What is it?
T-Mobile's (NYSE: TMUS) Un-carrier 8.0 Data Stash announcement is essentially the concept of data rollover. Unused data is rolled into the following month but after a year some of the unused data expires annually. To kick off this move beginning on January 1, 2015, the company is providing a starter 10GB of data for subscribers of plans with greater than 3GB or mobile broadband plans/tablets of 1 GB or greater.
The notion is not new as it is structurally the same approach as Cingular Wireless'/AT&T's (NYSE:T) Rollover minutes introduced circa 2002. Closely-held regional carrier C Spire reworked the rollover concept with data and launched at the end of November. The motivation was a means of differentiation and value against the national carriers.
- ARPU Boost Scenarios - With the wireless carrier community moving toward Equipment Installment Plans (EIP) and fierce service price competition, a byproduct is declining service revenue. In order to offset the decline, carriers want to increase data stickiness through increased consumption and then upselling to the next data level. Data Stash also has the same impact through feature eligibility. Smartphone ARPU lift: Only smartphone plans with 3 GB or greater. T-Mobile has two plans that fit this criteria, $60/3GB and $70/5GB. Lower plan subscribers (e.g., the high volume of 4 line/$100 users with 2.5GB per line could upgrade to the next tier, 4.5GB. Therefore, a $100 family account potentially turns into a $140 account. On the individual user scenario, the entry $50/1GB customer turns into a $60/3GB customer). Tablet ARPU lift: The low entry at $20/1GB alows users to jump to the next $30/3 GB level and potentially higher with increase use, especially after draining the initial 10GB starter allotment.
- Tablet Additions - In 2014, the tablet category has helped all carriers' postpaid net additions. For the 3Q14 in the mobile broadband/tablet category, Verizon Wireless (NYSE: VZ) had 1.1M, AT&T added 450K, Sprint (NYE: SS) added 261K, and T-Mobile followed with 204K. Promotion-wise, T-Mobile is already stimulating tablet additions. Ahead of Black Friday, T-Mobile gave away free tablets with a qualifying plan. In conjunction with Data Stash and aggressive promotions, T-Mobile is well positioned to drive more tablet additions in 2015.
- User Retention - Though T-Mobile claims a majority of its new users are prime, they're are switching for value. Given Sprint's intense customer acquisition efforts and its positioning as the value leader, there is a threat that these new high-value users may switch over. Data Stash, as a prominently positioned value feature, can offset that switching threat.
- Priming for 2015 - End of 2014 timing for the Un-carrier 8.0 announcement is good as T-Mobile closes an enviable net addition year with revised guidance to 4.3-4.7M postpaid customers. Given this 2014 momentum, how can they set the table for 2015? Un-Carrier 8.0 begins on January 1st when T-Mobile can start with another customer acquisition tool.
Points of concern:
- Is the Network Data-Strong enough?: T-Mobile says its smartphone customers average 3.5GB/month, a consumption pattern greater than its larger competitors Verizon Wireless and AT&T. Its fastest network speed marketing and Wideband LTE advertising will surely reinforce higher data consumption north of the current average. In conjunction with the recent two lines of unlimited data for $100, subscribers resourcefulness can push the boundaries of smartphone and tablet-only use to tethering laptops and in the extreme case, servers. T-Mobile network planners clearly have modeled and projected future consumption patterns in prepping for this and future offerings. Accelerated spectrum and capacity exhaust faster than modeled may push for additional capital expenditures. Alternatively, it also may necessitate creating and implementing data consumption control mechanisms, whether they be software, hardware or service plan amendments.
- Downward Unlimited User Migration: T-Mobile's John Legere said that there were about 20% or more of the base on its $80 unlimited plan. Those (consumer or small business accounts) who aren't likely to use it may drop down to save some cash.
- Will others follow? When AT&T (Cingular) introduced Rollover minutes many years ago, the natural logic was that chief rival Verizon Wireless would follow. They did not. Each carrier will have to model what the liability impact of implementing a similar rollover data feature may be. T-Mobile argues that with Verizon Wireless' and AT&T's larger user base and their pace to add capacity, that liability may be too great for them to swallow. Sprint, however, is in the best position to entertain the idea in the long run given its 2.5 GHz spectrum capacity depth in high data tonnage markets, whenever it's built out.
- Unlike the better cost savings promotions that prompted people to switch over, Un-carrier 8.0 in and of itself may not push the large 2014 porting numbers. Rather, it will be in conjunction with an aggressive promotion in 2015. Therefore an essential element of whether competition follows will be how effective T-Mobile is again doing with gross and net additions.
Disclosure: The author is long VZ.
The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: The author has a small long position in VZ