T-Mobile Dropping Fees and Surcharges, Not Raising Prices

By Daniel B. Kline Markets Fool.com

T-Mobile (NASDAQ: TMUS) knows how to put on a show. In fact, CEO John Legere clearly has borrowed from Steve Jobs, P.T. Barnum, and Vince McMahon to varying degrees. The outspoken wireless boss has a charisma and an arrogance that would not work if his company did not deliver on his promises.

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But like Muhammad Ali taunting an opponent and then knocking him out, T-Mobile does deliver. The company has added over 1 million subscribers for each of the past 15 quarters (including adding 2.1 million in Q4)while also leading rivalsAT&T(NYSE: T),Verizon Communications(NYSE: VZ), and Sprint (NYSE: S) for most net adds for 11 straight quarters.

It's an impressive performance driven by Legere's personality and the company's ongoing Un-carrier initiatives. That makes every T-Mobile press conference an event, and anticipation was running high in advance of the company's Jan. 5 "Un-carrier Next" event at the Consumer Electronics Show (CES).

The stage was bathed in magenta lights in advance of the Un-carrier Next event. Image source: author.

A trip down memory lane

Taking the stage in a darkened room with rock-concert-like magenta mood lighting,Saturday Night Live's Colin Jost and Michael Che opened the event with "Wireless Update," a series of jokes about the wirelessindustry, the Las Vegas location, and, of course, AT&T, Sprint, and Verizon. Their routine included Legere appearing as a special correspondent driving people around Vegas while talking about wireless carriers.

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Legere concluded his taped bit by promising a big announcement. "When you hear what I announce next, there is no way you would not want to switch," he said, before taking the stage to shrieks and whoops from the T-Mobile employees in the audience.

"Four years ago, I just snapped," he said. "The Un-carrier took the form of a tirade. If you landed from Mars on this planet and saw how people sell wireless, you would turn around and go back."

At the time, T-Mobile was bleeding customers and losing money, the No. 4 player in the industry. "We did not talk about a turnaround; we talked about changing wireless for good," Legere said.

Back to the future

Legere took the audience on a walk through all the changes T-Mobile has pushed on the industry. He noted that most customers no longer have contracts, switching fees have been largely eliminated, and overage charges have decreased across the industry. Of course, the CEO also pointed out how AT&T and Verizon specifically fought many (if not all) of those changes before eventually giving in.

For the company's latest move, dubbed Un-carrier Next, Legere told the crowd that T-Mobile has another big set of changes ahead based around the mobile internet, where he noted that 80% of all internet use happens.

Calling wireless plans "a mobile internet connection," Legere said that beginning on Jan. 22, T-Mobile will only sell unlimited plans. It will allow existing users to stay on their plans but is getting rid of the Simple Choice plans for new customers. He also said that "what you see is what you should pay," pledging that the telecom's pricing would only advertise prices that are "all in," with all taxes and fees included.

"We're doing it without raising prices," Legere said. "Taxes and fees aren't going away. We're investing in our customers."

But wait, there's more

Legere showed a video featuring comedian Jason Jones going over subscribers' Verizon bills where each family paid much more than the advertised price.

T-Mobile's new plans' selling point is that what you see is what you get. A family of four will pay $40 each for unlimited data, calls, and text with no extra fees for a total of $160. The company has also pledged that it won't raise prices, reduce service, or change its customers' plans without consent. In addition, if a consumer uses less than 2 GB of data in a month, they will get a $10 bill credit each month per line for up to 12 lines.

This is another effort by T-Mobile to change how the industry works. The company now has an all-in-one unlimited plan with simple pricing that also takes into account users who will not be using a lot of data.

It's another major shot at the rest of the industry, and it could win T-Mobile even more customers. It's also likely that dropping separate fees and offering transparent pricing could force AT&T, Verizon, and Sprint to follow suit.

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Daniel Kline has no position in any stocks mentioned. The Motley Fool recommends T-Mobile US and Verizon Communications. The Motley Fool has a disclosure policy.