If you're a T-Mobile (NASDAQ:TMUS) subscriber and a BlackBerry (NYSE:BB) fanatic, you might want to consider switching to a different carrier: BlackBerry's contract with the nation's fastest-growing carrier expires later this month, and BlackBerry has said it will not renew the agreement.
While the end of the deal could be bad for both companies (T-Mobile could lose subscribers, BlackBerry could lose customers), I doubt it will have much of an effect on either. If anything, it's a sign that BlackBerry's handset business -- at least among U.S. consumers -- has become irrelevant, but at this point, that's already been well-established.
T-Mobile trashes BlackBerry
The break between the two companies follows a T-Mobile marketing campaign that generated a great degree of backlash from BlackBerry fans and even drew in the company's CEO.
In February, T-Mobile targeted existing BlackBerry handset owners, offering them a $200 credit if they traded in their current handset and bought a new phone. In an accompanying ad, T-Mobile suggested current BlackBerry owners upgrade to an iPhone 5s, prompting the ire of BlackBerry CEO John Chen. In a lengthy blog post, Chen slammed T-Mobile, calling its marketing campaign "inappropriate and ill-conceived."
T-Mobile subscribers who took advantage of the offer could get the BlackBerry Q10 (in fact, if they did, they'd get an extra $50 in addition to the $200 credit), but few of them of did. According to TmoNews, citing an internal memo, 94% of BlackBerry owners who took advantage of the offer switched to a rival platform.
Betting on Indonesia and BBM
For that reason, it seems highly unlikely that T-Mobile will lose many subscribers when its deal with BlackBerry ends. More menacing is BlackBerry's potential lost hardware sales, but those customers were unlikely to buy its handset anyway. BlackBerry's share of the U.S. smartphone market has dwindled in recent years, and is now basically negligible. In January, Consumer Intelligence Research Partners reported that virtually no new BlackBerry handsets were activated in the U.S. during the fourth quarter of 2013.
BlackBerry investors, for the most part, have acknowledged this fact, and analysts have turned their attention toward other parts of BlackBerry's business. Needham recently upgraded their rating on BlackBerry, but not on the hopes that it could capture U.S. consumers. Instead, BlackBerry is aiming to dominate emerging markets, including Indonesia, while attracting and retaining enterprise customers with secure services like eBBM. Analysts at CLSA likewise upgraded shares late last month, citing, among other things, the potential of BlackBerry's Secure Work Space.
BlackBerry's U.S. dominance is long past
BlackBerry's days of selling smartphones to U.S. consumers appear to be long gone, but that's been overwhelmingly evident for several years now. Its share of the U.S. smartphone market was cut in half in 2011, and has never rebounded.
Its split from T-Mobile is only further evidence of that trend, but any investor expecting BlackBerry to recapture the U.S. smartphone was delusional. If there's hope for BlackBerry's business, it will come from emerging markets and its enterprise services, not handsets sold to T-Mobile subscribers.