T-Mobile's done a great job of growing subscribers and will probably overtake Sprint soon -- if not already. But the designation of the third-largest wireless provider is mostly symbolic. Image source: T-Mobile
When it comes to wireless providers, the interesting moves are not being made by the big, legacy providers likeVerizon and AT&T, but rather by the No. 3 and No. 4 providers, Sprint and T-Mobile . After watching T-Mobile register strong growth under CEO John Legere, Sprint replaced long-term CEO Dan Hesse with Marcelo Claure in August 2014 amid continued struggles.
For T-Mobile, it appears its subscriber growth was due to a smart strategy. After years of being relegated to fourth place as a traditional carrier, the company decided to shake up the industry with its Un-carrier focus. In short, the company sought to reinvent a subscriber's relationship with a carrier by improving the more-onerous terms of a traditional contract. And if last year is any indication, the company's Un-carrier policies are succeeding.
Last August, T-Mobile CEO John Legere famously predicted that T-Mobile would overtake Sprint in subscribers by the end of the year. And he was nearly right. At the start of 2014, T-Mobile trailed Sprint by 8.4 million subscribers: 55.05 million versus 46.684 million, according to Strategy Analytics. It ended the year roughly half a million subscribers behind by adding 8.3 million subs while Sprint added fewer than 500,000. At the end of the year, Sprint reported roughly 55.5 million subs versus 55 million for T-Mobile.
According to Legere, Sprint's padding their subscriber figuresLeave it to John Legere to not concede or backpedal from any promise or prediction. While most CEOs would be content with subscriber growth of 17.9% -- roughly double Verizon's and AT&T's totals of 8.7% and 9.2%, respectively -- Legere is accusing Sprint of padding its subscriber numbers. Legere contends Sprint is counting inactive customers from its MVNOs (mobile virtual network operators).
Specifically, he mentions the fact that Sprint counts 1.7 million subscribers from MVNOs (think Boost Mobile, Credo Mobile, and Ting, among others) that Sprint hasn't received payment from in over six months. Sprint has a policy of counting the subscriber until the MVNO tells it otherwise, while Legere states the industry standard for turning off service is 60-90 days. If you back the 1.7 million out of Sprint's total, then T-Mobile is ahead as far as subscriber count goes.
Sprint CEO and CFO, "We don't care"While Legere is certainly happy to bring up this milestone, Sprint's management is understandably less enthusiastic. Both CEO Marcelo Claure and CFO Joe Euteneuer have downplayed the importance of Sprint losing its No. 3 position. Earlier this year, Claure addressed T-Mobile's claim by stating to CNET: "T-Mobile has great momentum. I'm focused on fixing the fundamentals whether we're No. 3 or No. 4. Customers don't care about rank. I'm not worried about whether we're No. 3 or No. 4."
For Sprint, that's actually a smart strategy. First, Claure is correct; most subscribers don't care about a provider's rank -- they just want affordable, high-quality service. Sprint has been diligently working on upgrading its network, and the latest RootMetrics survey found these network updates are bearing fruit. In addition, the company is working hard to pull postpaid subscribers from Verizon and AT&T with its "cut your bill in half" promotion. It even shrewdly partnered with bankrupt RadioShack to cost-efficiently expand its retail footprint.
Even if you count Sprint's disputed MVNO numbers, losing its No. 3 spot is mostly a fait accompli at this point. However, it does appear the company is starting to compete -- a stark contrast to the Sprint of yesteryear.
The article Has T-Mobile Already Overtaken Sprint in Subscribers? originally appeared on Fool.com.
Jamal Carnette owns shares of Sprint, AT&T, and Verizon Communications (I cover telecom, ok). The Motley Fool recommends Verizon Communications. 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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