The Real News Behind T-Mobile's Latest Move

T-Mobile will pay customers' early termination fees from rival carriers, but the move may not be enough.

Jan 9, 2014 at 1:05PM

At the Consumer Electronics Show yesterday, T-Mobile (NASDAQ:TMUS) officially announced its latest uncarrier move by launching a plan to pay the early termination fees for families switching from AT&T (NYSE:T), Verizon Communications, or Sprint to T-Mobile.

For T-Mobile investors, this latest plan may be another smart move, but the real news is how many new subscribers the company added in the fourth quarter.

Source: T-Mobile

Terminating the status quo
Last year T-Mobile shook up the U.S. carrier market with its upfront pricing, lack of phone subsidies, free tablet data, and free international roaming. With its latest move T-Mobile will pay up to $650 per line -- with an eligible phone trade-in -- in early termination fees to customers who switch their plans from the top three carriers to T-Mobile. The incentive includes up to $300 for a device trade-in credit and up to $350 to cover the early termination fee from AT&T, Sprint or Verizon.

Aside from being a way to make headlines, T-Mobile is in the middle of an all out fight to grab customers away from its rivals. T-Mobile is the nation's No. 4 carrier, and has been battling back form years of subscribers losses.

T-Mobile has made competitors like AT&T nervous, and AT&T just launched its own plan to steal T-Mobile customers last week by paying them up $450 to switch to their network. That may or may not have lead T-Mo's CEO John Legere to crash AT&T's party at the Consumer Electronics Show earlier in the week.

More than just hype
While T-Mobile has certainly kept the U.S. wireless industry interesting with its latest moves, the bigger picture is that the company just released preliminary Q4 numbers that show significant customer growth. 

T-Mobile reported that it grew its coveted postpaid subscriber base by 869,000 in Q4 2013, which is up from a loss of 515,000 postpaid subscribers year over year. That's in addition to the 1.3 million postpaid subscribers it added in the previous two quarters. T-Mobile's past three quarters of postpaid subscriber growth prove that the company's initiatives are more than just publicity stunts -- but there's still lots of work to be done

In Q3 2013, the company had a loss of $36 million, more than the $16 million loss from the previous quarter. While T-Mobile has made significant additions to its network and customer base over the past year, its average revenue per user for postpaid subscribers fell by $1.40 to $52.40 in the third quarter; T-Mobile hasn't released the official net income numbers for Q4 yet. At some point -- and sooner rather than later -- T-Mobile needs to get its ARPU up while it continues to boost postpaid subscribers.

In the long term, T-Mobile's future may depend a possible merger or acquisition and the additional postpaid subscribers is a great way to make the company more alluring to buyers. Sprint is reportedly interested in purchasing the company, and DISH Network may be looking to make a bid as well. The next few months may be an interesting time for T-Mobile investors as more details of these possible deals emerge. For now, investors should view T-Mobile's latest customer growth and new incentive plan as the right moves for growing the company If Sprint or DISH Network does want to buy T-Mobile, it's in the carrier's best interest to have the most customers as possible before that day comes.

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