T-Mobile USA’s five-year plan is nearing its end point, as it was put into action in 2018, and CEO Mike Sievert is already giving indications of what may be including in the next plan.
The third US MNO, in the past four years, has changed from being largely a low-cost operator targeting the lower rungs of mobile subscribers, to a disruptive marketing force that has gained significant market share through its aggressive pricing and content offers under its ‘Uncarrier’ brand; as well as by moving into new markets such as enterprise; and of course acquiring Sprint.
But with two strong rivals, AT&T and Verizon, and potential challenges from the major cablecos and from new mobile entrant Dish, TMO cannot rely on clever marketing alone, or even on its superior spectrum position (courtesy of Sprint, it achieved a desirable ‘layer cake’ of spectrum in multiple bands). But that advantage, especially in the 2.5 GHz midband, was diminished once the two market leaders belatedly gained their own midband assets in the C-band auction.
So the market will be looking to TMO for new ideas, and the operator has a recent history of creative thinking to give them hope.
Increased focus on fixed wireless access (FWA) and enterprise services have been a feature of the latter stages of the current plan and their role is likely to be increased from 2023. Sievert told the recent UBS 50th Annual Global TMT Conference that the business plan also includes stronger targeting of areas, including rural markets, where TMO has low market share (often less than 20%).
Enterprise growth will be crucial. Although the formerly consumer-only TMO has expanded into business services, both fixed and mobile, it has only about 10% market share, and Sievert said 90% of business customers are currently with AT&T and Verizon, so there is plenty of new revenue to chase. He also said there was a “huge tailwind for us” in FWA.
In the mobile market, he said: “We are number one in the big cities all across the country — I’ll say, on average, the top 50 cities”. But this was achieved mainly through marketing and clever pricing. The next five-year plan will be far more heavily focused on leadership in the network itself, and on competing with the big players on the qualities they have traditionally marketed, such as network quality of service, and also on fully flexible infrastructure to support cloud and edge services, and slicing.
In this respect, TMO will also be eyeing Dish, which plans a wholesale-only model enabled by its open, software-defined 5G network, in which even its own mobile retail brands will act as MVNOs with their own slice of the RAN.
Sievert said: “We got here without winning the network story, and now we can win the network story. So, the strategy in top markets isn’t to defend that share, it’s to extend it by going after the tens of millions of people who never gave us a good look when we were coming from behind on network.”
He claimed that, over the past three years, TMO has already “slashed the perceived leadership of Verizon” in network quality. In the third quarter of this year, TMO gained
854,000 postpaid subscribers, while AT&T won 708,000 postpaid subs and Verizon only 8,000 postpaid net adds.
But the USA’s third operator still relies heavily on its uncanny knack for smart pricing, and Sievert claimed that Verizon “gave us an assist with all their price increases this summer”.
In the rural areas, which account for 40% of the USA, Sievert expanded on the strategy, explaining: “We actually take this 40% of the country, and we algorithmically break it into 775 markets and rate our relative competitiveness in all those markets on an ongoing basis. And when we achieve a level that we call ‘license to play’ or better, that’s when we pour in distribution and targeted marketing efforts and go after share gains.”
He said TMO has improved its rural addressable market from 30% to 50% of the markets rating as ‘license-to-play’ or better. “Even if we got no better at this, all I need to do is finish the job of getting more placings license-to-play or better, and we’ll achieve the aspirations that we put out in front of people last year,” Sievert said.
But he cannot afford to be complacent. Dish has many challenges but is undoubtedly taking a disruptive and creative approach, if it can support its plans financially and win the confidence of US business. And Sievert acknowledged the challenge from the large cable operators, led by Comcast and Charter, which operate mobile services via MVNO deals but are also planning to build some of their own infrastructure. He said: “We’re expecting Charter to have a fantastic quarter, maybe their best one ever.”
He feels there is space in the undertapped parts of the US market for new competitors as well as for significant TMO growth, but with the landscape changing significantly, TMO will not just need to build on marketing, enterprise and FWA efforts as it sets out its next five-year plan from 2023. It will need to learn lessons about network flexibility and service agility, as well as partnerships with key allies such as hyperscalers, if it is to continue its impressive streak of success and narrow the gap with the incumbents, while limiting the impact of new challengers.