Yahoo Finance T-Mobile Banks on Un-Carrier Service amid Stiff Competition - Analyst Blog
On May 15, 2015, we issued an updated research report on T-Mobile US, Inc. TMUS – the fourth largest national telecom carrier in the U.S. in terms of subscriber count.
This Zacks Rank #3 (Hold) company reported mixed financial results in the first quarter of 2015. While the top line surpassed the Zacks Consensus Estimate, net loss was wider than the mark. Meanwhile, for 2015, the company has raised its guidance and now expects branded postpaid net customer additions to range from 3.0–3.5 million.
It is worth noting that despite stiff competition, T-Mobile US’s unique “Un-Carrier” business model has gained commendable popularity. The service offer a series of price concessions like no annual service contract, equipment installment facility, free international data roaming, to name a few, and has effectively enabled the company to gain a large number of customers.
Moreover, in Mar 2015, T-Mobile US unveiled its Un-carrier 9.0 initiative with an aim to revolutionize the business enterprise segment. With this plan, the carrier seeks to provide its customers with transparent pricing options and additional benefits across businesses of all sizes.
On the other hand, to cater to the consumer market, T-Mobile US introduced two new major Un-carrier initiatives – Un-contract and Carrier Freedom. With its Un-contract, T-Mobile US has proclaimed that it will not hike rates offered to customers in the course of its promotions. With Carrier Freedom, the company has offered to pay up to $650 per line for up to 10 lines to cover payments outstanding on devices for customers who switch to its services.
T-Mobile US has also started deploying LTE network on its 700 MHz spectrum holdings to enhance its service quality outside major urban areas. We believe recent license wins in the AWS-3 spectrum auction should further help the company in its plans for network coverage expansion.
Recently, Google officially launched its much-anticipated wireless phone service 'Project Fi' in the U.S. With Project Fi, Google has emerged as a mobile virtual network operator (MVNO) of T-Mobile US. This has opened up a new revenue stream for the company, thus building scope for its top line to move higher in the coming quarters.
However, the U.S. wireless market is highly price sensitive. In the near future, T-Mobile US will likely face cut-throat pricing competition from peers like Verizon Communications VZ, AT&T T and Sprint Corp S.
Moreover, in order to lure customers from competitors, T-Mobile US recently introduced several low-priced service plans for individual consumers as well as small business entities.
However, wireless business thrives on the loyalty of a company’s customer base. Thus, this exposes T-Mobile US to the risk that it might not be able to win adequate new customers to compensate discounted prices. In addition, discounted prices may dent the company’s margins further, going forward.
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