T-Mobile (TMUS) CEO John Legere's Biggest Predictions For 2015

By Markets Fool.com

T-Mobile CEO John Legere ended the year with the same bombastic, over-the-top tone he has used throughout the past 12 months.

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In a letter published on the company's website, the brash boss took a bit of a victory lap and laid out his predictions for 2015. Of course, in laying out the course for the wireless industry going forward, Legere put himself and his company in the center of the action.

I said we would change wireless for the better and we are. Revolutionizing this industry has always been about truly reinventing it. The other guys will keep trying to fake their way through -- with their eye on their own bottom line -- but we will keep shaking things up and forcing change. Unfortunately, I don't see any real behavior changes coming from the carriers in the year ahead and I'd be missing an opportunity to keep the pressure on them if I didn't remind you of the pathetic efforts these guys have made to keep up with us so far.

Of course, Legere has a point -- T-Mobile did force its competitors to change, which is something they have not done well. And, while his delivery may be a bit abrasive for some, Legere's thoughts and predictions have generally proven true. That suggests that his theories for 2015 will likely pan out as well.

Legere talks a lot, but he usually backs up what he's saying. Source: T-Mobile

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Phone subsidies are going away

T-Mobile was the first -- and so far only -- carrier to eliminate phone subsidies, butAT&T,Verizon, andSprint have all started playing them down. Subsidies allowed subscribers to get low- or no-cost phones in exchange for paying higher rates during the life of a contract. These plans locked consumers into their carriers and generally did not save them money in the long run.

Now T-Mobile has no contracts, and makes customers either buy their phones outright or finance them; in either case, they pay the full price of the phone. The other major carriers, though they still offer subsidies, have tried to make non-subsidized plans more attractive. That, Legere said, has led to 41% of devices being purchased without subsidies in 2014.

"In 2015,two-thirds of devices will be sold without those confusing subsidies, and more than half of US wireless customers will be contract-free," he predicted.

Overages are not -- other charges are here to stay too

While Legere feels his company's efforts to end subsidies forced his competitors to do the same, he does not feel that T-Mobile's elimination of overage charges will have the same result. Traditionally overages occur when a customer uses more data or phone minutes then their plan calls for. That has been a lucrative way to pump up customer's bills since the beginning of the wireless industry.

T-Mobile dropped overage charges by giving all users unlimited calling and text messaging while slowing down data speeds when someone exceeds the amount included in his or her plan. Unfortunately for consumers, Legere does not see any move by AT&T, Verizon, or Sprint to do the same. He also expects his competitors to continue to make it difficult to use your phone when out of the United States, and he thinks it's possible they will make it harder for contracted customers to leave by making early termination fees even heftier.

"Overages will still be rampant," he wrote. "People will still have to turn off their phones when they land in a foreign country (unless they are a T-Mobile customer...). ETFs will still exist -- andsome carriers may make them even more onerous."

Legere does not think much of his competitors

The CEO's letter repeatedly poked AT&T, Verizon, and Sprint, predicting what they would do in the new year. In his words:

  • AT&T will find new ways to cause their customers pain- especially those still on grandfathered unlimited plans...I'm also betting AT&T will introduce a weak Data Stash knock off -- but the fine print will be massive, and they'll miss the first and most important step in the process -- which is to stop punishing their customers with domestic overages and instead get rid of them. In fact, I predict that AT&T will collect more in overages in 2015 than anyone else.
  • Sprint will continue throwing out campaigns, offers and promotions -- anything to see if it sticks.It'll be confusing as hell. Somewhere mid-year, they'll realize they can't slash their way to growth and start to invest in their network and customer care.
  • Verizon will keep trying to baffle American wireless customers with BS promos, like the one they did this year telling customers they could get afree iPhone 6(don't forget to read the small print!),as well asmisleading advertisingabout everything from coverage maps to device trade-ins.

Harsh words, but Legere is essentially using past behavior to predict future actions, so it's hard to say he's wrong.

Bring on wearables and phablets

Not all of Legere's words were devoted to bashing his competitors. He also had some nice things to say about a few companies in the wearables space.

"I love what Jawbone, Fitbit, Samsung, LG, Microsoft and others are doing in the wearables space," he wrote. "But we haven't begun to see the potential of this category. It's going to go from$1 to $20 billion in the next few years.And though we won't see its full impact in 2015, I believe thatthe Apple Watch will mark the tipping point when wearables go from niche to mainstream.

Legere also expects phablet sales to climb, though he sees a downside

"Phablet sales will continue to sky rocket-- up at least 50%," he wrote. "This will have a couple of important side effects. First, phablets will continue to cannibalize the tablet market, and second, the rise of phablets -- which are made for data hounds -- will continue to fuel the exponential growth in mobile data use."


The article T-Mobile (TMUS) CEO John Legere's Biggest Predictions For 2015 originally appeared on Fool.com.

Daniel Kline owns shares of Microsoft. He is a Sprint subscriber pondering a move to T-Mobile. The Motley Fool recommends Verizon Communications. The Motley Fool owns shares of Microsoft. 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.