1 Thing T-Mobile's iPhone Test Drive Isn't Fixing

T-Mobile is counting on its new iPhone test drive to woo customers, but getting current customers to spend more should be the real focus.

Jun 24, 2014 at 9:41AM

Just 24 hours after T-Mobile (NASDAQ:TMUS) launched pre-orders for its iPhone 5s test-drive promotion, more than 12,000 potential customers signed up for the service. But T-Mobile's real goal is to get those people, and many more, to actually switch to the company and spend enough money on the network once they do.

T Mobile Iphone

Image from T-Mobile's latest un-carrier event. Source: T-Mobile.

Good news, but not great
In a recent blog post talking about the Apple (NASDAQ:AAPL) iPhone test-drive plan, T-Mobile Chief Executive Officer John Legere said, "More than 12,000 people have already signed up to start cheating on their carrier." The company's goal is to get one million people signed up for the test drive by the end of the year.

The new initiative allows potential T-Mobile customers to try out an iPhone 5s on T-Mobile's network completely free, for seven days. The company wants to allow people to test out the network for themselves to see how well it works near their home and work.

T-Mobile is hoping the combination of its 4G LTE network and the premium Apple smartphone will be enough to convince people they should sign up for T-Mobile's service.

But getting new users to join the network hasn't been a problem for the company as of late. In the first quarter of 2014 the company added 2.4 million new subscribers. The big problem is getting current users to spend more money once they join. 

Iphone

T-Mobile is letting potential customers test drive the iPhone 5s. Source: Apple.

Test drives aren't the fix
Aside from the subscriber growth in the first quarter of this year, T-Mobile posted a loss of $151 million, down from its profit of $107 million year over year. The drop comes as T-Mobile's average revenue per user, or ARPU, has been falling. Right now, the company's ARPU is down 8% year over year.

This means T-Mobile needs to get those test-drive customers to sign up for the network, make sure they buy that iPhone 5s, and also sign up for one of the company's more expensive unlimited high-speed data plans.

I wrote late last year that T-Mobile needed to sell more iPhones and increase ARPU, and this latest test drive could help do both, but it's still too early to tell. While the 12,000 pre-order number seems good, there's no clear indication as to how many of those will buy the phone and sign up for a plan.

Hopefully T-Mobile will be able to report numbers from the test-drive plan that actually benefit investors, but we'll have to wait for the company's next quarterly results for that. What investors need to see is the ARPU increase -- there's no getting around that. If the average revenue per user continues to drop, or stays relatively flat, there will be no amount of iPhone test drive figures that can make up for it. T-Mobile does a fantastic job of convincing people to join its network, now they need to take that same creativity and use it to convince people to spend just a little more once they sign up.

Leaked: Apple's next smart device
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Chris Neiger has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of 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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