Company / division: T-Mobile
T-Mobile today announced its latest “Un-Carrier” move today, in one of its simplest and certainly its shortest announcement so far: it’s offering free Netflix subscriptions to subscribers to its family plans. Specifically, the offer is available to subscribers who have at least two paid voice lines on the T-Mobile One plan introduced in August last year. That’s now the standard plan for new customers, but many existing customers will be on older family plans and will need to switch to those plans, which may cost more than those offered previously. Typically, two paid lines will be $120 per month with taxes and fees included, so the annual benefit of this offer is equivalent in value to a month’s wireless service. T-Mobile has just over 12 million postpaid accounts at the moment, with an average of just under 3 lines per account, so that gives some sense of the addressable market here, although many would need to switch to T-Mobile ONE to qualify. For Netflix, the upside is smallish – a few million potential new customers over the next few years – but low risk, with these subscribers likely having lower churn.
Certainly not all of those lines would qualify today, but assume that a quarter of those accounts eventually take the Netflix offer, and it ends up being about $90 million per quarter at the full $10 price, which I’m guessing Netflix isn’t paying. More realistically, at 80% of the full retail price, the cost to T-Mobile would be closer to $70 million on a revenue base of roughly $10 billion in revenue per quarter, so the cost is likely to be far from material for the company. Conversely, the Netflix offer will likely increase loyalty and therefore reduce churn and the costs associated with it, and drive more people to the T-Mobile ONE plans and thereby increase ARPU in at least some cases, so T-Mobile will not unreasonably be hoping the net effect on margins is positive.
This move is just the latest in a long string of Un-Carrier moves from T-Mobile, the vast majority of which have been fundamentally about the price or cost of service, either discounting services or throwing in freebies, while dressing the moves up as being something more. That’s clearly worked for T-Mobile, as it’s been by far the fastest growing postpaid phone operator in the US over the last several years, and this move is likely to provide a further little boost, though not a massive one. And of course it’s worth noting that AT&T has been offering free HBO to some of its unlimited subscribers for a while too, so T-Mobile certainly isn’t the first to offer a bundle, but Netflix has broader appeal in the US than HBO and the requirements to qualify are less stringent on the T-Mobile plan.
Sprint and T-Mobile Holding Informal Merger Talks (May 12, 2017)
New Narrative: T-Mobile is Winning in US Mobile (May 6, 2017)
When I launched this site fully earlier this year, there were 49 “narratives” reflecting many of the prevailing narratives about various aspects of the tech industry, which provide context for the individual items on the site each day. Today, I’m adding the first new narrative since launch, and the narrative is titled “T-Mobile is Winning in US Mobile“. Now, it’s worth noting as a reminder that the narrative titles don’t reflect my views, but rather the prevailing narratives in the industry, whether right or wrong. Subscribers can read the new narrative essay on this topic and my evaluation of the prevailing narrative on the narrative page linked above. I’ve also gone back and tagged 26 earlier news items with this new tag so that there’s a history there now, including several posts from the last couple of weeks, with many of the older posts available to non-subscribers as well. As with each of the other narratives, there’s also a forum topic for anyone who’d like to discuss the narrative and the essay, available to subscribers here. Lastly, this narrative also forms the subject of this week’s Narrative Video, which subscribers can also see on the narrative page.