After watching its union with AT&T fail, its churn rise, and key executives depart, T-Mobile US Inc. needed a serious comeback. But instead of building its strategy around what carriers typically want from customers—binding contracts, hidden fees, and limited upgrades—T-Mobile created a strategy based on what customers really want from carriers, like unlimited data and no contracts.
T-Mobile became America’s first “Un-carrier.”
Fueling the fire
On March 20, 2011, AT&T Inc. announced plans to acquire T-Mobile from parent company Deutsche Telekom AG for a cash-and-stock transaction worth approximately $39 billion. But on August 31, 2011, the U.S. Department of Justice filed a civil antitrust lawsuit blocking the proposed transaction. The DoJ claimed that the proposed acquisition would “substantially lessen competition” for U.S. mobile wireless carriers, raise prices, cause poorer quality service, and lead to fewer choices and products for Americans. The Federal Communications Commission also released a report at the end of November 2011 stating that the “competitive harms” from the acquisition would outweigh the claimed benefits. By December 19, 2011, AT&T ended its T-Mobile bid.
But when one door closes another one opens. Andrew Sherrard, SVP of brand marketing at T-Mobile, describes the failed acquisition as a “catalyst” for the wireless carrier. “Once that decision was reached we said, ‘We have to change the way we approach our own customers [and] how we approach the market,’” he says. “That’s what fueled our desire to go out, do something really different, and revolutionize the industry.”
Finding the rebels
If T-Mobile wanted to revolutionize the industry, it would need a group of rebel customers to join them in the fight. In the past there had been two wireless segments, Sherrard explains: the high-end segment that paid a lot for big-name brands like Verizon Wireless or AT&T and the low-end segment that wanted simple, cost-effective plans but ended up with lesser-known carriers. Sherrard says T-Mobile strove to create a “middle ground” in which subscribers could get the latest devices and renowned brands without overpaying.
But attracting this customer segment was only half the battle. Determining how to keep these customers was an entirely different challenge, especially considering that T-Mobile’s blended churn rate for contract and prepaid customers reached 4% in Q4 2011, up from 3.5% in Q3 2011.
So T-Mobile set out to identify what customers dislike about their carriers. The brand conducted several studies, including surveying more than 4,000 U.S. consumers in the summer of 2012. The results? Users were fed up. Seventy-three percent of respondents said data plans are too expensive, 75% said devices are too expensive, and 62% said carriers force them into signing one- to two-year contracts. And the complaints didn’t end there. Seventy-five percent of consumers said they despise paying for expensive upgrades, and 61% said that phones outdate too fast and that they want to have the freedom to get the newest device while it’s still new.
While determining how best to deal with these customers issues, T-Mobile was experiencing a few ailments of its own, including an exodus among senior staff. In addition to fulfilling the role of SVP, Sherrard had to step in as interim CMO after Cole Brodman left the carrier in May 2012. About a month later T-Mobile’s CEO Philipp Humm also resigned, leaving Jim Alling, T-Mobile’s chief operating officer, to fill the role.
So with a new executive team and a new target audience in sight, T-Mobile set out to reverse the negative images associated with the wireless telecommunications industry and unleash the Un-carrier revolution. “Someone has to change the wireless industry,” Sherrard says. “It might as well be us.”
Becoming the Un-carrier
The Un-carrier revolution kicked off on March 26, 2013, just four months after T-Mobile appointed Michael Sievert its new CMO. That day T-Mobile revealed its first round of signature moves. They consisted of building a $4 billion “un-congested” 4G Network; including the iPhone 5 in its product offerings; allowing customers to upgrade their devices without signing a two-year contract; and launching Simple Choice Plans—plans that ditched annual service contracts and provided customers with unlimited talk, text, and data at the high speeds they expect.
