Bullet Point Analysis: T-Mobile's Un-carrier 5.0 & 6.0

WHAT IS IT?

On the evening of June 18, T-Mobile announced the latest Un-carrier initiatives – 5.0 and 6.0. Beyond these next levels of iteration that address customers’ ‘pain points,’ the network progress story provides the foundation for these and future T-Mobile moves. 

• The T-Mobile Network (specifically its LTE capability) has been expanding aggressive. T-Mobile stated that by the end of June 2014, The LTE network will cover 230 million POPs and by the end of the year, reach 250 million POPs. T-Mobile counts 16 markets with 15 + 15 MHz (AWS) spectrum – T-Mobile’s uses the moniker Wideband LTE for these markets. To take advantage of LTE, Voice over LTE (VoLTE) is in 15 markets (not the all the same markets above) covering 107 million POPs and national coverage by the end of 2014.

• Un-carrier 5.0, known as T-Mobile Test Drive allows consumers to receive (specifically) an Apple iPhone 5s for 7 (marketing tag – 7 Night Stand) days to use for free. After the test period (they return the iPhone to a T-Mobile store). Test Drives are limited to 1 time per year, per credit card, per customer. For business customers, instead of registering online and receiving the phone by mail, these customers will get their (up to 3) iPhone 5s units by a T-Mobile representative. Instead of one week, the business test drive period is two weeks. Both new and existing customers may participate.

• Un-carrier 6.0 is music focused. Coined Music Freedom, Simple Choice customers with 1, 3, and 5 GB allowance plans may stream audio without drawing from their data buckets. The initial ‘over the top’ music brands include Pandora, Rhapsody, iTunes Radio, Slacker, Samsung’s Milk Music, and yet to be launched Beatport. With customer input, additional music services may be added to list.

• Without an Un-carrier designation, T-Mobile partnered with Rhapsody to build an ad-free unlimited streaming music service known as unRadio. For Simple Choice customers get it for free or $4/month for other T-Mobile customers, and open for $5/month for non-T-Mobile customers.

ANALYSIS

• The Network (marketing tag – Data Strong) – It’s well known within the industry that a strong network and public perception is foundational to customer acquisition and retention. Coupled with competitive pricing and a strong device portfolio, customers are unlikely to churn. Both Verizon Wireless and AT&T have strong network perception, partly due to the reach of their lowband spectrum. T-Mobile’s approach is to fully take advantage of its spectrum portfolio piecing together its AWS properties using carrier aggregation and advanced MIMO antennas. In some markets, it has 15 + 15 MHz (FDD) and 20 + 20 MHz (in 90% of the top 25 markets) in others. What this all translates to theoretical ~147 Mbps DL/ 40 Mbps UL. Of course on a loaded network, customers will likely experience less. At the announcement, it reprised its America’s Fastest LTE Network claim. It’s a certainty that this will continue be a central marketing value proposition.
  

Bragging: Legere shared that T-Mobile’s consumers are the industry’s biggest data users with the following stats: T-Mobile users use 69% more data than the Verizon customer, 61% more against Sprint, and 100% more against AT&T. A network engineering person would initially cringe but these consumption stats speaks to how Neville Ray’s (CTO) team work – creating a network to specifically address speed and capacity. From a marketer’s lens, a fast network embraces the explosive trend of data consumption, particularly the growing millennial segment.

• Un-carrier 5.0 addresses two points and cements a partnership. Customer acquisition and dispelling bad network perception is behind the 7 (or 14 day for business customers) Test Drive. The postpaid market is furiously in a switching game as the number of these type of subscribers reaches saturation. Every Un-carrier move is about customer acquisition. 1.0 was about low priced no-contract plan, 2.0 (JUMP) addressed the ability to upgrade a phone, 3.0 paid the termination fees for switching and 4.0 gave 200 MB of LTE tablet data for life. With 5.0, a free ‘try before you buy’ is a huge marketing bet - specifically use iPhone 5s for competitors’ customers to try the network, without obligation. Engaged them daily with giveaways, contests and other promotions. The brilliant part of this is at the end in which the target customer enters a T-Mobile store to engage in a switching dialog. On the business side, it provides a strong lead generation tool for its infant business group. At the end of the two week test period, the business rep has a stronger position to talk about T-Mobile’s network and plans. T-Mobile is projecting over 1 million Test Drives over the next year.

Using an iPhone 5s gives Apple the opportunity to drive additional volume at T-Mobile. While T-Mobile finally got the iPhone in April 2013, it has set publicly that Android devices drove most of its sales. There is synergy here as Apple also benefits with Test Drive as a tool to convert Samsung customers with its halo device. Apple’s skin in the game is that it is providing all the iPhones. The logical psychology is that the target customer will be smitten with the 5s, benefiting T-Mobile’s iPhone volume commitments, helping to increase equipment revenues and fortifying the business relationship for future promotions.

• Un-carrier 6.0 is essentially T-Mobile zero-rating audio data. This is a good gamble as audio data is tiny compared to the popular data hog video. Legere claims that even if a T-Mobile customer exhausts their data bucket, they will continue to listen to audio without penalty. There are two messages here – to millennials (mostly) use streaming music to your heart’s content and a general one, our network can withstand this anticipated music deluge. In addressing net neutrality, T-Mobile states the zero-rating is unilateral and aside from technical integration cooperation, there aren’t any commercial agreements. However, customer voting on which future music services will be included, some may argue an exclusion and favoritism against emerging companies. 

• unRadio provides an alternative to the over the top streaming music services. For its young (and young at heart) subscriber base, it’s a ‘cherry’ on top of the continuing attractive features of being in the T-Mobile community. unRadio features differentiate from other internet music with features including ad-free listening, unlimited skips, customized stations, and a song ID (called TrackMatch) for music discovery. Therefore, unRadio blatantly provides an anti-churn tool for T-Mobile more so than a primary customer acquisition tool. 

COMPETITIVE IMPACT?

History has shown that most Un-carrier moves responsible for T-Mobile’s formidable subscriber growth and met by competitors in some cases.

- Un-carrier 1.0 - Simple Choice
Response: AT&T Mobile Share Value and Verizon More Everything

- Un-carrier 2.0 JUMP
Response: AT&T Next coupled with Mobile Share Value, Sprint Easy Pay, and Verizon EDGE coupled with More Everything

- Un-carrier 3.0 – Free unlimited international texting and data roaming (EDGE), Stateside International Talk & Text $10 Add-on

Response: AT&T Mobile Share & Mobile Share Value plans w/included unlimited stateside international messaging and $5 World Connect Value add-on and Verizon More Everything plans with free unlimited stateside international messaging

- Un-carrier 4.0 – Contract Freedom (Paying ETF &; Value of Phone)
Response: Limited time AT&T promotion, On-going Sprint switching promotion

Of the two announcements, 5.0 is more threatening as it couples a high-end iPhone with a no-obligation try before you buy opportunity. Fence sitters who are drawn to T-Mobile’s low pricing but concerned about network robustness are likely defectors. As Verizon’s and AT&T’s networks are proven robust, T-Mobile’s play will be pushing Test Drive participants towards the speed angle. As all carriers are in the next phase of LTE progress – carrier aggregation (to increase speed), the vulnerability will be customers with older and less capable 3G or LTE handsets and featurephones.