T-Mobile Posts 'Outstanding' Q2, Still More Un-Carrier Moves to Come

T-Mobile added 1.1 million customers, sold 4.3 million smartphones and led the industry in branded postpaid adds. And still there are areas left to "attack."

T-Mobile may be the nation's fourth-largest carrier, but during the second quarter of 2013, it led the wireless industry in branded postpaid customer additions, it announced Aug. 8.

This is what a comeback looks like.

T-Mobile had been hemorrhaging subscribers for years. It had no iPhone to sell, no Long Term Evolution (LTE) network to flaunt and it wasted a year—a hugely dynamic one in the industry—in a static limbo, as AT&T fought to be able to acquire it.

AT&T backed away from the deal during the 2011 Thanksgiving weekend, and T-Mobile later announced 2011 fourth-quarter losses of 800,000 customers and service revenue down 2.7 percent.

Then a few things happened.

T-Mobile received a windfall breakup fee from AT&T for failing to get the deal approved and broke ground on an LTE network. John Legere, a self-proclaimed industry-outsider, was appointed CEO. T-Mobile announced that it was dropping the two-year-contract business model and offering monthly device financing. It worked out a deal with Apple to offer the iPhone and got behind a handful of other hot devices at launch, including the Samsung Galaxy S 4 and the HTC One. It bought prepaid network MetroPCS and a chunk of spectrum and customers from U.S. Cellular. And then it introduced Jump—a program that lets users upgrade their phones every six months, instead of the industry-standard two years.

During its second quarter, T-Mobile added 685,000 branded postpaid phone net additions—more than any of its competitors—which contributed to a total 1.1 million new customers.

Its LTE network, well ahead of schedule, is now live in 116 metro areas, covering 157 million people, and it sold 4.3 million smartphones—an increase of 71 percent from a year ago and even nearly 60 percent from the quarter before.

"We clearly had an outstanding second quarter," Legere said, opening up the earnings call.

Smartphones accounted for 86 percent of T-Mobile's total units sold. It sold 600,000 Galaxy S 4 smartphones and more than 2 million iPhones. The vast majority of those iPhones, however, went to upgrading customers, not new customers.

"Unfortunately for our competitors," said Legere, "pent-up desire for the iPhone is not an explanation of the phenomenon we're explaining here for Q2."

"The month of the iPhone launch was a great month, but May and June were even better," Chief Marketing Officer Michael Sievert added. "What we have here is a reassessment of our brand ... and that more than anything else is what's driving our new momentum."

Legere reiterated much of what he said during the July 10 event to introduce Jump: That T-Mobile has unleashed Uncarrier 1.0 and 2.0, and version 3.0 is coming soon. ("Fall," it said at the event.)

Regarding 3.0, Legere promised, "You can trust it's going to do two things: solve another pain point [for customers] and unveil another competitor weakness."

He added, seemingly for the sake of investors, "We will continue to be disruptive but will do so smartly and profitably."

T-Mobile Has No Interest in Leap—Just Its Customers

While back in December, offering the first hints of T-Mobile's Un-carrier strategy, Legere doubted whether the larger carriers would care to or be able to respond to T-Mobile's offers of monthly device financing or doing away with two-year contracts. That's no longer the case.

"They may not want to admit it, but they're in full fight-back mode," Legere said during the August call.