T-Mobile USA Looks to Regain Value Momentum with New Unlimited Offering

| Apr 13, 2011 | Consumer Services U.S.
| Analyst: Weston Henderek

Event Summary

April 13, 2011 – T-Mobile USA has announced the launch of a new $79.99 Even More plan with unlimited voice, text and data. While the data portion of the plan is unlimited, T-Mobile throttles down the data speed for the remainder of a customer’s billing cycle once 2 GB of data has been used. The new plan is available on all T-Mobile handsets.

Quick Take

Analytical Summary

• Current Perspective: Positive on T-Mobile USA’s launch of a new $79.99 unlimited voice, text, and data plan as the carrier needed to reinforce its value oriented status in the face of losing subscribers last quarter and the uncertainty surrounding its pending acquisition by AT&T. With this new offering, T-Mobile now has the cheapest unlimited voice, text, and data plan for smartphone customers by at least $30 compared to its national carrier competition. However, it could hurt T-Mobile from an ARPU perspective if many existing unlimited subscribers switch to the new plan. In addition, while the plan does include unlimited data, once a customer exceeds 2 GB in any given month, data rates will be throttled to EDGE like speeds. This is something that might not go over well with data oriented smartphone customers.

• Vendor Importance: High to T-Mobile USA as the carrier’s once strong growth evaporated with 23,000 customer losses in Q4 2010. In addition, the company faces a long wait regarding the regulatory approval of its acquisition by AT&T. As a result, T-Mobile needed to do something in the short term to reinforce its value message as it faces competition from both larger national carriers and smaller unlimited prepaid players.

• Market Impact: Moderate on the wireless services market, as a more competitive unlimited voice, data and text plan from T-Mobile does have the potential to bring in value-oriented heavy users. Also, the effect on larger carriers such as Verizon Wireless and AT&T is likely to be more limited as they tend to appeal to a higher end demographic in the unlimited space. Sprint however is more vulnerable as it has aggressively marketed its all inclusive unlimited voice, text and data plans at more value oriented customers. In addition, there could be some effect on carriers such as Leap and Metro PCS who go after a much more value oriented demographic.

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Competitive Strengths and Weaknesses

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