T-Mobile Offers Strong Incentives to Ditch Rivals' Wireless Contracts

By Wayne Rash  |  Posted 2014-01-08

T-Mobile Offers Strong Incentives to Ditch Rivals' Wireless Contracts

At T-Mobile's Jan. 8 press conference, CEO John Legere, best described as moderately profane and unabashedly pugnacious, challenged the other carriers for practices that he condemned as unfriendly to consumers. He heaped particular scorn on Sprint, which he described in words that my editors won’t allow and took on Verizon's family plans.

But first Legere derided AT&T's "bulls*** roaming charges," excoriated Sprint for having LTE speeds so slow they're only half as fast as the next fastest and denounced AT&T for claiming they have the fastest LTE. Legere even said he was going to send a cease-and-desist letter to AT&T demanding they stop advertising that their LTE is faster than T-Mobile's.

But this was just the appetizer. Next he went on the attack. He introduced a new incentive plan designed to cover the complete cost of moving from another carrier to T-Mobile and even sweetened the pot with a small profit for users moving to T-Mobile.

In the process, Legere also proved that I was only half right when I predicted a $350 incentive to people changing lines to T-Mobile. The reality is that T-Mobile, in its Un-Carrier 4.0 plan, will pay that $350 to reimburse early termination fees, plus up to $300 for the value of a phone that customers would otherwise be forced to pay off for leaving their contract early. That means that T-Mobile is offering up to $650 per person to transfer a family or an individual plan to T-Mobile.

After his press conference, during which Legere made so many disparaging comments about rival Sprint that I lost count, he also addressed unceasing talk that Sprint was planning to take over T-Mobile. "T-Mobile, the people, the business, we're here to stay. What we're doing will prevail." The emphatic way he said it made me wonder whether the reality might be just the opposite—that T-Mobile wants to take over Sprint.

Legere even hinted at such a possibility when he referred Sprint as "a pile of spectrum waiting to be turned into a capability."

But what's probably more important is the peek into T-Mobile's next quarterly report, in which Legere said that the company would report a subscriber growth of 1.6 million in the last quarter and 4.4 million net additions in 2013. "We've added more phone customers in 2013 than everybody else combined," Legere said.

It's hard to know for sure why T-Mobile has added so many customers, although there's probably more to it than just a great deal on family plans. Striding the stage with his trademark magenta T-Mobile T-shirt, swigging on a can of Red Bull, his speech laced frequently with S-bombs, it's clear that Legere is aiming at something besides the usual wireless demographic.

T-Mobile Offers Strong Incentives to Ditch Rival's Wireless Contracts

He repeatedly referred to tests reporting that T-Mobile's LTE was faster for Web browsing; that users didn't need to worry about roaming fees when traveling; and that users could have new phones on their schedule, not the phone company's. This was a pitch to Millennials and others in younger free-spending age groups that marketers salivate over.

But Legere also disparaged the major carriers in their corporate soft spots. He ridiculed them for their expensive plans, their limits on choice and their inflexibility. He was, in effect, the un-carrier personified as the counter-culture CEO. He got so worked up in his presentation that a reporter from the Boston Globe asked him, "John, what has happened to you?"

Legere has, it would seem, done what so few CEOs succeed in doing; He has drunk his own Kool-Aid. He has become what he exhorts others to become—a true believer in his own brand.

By doing this, Legere and T-Mobile have become something that no one believed could happen two years ago when the company emerged beaten from a protracted merger mess. The company has become a transformative force in the wireless industry effectively making the much larger players dance to T-Mobile's tune.

And the larger carriers will have no choice. If, as seems likely, wireless customers—especially those lucrative family plan customers—start heading to T-Mobile by the tens of thousands, the die will have been cast. Wireless companies will no longer be able to conduct business as usual. Except for specialized circumstances or for customers with major corporate contracts, it's hard to see how they will fight T-Mobile without offering to reward customer loyalty with significant concessions.

And ultimately, that seemed to be the goal of T-Mobile as Legere sees it. He said that the time will come when T-Mobile isn't the fourth-largest carrier, or the second or the third. Legere made it clear that his goal is the big one—to become the largest carrier in the United States.

While he didn't exactly say how he would pull this off, he did say that it would take time and he plans to achieve that kind of growth. He also didn't say whether T-Mobile was going to take over Sprint on its way to the top. But you could tell he was thinking about it.

Rocket Fuel