T-Mobile is giving away more tablet data and reducing the cost of LTE tablet models. Source: T-Mobile.
T-Mobile (NYSE: TMUS) launched yet another un-Carrier promotion, this time aimed at grabbing new tablet customers. The move offers additional free data for tablet customers and cellular-equipped tablets for Wi-Fi tablet prices.
But is this really the best move for T-Mobile to acquire tablet subscribers?
An offer you can't refuse
T-Mobile already gives away 200 MB of data per month for life to customers who sign up for tablet data plan on its network. But the latest promotion takes that a step further and piles on an additional 1GB of 4G LTE data per month for free, through January 2015. In addition to that, customers can get an LTE-enabled tablet for the price of a W-Fi one -- a savings of up to $130 when buying a new iPad Air.
What gives?
In the fiscal fourth quarter 2013, T-Mobile had about 69,000 mobile broadband postpaid net subscribers, the vast majority being tablet users. That was an increase from just 5,000 mobile broadband postpaid net subscribers in the preceding quarter.
But as good as the jump was, it still falls far short of T-Mobile's competitors. In the fourth quarter of 2013, AT&T (T 2.46%), T-Mobile's nemesis, added 440,000 branded tablet subscribers.
AT&T and T-Mobile have been embroiled in back-and-forth promotions to woo smartphone customers away from each other, and this latest T-Mobile promotion shows how serious the company is about gaining stealing away tablet customers as well.
Why fighting for tablet customers is worth it
A recent Cisco report showed that in 2013 tablet owners used up about 1.4 GB of mobile data traffic per month, while smartphones used about 529 MB. That difference may not seem like much to the average user, but to T-Mobile and AT&T, it's a very important number.
Since the tablet users burn through significantly more data than smartphone users, there's a lot of incentive to get them to purchase a cellular-equipped tablet and sign up with a monthly plan. T-Mobile's promotion is giving users almost the exact amount of data the average tablet customer uses, and is removing the cost barrier of a cellular tablet at the same time.
Foolish thoughts
So let's recap real quick: The average tablet user eats up 1.4 GB per month on their device, and T-Mobile is giving new customers 1.2 GB for free (until January 2015). Subscribers get used to having that level of data, so when it drops down to 200 MB of free data for life, they're already hooked on having more, which hopefully leads to increasing their monthly data plan.
At the same time, T-Mobile is likely to keep those customers after the data plan drops down, because it's the only carrier that offers free tablet data for life. So it's not likely a large amount of customers would take their T-Mobile tablet to another carrier after the promotion ends.
The end result for T-Mobile will hopefully be a significant amount of new tablet subscribers for the quarter and long-tail opportunities to sell more data to them down the road. Considering how well T-Mobile's previous un-Carrier initiatives have paid off, I'd say the company is doing exactly what it should be right now with tablets. But we'll have to wait until the second-quarter 2014 earnings report to find out for sure.
