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

BlackBerry just announced it will not renew T-Mobile's license to sell its products. Here's why T-Mobile had it coming (but still doesn't care).

Apr 2, 2014 at 8:00PM

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 (NASDAQ: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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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

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