We can’t be the only ones experiencing a distinct sense of disappointment following T-Mobile’s reformed TV plans this week, coming full circle from full-on video disruptor to content aggregator in a matter of months. But will the provocative telco still deliver its promise of helping subscribers escape the clutches of pay TV contracts?
For now, yes. T-Mobile US still has plans in place to launch its home TV strategy in the first half of 2019 (pushed back from the end of 2018), using the Layer3 technology TV and brand, and the operator still wants to disrupt the mobile-first OTT video space, just not with its own undifferentiated skinny bundle.
Despite disappointment, as we feel T-Mobile US could do a pretty good job at competing with the major streaming services, we believe becoming an aggregator of TV content suits it down to the ground. The strategy is much like that of pay TV operators eventually partnering with Netflix following a short-lived battle – with T-Mobile becoming the country’s central mobile-first hub of all things video.
Ultimately, T-Mobile US wants to build a unique puzzle for each individual subscriber, piecing together a media subscription at a nuanced $5, $6, $7, $8 at a time. We don’t know how it will look or work right now, or how similar it will be to the controversial BingeOn service, but with the abundance of streaming choice in the market right now, the uncarrier is in a unique position to be country’s main mobile video aggregator. And from there, it can monetize the hell out of it, either via a subscription or with ads, or both.
“We think we can play a role for our customers at bringing these worlds of media and the rest of your digital and social and mobile life together. Helping you choose subscriptions that make sense, building for those things, search and discovery of content,” said COO Mike Sievert on the company’s earnings call this week.
“Customers have an incredible array of optionality today through the massive expansion of OTT services that are available. It’s subscription palooza out there. Every single media brand either has or is developing an OTT solution and most of these companies don’t have a way to bring these products to market. They’re learning about that. They don’t have distributed networks like us. They don’t have access to the phones like we have,” added Sievert.
T-Mobile US also plans to roll out a home broadband pilot this year, based on 4G LTE and later moving to 5G, marketing the service to 52% of households with a median speed of 450 Mbps. As largely expected, CEO John Legere revealed this week that the broadband service will eventually be integrated with the home TV offering. “The ultimate strategy is for home TV and home broadband to be a blended go-to-market approach,” he said.
While T-Mobile US tips itself as a trendsetter, our job is to be the trend-spotter, and one we have noticed over the past year is the diminishing mention of Layer3 during the operator’s earnings calls. Clearly the home video strategy is all about selling broadband to areas of the US where households only have one choice of internet service provider, and the only reason T-Mobile can afford to do this is thanks to the hugely successful mobile business picking up the slack.
Previously, T-Mobile has emphasized the role of Layer3 technology and how merging with Sprint to create New T-Mobile will provide sufficient capacity for delivering 4K content wirelessly nationwide. We have known for a few months now how the long-term strategy is to dress up the overhauled Layer3 as the best and only TV service purpose built for 5G – using this to sell fixed wireless broadband; not the other way around.
An attempt at revitalizing Layer3 TV was recently trialed across four cities as a predecessor of sorts but, judging by a smattering of reviews, the service was viewed as virtually identical to the old Layer3 TV business. However this was all a learning curve, collecting feedback from desired features and T-Mobile says it has decided to go ahead and develop certain new features and make additional quality improvements before rebranding and rolling out a new product.
Q4 was another record breaker for the uncarrier, clocking up 2.4 million net additions to make it 7 million in total for 2018. Revenues grew 6.4% year on year to $11.45 billion, but with net income down substantially by 76.4% to $640 million, primarily due to the impact from the TCJA (Tax Cuts and Jobs Act) which resulted in an income tax benefit of $2.2 billion recognized in Q4 2017. Excluding the impact from the TCJA, net income would have increased by 21% in Q4 2018 and 22% in full-year 2018.