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T-Mobile's Latest Initiative Involves Copying Apple

By Sam Mattera - Jul 29, 2015 at 12:03PM

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Could beefed-up text messaging from competitors hurt Apple's iPhone?

T-Mobile ( TMUS 2.47% ), the nation's third-largest wireless carrier, has improved its text messages, adding some of the enhanced features users of Apple's ( AAPL 2.35% ) iMessage system have enjoyed for years. The improvements represent a modest challenge to Apple's U.S. iPhone business, but more significantly continue to advance the notion that T-Mobile is out-innovating its wireless rivals.

Photo: Apple

T-Mobile's enhanced text messages
T-Mobile's subscribers will soon find their text messages augmented with a number of enhancements, including faster transmission, read receipts, and the ability to share large image and video files. 

Users of select T-Mobile handsets, including the Galaxy Grand Prime, can take advantage of these new features now. In the future, support should arrive for other Galaxy devices, and in the long run, T-Mobile believes all of its handsets will eventually support the format.

For the time being, T-Mobile is the only carrier to offer enhanced text messages, though management admits that this is unlikely to persist for much longer. "I expect our announcement will be a wake-up call for the old carriers to get moving with RCS [rich communications services]," T-Mobile Chief Technology Officer Neville Ray wrote in a blog post July 22.

That doesn't make it much of a selling point. Yet it still enhances T-Mobile image as the "Un-carrier." Since it unveiled its original Un-carrier initiatives early in 2013, T-Mobile has added more than 20 million subscribers, nearly doubling its customer base. The campaign has been built on eliminating pain points in traditional wireless agreements, and moving to offer new features (like Wi-Fi calling and data rollover) ahead of rivals. Rich text messaging serves as another example of T-Mobile's commitment to innovation.

iMessage helps keep iPhone customers loyal
Apple's text messaging system, iMessage, has offered these features to iPhone owners since 2011, but notably, is not cross-platform. iPhone owners can use iMessage to text their iPhone-owning peers, but cannot use it to contact those who own Android handsets. T-Mobile's rich text messaging, in contrast, is completely cross-platform and will eventually be cross-carrier (assuming its telecom rivals adopt the standard).

iMessage, while convenient, is not unique; there are plenty of other text messaging alternatives (WhatsApp, Line, Messenger, etc.). Still, it's a feature that Apple was able to offer iPhone owners natively. To date, Android users have had to go through the cumbersome process of downloading, installing, and signing up for these services, assuming their friends use them at all.

If rich text messaging becomes the standard, it would remove one of the iPhone's unique points of differentiation. It's hard to say how much this could affect sales, but anecdotally, I've met people who have purchased the iPhone just to take advantage of iMessage. More specifically, there have been widespread reports of iPhone owners experiencing issues with their text messages after switching to Android -- enough to spark a class action lawsuit. Last fall, Apple released a tool to address the issue (a website that allows former iPhone owners the ability to deactivate iMessage), but the process may still prove daunting for some, discouraging them from purchasing an Android phone.

That's not to say that Apple's strong customer loyalty is due to iMessage, but it may be a relevant factor. Certainly, there are bigger potential threats to the iPhone business, but it's something Apple shareholders should be mindful of. If carriers, led by T-Mobile, put an increasing emphasis on improving their standard text messages, it could erode whatever ecosystem benefits iMessage has been offering.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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