Questions via message board Reddit continue to mount over the T-Mobile One unlimited data plan, though biz case looks sound
T-Mobile US is garnering some backlash from its recent Un-carrier 12 event, which highlighted plans to roll out a new “unlimited” data plan, T-Mobile One, beginning Sept. 6.
The backlash, which is heated on at least one Reddit thread, is coming from the carrier’s eventual plans to focus exclusively on the unlimited data plan at the expense of its current tiered data plans.
Pricing for the new plan, which was announced last week, is set at $75 for the first smartphone line of service, $55 for the second line, $25 per line for lines three through eight and $35 per line beginning with line nine. The carrier is offering a $5 discount per line for customers signing up for its AutoPay feature.
The plan is also set to include unlimited domestic voice calling, text messaging, on-network LTE data and mobile hot spot service at 2G network speeds. Similar to its current unlimited data plans, T-Mobile US reserves the right to limit network speeds for customers using in excess of 26 gigabytes of data per month.
While T-Mobile US focused the move on eventually simplifying its branded rate plans by eliminating data buckets, it also was somewhat forceful in stating the new One plan will shortly be its main focus going forward.
“This is not a rate plan announcement,” said T-Mobile US CEO John Legere, on a Periscope-based session following the rate plan unveiling. “We’re not sticking it forever alongside all the rest of the things that we do. This is where we are going. It’s called T-Mobile One. It’s one plan that we will go to. … We still are for the time being going to sell our existing plans. But, we are going to move away from them.”
Legere added the carrier had been working for years on making the move, although the carrier earlier this month rolled out its Smart Fit promotion that provides customers with one month of unlimited data access that the carrier will then use to recommend an appropriate data bucket for consumers on a go-forward basis.
T-Mobile US currently has various rate plans that begin at $50 per month for a single line of service with 2 GB of high-speed data access. The carrier also is running a multiline promotion providing four lines of service with 6 GB of high-speed data per line for $120 per month.
However, the new plan undercuts T-Mobile US’ current “unlimited” data offer, which is priced at $95 for the first line, $75 for the second line and $55 for additional lines. The current plan does include 14 GB of high-speed mobile hot spot service, with the new offer requiring customers to pay $15 for a 5 GB bucket. The new pricing plan also doubles the cost of adding a tablet to an account to $20 per month, although that tablet does get its own “unlimited” amount of data.
T-Mobile US also is being dinged for charging an extra $15 per month for unlimited data customers to stream high-definition video through the carrier’s Binge On platform, while the current unlimited plan includes allowing customers to stream HD-quality video up to the 26 GB per month limit before there is the possibility of having streaming speeds impacted. However, the lower per-line charge for unlimited data on the new plan would seem to outweigh the $15 surcharge.
The carrier also hinted it plans to move its branded prepaid offering in the unlimited direction as well, noting those customers are set to receive the option “in the future.”
New customers looking for tiered data options could divert their attention to T-Mobile US’ MetroPCS brand, which at least for now still offers various data buckets. Those plans begin at $30 per month for a single line with 1 GB of unthrottled data, and can reach up to $60 per month for unlimited smartphone data.
Business impact: ARPU, churn
From a business perspective, the move could provide the carrier with a way to stabilize average revenue per user and further help it improve customer churn.
In reporting its recent second-quarter financial performance, T-Mobile US noted service ARPU was down $1.18 year-over-year, and down 66 cents through the first half of this year compared with 2015. While the drop was in line with what is happening across the segment, carrier revenue is indeed being pressured.
The new One plan does look to drive a similar revenue pattern to what the carrier is currently looking to get from its 6 GB capped data plans, although it’s likely the offer of “unlimited” data could be more compelling to consumers compared to the less expensive 2 GB data plan than the current 6 GB capped plan.
Customer retention could be the stronger business case for T-Mobile US. Most analysts have noted the domestic market’s near saturation in terms of postpaid smartphone customers is forcing operators to more aggressively target rivals, making customer retention a serious operating tenant. Sprint, for instance, said it was “port positive” against all of its nationwide rivals for the quarter, meaning it attracted more customers from Verizon Wireless, AT&T Mobility and T-Mobile US than it lost.
T-Mobile US has made significant strides in terms of its postpaid customer churn metric, which dipped to a company record low of 1.27% during Q2, having been consistently in the 2% range prior to the carrier’s aggressive approach to the market.
By aggressively marketing its unlimited package, T-Mobile US could hold a compelling “stickiness” over its customers. Plus, the offer of a $5 per month discount for signing up for the carrier’s AutoPay feature could cut down on customers having to “think” about their wireless costs and as to whether there might be a better offer somewhere else.
T-Mobile US also is set to offer the new package ahead of the expected release of Apple’s latest iPhone update, which is predicted to happen in mid- to late September. The carrier has in the past aggressively marketed various iPhone payment promotions, which, if it follows suit, could provide a significant bump in adoption of the One rate plan.
We likely won’t know the real impact from the plan until early next year, as it will only have been available for one month of T-Mobile US’ third-quarter operations, which also will have been impacted by early activity surrounding a new iPhone launch. Thus, it might not be until fourth-quarter results are announced in the late January or early February timeframe before true analysis of the rate plan move is dissected.
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