T-Mobile might take aim at termination fees, pressure AT&T/Verizon's margins


Jefferies' Mike McCormack notes multiple Web sources indicate T-Mobile USA's (TMUS +1.2%) Jan. 8 "Un-Carrier 4.0" event will involve the launch of a promotion in which the carrier will offer to pay off the early termination fees of consumers switching from rivals and trading in their old phones.

One report states T-Mobile will offer up to $350 in credit to smartphones users, and $200 in credit to feature phone users.

McCormack worries T-Mobile is "opening a Pandora's box, leading to intensified competition from larger peers that have better scale and higher profitability." That's a reference to AT&T (T +0.1%) and Verizon (VZ), and perhaps to a lesser extent Sprint (S +8.3%).

In addition to potentially increasing churn at rival carriers and compelling them to respond with similar promotions, T-Mobile's move could lead rivals to offer early subsidies in an effort to keep customers in the middle of contracts from switching. AT&T and Verizon have been trying hard to reduce subsidy expenses via service plan and policy changes.

Over the last 10 months, T-Mobile has already eliminated contracts/subsidies in favor of phone installment plans, rolled out a smartphone upgrade program (leading peers to do the same), and launched cheap data roaming and international calling services.

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Comments (14)
  • mkemac
    , contributor
    Comments (1549) | Send Message
     
    Go TMO. DONT SELLOUT TO SPRINT. TMO IS VERY VALUABLE-- $38-42 A SHARE EZ.
    27 Dec 2013, 04:47 PM Reply Like
  • 1880gh
    , contributor
    Comments (94) | Send Message
     
    Great idea !will move Ina NY minutes mike
    27 Dec 2013, 05:19 PM Reply Like
  • Randal James
    , contributor
    Comments (4415) | Send Message
     
    The coolest part is there is much more rivalry between VZ and AT&T, so they would spend lots of dollars stealing and re-stealing each other's customers. T-Mobile might actually get people who stay because they like the underdog element and understand this is a work-in-progress. T-M may also understand that there are many customers unhappy with their devices - maybe they got the new Apple and are unimpressed or want the new Apple and still have to wait a year. If TMUS wanted to shake things up, they are doing a good job!.
    27 Dec 2013, 06:51 PM Reply Like
  • AggGrow
    , contributor
    Comments (210) | Send Message
     
    McCormack may have concerns, but to the well-capitalized first mover, that is the only way to seize opportunity and advantage.
    27 Dec 2013, 07:15 PM Reply Like
  • Deja Vu
    , contributor
    Comments (1805) | Send Message
     
    Great publicity stunt! Tmobile knows that absolutely no one who has been on a carrier other than Tmobile will ever switch to Tmobile so this stunt will cost nothing and get a great deal of publicity. BTW, if you ever don't have a map of the interstate system in the US, a Tmobile coverage map is exactly the same.
    28 Dec 2013, 02:23 PM Reply Like
  • SoIncrediblyBored
    , contributor
    Comments (39) | Send Message
     
    Here in North New Jersey and in NYC, Sprint has absolutely atrocious service. My Neighbors and co-workers with T-mobile, on the other hand, have immaculate coverage.
    30 Dec 2013, 10:26 AM Reply Like
  • Jbgoose
    , contributor
    Comments (3083) | Send Message
     
    S uses VZ backbone if this is true, and others where applicable. You can send them the note about the dead zone. I did, two years later .... they sent me a text (Verizon did) that the tower had been replaced, and our service is far better, now. They are also now re-wiring the whole zone as it has caught fire multiple times. Neighbors finally got together, took pictures of the flares with our kids playing under dripping rubber lines, sent them to our commissioners who then had ammo - They worked directly with the community liaison for Telco's and cable co's. Its arduous and painful, but does eventually get done.
    30 Dec 2013, 11:15 AM Reply Like
  • Randal James
    , contributor
    Comments (4415) | Send Message
     
    JB

     

