T-Mobile's Legere takes low price war to the business market
T-Mobile (TMUS) CEO John Legere's latest attempt to blow up the wireless market may have been the least interesting for consumers, but it could be among the most significant for the company's bottom line.
At yet another rock 'n roll-filled announcement event, Legere on Wednesday unveiled a highly discounted wireless service offering aimed at businesses. The new plans start at 10 lines for $16 each and scale up to thousands of lines for $10 a pop. The price includes 1 GB of high-speed data per line, with more available for additional fees.
The rates are 40% below Verizon (VZ) and AT&T's (T) prices, Legere said. "Two things you can guarantee will happen as of today," the CEO said in an interview after the announcement. "Our business revenue will go up and their's will go down."
"Business services could be the next big leg of growth," says longtime telecom analyst Craig Moffett at MoffettNathanson Research. "Verizon, AT&T, and Sprint all have large commercial businesses but for T-Mobile it is still virgin territory."
Indeed, Verizon and AT&T combined have $72 billion in annual business wireless revenue, T-Mobile said, versus its own yearly take of less than $4 billion.
Legere's "uncarrier" strategy, including eliminating customer contracts, roaming fees and overseas texting charges, has succeeded brilliantly for the past two years, but mainly with consumers. T-Mobile ended 2014 with 55 million customers, up from 33 million when Legere took over in September 2012.
The company's stock price has bounced around on merger deals, rumored and offered but never completed, but has gained 22% so far this year as Legere's go-it-alone strategy looks increasingly successful. The stock was up 0.4% to $32.82 after the business announcement, while shares of Verizon and AT&T gained 1%.
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"We are not going to stop," Legere told a crowd of journalists and T-Mobile employees at a crowded event filled with loud, blaring music in downtown Manhattan.
Noting his company drew more new subscribers than competitors in the fourth quarter, Legere opted for the colorful language he prefers. "What's happened in the last few weeks, I find hilarious," he said. "We took the quarter off, we were fighting with one arm behind our back and we kicked the shit out of them."
The new business plans will also come with a free web site and domain name registration via a partnership with GoDaddy. A free email account at a custom domain address offered through Microsoft's Office 365 service is also included. And the business plans will come with discounted family wireless plans, as well.
Legere also had a few new offers for consumers, even though the event was focused on business customers. All of T-Mobile's current limited promotional plans, such as 4 lines each with 2.5 GB of data for $100 a month, will become permanent, he said. All customers on unlimited data plans will be guaranteed the same terms and price for two years, Legere said.
"Unlimited is a world in and of itself," he said. "I can't pretend to tell you the 10 year view. For at least for two years, I will not change unlimited or the price."
And the company will begin to cover the cost of remaining phone installment payments for new switching customers. Last year, T-Mobile started paying early termination fees for switchers and has covered 1.8 million so far.
The new moves extend the ongoing price war that Legere had already kicked off in the consumer market into a whole new piece of the market. The larger carriers have tried to stay above the fray but have increasingly offered discounts to their own customers to maintain market share.
