Industry Analyst Speculates The Tide Has Finally Turned In T-Mobile’s Favor

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With T-Mobile’s first truly positive quarterly results still fresh in the mind of industry analysts, at least one such industry watcher is publicly stating T-Mobile is on the prowl. In a research note last Friday, UBS Investment Research analyst John Hodulik notes that T-Mobile’s second quarter successes means “more upside” for T-Mobile’s share value. Hodulik also insinuated that the successes of T-Mobile are likely to be a “bad omen” for investors looking to earn higher margins from the likes of AT&T and Verizon.

T-Mobile has emerged as an aggressive share-taker far sooner than expected and porting ratios in July suggest the worst may not be over. The Un-carrier 3.0 launch, expected by Halloween, will be another shot across the bow, forcing the larger carriers to sacrifice margins and/or share. Layering on a resurgent Sprint in 2014 makes higher wireless margin estimates start to look like a stretch.

Hodulik further notes that T-Mobile gained share from the other big three carriers and saw its churn rate drop while the rest of the industry remained flat. Hodulik notes that according UBS calculations, T-Mobile was gaining two subscribers from AT&T and Sprint for every one it lost to those carriers. That sentiment has already been echoed by T-Mobile CEO John Legere in interviews following T-Mobile’s August 8th financial report.

That’s not to say we should write Sprint off just yet, as a “resurgent” Sprint is expected in the future now that the SoftBank deal is finalized. SoftBank has plenty of cash to pump into Sprint and it’s unlikely they’ll bide their time leaving Sprint as a still formidable competitor.

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There are some market conditions Hodulik notes that will also work in the favor of T-Mobile and Sprint in their battle against AT&T and Verizon:

  • For one, Sprint and T-Mobile’s LTE rollouts are coming on strong and while AT&T and Verizon still have a competitive lead, especially Verizon, T-Mobile went from 7 markets to 116 overnight.
  • Second, postpaid growth is slowing, if not stalling altogether. USB forecasts that prepaid growth will accelerate once again as customers move away from contract plans in search of cheaper prices. Sprint and T-Mobile are ready for the prepaid march with the likes of Virgin Mobile and MetroPCS.
  • The third and last reason is the war of attrition being fought in the US market. As the market itself becomes saturated, customer growth is gained by stealing customers from the “other guy.” Hodulik surmises that this will again benefit the likes of T-Mobile and Sprint as they both show a competitive streak in pricing and promotional offers. Whether or not AT&T and Verizon will cut prices and therefore cut their margins to match them is something that remains to be seen.

Hodulik isn’t just another fly-by-night analyst and he’s well respected in the industry. It’s possible his predictions could be premature, spot-on or just plain wrong. The analysis presented by Hodulik spans a three-month period, but the trends are there from a greater period.

I think T-Mobile’s CEO would agree that momentum is on their side and he sure isn’t letting up on the AT&T attacks. Still, It’ll take more than one-quarter of positive growth for us to say that T-Mobile is making headway against the monoliths that are Verizon and AT&T, but if they do, things are looking very, very up for T-Mobile indeed.

Light Reading; GigaOM

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  • http://www.jeffkibuule.com Jeff Kibuule

    I’m a happy T-Mobile customer since May and have noticed significant improvements in performance since I began testing in March. LTE service is great, give it more spectrum and let it really shine!

    • Clarkkent113

      Welcome to the T-Mobile family.

  • vrm

    Tmobile filed for $500 million debt offering yesterday. I hope it is not related to Deutsce Telecom’s “investment” to the tune of 500 million Euros in tmobile.

    I hope this is a separate fund and if so, it can only mean they are investing $500 million more in the n/w coverage.

    On another note, as all operators move to LTE, the only thing stopping people from jumping is VOLTE ( or lack thereof). When that is complete, people can jump across the 4 networks. That would be a good scenario for consumers.

    • mingkee

      T-Mobile already has same technology used on Wi-Fi calling.

    • http://www.getintonursing.com/ Jon

      Yep…and the Google play store will be ready and waiting. Google will continue to sell really inexpensive hardware that will save people from contracts and make the whole market more competitive on stuff other than hardware exclusives. Hopefully that means price and service quality.

      I long for the day that 1 phone will work on any of the major 4 carriers in the US with just a SIM card swap just as it is in Europe.

    • Jarrod

      USD and Euros aren’t worth the same, when I calculated it out they were going to get $669million because the US dollar isn’t worth anything. The way it strikes me is that they are going to have a combined total of $1.169billion to invest into the company($669million DT and $500million loan).