    I may be a bit technically dense, but you are referring to VZ's hardware system for landlines ("dripping rubber lines") rather than the ubiquitous cell towers. Or so it seems. I was a Sprint customer in Westchester and the local consumer surveys placed it at the bottom of the major services because they had not invested in enough wireless tower transmission sites. If I was on a Sprint call, the best thing to do was to stay put - at least I could complete the call where I was. When I switched to ATT there was one stretch of highway with a 2 mile dead spot and that was about it. Not, of course, that I ever talked on the phone while in a car... Surprisingly, service outside of NY metro and away from cities is poor.
    30 Dec 2013, 11:35 AM Reply Like
  • Jbgoose
    , contributor
    Comments (3083) | Send Message
     
    The issue in non rural areas (and everywhere to an extent) is companies all play the who pays for it game. Nobody will. The energy company lines are at the top, under is communications and Telco. In our case PECO contracts with tree companies who clear the lines - They are not allowed to help out the telco''s because Comcast would not pay for it, so they leave problems alone, which then turn into fires. its within their right to come into your property and chop down a 200 year old tree if they wanted to, luckily I was involved and they trimmed rather than clear cut. In rural areas there are other rules AND FED FUNDS available. The concept is the same.

     

    In our case VZ added a new cell tower- it resolved all issues, then, our township negotiated with all, to install smaller, on the road, nearer field cell towers in the dead zones vs larger, ugly towers (in a well established old burb) as part of the social contract so they could continue to offer cable services. It took until the contract was up again, flagging down enough trucks until I got the right person involved. in my situation there are trucks every day to flag, keep at it- it is only us, the consumer, that can identify these zones first and then they come and drive specialized trucks that analyze the entire grid via computers and then they work on the problem areas (they can identify a single pole that s not working right). It takes time but they DO fix it. Call and ask your town political officers who are tasked with this role- best place to start. I admit I was astonished when my actions as a property owner, then amplified by neighbors actions, resulted in a re-design for thousands of people. Nobody will ever know it was me other than the few involved, and that's fine by me- it is their job which cannot be done unless people provide the details for action. I also collect debris from a pole on my property that the animals and workers drop and never clean up, as my son is a curious fellow.
    30 Dec 2013, 11:57 AM Reply Like
  • William Gary
    , contributor
    Comments (13) | Send Message
     
    I thought of this so long ago, I was shocked to see this being the content of the article. If T-Mobile wants to do something "revolutionary" they should turn their Jump program into a voucher like system. A customer who's enrolled should be able to log into Tmobile.com/jumpstore and any compatible smart phone sold anywhere (even if not in their stores) the customer can select it and T-Mobile sends pre-paid packaging to them to "swap" their current device ships them the phone of their choice. This would provide their customers with the most freedom and could potentially free them from paying millions upfront to stock smart phones. If Dell release a smartphone as a jump customer I should be able to go directly to Dell and have T-Mobile incorporate my purchase as part of my service contract.
    28 Dec 2013, 10:09 PM Reply Like
  • Randal James
    , contributor
    Comments (4415) | Send Message
     
    Wm. Gary

     

    There are two problems with your desire to offer consumers freedom of choice. The first is that you wish to ask a customer to mail in their phone 2-3 business days and then wait a comparable time to get the new one. That is being phoneless for a week and while that would not bother me, it would be simply laughed at by most active users.

     

    Of secondary concern is supposing I really want the Nokia 1020, which is available from AT&T but will not appear soon on T-Mobile. If one is sent to me and doesn't work 2 weeks later, where is my recourse? If it was a stock phone (TM carries about 3 dozen) replacing it is not hard at all. One of the others is complicated indeed.

     

    And then there are bandwidth and software functionality that make swapping these phones around very difficult.

