Feature Article

May 08, 2013

How Well Will T-Mobile USA Fare?

Eric Costa, Technology Business Research analyst, believes T-Mobile USA will do better, but perhaps not “much better,” now that it has merged with MetroPCS, begun its Long Term Evolution deployment and launched “Simple Choice” plans.

Some others would similarly argue T-Mobile USA's options are much improved, as a result. Others believe T-Mobile USA will fail. Though T-Mobile gains subscriber heft and additional spectrum, it might still lack the critical mass to do battle with the much-larger Verizon Wireless and AT&T operations.

T-Mobile USA can expect to stabilize its revenue in 2014, though growth of the crucial postpaid customer base will be limited. In fact, Costa expects T-Mobile USA will continue to lose postpaid customers throughout 2013.

To be sure, turnarounds take time. In the first quarter of 2013, for example, T-Mobile USA revenue declined 10 percent, year over year, and lost 199,000 net postpaid customers.

But that is an improvement from the rate of losses T-Mobile USA had sustained in prior years.

T-Mobile USA actually added first quarter 2013 customers (including prepaid customers) for the first time since the first quarter of 2009.

Observers familiar with Sprint’s results over the past half decade also will note the similarities. As did Sprint, T-Mobile USA first must halt customer erosion before it can seriously try and take market share away from the other three mobile service providers.

Some will note that, with the MetroPCS merger, which does add helpful spectrum, T-Mobile USA becomes even more dependent on prepaid accounts, though. So, for better or worse, T-Mobile USA will have to try and stake out a role as the nation’s largest “value” provider of mobile service.

Whether that ultimately will prove beneficial is hard to say, right away. Most service providers prefer the higher average revenue per user that postpaid accounts represent, plus the stability of multi-year contracts, rather than the lower ARPU and churn exposure typical of prepaid service.

Sprint’s strategy might hinge on whether SoftBank or Dish Network wins the bidding to buy Sprint. If SoftBank gets Sprint, most observers expect Sprint to launch a “value” assault of its own aimed at destabilizing the U.S. mobile market, presumably using the huge spectrum resources the firm should have at its disposal, assuming Sprint also succeeds in acquiring the rest of Clearwire it does not already own.

That will pose a clear threat to T-Mobile USA, of course. Though T-Mobile USA might prefer to claim the mantle of “value” provider in the market, Sprint will compete directly with that positioning.

Edited by Jamie Epstein

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