2013: T-Mobile's Year of the Un-Carrier

To say that T-Mobile (NYSE: TMUS  ) has had a monumental year would be an understatement. One completed merger, a massive un-carrier marketing launch, a full restructuring of monthly plans, spectrum speculation, a second stock offering, and an ambitious countrywide LTE rollout that outpaced its expected launch date -- not to mention the stock price is up 40% year to date.

It's worth going through the company's past 12 months, not just because of how they've affected T-Mobile, but because the company's decisions are changing the U.S. wireless carrier landscape.


Source: T-Mobile.

The new T-Mobile
Back in March, T-Mobile kicked off the first phase of its un-carrier marketing blitz, dropping phone subsidies from its plans, ditching annual service contracts, and launching its 4G LTE network in seven markets. The company's president and CEO, John Legere, said at the time, "These bold moves serve notice that T-Mobile is canceling its membership in the out-of-touch wireless club."

Source: T-Mobile.

The shift in plans and contracts, brought some skepticism, though. Washington State Attorney General Bob Ferguson said the no-contract talk was deceptive because customers would still have to sign a contract to pay for new phones. The result led T-Mobile to have to agree to let users who signed payment contracts get out of their agreements within the first month if they were confused by the company's marketing. But since then, the skepticism surrounding T-Mobile's plans seems to have subsided.

In May, T-Mobile officially completed its merger with MetroPCS, which helped it achieve a customer base of more than 40 million, and added some much-needed wireless spectrum as well. The merger also officially made T-Mobile a publicly traded stock, which has fared better than its rivals over the past 12 months.

Competing for more customers
Overall, T-Mobile expects to finish 2013 with 1.6 million to 1.8 million total branded net subscriber additions for the year. The increase can be attributed to several factors, including the MetroPCS merger, the low-cost smartphone plans, and the company's expansion of its 4G LTE network. At the beginning of 2013, T-Mobile set a goal of covering 200 million people on its LTE network by then end of the year, and it met that goal a few months early. T-Mobile told CNET in October that it will end 2013 covering about 205 million people on its LTE network, and plans to expand coverage to at least 225 million people by the time its current plan is finished.

Source: T-Mobile.

But that doesn't meant T-Mobile is done building out its network. The company held a second stock offering in November and raised about $2 billion to put toward a possible wireless spectrum purchase. A few days later T-Mobile sold another $2 billion worth of senior notes. While T-Mobile can use the money any way it wants, the company is rumored to be in talks with Verizon Communications to buy up some of its wireless spectrum.

But one of the biggest changes this year came not to T-Mobile, but possibly from what it's been doing. Earlier this month, AT&T (NYSE: T  ) announced that it also wanted to move away from subsidized phones and offer smartphones at full cost with no money down and free financing, which is similar to some of T-Mobile's plans. AT&T customers who have unsubsidized phones or bring their own devices will pay up to $15 less per month on the new plans, an effort to compete more directly with T-Mobile's upfront and low monthly pricing.

AT&T's move shows that T-Mobile has hit on something that resonates with wireless customers, and with the company expanding its network coverage and speeds, T-Mobile's influence could continue to grow.

Foolish final thoughts
In the third quarter of this year, T-Mobile added more than 1 million net subscribers, with 643,000 of those being branded postpaid phone net additions. That was the biggest postpaid net customer gain of all the carriers for the second straight quarter, and much higher than AT&T's 363,000 over the same period. 

The company also managed to reduce its customer churn rate this year, dropping to just 1.7% in Q3, down from 2.3% year over year. But one thing investors should continue to watch is T-Mobile's average revenue per user. In the third quarter of this year the ARPU was $52.50, down from $57.35 the same time last year. Investors obviously don't like to see that number go down.

T-Mobile expects ARPU to level off in the second half 2014, so investors should keep an eye out on whether the company is able to actually make that happen. But overall, it seems T-Mobile's un-carrier marketing, along with its upfront pricing plans, have created a strong contender in the wireless carrier space, and investors should be pleased with the company's overall strategy and stock price trend over the past 12 months. With more spectrum and network coverage on the horizon, 2014 may bring even more good news for this former dark horse.

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