     

    Consider: Phone Compatibility Among Networks:

     

    "This is where things can get confusing and even more confusing. In the USA, you can use any SIM unlocked phone from AT&T on T-Mobile and vice versa, but you will not get 3G on the other carrier since they use different bands and most phones do not support both.
    What is SIM Unlocked? When T-Mobile sells a phone to a customer, the phone’s SIM Card reader is locked to only use T-Mobile sim cards, however after being on them for 41 days, you can request a free sim unlock code so that you can then use any SIM Card in it. AT&T and T-Mobile both use a SIM Card to store your information and in theory, you can swap your SIM Card from phone to phone and have your account on the phone w/the SIM Card. This is getting a bit more harder to do these days if you go from say a Blackberry to an Android phone on either since there are different data plans. Most carriers are using IMEI filtering to know what type of phone you have, and in turn, block internet or services if you’re not subscribed to them.

     

    Also note that you can use other unlocked GSM phones on T-Mobile USA and AT&T, however 3G again will be limited to AT&T phones (depending on bands). T-Mobile’s 3G band is not compatible with any other European or USA carriers (at the moment) and in turn to get 3G/4G on T-Mobile USA you need a branded phone from them. You can still receive and make phone calls, text/sms and get basic EDGE (2G) data service on an AT&T phone. So if you don’t need 3G and just need phone coverage, you should be fine (be sure it has the 850MHz band). If you get a world GSM phone, I recommend a Quad Band (850/900/1800/1900mhz) since it will get the 850MHz band that is used mainly in rural areas in the USA.

     

    MetroPCS, US Cellular, Sprint and Verizon phones in theory should work on each others networks; however, the software and the way the network works makes them incompatible. You basically need to get EPST/DST/PRL settings and then program your phone with them, and you would need the ESN in their database. A hacker would need a lot of time, luck, and inside work to get it working. Plus, they may be using IMEI type of filtering too."

     

    Remember that one of the reasons the carriers do this is so you will NOT migrate to another pond and take your phone with you. For the time being, TM's deal is fairly straightforward though you'll have to decide if their 'bounty' for your old phone is worth the cost to switch and if you are sure you'll be happy with the service in your area. Ask around your neighborhood. I lived in a poor Sprint neighborhood for my first cell experience and have a friend who is in a basement apartment that has to leave the house to use her cell.
    28 Dec 2013, 11:45 PM Reply Like
  • Jbgoose
    , contributor
    Comments (3083) | Send Message
     
    The entire paradigm has shifted and all consumers will become accustomed to the new reality in time. The basket of these big four is a fun one to follow. The breaking point is what these companies seek- it is unknown just when the chord cutting and content scripts converge. It is known many will pay 3-500 a month for all of it combined. To me, the reality is 175-250 in the end with them making up more via creative packaged promos and partnerships. And we all forget air waives are public domain .... Why? Read the legislation... It is enlightening.
    29 Dec 2013, 09:41 AM Reply Like
  • William Gary
    , contributor
    Comments (13) | Send Message
     
    The way I envision a better jump is like a subsidy; When Dell made the Venue Pro I called Dell and told them I wanted to pay with T-Mobile, they had an arrangement with T-Mobile where they could verify my upgrade status and I received my new phone.

     

    T-Mobile could have you wait until your new phone arrives before you send in your old one. With JUMP T-Mobile will just pay for the device and you finance it for you. So if I wanted the 1020 I could go to Amazon order it and get in touch with T-Mobile and everything works out.

     

    T-Mobile wouldn't even have to try and stock phones and their selection of Windows phone in particular is rather lacking so why not let us just buy whatever phone we want that's compatible.
    30 Dec 2013, 04:27 PM Reply Like
  • Jbgoose
    , contributor
    Comments (3083) | Send Message
     
    Hey WG n RJ: All carriers offer you a free lender phone, no gap issues. So if your local store does not, the manager does not know company policy, you'd call the 800 service line to initiate the pick up.

     

    VZ is now re- wiring our grids hot spots. Three weeks and still going. Comcast flat out said they would not rewire despite the fact the lines are water logged- So, mostly all went with VZ Cable ( fios) while Comcast is offering full services for those who don't care from 29.99 month- with free DVR. Add in a few premiums and it's a great deal if willing to have a bad signal that drops and wait for the truck all weekend... That's the real Comcast people never discuss on SA.
    30 Dec 2013, 05:56 PM Reply Like
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