T-Mobile execs explain move to unlimited data, potential for ‘radical simplification’ and cost savings

T-Mobile recently launched its T-Mobile One unlimited data plan. Credit: T-Mobile

T-Mobile executives said that the company’s new “T-Mobile One” unlimited data plan is selling well, and is part of the reason the company released its expected third-quarter subscriber additions earlier this week. Further, the executives hinted that the offering represents the “second phase” of T-Mobile’s Uncarrier push, and will allow the operator to significantly reduce its expenses.

“It’s going incredibly well. That’s one of the reasons we updated on how our quarter is going,” Mike Sievert, T-Mobile’s COO, said this morning during an appearance at the Goldman Sachs Communacopia investor conference, though Sievert didn’t provide any specific sales figures for the new plan.

T-Mobile said this week that it added roughly 753,000 net postpaid phone adds overall thus far during the third quarter and an additional 650,000 net prepaid customer adds. Both of those figures surpass its overall second-quarter results.

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Sievert also explained why T-Mobile tweaked its T-Mobile One plans with additional options, including a premium T-Mobile One Plus offering, shortly before launching the plans earlier this month.

“We get feedback,” Sievert said. “And there’s this loud 1 percent that said, ‘Hey, we don’t like these tethering buckets on this plan.’ And before launching it, we were actually able to change it and address that need. We took tethering to unlimited on the plan. We offered T-Mobile One Plus, which allow the ongoing high definition [video]. We offered day passes for high definition at $3 a day, and we actually doubled the international speeds.”

Importantly, T-Mobile executives also argued that the company’s network will be able to handle the additional traffic generated by more unlimited data users, partly due to T-Mobile’s launch of its Binge On service last year that zero-rates the data for customers from participating video providers. “We have a year’s worth of experience under our belt with our customers and our network, which gives us great confidence with what we can do with this [T-Mobile One] program going forward,” said T-Mobile CTO Neville Ray.

“It’s fascinating that the slope of growth of our network payload has slowed down since Binge On, while the rate of consumption of video has sped up,” Sievert added. “When you’re taking the 70 percent of the network consumption, which is video, making it three times more efficient to deliver, and giving it to people for free, fundamentally you’re giving them unlimited service.”

In his comments, Sievert also described T-Mobile One as a major effort by the carrier to redefine its business, with an eye toward reducing selling and customers acquisition costs. “This isn’t just rolling out a new offer,” Sievert continued. “I really think T-Mobile One is the second phase of Uncarrier because it is the beginning of a radical simplification of our offer. What we’re transitioning to is making our service a monthly subscription to the internet. … There’s real opportunity for our business, not only for our brand, but for running our business.”

Sievert explained that fully one-third of all calls to T-Mobile’s customer care call centers involve questions on a customer’s bill. With T-Mobile One, “What if there was no bill? What if there was no need for a bill, because everybody has one simple subscription and they’ve gone ahead and put it on autopay.”

(Interestingly, T-Mobile CFO Braxton Carter said that T-Mobile promotes its autopay service by cutting $5 off users’ monthly expenses, and that roughly 20 percent of the carrier’s customers use autopay. “Our aspirations are more to double that take rate,” he said.)

“What we’re really excited about is what Mike and his team are driving from a radical simplification standpoint of our value proposition,” Carter said. With T-Mobile One, “we can demonstrate very significant scale from an SG&A [selling, general and administrative expenses] standpoint, accreting to margins in the future.”

Carter added that a simple, unlimited data offering could also reduce the amount of time it takes T-Mobile to sign up new customers. “Think about the onboarding experience in our retail fleet,” he said. “If we can ultimately … streamline and even cut just 50 percent off the onboarding time, think about what that does to our cost structure. Think about what that does to the call center.”

“T-Mobile One might be the beginning of a product that’s simple enough that that product deserves to be bought and managed digitally,” Sievert said. “Because right now in our industry, across all four competitors, there’s no material amount of self-sales and self-care, and radical simplification has the opportunity to change that.”

“The era of the data bucket is over,” Sievert noted. “The idea that it [data] ought to be metered out by the megabyte is so outdated. And I’m curious how long our competitors will stay on the wrong side of this long-term trend.” Notably, Verizon’s Fran Shammo this morning reiterated the carrier’s aversion to unlimited data.

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Related articles:
T-Mobile reports 753K net postpaid phone adds so far in Q3
T-Mobile, Sprint pit new unlimited data plans against one another
T-Mobile tweaks new unlimited plan, adds premium offering

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