Can T-Mobile's Free High-Speed Data Be Successful?

T-Mobile's newest marketing program is both clever and potentially valuable. But will it make a difference to Magenta's subscriber counts?

Aug 23, 2014 at 8:00AM

Source: T-Mobile.

T-Mobile US (NASDAQ:TMUS) CEO John Legere has never been one to mince words. The colorful executive shot another verbal broadside at Sprint, paired with an aggressive incentive program. Other carriers, and especially Sprint, have been giving their best deals to outsiders forever, while leaving loyal customers empty-handed. So existing T-Mobile subscribers who bring a poor, suffering Sprint (or Verizon or AT&T) subscriber over to Magenta, well, they are due for a nice reward.

T-Mobile users who refer a new customer to the service will receive a full year of free 4G data service. Not only that, but the new customer will also enjoy the same incentive. If you've already qualified for this reward once, you're not getting another year. But you do get a $10 credit to your monthly bill for another year.

This sounds like a great recruitment program... but will it work?

What is this program really about?
First, let's get the most obvious point out of the way: This is really not about rewarding existing customers, and all about roping in more subscribers.

The big hope is to convert T-Mobile's 50 million wireless customers into a low-cost recruitment force. Word-of-mouth marketing is a powerful force -- assuming that the product or service that's being sold actually inspires a positive attitude. Throwing up to $30 of monthly perks into the mix could certainly get some good feelings going, and T-Mobile will also reimburse the new customers for up to $650 of Sprint, AT&T, or Verizon cancellation fees.

With a total of two years of free data service and a hefty cancellation reimbursement allowance, T-Mobile's costs seem to rack up very quickly. Don't forget that the whole package needs to be marketed, as well -- neither billboards nor direct mailings are free.

However, the organic nature of this program makes it a terrifically targeted campaign. The cost per gross addition will almost certainly be higher than the $320 per new subscriber that T-Mobile reported in 2013.

But there will be less wasted effort and fruitless advertising involved compared to the regular "megaphone in the shopping mall" approach. Plus, T-Mobile must be banking on the true value driver behind incentive programs and gift cards. Many of these incentives will simply never be claimed.

For example, forty percent of Americans who receive a gift card just never use it for anything

T-Mobile has set up a fairly sweet little promotion here. If nothing else, the company may get some people to try its service just for the free swag and lack of long-term commitment. There are no guarantees that these curious customers will stick around, but it's a foot in the door. Every journey of a thousand miles begins with the hardest step.

Free cash doesn't always help, believe it or not
Unfortunately, incentive programs don't always work. In fact, they often fail outright. For example, when Microsoft (NASDAQ:MSFT) rebranded its Live Search service as Bing in 2009, the new service was paired with cash incentives for actually using its online shopping tools. But that program never gained traction, and was cancelled in 2010.

Bing Cashback was quickly revamped, renamed, and relaunched as Bing Rewards. This time, you were able to get paid for buying nothing and simply doing your regular online searches on Bing. This version is still around four years later; but has it made a difference to Bing's market share?

According to search market researcher ComScore, Microsoft's search tools have indeed gained some ground since the summer of 2010, rising from 11% to 19% of the U.S. search market. 

But these gains have not stolen any search action from market leader Google (NASDAQ:GOOG)(NASDAQ:GOOGL). Big G also rose during this period, reaching a company-record 67.5% share this spring.

Microsoft has largely been siphoning search users away from search partner Yahoo!, which actually powers most of its web searches with Bing anyway. 


The Foolish takeaway
Even when incentive-based marketing programs do work, they're rarely huge slam-dunk wins. Coca-Cola (NYSE:KO) claims to have the largest online consumer promotion program in its long-running: My Coke Rewards.

But My Coke Rewards has just 17 million registered users for a company that ships more than 20 billion cases of soda every year. That's a vanishingly small promotional reach, despite the dead-simple process of collection points for everyday purchases.

In other words, I don't expect T-Mobile's subscriber counts to spike sky-high based on this marketing program. It remains a clever and reasonably effective recruitment booster, but it's not a game changer like deep-discount handset prices, or proven top-notch network quality can be.

John Legere's colorful barbs for "arrogant" and "indifferent" sector rivals are always fun to read, but this particular promotion doesn't seem likely to move T-Mobile's needle. And I say that as a longtime T-Mobile customer myself.

Leaked: Apple's next smart device (warning, it may shock you)
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!

Anders Bylund owns shares of Google (A shares). The Motley Fool recommends Coca-Cola, Google (A shares), and Google (C shares). The Motley Fool owns shares of Google (A shares), Google (C shares), and Microsoft and has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola. 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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers