It wasn't that long ago that T-Mobile (TMUS 3.70%) was desperate to sell itself to AT&T (T 2.60%). After the merger fell through, T-Mobile set on a path to shake up the industry. CEO John Legere headed up the Un-Carrier initiative last year, and put an end to its declining revenue. T-Mobile notably became the last major U.S. carrier to add the Apple (AAPL 1.27%) iPhone last year, after Sprint (S +0.00%) and Verizon (VZ +1.55%) added the smartphone in 2011.
The efforts have paid off as T-Mobile's service revenue growth rate has climbed from -9.6% at the end of 2012 to -1.1% at the end of 2013. Another notable trend is the impact of losing iPhone exclusivity for AT&T and the value it's brought to Verizon and Sprint.
Source: UBS via Business Insider.
The impact of the iPhone
AT&T lost its iPhone exclusivity in the first quarter of 2011, and the impact is clear. Service revenue growth fell from 8.6% to 4.8%.
Meanwhile, Verizon saw an immediate impact accelerating from 3.7% growth to 4.9%, but growth slowed in the second half of the year. Sprint had already accelerated revenue growth earlier, with its unlimited data plan, but the addition of the iPhone helped it capitalize on that momentum.
T-Mobile, on the other hand, as the only major carrier without the iPhone, saw its revenue growth dip into the negatives by the fourth quarter. Revenue has continued contracting since then.
Avoiding the fate of Sprint
Sprint couldn't keep its momentum going for long. Coming against tougher comparable quarters saw its revenue growth rate decline significantly as seen in the second half of 2012. The company has just about flatlined on revenue growth, and could be feeling the impact of T-Mobile as well.
Verizon, meanwhile, has continued growing revenue at an astonishing pace considering the saturation of the U.S. market. With the acquisition of Vodafone's Verizon Wireless stake, the company expects to continue growing revenue at a market leading pace.
So, will T-Mobile be more like Sprint or Verizon?
First things first, T-Mobile has yet to return to year-over-year revenue growth. The carrier continues adding subscribers, however, and did increase revenue quarter over quarter throughout 2013. In fact, the fourth quarter saw the largest sequential leap in service revenue, indicating the Un-Carrier is gaining traction.
John Legere isn't taking his foot off the gas either. He continues rolling out incentives for new subscribers. Most recently, that includes paying early termination fees at other carriers. AT&T offered a similar deal exclusively to T-Mobile subscribers, indicating the company sees the fourth-place carrier as a legitimate threat.
Behind the scenes, it is doing what it can to keep the customers it attracts. The company is working closely with Verizon to improve its spectrum. They swapped airwave licenses in December, and T-Mobile acquired additional spectrum from Verizon in January. The latter is expected to improve in-building reception in key markets.
Source: T-Mobile. T-Mobile's new spectrum should improve reception in the fourth quarter.
Carriers need the iPhone. Does the iPhone need new carriers?
Apple has successfully partnered with all four major carriers in the U.S. and most of the carriers throughout the world. Its recent deal with China Mobile, which went into effect in January, may shed some light on how important carrier partnerships are to Apple.
In the first full month of iPhone sales on China Mobile's network, the largest wireless carrier in the world added 1.34 million 4G customers, most of them iPhone purchasers. It's not the best metric to go on, but considering 3G and 4G access is concentrated in the wealthier cities, it gives us a good indication of how the iPhone is doing in China.
We'll know better when Apple reports its second-quarter earnings. The evidence is pretty clear, however, that carrying the iPhone is all but essential for carriers, so Apple won't lack support in selling it. As a result, it can lean on carriers to market the iPhone, something its rivals envy.
