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What a year T-Mobile has had.
Speaking at an investor conference in New York Wednesday, Chief Operating Officer Jim Alling, who has been with the company since 2009, looked back on 2013 year with a sense of pride and maybe even some wonderment in all that the company has accomplished in the past year.
“What a difference a year makes,” he said. “This time last year, I don’t think anyone anticipated what was coming. The biggest story is our customer turnaround. We went from losing 2 million customers last year to gaining customers again.”
He said two key decisions have made all the difference for T-Mobile. The first was the company’s continued investment in upgrading its network to 4G LTE. T-Mobile put spectrum it got from AT&T as part of its failed 2011 merger to good use. It now covers more than 203 million people in 254 markets throughout the US with 4G LTE service.
But the biggest thing the company did to turn things around at T-Mobile was really listening to its customers and offering service the way customers want it, he said.
“Overall the ‘Uncarrier’ story is about listening to our customers and getting rid of their pain points,” he said. “People didn’t like getting stuck in a contract. They felt locked in, like they couldn’t get away. We got rid of it. But if we hadn’t put ourselves in a position where the network was there, there would have been a lot dissatisfaction.”
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The Uncarrier story
In March, T-Mobile announced it would eliminate contracts with customers. And it didn’t stop there. In July it announced its early upgrade program Jump, which has since become very popular. Alling said more than 2.2 million existing and new customers have signed up for the program. In October, the company also introduced free international roaming for customers traveling abroad. And the carrier is also now offering the first 200MB of data free to tablet owners.
T-Mobile is still listening to customers, he said. Just yesterday, T-Mobile announced that customers buying certain Apple and Samsung products, like the new iPhone 5S and iPhone 5C as well as the Samsung Galaxy S4 and tablets like the iPad Air and Galaxy Tab 2 10.1 can buy these devices with no money down. Even though the overall cost of the device is the same with or without a down-payment, now there is another pricing option available for customers who want to pay more monthly for their devices instead of paying a little bit upfront and having the rest of the cost spread over 24 months.
“We started with getting rid of contracts,” he said. “We’ve built upon that story and continued the momentum. It’s not rocket science. We look at what irritates customers about their carrier, and we knock those out.”
This philosophy of listening to customers seems to be working well for T-Mobile as evidenced by its third quarter results, which showed the company added a total of 1 million new customers to its network. About 648,000 of these customers were highly valuable, so-called postpaid customers, who tend to have stronger credit history and are willing to pay more each month. In total T-Mobile ended the quarter with 45 million customers.
Alling said the approach not only helps retain customers, but it also attracts new customers. And those customers don’t always come from T-Mobile’s traditional base of value-oriented cell phone customers. The company has expanded its potential audience to business users and tablet owners.
“We weren’t competing in the tablet market at all really,” Alling said. “But we heard people say they wanted to be more mobile with their tablets and not be tied to a Wi-Fi hotspot. So we made the offer of free data available.”
Alling said the company sold more tablets the first weekend the iPad Air was available than it had for the entire third quarter. He admitted that number is still low, but he said it’s a growing business for T-Mobile. Alling said the new business pricing and offerings are also increasing the amount of money that customers are spending with the company. Specifically, he said that customers are signing up for more data services, and they’re adding additional devices and people to their plans.
He said the company isn’t done addressing consumer pain points, although he wouldn’t elaborate on what might come next.
The network
None of this would have mattered much to T-Mobile’s turnaround without the improvements to its network, he said. Much of that work had begun in 2012, when T-Mobile started upgrading its cell sites and improving connectivity on its backhaul network. This laid the groundwork for 2013, when T-Mobile aggressively started launching LTE service.
The company’s acquisition of prepaid operator MetroPCS has also played a significant role as well, adding more spectrum to T-Mobile’s portfolio. Alling said that T-Mobile has been able to improve and upgrade its network faster than the company expected. He said T-Mobile now has bigger 10MHz by 10MHz spectrum channels in 40 to 50 markets that can produce faster data rates and carry more data traffic. The company hopes to get to 100 markets with these bigger channels by the end of the year.
Then the company will look to increase the capacity yet again to 20MHz by 20MHz channels, Alling said. Dallas, Texas is the first city to get the new 20x20MHz service. And Alling said that the higher capacity network can offer download speeds of up to 150Mbps and upload speeds around 47Mbps to 50Mbps.
Alling took a swipe at Sprint, which has also been increasing capacity on its network as part of its major network overhaul.
“Sprint has shown some things in a lab,” he said. “We have actually done it in Dallas, where you can really see the downloads are 150Mbps and uplink speeds are 47 to 50Mbps. It’s incredible performance compared to what others have said they’ve done in a lab.”
The company will continue throughout 2014 to reuse spectrum for LTE that was previously allocated to older 2G services. But Alling noted the company still needs low-band spectrum in its portfolio. This type of spectrum, which AT&T and Verizon already own quite a lot of, is helpful for improving in-building coverage and also for addressing more rural settings. Alling said this type of spectrum would be very useful for T-Mobile to help it build out its network to suburban areas, where its coverage may be lacking.
“The key for us is getting low-band spectrum,” he said. “Even though we can compete today, the low band spectrum would just be that much more of the puzzle. For us, capacity is not an issue today. For us, it’s the reach and improving the signal quality. And down the road, increased capacity will be needed by every carrier.
Deal making and competitor bashing
Alling said that T-Mobile is open to discussions with current low-band spectrum owners for any sort of potential deal. The company is also likely to participate in the Federal Communications Commission’s TV broadcast spectrum auction now schedule for mid-2015. Alling wouldn’t comment on specifics, but said that T-Mobile would like to see a level playing field for fair access to the spectrum.
Alling also took a shot at competitor AT&T. The company followed T-Mobile’s lead in introducing an early upgrade program it called AT&T Next, but it revised the program last week when it revamped pricing for its services and began offering customers off contract a lower monthly service fee. Alling said the rate change proved to him that AT&T thought its own early upgrade program was a failure.
“It just shows that AT&T has finally learned that customers are a lot smarter than they give them credit for,” he said. “Customers were paying twice for their phones. And they realized it was a rip off.”
Still, Alling said that AT&T’s new rate plans are still confusing. And he noted that some customers, especially families, may end up paying more per month under the new plans.
“We’re always aware of what our competition is doing,” he said. “And we may respond. But we don’t lose sight of what we do well.”
