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T-Mobile has finally achieved the third-place status that CEO John Legere promised would happen in 2015. The quarterly performance numbers issued by both companies showed that T-Mobile had about 1 million more subscribers in the second quarter of 2015 than the previous No. 3company, Sprint. This means that Sprint now drops to fourth place among national wireless carriers.
T-Mobile has 58.9 million customers, versus Sprint’s 57.7 million customers. In addition, T-Mobile results show the company growing at a faster rate than Sprint, despite Sprint’s recent turnaround in network performance.
But can T-Mobile keep it up? T-Mobile reached the third-place ranking through a combination of lower prices than its competition, more aggressive marketing and a series of service features that made the carrier more attractive to potential users than the other companies.
Those attractive features include allowing music streaming that does not count against data caps, free roaming throughout North America, free data roaming nearly worldwide, and subsidizing the costs of customers from other companies that want to switch to T-Mobile.
But Sprint has taken a “me too” approach to most of T-Mobile’s efforts, offering its own subsidies for switching and providing similar incentives in terms of roaming charges. What Sprint hasn’t had and still doesn’t have is a high-speed data network to challenge T-Mobile.
Sprint, unfortunately, came out on the short end of the 4G wars of a few years ago. Verizon and AT&T both launched LTE networks, while T-Mobile went with HSPA and Sprint went with WiMax.
The difference is that T-Mobile used HSPA as a bridge to LTE, while Sprint stuck with WiMax until it became clear that it was a technological dead-end. Sprint is in the process of shutting down the WiMax network, a task that should be completed by the end of 2015.
For Sprint, this sidetrack into the WiMax wilderness delayed a move to LTE and while Sprint is now well into rebuilding its 4G network, this time as LTE, it’s far behind everyone else.
Even worse for Sprint, the company’s one-time edge as a preferred business carrier was put in peril when the company jettisoned its Nextel service. Nextel was a favorite in some vertical industries such as construction and oil services as well as for emergency first responders because of its push-to-talk two-way radio capability. Now Sprint has replaced that with a service that users have reported as being less responsive.
Meanwhile T-Mobile has broadened its marketing approach by reaching out to business users, especially small- and medium-sized business with what the company calls T-Mobile @Work.
T-Mobile Uses Aggressive Pricing, Free Roaming to Overtake Sprint
While T-Mobile doesn’t offer a two-way radio function, it does offer what is essentially a business version of its personal mobile plans. These plans include the same roaming features, the same free data internationally and the same aggressive pricing on phones and devices.
T-Mobile still doesn’t have the ubiquitous coverage of Verizon, but its LTE coverage is much better than Sprint’s. Because of this, Sprint customers have a realistic upgrade path by going with T-Mobile, which will help keep costs competitive while also offering decent coverage and better pricing internationally compared with Verizon.
Whether Sprint can reverse course quickly and aggressively enough to catch up to T-Mobile remains to be seen. So far, Sprint has seemed to be caught short by T-Mobile’s series of “UnCarrier” moves, which seem to pop out of the Seattle area headquarters relentlessly. Although Sprint seems to be willing to match those moves in some way, usually a few weeks later, the company hasn’t shown any market leadership.
However, T-Mobile can’t price-cut its way to dominance forever, either. So far, much of T-Mobile’s growth has been based on budget pricing as a way to attract consumers. The company has coupled that with features such as free data for music, free roaming for North America and discounts on phones and devices. As T-Mobile continues to grow and challenge larger competitors, they, too can play that game.
But whether Sprint can play the discount game is another matter. The company’s balance sheet shows it has relatively small reserves to use for buying market share. Its purchase by Japan-based Softbank has reduced Sprint’s telecom market flexibility because it now has an owner, Masayoshi Son, who apparently has no grasp of what it takes to compete in the large and diverse U.S. telecom market. Worse, Sprint also has to compete with the top telecom market leaders, which are major players globally.
What this means is that Sprint is probably going to be the No. 4 wireless carrier for a while. There’s every indication that T-Mobile plans to keep on attacking its next largest competitors directly as they continue to try to grow. In fact, in a Tweet issued after announcing quarterly results, T-Mobile’s Legere warned AT&T that they were his next target.
There is another factor that could disrupt T-Mobile’s growth plans. There are persistent rumors that T-Mobile is in talks with Dish Network to merge. On one hand, a merger would give T-Mobile access to vast amounts of wireless spectrum, something T-Mobile needs badly.
On the other hand, depending on how the merged companies are organized, a merger could negatively impact T-Mobile’s agility, which has been a major factor in T-Mobile’s brash and relentless expansion.