On the same day T-Mobile announced its “Forever Upgrade” promotion with the release of Apple’s iPhone 13, EVP and CFO Peter Osvaldik singled out Samsung for falling short on the supply chain front.
Operators are rarely critical of specific suppliers, either on the handset side or infrastructure, in public. But Osvaldik took the opportunity during a BoA Securities investor event to lambast Samsung.
Compared with some other carriers, T-Mobile’s customer base historically has skewed more toward the mid- and higher-end Samsung devices, and “Samsung has really fallen behind the eight ball relative to other OEMs on the global supply chain issue,” he said.
Samsung discontinued the Note device, which “many of our customers just loved,” he said, adding that the S-Series smartphones are in “very short supply.”
Other operators with a more Apple-oriented customer base are probably likely to be less affected, he noted.
“A lot of our customer base are also very significant Samsung lovers,” so T-Mobile probably saw more of the supply chain issues there. It’s currently not affecting T-Mobile’s postpaid net add guidance for the year, but it’s keeping a close eye on the situation.
Everyone also is closely watching what happens with the next iPhone cycle, which kicked off on Tuesday with all the major phone operators launching new iPhone promotions.
T-Mobile’s Forever Upgrade is a new initiative that gives customers the chance to trade in an eligible smartphone for a new iPhone model with 5G. Every two or more years, they can upgrade to the latest iPhone and get up to $800 off. It comes after AT&T launched its aggressive iPhone promotion last year, giving steep discounts to new and existing customers who want the latest Apple device.
Network on track
Speed is probably more of an issue for T-Mobile than others when it comes to maintaining its lead in 5G from a network perspective, noted BoA Securities analyst Dave Barden. In that regard, T-Mobile is not experiencing any supply chain delays right now, Osvaldik said. “I think that’s the advantage of being a first mover” and President of Technology Neville Ray and his team securing multi-year agreements with the carrier's most significant vendors, he added.
“We’re off and running at the pace that you would expect of Neville and his team and not seeing any supply chain issues on that front,” he said.
As for home broadband, where T-Mobile and other carriers are using fixed wireless access (FWA) technology to compete against cable, Osvaldik acknowledged that sometimes demand did exceed supply. However, “we’re already seeing increasing supply there as we head into the second half,” he said. “We feel really good about our momentum on the home broadband side of the house.”
T-Mobile still expects to meet its FWA subscriber target by the end of this year.
“The demand that we’re seeing puts us on track” to meet that target, he said. It’s tracking average download speeds in the range of 100 Mbps and sees the potential to increase that as the network build continues.
T-Mobile already is getting great third-party recognition, including from PCMag, where readers awarded the T-Mobile Home Broadband product higher than the cable offers. “We’re seeing great demand across that product,” he said, reiterating the goal of hitting 7 million to 8 million customers by the end of 2025.
Walmart for the rural play
Speaking of T-Mobile’s recent distribution agreement with Walmart, the CFO said it turns out to be very cost-effective because in a lot of these places, it might not make a lot of sense to have its own direct company-owned store given the size and population density, but it may make a lot of sense to use a partner like Walmart.
“Now that we have the size and the scale of the combined company, I think the economics and the rationale makes maybe a lot more sense than it did for stand-alone T-Mobile,” he said. “That’s a lot of, I think, what’s driving the distribution and the partnership and really looking forward to that.”
Barden noted it’s a very expensive channel to use and asked if T-Mobile was able to negotiate a good deal this time around or just settle with the old-school idea that it’s going to cost a lot to sell a phone inside Walmart.
Osvaldik said he isn’t going to reveal the terms of the arrangement. But “we do things that we believe are accreditive” from a distribution perspective. “Walmart is a very established brand, particularly in rural areas,” he said. “That’s something that can benefit us as we look to enhance distribution” and go after for potential significant growth.
Osvaldik said he’s proud of what T-Mobile has seen in postpaid account growth, including in the second quarter. “We saw significant quarter growth in T-Mobile for Business,” which is one of the focus points for growth opportunities.
All of this is occurring in a period where they knew they would have heightened churn as they go through the integration of Sprint customers.
“We knew we would be carrying around the highest churn in the industry as a result of that highest-churning [Sprint] base, and of course, that’s mitigated by the fact that we’ve seen the lowest churning base in the industry on our Magenta [T-Mobile] brand,” he said. “But we’re working through the integration and bringing the full value proposition and power of this network … to the Sprint customers.”