T-Mobile Continues to Roll Through 2017

First to report of the major US carriers, T-Mobile looks to remain ahead of the pack on phone net adds both this quarter and for the rest of the year.  A few years ago, TMO was a fledgling carrier in no-man’s land.  The company was behind both Verizon & AT&T rolling out LTE.  They were not a budget alternative, either.   So, they were losing both high-end, prime subs and low-end subs to upstart, unlimited prepaid alternatives.  However, over the past 18 quarters the company has dominated the competition under challenging market conditions.  Here are a few reason for the continuation of the turn-around:

T-Mobile’s series of ‘un-carrier’ initiatives has something for everyone whether it is a premium sub wishing to upgrade every year, a low-end user on a strict budget, or a power user who is a heavy video and/or music streamer.  Most recently, TMO has made gains within business subscribers.  And, this is not surprising as the company has densified its national network and has arguably the best international usage terms.  T-Mobile has brilliantly navigated the MetroPCS merger gaining millions of prepaid customers and limited buying down from higher ARPU, Magenta postpaid plans.

The company announced it is aggressively enhancing purely digital (online) sales.  This is an effective way of saving money by cutting out the middleman (namely national retailers & dealers) and bringing simpler online experiences to the purchase of cellular service.  Ironically, the carrier is also the most aggressive in opening new stores.  The company is well on-track to open 3,000 stores this year—many in regions TMO has never had a presence.  If online takes off or offline remains the normal buying pattern, TMO is well positioned.

Once its Achilles heel, the company has made some legitimate network gains.  The company is lighting up 600MHz spectrum in August.  This spectrum can be used for GB LTE and 5G upgrades as it is opportune for long-range, mobile broadband coverage.  The company can also use the spectrum for rolling out wide-area IoT applications.  T-Mobile is also doing the required blocking and tackling of accompanying technologies to enhance the major metro areas.  The company is using small cells (1k in Los Angeles alone), also has over 13k DAS (distributed antenna system) nodes, and will have MM wave spectrum in major metros.  TMO is also exploring 5GHz on unlicensed LTE and LAA.  A carrier will always take more spectrum, but TMO is in a vastly better position today than the pre-Legere days.

Today, VoLTE comprises 72% of all voice calls, allowing the company to free up 2G and 3G spectrum and transition it to LTE.  TMO brags it is the only carrier to have rolled out carrier aggregation and GB LTE (4×4 MIMO, 256QAM).

On devices, the company is well served.  LG & Samsung will be rolling out 600MHz devices to take advantage of new spectrum purchases.  Multiple, new OEMs will be launching GB LTE devices 2H17 and T-Mobile will be aggressively selling them into the base.  Since the company has a very diverse set of subs, handset volumes are much better distributed in both postpaid & prepaid.  So, second tier vendors are usually better rewarded within MetroPCS & T-Mobile Magenta channels than other carriers who are much more dependent on Apple-Samsung.

TMO subs have been upgrading at a higher rate than the other carriers.  In Q2, 7% of its base upgraded—over 2m subs.  The company sold 8.3m phones, virtually all smartphones.  TMO also added ~300k connected devices, mainly tablets.  Due to its lowering churn and high % of overall net adds, TMO has been selling as many phones as the much larger Verizon, which further helps handset suppliers.

For further sell through details and the rest of Q2 US results, see our full coverage at counterpointresearch.com.