Breaking up the Family, the T-Mobile Way

T-Mobile has, as expected, launched the next salvo in the Un-carrier strategy. Starting tomorrow, T-Mobile will cover up to $350 of early termination fees per line for up to five lines per family, in addition to providing an instant trade-in credit of up to $300 for their phone.

While aimed at all carriers, the move really continues the growing battle between AT&T and T-Mobile, and ups the ante in response to AT&T’s earlier incentive promotion to persuade T-Mobile customers to switch to AT&T. Indeed, John Legere, T-Mobile USA’s CEO turned AT&T’s promotion to his own benefit, describing it as a “no fault guarantee” for AT&T customers. In other words, if you switch to T-Mobile (with T-Mobile having bought you out of the AT&T contract) you can then choose to switch back to AT&T if the T-Mobile service does not meet expectations… and AT&T will pay you $200 to do so. Of course, that is hardly T-Mobile’s intention, but it will increase pressure on AT&T in particular to maintain the promotion and actively try to win back (or even better, not lose) these customers in the first place.

The new Un-carrier 4.0 has three core steps: 1. Trade in your old phone; 2. Buy a new one – and in that regard, T-Mobile is offering $0 down across the bilk of its handsets to further encourage the switch – and; 3. Show the early termination fee from your previous carrier and T-Mobile will refund you the amount.  In an additional, tongue-in-cheek move, T-Mobile will also help you script a “break up letter” to your old carrier, explaining why you have to go your separate ways (it IS you, not me is the theme of it).

The core target for the T-Mobile strategy (Uncarrier 4.0) is the family plan, which John Legere describes as a “life sentence” due to staggered early termination fees. In other words, while family member one may be near the end of their contract (and therefore ready to move), family member two may have been added a year later, and is therefore still embroiled in early termination fees. Add more family members and the complexity of organizing a shift to another carrier is almost insurmountable. By offering to pay all the early termination fees, regardless of what contract stage they are up to, T-Mobile cuts through all of the confusion with answer.

Of course, all of this would be immaterial if T-Mobile’s network had not improved. One of the reasons why T-Mobile has been in such bad shape over the past few years is that the network coverage and data speeds were lacking. Now, with a large LTE footprint, T-Mobile is claiming to be the fastest network (a title that changes hands quite regularly in the wireless world).

Will T-Mobile’s move be successful? Of course. The carrier is already on a tear, with 4.4 million net new postpaid ads in 2013. This year looks set to be even stronger – particularly with the focus on family plans. But it’s not just about the plans and the network. What the new T-Mobile – with the out-in-front leadership of John Legere is doing is very reminiscent of another carrier that came close to shaking up the U.S. mobile industry. The new T-Mobile is essentially what Virgin Mobile tried to be when it first launched in 2002. It too cultivated a “bad boy” reputation, with Sir Richard Branson attempting to take on the U.S. wireless industry. The move was somewhat successful until Sprint bought Virgin’s U.S. operation and brought it more firmly into line with the status quo. Ironically, that is the possible outcome for T-Mobile too, with many pundits expecting a deal to be announced later this year. But as Legere puts it: “The U.S. needs a change agent or maverick. What we're doing will prevail.”