  • http://knightofscorpio.tumblr.com/ DtheArtist

    9 1/2 years a customer, glad to continue my wireless relationship with no other than T-Mobile. I don’t see myself happy at any other big national wireless carrier.

    • g2a5b0e

      Same here, man. 10 years in October. Couldn’t be happier.

      • Garo.j

        Same here
        11 years with t mobile.cant wait until i can upgrade tO
        The LG G2
        Next month.

        • g2a5b0e

          Note 3 for me in October or November. With JB 4.3 in tow. Have fun waiting for your update. We all know how awesome LG is when it comes to those. ***cough G2x cough***

        • Garo.j

          I do admit the LG. had its issueswith the G2x. That was two years ago. They have improved there updates.

        • g2a5b0e

          You’re still going to have to wait longer than with most other OEMs.

        • http://www.getintonursing.com/ Jon

          Fair enough, but there is plenty of choice for those that want fast upgrades. I don’t even look at a phone for software anymore, I just buy the hardware, then I put Cyanogen Mod on there and that settles that.

          And things got way better now that all of these Google Play store versions of phones are coming out. Makes it very easy to get stock Android, and recent updates on the sibling phones that aren’t running stock Android.

    • rdg666

      11 1/2 years and I’ve had it good with T-Mobile over the years. Only one issue and that was in 2011 after losing a phone.

  • Sectime

    I sure hope this isn’t a plan to make Tmobile ripe for a sale.

    • fsured

      But do you think they could get the same price At&t offered? I would assume more since the situation with the company has changed but didn’t they put a high bid to make the offer too sweet to pass on?

      • Jose Hernandez

        If I am not mistaken, AT&T put on a ridiciously high bid. That is why DT was so keen in selling T-Mobile. They where getting a really good chunk of cash for it. AT&T just wanted to kill the competition and got caught doing it.

        • Sectime

          Exactly, sale was blocked. A Tmobile moving up unlike when AT&T bid has to be worth more. I guess watching Capx
          would be a clue if this is a long term or short term play.

  • Clarkkent113

    Been with T-Mobile since the Voicestream days and there has never been a more exciting time to be a T-Mobile customer. Finally the service is really competitive with Verizon and ATT.

  • mreveryphone

    For some reason my lte keeps beating my friends that are on Verizon and att, but yet they pay more each month? And now I’ll be able to upgrade twice next year and my bill is still cheaper?? Is my brain on?

    • Eric

      John Legere is mind-controlling you to stay on T-Mobile. :D

    • http://www.getintonursing.com/ Jon

      I’m getting on the JUMP plan next month when the Note 3 and G2 come out. I did the math several times and I can’t believe how much money I will save a year. Somewhere around $500 over what I do now, which is buy a used phone, then sell it 6 months later. The depreciation kills me everytime. JUMP plan is exactly what I’ve always wanted.

  • Jessicad

    Well so far I been a happy tmobile customer I had a line with sprint and att, I still have my Verizon line active from work. I live in los Angeles but everywhere else I been san Francisco, Phoenix, vegas,san diego, Sacramento one time I even crossed to Seattle nice place btw.. And believe it or not I found tmobile and Verizon to be the most reliable . The problem I had with att everywhere I went was dropped calls it drops a lot even with full bars standing outside its2013 and att network gets congested it gets pretty bad every major city I went to att was the worse in terms of dropped calls. Sprint didnt drop as many calls as att but data wise it was the worse most of it was 3G which is horrible I had an lte phone on sprint but was on 3G 95 percent of the time. Now Verizon and tmobile worked better mostly everywhere I gone to and dropped less calls on them.

    • Jose Hernandez

      I have had just about the same experience while using T-Mobile as my cell provider. I have had some issues with coverage while traveling, but nothing too bad that would make me even think about switching.

  • Oliver Jackson

    Joined TMobile in 9/27/12 because they have the best offers that made sense.The handset I got when coming aboard was the GSIII and I paid it off in Feb 2013 and got the Galaxy Note 2 because of the LTE capability.Then Mr.Legere was intro’d as the CEO and I got to admit,this guy is real!! With the UNcarrier brand,LTE deployment ,fresh portfolio of smartphones,and JUMP, TMobile is the place to be.
    Come Sept.27 it’ll be 1 year and I couldn’t be happier.

