Narrative: T-Mobile is Winning in US Mobile
Each narrative page (like this) has a page describing and evaluating the narrative, followed by all the posts on the site tagged with that narrative. Scroll down beyond the introduction to see the posts.
Sprint and T-Mobile Holding Informal Merger Talks (May 12, 2017)
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AT&T-Straight Path Deal Becomes Verizon-Straight Path Deal (May 11, 2017)
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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.
★ T-Mobile Announces Plans for Rapid Nationwide Rollout of 5G in 600MHz (May 2, 2017)
T-Mobile this morning announced plans to roll out 5G services nationally starting in 2019 on the 600MHz spectrum it acquired in the recent FCC auction. T-Mobile is here taking a different tack from the other US operators and many international operators, which are instead using high-band millimeter wave spectrum to test and eventually roll out 5G. T-Mobile’s approach is very much more incremental in nature, not providing the kind of dramatic speed and latency benefits which have been associated with previous generational shifts in mobile, in contrast to the fiber-replacement services being tested by AT&T and Verizon. On the other hand, T-Mobile will be able to claim that it has widespread 5G coverage long before the other carriers, which will have to roll out the infrastructure-dense high-band version much more slowly. There’s a danger that T-Mobile’s more modest ambitions for 5G set low consumer expectations for the technology and that other carriers will have to work hard to raise those expectations with their own rollouts, and there’s a certain irony to the prospect of T-Mobile building a network with the broadest coverage but lower speeds given its current reputation for providing a fast but not ubiquitous LTE network. Some of the other non-speed-related aspects of 5G will still be realized, which should allow T-Mobile to launch some interesting new IoT services, which will helpful as its growth from phones continues to slow. See also my longer comment for media here.
via T-Mobile
★ AT&T Reports TV and Wireless Subscriber Losses in Q1 2017 (Apr 25, 2017)
AT&T reported Q1 2017 results today, and it looks to have been a grim quarter across its consumer business. It reported net adds of 2.1 million, but in reality saw a drop of 641k subscribers in the quarter due to the disconnection of 2.3 million subscribers as it decommissioned its 2G network and a removal of 400k reseller subs due to an unspecified “true-up” of its reporting. On the TV side, AT&T lost a total of 233k subscribers, a worsening of the past trend, which had been close to zero on a net basis between significant U-verse losses and good DirecTV gains. Those losses mostly came from those customers taking standalone DirecTV service without a bundle, and that’s worrying because although AT&T has been offering wireless-TV bundles since the merger closed, it can’t offer a national broadband-TV bundle, which is the one consumers mostly care about. That, in turn, is going to make it hard to turn that trend around, especially given that AT&T is already offering strong incentives for customers to bundle TV with wireless, including a $25 bill discount for TV and free HBO.
On the wireless side, connected devices (such as connected cars) continue to be the salvation for its overall subscriber numbers, because its postpaid business actually shrank in the quarter for the first time ever (as did Verizon’s), while its reseller numbers dropped like T-Mobile’s (possibly because big MVNO Tracfone disconnected 1.3m subs in the quarter). The re-introduction of unlimited plans was, however, a hit, with around 4.4 million new subscribers since the change, a more than 50% increase in that base. However, AT&T characterized its position now as being more or less the same competitively as at the beginning of the quarter, suggesting it doesn’t see any kind of permanent lift from the change. Financially, things overall were a little better – AT&T has been holding costs down in wireless which has allowed its margins to expand despite revenue challenges, and although equipment revenue is dropping rapidly due to much lower phone upgrade rates, that’s effectively zero-margin revenue anyway.
via AT&T
AT&T Starts Using 5G in Marketing for LTE Services (Apr 25, 2017)
AT&T announced today that it’s bringing what it calls 5G Evolution to over 20 metro areas by the end of the year, starting with Austin. However, as I’ve said before, 5G itself hasn’t been standardized yet, so the best anyone can claim to have today is pre-5G technology. But what’s more worrisome about this AT&T announcement is that it’s actually using that 5G Evolution brand as an umbrella term that includes some technology that has nothing to do with 5G, notably the faster LTE technology in the new Samsung Galaxy S8 and S8+. What we’re starting to see is the same marketing-led muddying of the water over a new wireless generation we saw with 4G a few years back, when Sprint, T-Mobile, and AT&T all used the term 4G to describe non-standard 4G network technologies (WiMAX and HSPA+ specifically). We’ve also already seen the gigabit LTE label thrown around, and though it’s technically accurate in terms of maximum throughput, it’s likely to disappoint consumers who actually use it. While carriers might want to steal a march on competitors, this does nothing for consumers, who will likely require significant education when real 5G does launch without being further confused by labeling non-5G technology with a 5G-related moniker. It also means that when 5G does launch, consumers will wonder what they’ve been using all this time, making it hard to develop strong marketing messages around real 5G. I’m hoping this doesn’t spread, but past experience suggests it will.