T-Mobile President and CEO John Legere, who joined the company in September 2012, announced the changes in a video created in partnership with global digital agency Wunderman. T-Mobile emailed its customers a link to the video. Notifying existing customers about new plans and devices, instead of pitching potential customers, is a critical part of T-Mobile’s communication strategy, notes Kass Sells, president of Wunderman North America. And T-Mobile doesn’t play favorites. Sherrard says T-Mobile offers existing customers the same deals it offers potential customers, which helps the brand maintain a single voice and avoid “tying itself in knots.”
“Sometimes…when you’re a customer, you see other big telecom companies go out and make great deals to get new customers or offer great deals on new phones. And you’re sitting there as an existing customer going, ‘What about me?’” Sells says. “T-Mobile flips that on its head and says, ‘We’re going to take care of our existing customers first, give them the best service and best opportunities to upgrade to new plans and new phones, and make it easy for them to do that.’”
The Un-carrier movement didn’t end there: On July 10, 2013, T-Mobile launched its Just Upgrade My Phone (JUMP) program—an initiative that enables customers to upgrade their phones anytime they want, up to twice a year. In October the company announced that it would also provide unlimited international data coverage and texting, as well as 20-cents-per-minute call rates, in more than 100 countries for certain Simple Choice customers. Two weeks later T-Mobile revealed that it would provide tablet owners with up to 200 MB of free data each month for the life of their device. And at the January 2014 global technology event International CES, T-Mobile announced that it would pay early termination fees for individuals wanting to switch from AT&T, Sprint, or Verizon.
Spreading the word
T-Mobile started to connect with customers to spread the word through the two channels they engage with the company the most: their phones and their statements. For example, when customers sign up for T-Mobile, they receive a link via SMS to the company’s information hub, The Source. The site provides news, app recommendations, and tips and tricks about various mobile devices. The telecom also includes links to The Source in customer emails and billing statements.
Unlike T-Mobile’s main website, which provides broad information for customers and prospects alike, The Source provides much more personalized communications and only targets current customers. For instance, if a customer roams internationally, T-Mobile can send her to a landing page on The Source that provides information on the latest international deal, Sherrard explains.
Another key point of contact is T-Mobile’s My Account app, which allows customers to view data usage, review and pay bills, and add or change services. Sherrard says that T-Mobile also can target customers with relevant banner ads while they’re using the app based on specific triggers, such as how close a customer is to an upgrade or if T-Mobile is hosting an event in his local market. “It’s about those moments,” Sells says. “You need to pick the right moments that are relevant to [customers].”
T-Mobile sees billing statements as another opportunity to enhance the customer experience. For instance, if a customer runs out of data one month, T-Mobile will recommend a plan that may be more suitable for that customer’s usage right in the statement, Sherrard says. It can also inform customers about new devices and upgrades via statements.
In addition to spreading its Un-carrier message through customers’ devices and statements, T-Mobile tells its story through television. Sherrard says the objectives of its TV advertising are to “build a brand over time and drive traffic today.” T-Mobile aims to achieve these goals by showing humorous spots about what vexes customers. For example, to promote JUMP the company produced a series of TV spots in which former Saturday Night Live cast member Bill Hader experiences the pains of being unable to upgrade to a new device due to contracts, including cutting his finger on a broken screen and missing his girlfriend’s emergency text messages. “We grounded it in consumer insight, the voice of the consumer, and stuff that really happens,” Sherrard says with regards to the Hader spots. “It was dramatizing real pain points.”
Likewise, in T-Mobile’s “Catch Jeremy” spots, a pair of enraged parents complain about the high phone bill their son is racking up abroad to illustrate the pain of paying international roaming fees. Both spots were created by Publicis Seattle.
T-Mobile extends these TV experiences to other channels. For instance, consumers could help Jeremy’s parents locate their son by following his Twitter handle for clues, like tweeted pictures. Consumers could then visit catchjeremy.com to receive more clues, map out where Jeremy was last spotted, and guess his location for the chance to win a $20,000 check, a trip for two to up to five countries, or Samsung devices. Consumers could also see a running total of Jeremy’s rising phone bill.
