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The Real Reason BlackBerry Ltd Is Cutting the Cord With T-Mobile

BlackBerry is severing ties with T-Mobile

Credit: BlackBerry

Have you ever tried disciplining children only to realize they really aren't taking you seriously? They might roll their eyes, walk off in a huff, or go back and do almost the exact same thing that got them in trouble in the first place.

I can tell you firsthand it's maddeningly frustrating, and I'm betting it's also exactly how BlackBerry Ltd (NASDAQ: BBRY  ) feels about T-Mobile US (NYSE: TMUS  ) right about now.

On Tuesday, BlackBerry announced it will not renew the license of T-Mobile US to sell BlackBerry products when it expires on April 25, 2014. BlackBerry CEO John Chen explained

BlackBerry has had a positive relationship with T-Mobile for many years. Regretfully, at this time, our strategies are not complementary and we must act in the best interest of our BlackBerry customers.  We hope to work with T-Mobile again in the future when our business strategies are aligned.

How did we get here?
It all started in mid-February, when T-Mobile raised some eyebrows by encouraging subscribers to upgrade to Apple's (NASDAQ: AAPL  ) iPhone 5s for $0 down, calling it a "GREAT OFFER for BlackBerry customers."

When Chen unsurprisingly responded in a blog post saying that BlackBerry was "outraged," calling the promotion "inappropriate and ill-conceived," T-Mobile CEO John Leger sarcastically took to Twitter with this:

Wouldn't you know it, but later that day, T-Mobile released a revised -- and carefully worded -- offer, telling customers to "Bring in your old, working BlackBerry and we'll give you $200 toward a new BlackBerry or any of our other state-of-the-art smartphones." In addition, anyone who chose to upgrade to a new BlackBerry Q10 or Z10 would receive another $50 off the purchase price.

Considering T-Mobile doesn't carry BlackBerry's latest models, and both the Z10 and Q10 were already nearly a year old, T-Mobile's revised offer made it crystal clear the "un-carrier" was still turning its back on BlackBerry. It should come as no surprise, then, that T-Mobile later confirmed the promotion led to at least a 15-fold increase in BlackBerry trade-ins, with 94% choosing to upgrade to a non-BlackBerry device.

Here's what BlackBerry is really taking away
Does BlackBerry have every right to be upset? Absolutely. After all, T-Mobile is brazenly trashing the struggling company, and what better way to voice your discontent than by severing ties. In effect, BlackBerry is really taking away what T-Mobile was primarily using as a promotional tool to herd customers toward BlackBerry's competitors.

But make no mistake... T-Mobile really didn't have much to gain from the agreement, anyway. It was obvious that T-Mobile wasn't interested in pushing BlackBerry's new devices, and even those using older BlackBerry products will eventually have to upgrade to something else

In the end, and unfortunately for BlackBerry, letting T-Mobile's license expire all but guarantees those eventual upgrades won't be to another BlackBerry device -- at least if those customers want to avoid the hassle of switching carriers. Judging by the 94% who recently chose to switch to something other than BlackBerry, it looks like the numbers will play out in T-Mobile's favor.

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Read/Post Comments (5) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 03, 2014, at 2:43 AM, jcdaris wrote:

    I'm guessing that the millions of IPhones T Mobile is stuck with and can't get rid of, as per the contract with apple has nothing to do with it..

    Do some research before you spew your opinion or tell us which crystal ball you're using...

  • Report this Comment On April 03, 2014, at 8:24 AM, greenember wrote:

    T-Mo is a a BYOD carrier, so if you want a BB10 on T-Mo, just order it online from somewhere else. There's a Z30 variant that works fine with all of T-Mo's frequency bands, so if you want it, it's out there.

  • Report this Comment On April 03, 2014, at 11:25 AM, TMFSymington wrote:

    @jcdaris, Any sources to back up your own research? I'd love to dig in.

    @greenember, Good point, though BlackBerry's old phones are still selling much better (well enough, at least, to justify that new BB7 device production run with Wistron). If BlackBerry really wants to win in devices over the long run, it needs to convince the broader market its new phones are worth choosing over the competition.

    Thanks for reading and Fool on!

    Steve (TMFSymington)

  • Report this Comment On April 04, 2014, at 11:25 AM, cbglobal wrote:

    I agree that T Mobile is looking at potential big iPhone losses. If iPhone 6 comes out soon, T Mobile may have to still buy up a lot of iPhone 5 that will be difficult to sell. It will be the free phone at TM's loss.

  • Report this Comment On April 05, 2014, at 8:02 AM, melegross wrote:

    Dispute the Apple haters here, and the Blackberry lovers. The trade in was predictable. Like. It or not guys, Blackberry is dead. Sales have been tumbling rapidly, and the edge of the cliff is near. T-Mobile was doing what could be expected. A trade in from the least wanted phone to the most wanted phone. Is it any wonder that 94% of Blackberry owners took up the offer? Not really.

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