via AT&T
★ T-Mobile Releases Q1 2017 Earnings, Improving Margins, Slowing Sub Growth (Apr 24, 2017)
T-Mobile released its Q1 earnings today, and there were quite a few familiar trends: strong revenue growth, improving margins, and lots of talk about how awful TMO’s competitors are. But this quarter also saw a return to the slowing subscriber growth we saw in the first half of last year, which is indicative of T-Mobile’s business today: it’s doing very well within what’s a rapidly slowing market with very little additional headroom. All four of its major customer categories (postpaid, postpaid phones, prepaid, and wholesale) saw lower net adds year on year. In the case of both prepaid and wholesale, the decline was signifiant, and wholesale net adds were negative for the first time in recent memory. T-Mobile said it did very well against AT&T in the quarter, which means for AT&T itself to have done well overall it will have had to hold its own much better against Sprint (which hasn’t yet reported) and Verizon (which has, and had a horrible quarter). T-Mobile continues to invest very heavily not just in spectrum but also in store expansion – it’s now targeting 3000 new stores this year, split evenly across its T-Mobile and MetroPCS brands, up from 2500 at the start of the year. So far, the strategy continues to work reasonably well, but there’s a ceiling on growth in the categories T-Mobile targets, especially with Verizon and AT&T getting back into unlimited, so I’m curious to see how much growth slows in 2017, though it appears margins are going to continue to improve anyway (though they’re still way below those of the two big carriers).
via T-Mobile (PDF)
★ Verizon Reports Poor Q1 2017 Results, Offset a Little by Unlimited Reintroduction (Apr 20, 2017)
Verizon today announced its Q1 2017 results, and they completely explained the company’s unexpected and rapid reintroduction of unlimited wireless plans in the quarter. Before it reintroduced those plans, it was on a trajectory for by far the worst postpaid phone losses it’s ever seen, and even with the little bit of growth it saw after the launch, it still had its worst quarter ever by some margin. Tablets also shrank for the first time ever, which in turn led to the company’s first-ever postpaid net losses in a quarter. Churn was up, average revenue per account was down… this was a terrible quarter for Verizon, only salvaged partly by the unlimited launch. Q2 and the rest of the year should be quite a bit better, but it’s clear that Verizon has been suffering recently, most likely at the hands of both T-Mobile and Sprint, which has explicitly targeted it in its advertising. Outside the wireless business, things weren’t that much better – wireline revenues were fairly flat, while margins improved a little. But there’s really no growth driver in the business at the moment, as essentially every part of the business is flat or declining, though the whole thing is still highly profitable.
via Verizon
Verizon CEO Indicates It’s Open to Mergers with Several Players (Apr 19, 2017)
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T-Mobile, DISH and Comcast Among Big Winners in FCC Spectrum Auction (Apr 13, 2017)
The FCC recently held an auction of spectrum to be freed up by broadcasters and made available for wireless services, in the 600MHz band, which is well suited to long-distance and in-building coverage. T-Mobile was the only wireless carrier among the big winners, with the two largest carriers having cleaned up in the previous auction, and a cash-constrained Sprint sitting this one out too (AT&T did win licenses worth $900 million, but T-Mobile spent $8 billion). The other big bidders were DISH, which spent nearly as much as T-Mobile ($6.2 billion), and Comcast, which recently announced its wireless service based on Verizon’s network but could eventually launch its own network. Though T-Mobile has always crowed about how much spectrum it has per customer, that was always more of a reflection of its smaller number of customers rather than a massive spectrum trove, and it lacked low-band spectrum. It has now made big strides in solving that problem, and plans to put at least some of that spectrum to work right away (though much of it will be unavailable for several years while the broadcasters go through the process of vacating it, with much of that unavailable spectrum covering the densest markets). It’s also worth noting that no phones in the US today support the 600MHz band – that support is likely to come early next year with a new Qualcomm modem, so even if T-Mobile does put a third or so of its new spectrum to work this year, it won’t do anyone any good until then. So, if you’re a US wireless customer today, none of this makes any difference for now, and it’ll only make much of a difference a year or several down the line if you’re a T-Mobile customer (or in limited cases an AT&T customer). Or as and when Comcast and DISH decide to put that spectrum to use.