T-Mobile CEO John Legere starred in a live webcast Tuesday in which he explained the company's Un-carrier 8.0 plans and laid out a bold new data rollover offer.
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Un-carrier is the company's name for aseries of changes designed to make it less like major competitorsAT&T,Verizon, andSprint. This has included eliminating overage charges, simplified pricing plans, getting rid of phone subsidies, and offering free streaming music from a number of popular services that does not count against 4G LTE data caps. As part of the program, T-Mobile eliminated contracts and has been paying early termination feesfor new subscribers, allowing customers to get out of contracts with its peers.
Un-carrier has helped T-Mobile post record growth, including adding 2.3 million newcustomers in the third quarter.
The bombastic Legere unveiled Un-carrier 8.0 in a one-on-one interview withYahoo!'sDavid Pogue. Legere was at his fiery best as he announced "Data Stash," a new, free addition to T-Mobile service plans that lets customers roll over any unused 4G LTE data from month to month, for up to a year. He also told Pogue that the company would give new and existing customers 10 GB in January as a one-time gift to start their "Stash."
"It is the biggest thing we've ever done," Legere said. "What you don't use you won't lose."
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T-Mobile CEO John Legere was quite animated as he spoke with Yahoo!. Source: screenshot.
Why is T-Mobile doing this?
The Un-carrier strategy is aimed at breaking the traditional practices of the wireless industry, which have regularly been used to pad customers' bills. Legere told Pogue that "90%"of smartphone users are guessing how much data they need. "People paid $1.5 billion in penalties last year," he explained. "So they panic and they buy up."
Legere said that in addition to the overage payments, customers spend another$50 billion per year on "buying up," or paying for larger plans than they actually need due to fear of going over and having to pay fees for overages.
In some ways, the earlier T-Mobile Un-carrier initiative, which eliminated overages by slowing customers' service when they exceeded their 4G LTE data allotment, already addressed this problem, but "Data Stash" sweetens the T-Mobile deal. Legere argued that if you pay for data, it's yours, and you should be able to use it whenever you want.
The CEO, who threw out plenty of insults and off-color terms toward Verizon and AT&T during the videocast, likened his competitors' policies to a restaurant taking your food away if you don't eat fast enough. He wants T-Mobile's actions to force change throughout the industry.
"We're asking carriers to eliminate a non-sensical charge that's pure profit. The only thing stopping AT&T and Verizon from getting rid of that $1.5 billion in charges is greed," Legere said.
Legere said he received 40,000 tweets from his customers about data rollover, and he credited them for the idea that led to Data Stash.
How does this make money for T-Mobile?
Pogue asked how Legere intends to make money if he gives away things that other carriers have traditionally profited from.
The CEO explained that his company has been adding subscribers because it acts differently than its rivals. This led to the company's third-quarter growth. T-Mobile, in its quarterly report in October, said the moves had also brought financial success:
In the third quarter 2014, the companyagain produced the fastest revenue growth in the industry in both service and total revenues. Service revenues for thethird quarter of 2014 grew by 10.6% year-over-year, primarily due to rapid growth in the company's customer base andincreased adoption of insurance and upgrade programs, partially offset by lower branded postpaid phone ARPU [average revenue per unit] due toincreased adoption of Simple Choice plans. ... T-Mobile grew total revenues in the third quarter of 2014 by 9.9%year-over-year due to growth in equipment revenues and an increasing contribution from service revenues.
The news was not all good, asadjusted EBITDA for the quarter was $1.346 billion, flat year over year but down 7.2% sequentially. "Quarter over-quarter,adjusted EBITDA was affected by the higher costs associated with the record growth in customers,including higher selling, general and administrative expenses and higher losses on equipment sales," the company stated in the quarterly report.
In the long run, Legere believes simplifying phone bills and giving customers sensible plans with cost certainty will win people over and drive revenue growth.
"In what other industry do you have to decide how much you need in advance and get penalized either way?" Legere said, explaining how Data Stash sets his company apart.
It's more than bluster
While Legere may act like a 1980s pro-wrestling manager in hyping his company, T-Mobile has made a steady series of changes that differentiate it from its competitors. The CEO has also been steadfast in his mission to make the wireless experience better for customers while also eliminating the anxiety of not knowing what your bill will be each month.
Data Stash simply puts another arrow in the T-Mobile quiver, and it further exposes how the wireless industry has been built on making as much money as possible through overage fees and unexpected charges. Legere continues to make his company seem more appealing while making his competitors look worse, and he's done that in a way that makes him seem like a foulmouthed Robin Hood taking from the rich (AT&T, Verizon, and Sprint) and giving to the poor (their customers who pay overages or buy data they don't use).
The article T-Mobile's John Legere Sticks It to Competitors Again With "Data Stash" originally appeared on Fool.com.
Daniel Kline owns shares of Apple. He is a Sprint customer considering a switch to T-Mobile. The Motley Fool recommends Apple, Verizon Communications,, and Yahoo. The Motley Fool owns shares of Apple and Yahoo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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