Proof That T-Mobile US Inc. Has Started a Wireless Revolution

T-Mobile kicked off its Uncarrier ways last year, and has made significant progress shaking up the industry. Adoption of early smartphone upgrade plans continues to soar.

Jun 7, 2014 at 12:00PM

Early last year, T-Mobile's (NASDAQ:TMUS) launched its Uncarrier crusade against its domestic rivals. The first part of its Uncarrier strategy was to eliminate two-year service contracts in favor of installment plans. On top of that, T-Mobile introduced a new program that allowed for frequent smartphone upgrades, and T-Mobile Jump was born.

While the math doesn't necessarily work out favorably for most users, the other carriers all inevitably jumped on the bandwagon. Within a matter of months, AT&T (NYSE:T) launched Next, Verizon (NYSE:VZ) rolled out Edge, and Sprint introduced Easy Pay. These early upgrade programs have soared in popularity in recent months, according to a recent study by NPD.

Enrollment in these plans has jumped from 7% in September to 31% by the end of the first quarter. However, some consumer confusion persists, and NPD believes that carriers have an opportunity to further spur adoption if they work harder at consumer education. The structures vary by carrier, which makes comparing them slightly intimidating.

Regardless, early upgrade plans are absolutely having an impact on the industry. Just this week, AT&T said it now expects second-quarter postpaid subscriber net adds to top 800,000, which would represent its biggest gain in almost five years. Smartphone sales through its Next program have been on the rise and are expected to comprise half of smartphone sales. Half of Ma Bell's postpaid smartphone subscribers are now on Mobile Share Value plans that involve no subsidy.

Verizon said last quarter that Edge helped boost EBITDA to the tune of $165 million because of lower subsidy expense. That helped Big Red's EBITDA margin by around 90 basis points. Verizon has been the most resistant to caving to the pricing pressures that T-Mobile is applying, but eventually it has to play ball if that's where the industry is heading.

Despite cutting prices in February to match AT&T and T-Mobile, Verizon CFO Fran Shammo said in May that the company would not "overreact" to any competitive pressures since there's no going back. It's much easier to lower prices than it is to raise them, after all.

The rising adoption of early upgrade plans may potentially benefit smartphone vendors. While they should become somewhat more price sensitive since the full retail price can cause sticker shock, the whole point is to facilitate more frequent upgrades overall. That could very well translate into higher unit sales.

The subsidy model has been in place for over a decade and done the industry a lot of favors. It's also not easy to get rid of, as several European carriers like Vodafone Spain and Telefonica experienced a couple of years ago. The key difference this time around is that U.S. carriers aren't asking consumers to quit subsidies cold turkey; they're offering an alternative in the form of installment plans.

T-Mobile continues to make waves and is even planning on hosting an Uncarrier 5.0 event later this month. What does the Magenta carrier have up its sleeve next?

Are you ready for this $14.4 trillion revolution?
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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.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

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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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