How T-Mobile Plans to Attack AT&T and Verizon

Sometimes acting like you are bigger than you are can actually make you bigger.

Mar 11, 2014 at 11:12AM

Howard Stern and T-Mobile (NASDAQ:TMUS) CEO John Legere may operate in completely different businesses, but the phone company boss has learned a lesson from the radio shock jock.

No T-Mobile hasn't started spanking strippers or having its staff make phony calls. Instead the company -- through its CEO -- is taking shots at its bigger rivals. Stern -- when he was a much lesser-known personality working in local markets -- did exactly the same thing. The man now known to his fans as the "King of All Media" would identify the top DJs in the market he was entering and ruthlessly attack them on the air.  

Either the competitors themselves or the local media would pick up on the taunting and turn a one-sided fight into an actual war. Stern would immediately be elevated to contender status simply by being linked to the current leader as a competitor. Legere is doing exactly the same thing as he seeks to make T-Mobile a player in a field dominated by AT&T (NYSE:T), Verizon (NYSE:VZ), and Sprint (NYSE:S).

T-Mobile CEO gets aggressive

Legere took a shot at his competitors on March 7 in a press release announcing a pricing change for T-Mobile.

"In the mobile age, wireless data caps and overage fees are just this side of extortion," said Legere. "Take the basic plans from the Big Two with ridiculously low data limits that hit you with fat overages each month. It's like getting your data from the neighborhood loan shark and paying 100% interest when the bill comes due. It's the classic shakedown."

It's not the first time Legere has taken a shot at his rivals. By going after his competitors and not just offering an alternative but mocking the status quo, Legere is getting the media to pay attention. 

When Stern did that it inevitably ended in a funeral -- a live radio show where the controversial host mock-buried his competitor when Stern became number one in the market. Whether T-Mobile has any funerals in its future for competitors remains to be seen, but Legere certainly has made it feel like his team is in the game.

Where the cell phone industry stands

In the United States Verizon has about 31% market share, AT&T has about 27%, while Sprint and T-Mobile each have around 11%, according to Gary Kim, writing at The major challenge facing any carrier hoping to steal market share from the big two is that despite the many commercials attempting to get them to do so -- customers don't switch providers very often.

Parks Associates consumer data show that almost 50% of U.S. mobile phone service customers did not change providers over the last 10 years. "Fully half of the customer base virtually never changes providers, meaning that all switching behavior is concentrated on just half the total subscriber base," the research company reported .

Only 13% of subscribers switched three times or more in the last 10 years. 

"The real battle to shift consumer allegiance would be fought over about 13% of customers, disproportionately concentrated among prepaid accounts," the Parks Associates report said.

It's certainly possible T-Mobile can lure people who rarely switch, but it's less likely. That makes making an assault on the big two a daunting task that may benefit from Legere's big talk. 

Sprint may change the game

Sprint also wants to take on the big two, and one of its strategies is to buy T-Mobile. That merger is far from certain as T-Mobile may fight the move and federal regulators will look at it closely. Though the combined companies would still service fewer mobile subscribers than AT&T and Verizon, the FCC has been against the idea of more consolidation in the space, Geekwire reported. 

The Justice Department and the FCC have said, according to Geekwire, that they're happy with the number of players in the wireless market and don't really want to see it shrink from four to three major carriers.

"It is arguable that the industry has in fact become more competitive for the industry's top two companies, as #3 and #4 players Sprint and T-Mobile have strengthened their competing nationwide networks with ongoing buildouts and spectrum acquisitions (i.e., T-Mobile's acquisition of MetroPCS and Sprint's acquisition of Clearwire)," Goldman analysts told Geekwire. "This has enabled them to be more competitive vs. Verizon and AT&T in key urban markets than previously, a dynamic that could continue to keep a lid on industry margins near term despite a very high level of consolidation."

A Sprint/T-Mobile merger or acquisition may not change the aggressive nature of T-Mobile's attempt to compete, as Sprint Chairman Masayoshi Son has not exactly been kind in his description of the big two.

"Every time I make a business trip to the U.S., I am reminded how terrible connections are there," Son told the Wall Street Journal. "The U.S. has one of the world's highest mobile fees."

T-Mobile is on the right track

T-Mobile added more than 1.6 million customers in the fourth quarter of 2013 and a total of 4.4 million for the year. Sprint only added 682,000 new subscribers in the fourth quarter  and lost subscribers in two of the three previous quarters (finishing the year up slightly).

With its bold CEO who talks tough and commercials that clearly take aim at the big boys, T-Mobile has found a winning strategy to claw its way forward in the increasingly competitive mobile space. By acting like he deserves a seat at the grownups' table, Legere has baited his competitors to lower prices, change plans, and generally acknowledge T-Mobile as a player. 

That may not lead to a Legere movie, a book deal, or a funeral for AT&T or Verizon, but it should keep T-Mobile growing.

The smartphone war's best-kept secret

Want to get in on the smartphone phenomenon? Truth be told, one company sits at the crossroads of smartphone technology as we know it. It's not your typical household name, either. In fact, you've probably never even heard of it! But it stands to reap massive profits NO MATTER WHO ultimately wins the smartphone war. To find out what it is, click here to access the "One Stock You Must Buy Before the iPhone-Android War Escalates Any Further..."

Daniel Kline has no position in any stocks mentioned. He has been a Sprint subscriber since 1998. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers