T-Mobile's Resolution List Backs Rumors of Undoing Termination Fees

 
 
By Michelle Maisto  |  Posted 2014-01-02 Email Print this article Print
 
 
 
 
 
 
 

T-Mobile intends to address more customer pain points in 2014. On Jan. 8, it's expected to announce it will pay off rivals' early termination fees for switchers.

T-Mobile's resolutions for 2014 can be summed up as "transform the wireless industry" and include "continue to remove customer pain points," according to an image Tweeted by CEO John Legere New Year's Day.

The image shows side-by-side resolution lists for 2013 and 2014. On the 2013 list, titled, "Shake Up the Wireless Industry," all five items—ending two-year service contracts, making it easier to upgrade, removing roaming data fees, giving away free data on tablets and delivering nationwide Long Term Evolution (LTE) capability—have been checked off with a hot-pink highlighter (a nod to T-Mobile's trademark magenta).

On the 2014 side, the last of five items—"Give AT&T a break … or not," is being written out.

In addition to addressing pain points, the other items on the list are: "4G LTE—go faster, go LOUD," which is likely a reference to the HD Voice technology it has begun to roll out; "unshackle the family from those other guys;" and "make waves at CES 2014."

T-Mobile will clearly begin crossing items off its list at the Jan. 8 press event it has planned at the Consumer Electronics Show (CES) in Las Vegas. The magenta invitation features a giant 4.0, signaling the fourth phase of T-Mobile's "un-carrier" strategy, and says only, "This one you aren't gonna believe."

Several sources have reported that the next "pain point" T-Mobile plans to address is early termination fees (ETFs).

Code-named Houdini, it's said the plan is to unshackle subscribers—ideally whole families—from the contracts of T-Mobile's competitors.

On T-Mo News Dec. 20, Cam Bunton posted an anonymous note he'd received from a tipster, who told him: "[Houdini] will give switchers up to $350 in credit when they switch to TMO. … Emphasis will be on families switching up to 5 lines regardless of contract end dates. …

"New customers will receive instant credit when they trade in a smartphone, then get a credit for the ETF charged by their old carrier when they submit the final bill to TMO."

Jefferies analyst Mike McCormack told investors in a research note a few days later that such a plan would put serious pressure on industry margins.

"We believe that T-Mobile could be opening a Pandora's box, leading to intensified competition from larger peers that have better scale and higher profitability," McCormack wrote, according to a Dec. 27 report from Investors Business Daily.

Also commenting on the rumor, Moffett Nathanson analyst Craig Moffet wrote that whether T-Mobile is really planning to buy out ETFs remains to be seen.

"If they are, AT&T in particular will face higher churn (a plan to buy out ETFs would be most appealing to families with compatible devices, which in T-Mobile's case means GSM-network-based AT&T), but all carriers would suffer in response and would potentially need to respond, triggering lower ARPU (average monthly revenue per user) and lower margins for everyone," wrote Moffett.

Forcing the Industry to Follow

In 2013, as its completed resolution list makes clear, T-Mobile did plenty to shake up the industry—and force its peers to change along with it.

After T-Mobile did away with two-year contracts, separated data plans from device pricing and offered monthly device financing, AT&T, Verizon Wireless and Sprint each offered monthly device financing, as well. And after T-Mobile made it possible to upgrade a device more frequently than the industry standard of every two years, the three leading carriers each offered their own version of the offer.

Legere, in his Tweet, made clear he's ready to keep barreling forward. "Let the transformation begin!" he wrote.

Follow Michelle Maisto on Twitter.

 
 
 
 
 
 
 
 
 
 
 

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