Uncarrier 5 Could be Another Thorn in the Side of T-Mobile's Competitors

T-Mobile has been leading the cellphone industry in subscriber growth. Will Uncarrier 5 continue this trend?

Jun 18, 2014 at 5:00PM

Fans of T-Mobile's (NASDAQ:TMUS) simplified wireless pricing -- and fans of T-Mobile stock -- should have more reason to cheer tonight as the company unveils the newest facet of its Uncarrier strategy. Outsider T-Mobile CEO John Legere has been disrupting the wireless industry with a string of headlining events to outline the company's strategy to beat the likes of industry leaders Verizon (NYSE:VZ) and AT&T (NYSE:T) in adding subscribers.

As a result of the T-Mobiles aggressive pricing strategy, the company netted 6.2 million new subscribers in the last four quarters, while Verizon and AT&T added 1.7 million and 2.7 million fewer subscribers, respectively.

But what could be on the Uncarrier 5 agenda tonight and what does this mean for subscriber growth? To answer this question, it is important to understand what T-Mobile has done at previous Uncarrier events to this point.

Uncarrier events changed the landscape
One of T-Mobile's boldest moves was to announce the company was doing away with standard two-year contracts at Uncarrier 1 in early 2013. T-Mobile set the industry precedent here, which was a sticking point for wireless consumers locked up in long-term contracts.

At Uncarrier 2, and separately at Uncarrier 3, the company announced its Jump Program and unlimited international data and texting. Jump allows subscribers to easily upgrade handsets more frequently than every two years.

In line with Uncarrier 1's significance, T-Mobile announced at Uncarrier 4 -- held at CES -- in January that the company was fronting the bill for early termination fees for those exiting contracts with competitors.

At each step along the way, Verizon and AT&T quickly answered T-Mobile's moves with similar programs of their own such as Edge from Verizon and Next from AT&T.

What's left?
While it is unclear exactly what T-Mobile will announce this evening, whatever is announced will likely customer friction. Some are speculating the company will introduce simplified pricing plans inclusive of tax, which averaged 17.2% of the total monthly tab in 2013. T-Mobile could even cut prorated charges to ease the understanding of monthly bills.

The end goal
Consolidating the industry is the way for T-Mobile can remain competitive. Legere recently stated "When you play this game over five years or so, there are capital requirements and ways to catch up with the big guys...We've always said, at some point, in terms of the industry, it's a consolidation game."

T-Mobile is not close to achieving scale yet. Its operating margins stand at 2.7% for the last twelve months, while Verizon and AT&T both surpassed 30%.

T-Mobile is also a distant third place contender in the wireless industry with a total of 49 million subscribers, far below that of 122 million and 116 million subscribers for Verizon and AT&T, respectively.

Foolish final thoughts
T-Mobile should continue to outperform competitors in adding subscribers and this trend is likely to continue as the company disrupts the wireless cell phone industry. In whatever form it takes, Uncarrier 5 will be another step in the right direction for T-Mobile to continue gaining market share by appeasing its customers.

The event may also set another precedent where competitors will follow suit with their own offerings to stave off subscriber losses.

In both cases, T-Mobile is in an enviable position driving the industry while others sit and react.

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Nathan Hamilton owns shares of Apple. The Motley Fool recommends Amazon.com and Apple. The Motley Fool owns shares of Amazon.com and Apple. 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.

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