An impressive 22 consecutive quarters with over 1m net customer additions is a staggering performance from the T-Mobile USA. This plowed on through the third quarter to surpass 77.2m mobile subscribers, so it comes as little surprise that 5G was mentioned 44 times in the operator’s recent earnings call – while potential merger partner Sprint got 20 mentions, TV seven, and there were just three remarks regarding its 2017 acquisition of cable provider Layer3 TV.
The merger with Sprint was, however, the main topic of conversation once the finances were out of the way, with TMO again talking up how a combination of high, mid- and low-band spectrum assets will provide unrivaled 5G coverage – creating a platform to build a full TV service, not just a mobile one, for the 5G era.
In a recent FCC filing, TMO said a ‘New T-Mobile’ video offering would help subscribers finally escape the clutches of pay-TV contracts. It emphasized the role of Layer3 TV technology and how merging with Sprint would provide sufficient capacity to deliver 4K content wirelessly nationwide.
On the earnings call, execs were tight-lipped regarding Layer3 and any progress for a rebranded cable disruptor service. Time is fast running out to meet the promised 2018 launch deadline, as the team once again assured the world that the journey will start later this year.
The second phase of the video journey will begin sometime next year, the company revealed, when the TV service will eventually expand to mobile. T-Mobile is essentially telling us not to hold our breath for a serious market-disrupting video service, as the Layer3 TV offering set to launch before the year is out will not look drastically different to the old service.
What has become more apparent from this so-called second phase is how the long term strategy is to dress up the overhauled Layer3 as the best and only TV service purpose built for 5G and use this to sell fixed wireless broadband; not the other way around. “For us to be able to be there, serving people’s homes with 5G broadband, we need to have an incredible 5G TV service,” said T-Mobile COO Michael Stievert.
CEO John Legere has ambitiously promised to reach 90% of the country with a new broadband service by 2024, yet the term ‘fixed wireless’ was mentioned just once in the earnings call, by none other than CTO Neville Ray, describing it as one of several compelling user experiences which could arrive on the back of 5G following a merger with Sprint.
So why only the solo mention for an opportunity to which Legere has dedicated blog posts, whipping up a storm pumped with promises to soften up the FCC? There’s no denying the ‘Uncarrier’ will continue to disrupt the mobile and video markets, but is it possible Legere is backtracking on his fixed wireless broadband estimates?
Well, Sievert cited an intention to bring broadband competition to 52% of US ZIP codes with the New T-Mobile (no timeframe specified), talking about taking on broadband not just in sporadic parts of some cities, whereby a device must be 500 feet from a tower, but in homes nationwide. We see this as a drastic downgrade.
Sievert elaborated slightly on his “incredible” 5G TV plans, saying: “We have our heads down building a TV service that is free from having to have wires, that has hundreds of HD choices coming in wirelessly, that’s free from a particular cable box, that puts you in control, that’s met your smartphone, that’s connected to your social, digital and mobile life in a way that TV has never been before as an island. So that’s what we are busy building.”
But without a gripping content portfolio, T-Mobile will struggle to disrupt the established over-the-top video platforms, despite its advanced network infrastructure, and we cannot envisage the company spending big on a content business given the ongoing Sprint deal and 5G investments.
“We expect to grow nearly 75% faster than Verizon, AT&T, Sprint, Comcast and Charter combined and more than 2.6 times faster than our next closest competitor, Verizon,” is the latest bold claim from Legere.
However, there is trouble ahead for TMO in New York as the Attorney General’s Office last week claimed a merger might reduce competition, as a result of the likelihood that one or more of the prepaid mobile services operated by T-Mobile US (MetroPCS) and Sprint (Boost and Virgin Mobile) would be dropped following merger completion.
What’s more, due to the aggressive pricing models adopted by all three, their undercutting practices will cease and in theory lead to price hikes. It’s an objection which is in danger of catching on, as the FCC last week said the Attorney General Offices of Alabama, Connecticut, Florida, Hawaii, Mississippi, Tennessee, Virginia, Washington, Wisconsin and the District of Columbia have all asked for information to start merger investigations.
Touching back on TMO’s results, third quarter revenues totaled $10.8bn, up by more than $800m year-on-year, and boosting the operator’s bottom line by 44.5% to $795m. Capex actually dropped off to $1.36bn in Q3, down from $1.63bn in Q2 and $1.44bn in Q3 2017. The calm before the storm we suspect.