price hikes, but the way T-Mobile kept trumpeting its unlimited plan made everyone ignore the price hike that had quietly occurred behind the scene.
The company’s original messaging with T-Mobile One was simplicity. Just one unlimited plan at $70/month/line. But even this was not correct. The old unlimited plan of T-Mobile at $95/month/line provided unlimited LTE with the option to turn off Binge ON and watch videos at any resolution. With T-Mobile One, if you want to watch HD videos, then you need to subscribe to T-Mobile One Plus that costs $95/month/line as compared to the old plan of $95/month/line. Also, T-Mobile announced daily passes in case you want to watch HD video for just one day at $3/day. So what originally billed as just one plan became three plans. T-Mobile One, T-Mobile One Plus and the daily passes. The Simple Choice plans that T-Mobile One replaced also had three plans. It’s like T-Mobile One replaced the entry level Simple Choice Plan. T-Mobile One and daily pass combined replaced the mid-level and high-level Simple Choice plans, and T-Mobile One Plus replaced the actual unlimited data plan. Technically speaking, the number of plans still remain more or less the same, but all under the disguise of unlimited. Some have argued that if a family of four people was on the 10GB Simple Choice Postpaid plan, then T-Mobile One turns out to be cheap, but as I said that with Binge ON and Music Freedom combined, the starting 2GB plan itself would have started acting as an unlimited plan for most people.
iPhone 7 pre-order figures
For this particular year, Apple didn’t give out weekend sale numbers for iPhones. This gave T-Mobile yet another opportunity to capitalize on the hunger for iPhone sale numbers especially considering Apple’s recent slump in iPhone numbers for the past few quarters. T-Mobile just vaguely said that pre-order numbers were 4 times that of iPhone 6. It’s amazing that T-Mobile didn’t give a multiple for iPhone 6S and rather decided to give a multiple for a two-year-old phone, I’m guessing it’s probably because the multiple doesn’t sound as good when 6S and 7 sales are compared. It’s important to remember that multiples are relative to the size of the sample in consideration. While T-Mobile’s 4 sounds like a brilliant multiple, T-Mobile also has one of the smallest iPhone bases in the entire US wireless industry. T-Mobile didn’t start selling iPhones until the iPhone 5S. Initially, T-Mobile had pre-orders of around 20k units/day for 25 days. Even if you assume some of the highest possible multiples, then also iPhone 7 pre-orders on T-Mobile are just a couple of hundred thousand units/day. I know a couple of hundred thousand sound like a lot, but they end up being a drop in the bucket considering the millions of iPhones Apple sells during the holiday quarter. I’ve seen people making references to T-Mobile and Sprint’s announcement of growth in iPhone 7 pre-orders to signify that demand for iPhone 7 is high, but I feel that’s inaccurate. It’s necessary to remember here that T-Mobile and Sprint are only part of Apple’s distribution channels and aren’t even a major one at that. The picture painted by both carriers for iPhone 7 pre-orders is no way indicative of the actual iPhone 7 sales. China is now an important market for Apple and China Mobile alone has 800 million subscribers, 8 times that of T-Mobile and Sprint combined. If China Mobile posts even single digit drop in iPhone 7 pre-orders or sales, then all the gains of T-Mobile and Sprint will be wiped away.
Conclusion
John Legere is great at making people believe what he wants them to believe on Twitter. But it’s necessary to read between the lines. T-Mobile One and iPhone 7 pre-orders are just two examples of T-Mobile’s (and especially John Legere’s) marketing skills. There have been several instances where T-Mobile has absolutely done an excellent work of hiding the fine print through magnanimous marketing. It may sound as though I am criticizing T-Mobile, but with almost all Uncarrier moves, the carrier has managed to either improve its ARPU or customer retention yet face as less heat for it as possible. This incredible marketing quality of T-Mobile makes me a real fan of the company and its rockstar CEO. Although I’ve placed extreme emphasis on marketing, it’s important to mention that marketing alone isn’t responsible for T-Mobile’s success in the US. T-Mobile has one of the best network teams in the US and their network has constantly improved over the years. Apart from a great network, T-Mobile’s management teams have also been pretty great all along, which has been evident in the way with which they have grown subscriber base, revenue, ARPU as well profit for the past three years. All in all, T-Mobile is a solid company but when it comes to marketing, there’s simply no beating them. Foot Notes: **T-Mobile clarifies that texts aren’t counted against data anyway (d’uh) and argues that Facebook, Twitter, Snapchat, the other 30% of video not white listed. Fair enough, but these aren’t high bandwidth content anyway. ***T-Mobile clarifies that it’s not mentioned on web anymore, but still available in stores/via customer care.
