T-Mobile US' (NYSE:TMUS) latest "uncarrier" move, to offer new and existing customers rollover data, could improve its business on the margins and boost its brand image, but it is unlikely to have a major impact or provoke a reaction from competitors, according to financial and industry analysts.
T-Mobile's new plan is called "Data Stash" and will be available in January to T-Mobile subscribers on an eligible postpaid Simple Choice plan who have purchased at least 3 GB of LTE data for smartphones or at least 1 GB for tablets per month.
In addition, T-Mobile said it will give every customer with Data Stash 10 GB of LTE data for free. T-Mobile said that customers' data won't start carrying over until after the free 10 GB runs out. The free 10 GB is available until Dec. 31 2015. The company said it is looking to bring the feature to prepaid customers soon. T-Mobile said customers will lose their unused data after one year from when it is deposited into their Data Stash.
In a research note, Jefferies analysts Mike McCormack, Scott Goldman and Tudor Mustata wrote that the plan is a "reincarnation of the once popular rollover minute plans offered by AT&T (formerly Cingular), possibly driving higher gross add volumes. We see little downside for the company as T-Mobile does not charge overage fees and narrow data buckets suggest customers may already be appropriately allocated. We do not anticipate an immediate response from AT&T or Verizon (NYSE: VZ)."
The Jefferies analysts don't expect T-Mobile's average revenue per user to decline much as a result of the plan. They noted that "the median T-Mobile customer uses 2.8 GB of data and those on 4G LTE use more than 4 GB, implying that customers on 'Data Stash'-eligible plans are likely using most of their allotment."
However, the Jefferies analysts also think the offer could revive "a popular and well understood concept of rollover minutes, possibly driving higher gross add volumes from customers paying overage fees at competitors. We believe it is unlikely that AT&T and Verizon will respond given potential ARPU headwinds, and the move could also increase pressure on larger peers to better manage the trade-off between ever-growing data buckets and future growth."
Other carriers are already getting into rollover data. Last month regional carrier C Spire Wireless announced it would bring back the rollover concept and apply it to unused data instead of voice minutes. Specifically, C Spire will let customers carry over unused data to the next month.
T-Mobile's Data Stash could also aid the carrier's churn, the Jefferies annalysts wrote, since it is unlikely that T-Mobile customers would "leave for single line teaser plans from AT&T and Verizon. Sprint (NYSE: S) could match the offer, but we see the company's network issues as making such offers less competitive."
Current Analysis analyst Lynnette Luna said that the offering "isn't a huge differentiator for T-Mobile as the carrier never charged overage fees to begin with, although it throttled data speeds." However, she noted it "will strengthen T-Mobile's value carrier image as it allows users to realize the full worth of their data service cost, especially as T-Mobile continues to strengthen its network coverage."
Luna noted the "Data Stash" idea "plays on customer fears of using too much data and serves as another strong marketing salvo--especially during the critical holiday selling season--against AT&T and Verizon that rely on their customers buying bigger buckets of data to avoid overage fees. If this is successful and delivers customer value, one possible downside for T-Mobile is the potential for users to consider the carrier's low-end options now that they can save their data."
Wells Fargo analyst Jennifer Fritzsche was more pessimistic in her assessment of the offering. In a research note, she wrote that while she gives T-Mobile credit for the "continued uniqueness of its offering and acknowledge it's another headline to rattle the industry, at the heart of this offering, we believe, is essentially what Sprint is already doing with unlimited data."
"In our view, Sprint's message is a lot easier and less confusing to potential customers," she added. "In regard to the two largest carriers and impact on them, a case could be made that T and VZ have already gotten ahead of this move by offering greater data in each of their buckets."
Additionally, she wrote, unlike the other three Tier 1 carriers T-Mobile does not let customers share data. "This is an important point to consider and is a disadvantage for TMUS, in our view," she said. "For example, if there is one heavy data user--this user cannot tap into the lower data users' data bucket. We believe this is a key differentiation that is somewhat unappreciated by the marketplace."
In terms of the actual name of T-Mobile's program, T-Mobile can't use the term "rollover" because AT&T actually still owns the rights to use the term, according to CNET. "We own equity in 'rollover' and we have for years," an AT&T spokesman told CNET.
T-Mobile said it never planned to use the term. "'Stash' is cooler," T-Mobile CEO John Legere said Tuesday on a conference call with reporters. "'Rollover' is such a 1980s term."
He added, "If you want to call it 'rollover,' that's OK."
- see this CNET article
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