T-Mobile US (NYSE:TMUS) today announced it will not charge any roaming fees to customers who travel to Mexico and Canada. The carrier also announced its preliminary results for the second quarter, recording 2.1 million net customer additions during the period--of which fully 1 million were customers on valuable postpaid plans.
T-Mobile's quarterly results show the carrier continues to enjoy noteworthy success in the wireless industry--T-Mobile said the period was its ninth consecutive quarter with over 1 million net new customer additions. And the carrier's new roaming announcement, covering Mexico and Canada, is its second "Un-carrier Amped" move and reflects T-Mobile's continued efforts to upend the wireless industry with aggressive promotions and pricing plans. T-Mobile's first "amped" announcement involved changes to its Jump-branded device-upgrade program.
T-Mobile took careful aim at AT&T with today's "Mobile without Borders" announcement, which the carrier said extends its coverage and calling across the United States, Mexico and Canada for all its Simple Choice customers at no extra charge. T-Mobile customers in the United States also can make unlimited calls to users in Mexico and Canada. T-Mobile cautioned though that more than half of customers' usage must happen in the United States for them to be eligible for the offering.
The roaming program improves on T-Mobile's existing roaming options, which cover more than 100 countries and offers unlimited calling, texting and 2G data speeds.
"After spending billions buying up Mexican telecoms, AT&T's CEO is promising 'the first seamless network covering Mexico and the U.S.,' something 'unique' that 'nobody else will be able to do for the consumer.' So much for that. They won't be the first. And they won't offer Canada for free," said John Legere, president and CEO of T-Mobile, in a typically fiery press release announcing the carrier's latest move. "We've done this the Un-carrier way--reaching across borders, partnering with leading providers offering the best LTE networks, creating a simple solution right now--then not charging a penny more for it."
After spending $4.4 billion to purchase Mexican wireless operators Iusacell and Nextel Mexico earlier this year, AT&T last month promised to spend $3 billion during the next four years to cover 100 million people in Mexico with LTE by the end of 2018. AT&T has said it is creating the "first-ever North American Mobile Service Area covering 400 million people and businesses in Mexico and the U.S."
AT&T said that starting this month its Mexican customers can take advantage of the company's "North American Mobile Service Area."
T-Mobile said starting July 15 every new Simple Choice customer will get Mexico and Canada included in their plan at no extra charge. Current T-Mobile Simple Choice customers can add the offering to their service by opting in online, by phone, or in-store--though they must sign up for a current Simple Choice offering (and therefore will have to forfeit any expired promotions they may still be receiving). The carrier said its business customers can also add coverage and calling across North America to their Simple Choice plan at no extra cost for the first 10 lines and only $1 a month for each line beyond that.
Interestingly, T-Mobile added that its Data Stash service will be available in Canada and Mexico later this year. The carrier said all of its Simple Choice services, including its Music Freedom offering that makes streaming music free to use, will work in Mexico and Canada.
In its announcement, T-Mobile also offered some statistics that it said show demand for free roaming. The carrier said 35 percent of all international calls and 55 percent of all international travel from the United States was to Mexico and Canada alone. For T-Mobile specifically, the carrier said 69 percent of all of its international calling minutes are placed to users in Mexico and Canada. The carrier also claimed that wireless operators raked in nearly $10 billion in global roaming charges at over 90 percent margins. "Meaning the carriers are lining their pockets with billions of dollars in inflated roaming fees--for coverage the Un-carrier now includes at no extra cost," the carrier said.
During a conference call with analysts to announce its offer, T-Mobile's Legere said the operator partnered with the "No. 1 and No. 2 carriers in both Mexico and Canada" for its roaming agreements. Rogers is the largest wireless operator in Canada by number of subscribers, and America Movil is the largest one in Mexico.
T-Mobile's Mike Sievert said the roaming agreements are reciprocal, potentially indicating that T-Mobile's roaming partners in Mexico and Canada will be able to offer inexpensive roaming into the United States to their own customers. Sievert and Legere did not provide financial details of the roaming agreements.
"We see mixed financial impact due to T-Mobile's and MetroPCS' tilt towards the Hispanic demographic and the potential cannibalization of existing Mexico specific international calling plans ($15 for T-Mobile Simple Choice postpaid, $10 for MetroPCS), which this free offer supersedes," wrote analysts from Jefferies in a note to investors this morning about T-Mobile's "mobile without boarders" announcement. "However because the offer is only available on new, more expensive Simple Choice plans, existing MetroPCS customers and customers on legacy Simple Choice plans will have to move up to more expensive plans to take advantage of the offer, offsetting the cannibalization risk. Furthermore, given that T-Mobile is one of America Movil's primary Tracfone partners in the US, the revenue loss could be offset by an agreement between the companies, limiting EBITDA impact."
As for T-Mobile's second-quarter performance, the carrier said its branded postpaid phone net customer additions reached 760,000 during the quarter, up 31 percent compared to the prior year, and its branded postpaid mobile broadband net customer additions were 248,000, down compared to last year, but up 85 percent sequentially. As for branded prepaid, T-Mobile said it added 178,000 of those customers during the quarter. The carrier said it lost 33,000 M2M customers during the quarter and added 919,000 MVNO customers. The carrier ended the period with 58.9 million total customers.
T-Mobile said its branded postpaid phone churn reached 1.3 percent in the second quarter, down year-over-year and flat compared with the previous quarter. "The year-over-year decrease in churn reflects ongoing improvements in T-Mobile's network as well as the increased customer value provided through Un-carrier innovations," the carrier said.
T-Mobile's second-quarter customer figures generally exceeded financial analysts' expectations.
Finally, T-Mobile also offered an update on its network expansion efforts in the United States. The carrier said it now covers 290 million POPs with LTE in the United States; the carrier has pledged to cover 300 million POPs with LTE by the end of this year. The carrier added that it now covers 185 markets with its Wideband LTE service, and 189 markets with its 700 MHz spectrum.
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Article updated July 9 with additional information from T-Mobile