LAS VEGAS--T-Mobile US (NYSE:TMUS) just upped the ante on its competition once again by announcing that it will pay up to $650 in early termination fees (ETFs) for customers that want to switch to T-Mobile from AT&T Mobility (NYSE:T), Sprint or Verizon Wireless (NYSE:VZ).
By getting rid of ETFs, which operators have used to prevent customers from leaving their two-year service contracts, T-Mobile is fundamentally changing the way the wireless industry does business. "We are going to take over this whole industry. These bastards are going to change or not. Either way we will still be highly successful," said T-Mobile CEO John Legere during an expletive-filled tirade at the company's media event here on the sidelines of the Consumer Electronics Show.
T-Mobile is particularly targeting customers on other carriers' family plans, which Legere called a "life sentence." Legere quoted a survey that he said found that 78 percent of families said they would switch wireless operators if someone would pay for them to do it.
However, according to Strategy Analytics, getting family plan subscribers to switch, particularly those on AT&T's Mobile Share and Verizon's Share Everything plans, is an uphill battle. A recent survey of mobile consumers conducted by the research firm shows that only 11 percent of family plan users are apt to churn, compared to 28 percent of individual users.
T-Mobile will kill ETFs starting tomorrow. According to Mike Sievert, T-Mobile's CMO, a family of four who switches from AT&T to T-Mobile could potentially save $1,880 over two years. "We will pay all of it," Sievert said, "every cent of a family's ETF."
"We believe that this move will likely help T-Mobile maintain share momentum despite AT&T now actively targeting T-Mobile," wrote New Street Research analyst Jonathan Chaplin in a note to investors. "We estimate that Un-carrier 4.0 would be modestly dilutive to margins."
In addition, Sievert said that T-Mobile will start making its devices available for zero down to qualified customers. Previously the carrier required initial down payments on devices of around $100. And the carrier will let customers trade in their used phones to get an instant credit, which they can then put toward a new device or their monthly service.
"We believe the trade-in cost will be offset by the resale value of the handset, but that ETF reimbursement could put some pressure on margins," Credit Suisse analysts wrote in a note to investors. "With a similar offer available to T-Mobile customers, we feel a reduction in churn could partly offset the ETF margin impact."
"We hosted a dinner with T-Mobile CFO Braxton Carter, CTO Neville Ray and Head of Corporate Strategy Peter Ewens," they added. "The tone of both management and investors was positive. Following the meeting, we feel comfortable that momentum is sustainable."
In typical T-Mobile style, the company is also offering to help customers "break up" with their existing carriers by providing pre-written letters to their existing wireless operators.
T-Mobile's "uncarrier" strategy appears to be working well. Legere also used the company's press event to provide some fourth quarter 2013 metrics: He said that in the fourth quarter T-Mobile added 1.645 million customers. Of those, 869,000 were postpaid. "This was our best quarter in eight years," Legere said, noting that of those 869,000 postpaid adds, 69,000 were tablets. That figure is notable considering the carrier just started selling tablets in the fourth quarter. (T-Mobile announced in the fourth quarter it would provide 200 MB of free data per month to tablet customers in an effort to get tablet users onto T-Mobile's network.)
T-Mobile also announced that its LTE network now covers 209 million POPs in 273 metro areas. According to T-Mobile CTO Neville Ray, who cited real-world, user-provided data from the Ookla Speedtest app, the company's network is the fastest in the nation, clocking average speeds of 17.8 Mbps. Ray also said the company launched wideband LTE in a 20 MHz by 20 MHz block of spectrum in Dallas--a configuration that likely will increase T-Mobile's speeds beyond that average.
To take advantage of that new spectrum, the company launched three new devices: the LG G Flex, the Samsung Galaxy Tab 3 and the Sony Xperia Z1s.
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Article updated Jan. 9 with additional analyst commentary.