But not everyone’s a fan of the telecom’s ads. On September 17, 2013, the Council of Better Business Bureau’s National Advertising Division (NAD), an investigative unit that reviews ads for accuracy, issued a release advising T-Mobile to modify or discontinue network speed claims it had made in comparison to AT&T. In its ads T-Mobile claimed to have 50% more bandwidth than AT&T. These claims were based on a comparative analysis in which T-Mobile reviewed peak period and nonpeak period download speeds across T-Mobile’s Universal Mobile Telecommunications System (UMTS), High Speed Packet Access (HSPA), and HSPA+ network and compared them to AT&T’s network.
Although NAD found that T-Mobile’s UMTS, HSPA, and HSPA+ network were all less likely to slow down due to congestion than AT&T’s network, the organization deemed the analysis “flawed” because the comparison didn’t include AT&T’s LTE Network, according to the release. NAD recommended that T-Mobile terminate its claims about having “more bandwidth” and “less congestion” than AT&T or adjust its comparative network claims by further explaining when and where consumers could expect to experience better performance. T-Mobile reestablished the basic premise of those claims in its advertisements and, aside from changing a few words, the brand is “exactly where it started,” Sherrard says. “We think our ads are truthful and effective at communicating how we’re a better choice for customers,…that’s why we spend money doing that advertising.”
The future of T-Mobile
T-Mobile’s Un-carrier revolution has begun to turn the dial—albeit slowly. According to T-Mobile’s preliminary Q4 2013 results, the Un-carrier accumulated 1.645 million net customer additions, compared to 1.023 million in Q3 2013 and a loss of 32,000 in Q4 2012. In addition, the company experienced a branded postpaid churn rate of 1.7% for Q4 2013—consistent with Q3 2013’s rate and down from 2.5% in Q4 2012. But, according to the Technology Business Research Inc.’s (TBR) Q3 2013 “U.S. and Canada Mobile Operator Benchmark” report, T-Mobile’s approximately $6.7 billion in revenue in Q3 2013 trails all of its main competitors: Verizon Wireless ($20.4 billion), AT&T ($17.5 billion), and Sprint Nextel ($8 billion). Eric Costa, author of the report and analyst for TBR’s Networking and Mobility practice, says that T-Mobile also falls behind the big three in terms of U.S. subscribers. And although the wireless telephone service industry increased its American Customer Satisfaction Index (ACSI) score by 2.9% in 2013, T-Mobile’s dipped 1%.
As for 2014, Costa predicts that Verizon and T-Mobile will lead in net additions for the first half of the year, but that the Un-Carrier will still lag behind its competitors. “Overall, T-Mobile probably won’t take over the top spot in net additions from Verizon, but it’ll remain successful in growing its subscriber base and growing revenue—two areas that it has failed to [grow] for a long time,” he says.
Despite the subscriber and sales data, T-Mobile competitors have shown signs of intimidation. In January AT&T started offering T-Mobile customers a $200 credit when they switch to AT&T, and up to $250 when they trade in an eligible smartphone.
T-Mobile’s Legere seems unfazed by AT&T’s aggressive strategy: “This is a desperate move by AT&T on the heels of what must have been a terrible Q4 and holiday for them….” he said in an executive statement in response to the news. “Consumers won’t be fooled…nothing has changed; customers will still feel the same old pain that AT&T is famous for.”
And if T-Mobile fraternized with the enemy once, could it be willing to do so again? Some suggest yes. This past September T-Mobile’s CFO, Braxton Carter, told Reuters that a Sprint/T-Mobile consolidation would be the “logical ultimate combination.” In addition, The Wall Street Journal reported that Sprint was working on a possible bid for T-Mobile this past December. But when it came time for T-Mobile’s Sherrard to comment on the potential union, mum was the word. “I don’t speculate on what might happen,” he says.
But if there’s one thing Sherrard did make clear, it’s that T-Mobile’s revolutionary journey has only just begun. “I don’t think we’ll ever be done, quite honestly,” he says. “We’ve made great strides and it’s a good start, but it’s just a start.”
