T-Mobile Free Music Streaming Is Latest Shot in Mobile Phone War

The company, which has been trying to differentiate itself from other mobile phone carriers, has found another way to do so.

Jun 20, 2014 at 10:50AM

T-Mobile (NASDAQ:TMUS) has spent the last two years zigging while its mobile phone competitors zag. CEO John Legere has been vocal about his desire to disrupt the market and break from the industry norm.

Under its "Un-carrier" marketing strategy, it has changed how its customers upgrade their phones, offered to pay early termination fees to people who switch from other carriers, and lowered prices in general. Additionally, instead of surprising customers with data overage charges, T-Mobile lets users know before they hit the wall, giving them the choice of buying more or getting throttled to a slower speed. 

Now the company is attempting to tweak its rivals again by offering unlimited music streaming to its customers. While not quite the same as offering unlimited data, making streaming music free and not having it count toward the data allotment will have the same effect for many people. Using the various streaming music services may not be as big a data drain as watching a movie, but heavy users can eat up their allotment quickly. This plan allows users to save their data for video, Internet use, or whatever else they might need.

This move comes at a time where other mobile phone carriers are looking to rein in data use. AT&T (NYSE:T) has begun throttling its unlimited customers after 5GB of data use in a month and Sprint (NYSE:S) has implemented a plan where it throttles its heaviest data users at certain times. 

Offering free streaming music continues T-Mobile's efforts to take some of the uncertainty out of mobile phone costs. Customers already know their bill won't vary each month and now they don't have to monitor their music and conserve data. The offer simplifies the process, and it could lure heavy music consumers to make the switch.

What is T-Mobile offering?

T-Mobile's Simple Choice customers (the company's basic plan) will now be able to stream all the music they want from popular streaming services, including Pandora (NYSE: P), Rhapsody, iHeartRadio, Apple's (NASDAQ: AAPL) iTunes Radio, Slacker, and Spotify. Music services from T-Mobile partners – Samsung's (NASDAQOTH: SSNLF) Milk Music and the forthcoming Beatport music app from SFX – will also stream without data charges. 

Other carriers have offered phones with limited-time free music streaming from a single partner but none has made such a broad array of music apps available for free streaming. T-Mobile CEO and President John Legere, as he likes to do, used the announcement as a way to tweak his rivals.

"As a committed music freak, I'm personally outraged at the way the other guys are using the music you love to lure you into over-priced plans with sweet 'promotional offers' that quickly roll into higher prices or trigger those absurd overage charges," said Legere. "Music should be free of all that. Music should have no limits. So, beginning right now, you can stream all you want at T-Mobile from all of the top music services – data charges do not apply."

Will it work?

People like streaming music but running into data overages is a concern. According to a poll conducted by CivicScience of U.S. wireless users, 37% of people say they avoid streaming on their phones – the majority out of fear that they will use up their data and run into overages.

This should help T-Mobile continue the roll it's been on since launching Un-Carrier in March 2013. The company added 2.4 million customers in the first quarter, up from 579,000 a year earlier.

Making music streaming free could help it bring in customers -- especially with the company being willing to pay early termination fees to make it easy for people to switch without paying a penalty.

T-Mobile's music strategy could drive other providers to set aside other popular apps from data caps, IDC's Carrie MacGillivray told USA Today. "They continue to disrupt the mobile services landscape with out-of-the-box thinking." 

In a business where the providers have long had an adversarial relationship with their customers, T-Mobile is presenting itself as a hero in a world of villains. Legere has carefully built an image as the guy who stands on the side of the customer -- the man willing to forego short-term profits to build a better long-term relationship. That's a tough line to continually walk as something small -- like a price increase -- can lead to people feeling betrayed, but it is working for now.

Offering unlimited music streaming without raising prices should keep current customers happy and be a major enticement for people undecided on a carrier. If the other mobile phone companies choose to not follow T-Mobile, the company should continue to dramatically increase its user base. 

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Daniel Kline is long Apple. He is a Sprint customer who pays for unlimited data mostly so he can stream music. The Motley Fool recommends Pandora Media. The Motley Fool owns shares of Pandora Media. 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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Jun 12, 2015 at 5:01PM

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