  • Ĵϵṟϵṃψ Ψαñ

    I like T-Mobile, but let’s not kid ourselves with this chart. ATT, VZW has much more robust LTE coverage than T-Mobile even in the cities. In Boston, there are many places where I fall back to 4G, and LTE signal bars are generally low. So, even if T-Mobile say they cover 80% people of what ATT, VZW covers, that doesn’t mean the actual coverage is as good.

    • HiyaBuddy

      I had no lte in my house in Cambridge which is a dead zone for the big 3 carriers except for T-Mobile. I had 4g since I signed up on the 31st of July and just yesterday I got a consistent LTE signal on my phone. It hovers between 3 or 4 bars on my gs4 and does not drop back to 4g hspa. Something tells me they didn’t fully roll it out around Boston yet but I guess it must be working now…

      • http://www.getintonursing.com/ Jon

        My apartment is on a hill in the Los Angeles area and it’s a dead zone for AT&T and Verizon. Somehow I’ve got a decent signal on T-Mobile.

        Coverage is all relative to your use case. T-Mobile in Los Angeles has been great and a huge savings.

        • Ĵϵṟϵṃψ Ψαñ

          It is relative to your. But I am sure there are more places where ATT and VZW are better. And that’s precisely why they have more users. I think there are a lot of people here asking for better coverage, but I guess they need 600MHz to do it.

    • Nate Sykes

      You have to keep in mind that with LTE, signal bars aren’t the meat and potatoes of how it will perform…you can have 1 bar of LTE coverage and still have smoking fast Up and Down speeds.

      • Ĵϵṟϵṃψ Ψαñ

        I agree that LTE can still be fast with one or two bars. But if so, why would ATT or VZW invest to make sure full bar? 1-2 bar probably consume battery faster too.

    • tomarone

      Some locations have TMo, and not Vz or ATT. However the spectrum problem gives Vz the edge, it just penetrates better, so in specific cases it drops less.

  • Steve

    I made the switch recently to T-Mobile, Me an wife both cracked our s3 screens. Our contract wasnt up for another 12month and the cost to replace was 400 total with insurance. Selling phones on ebay almost covered buying out our att contract and we get new phones. The service is ok, mostly 4g, with sprinklings of lte in CT. I went to Pennsylvania and it was bad bad. Worst case I pay these phones off and then switch back. But Ill probably give t-mobile a chance to get more coverage- but I cant get a grasp on if that is happening/happened/ or will happen?

    • Rauel Crespo

      I also live in CT. LTE is live in Meriden and New Haven and is FAST…30Mbps Down and 11 up. Even in areas with Faux-G(HSPA+) are pretty good.

  • 66_Large

    I’ve been a T-Mob customer for years on the pre-pay with a Nexus phone. I like what I have and had no problems, but some bad areas for reception while on the road. I got an 84 yr old relative signed up for a basic phone from TMob in the LA area. On a recent visit the relative asked why their bill had ‘gone up’ to almost $100 per mo. I looked the bill and saw that there were charges on the bill for ‘services’ from an ‘outside’ service (messaging). I’d had problems with same in the past (from a Minnesota scam site). I phoned TMob. customer service and got a complete resolution to the elder’s problems. Good for TMob. Now, get some better coverage in Central Calif.

  • http://twitter.com/SParKlngCyaNide SparklingCyanide

    Been a customer of since 2000(VoiceStream days), and I have never been prouder or more satisfied with T-Mobile as I am now. : )

  • Trevnerdio

    Besides a brief hiatus (about 3 months) where my family tried out Nextel (and may I say, there were absolutely horrible), we’ve been T-Mobile customers for nearly 14 years! Since the Voicestream days. Admittedly, we did live in a Houston suburb, so signal was never a problem for us. T-Mobile continues to impress me till this day. Things were looking grim for awhile with the AT&T proposition, but everything worked out in the end.

  • DetroitTechnoFan

    Against my friends who have Verizon, regular HSPA+ is competitive, if not better, generally at around 8-10 Mb/s, but the HSPA+ DC has clocked up to 24 Mb/s for me, and the LTE has pulled just over 40 Mb/s. This was with my Samsung Galaxy S4, which I swear is the BEST phone I’ve ever owned, and will probably hold onto for a very long time.

  • Hakim Leveille

    I left Sprint for T-Mo last Oct 24th to get the Note II after 9 years and 9 months and 26 days (12/28/02 – 10/24/12) best decision I’ve ever made.