The Exchange

T-Mobile’s Blunt-Talking CEO Shakes Up the Mobile Industry

The Exchange

T-Mobile US (TMUS) CEO John Legere drew chuckles from competitors back in March when he rolled out his “un-carrier” strategy to cut prices, do away with two-year contracts and separate charges for new phones from regular service fees.

Legere, dressed in jeans and a pink T-Mobile T-shirt, declared of the industry’s standard billing model, "This is the biggest crock of s--t I've ever heard in my entire life. Do you have any idea how much you're paying?"

Bigger carriers Verizon (VZ), AT&T (T) and Sprint (S) may have been put off by Legere’s shock-jock style. But they’re not laughing anymore.

A showman's touch, a bargain-shopper's eye

With a showman’s touch for antics and a bargain shopper’s eye for discounts, Legere is suddenly succeeding in shaking up the wireless telecom industry. After cutting prices, he’s since offered to let customers upgrade to new phones twice a year, slashed international roaming fees and finally added Apple's (AAPL) popular iPhone to the T-Mobile lineup. Just last month he created a modest but free-for-life data plan for the iPad.

Customers have noticed. T-Mobile added almost 1.4 million subscribers to its branded services so far this year after losing 1.1 million in all of last year, according to the company’s figures. In the most lucrative segment, continuous monthly subscribers, T-Mobile has attracted more customers in the past six months than all three of its larger rivals combined, analysts say.

“Lo and behold, it turns out that being cheaper really does matter – who knew?” quips industry analyst Craig Moffett.

Shares of T-Mobile US, which is still majority-owned by German phone giant Deutsche Telecom, have shot up 62% since May, when they first listed on the New York Stock Exchange. Closing at $26.75 Thursday, the stock could still have further gains ahead. T-Mobile could add another 2.4 million subscribers next year, helping the stock reach $36, Moffett says.

Colorful antics

Customers couldn't help but notice Legere's colorful antics as he rolled out the various pieces of the un-carrier plan. And not many CEOs speak with such candor --  or so much profanity -- about their views of competitors. At the March event, he promised to "stop the bulls--t." In July he took to the stage with a group of dolls intending to mock AT&T's commercials that feature cute and precocious little kids. "Hey kids, is it better for your network to be crap or is it better to have a good high-speed network in New York?" he asked. At the October global roaming event, he called other carriers' fees "completely crazy" and "insanely inflated."

Legere’s arrival last September followed a tumultuous period for the company. Previous CEO Philipp Humm resigned in June 2012 after regulators blocked AT&T’s bid to buy T-Mobile for $39 billion. AT&T had to hand over billions of dollars worth of valuable airwaves to T-Mobile as part of the failed takeover’s breakup fee.

With more spectrum, Legere has been able to accelerate plans to expand T-Mobile’s network to faster “LTE” service. He also brought in a new marketing team headed by Mike Sievert, who’d worked for other upstarts including Clearwire and eTrade (where he helped create the famous 1999 Super Bowl ad starring a dancing monkey). That Sievert had also worked for AT&T Wireless probably didn’t hurt his appeal.

“When we came in a year ago, we found an industry lining the pockets of two very big, very rich companies,” Sievert says with characteristic bluntness. T-Mobile's new approach is “systematically changing all of the crazy rules.”

T-Mobile won’t say which un-carrier features have attracted the most customers but the low prices are obviously a key component.

"Deals that are hard to pass up"

Web developer Kevin Ngo signed up for T-Mobile’s low-priced data plans recently, which the competition couldn’t match, he says: “They are just offering deals that are hard to pass up.”

Still, the low-price strategy alone wouldn’t have succeeded without major improvements to the company’s mobile network. In less than a year, T-Mobile has gone from having virtually no LTE service to coverage of areas including two-thirds of the U.S. population.

“Without a robust network, all this talk would have fallen on deaf ears,” says Chetan Sharma, a mobile-industry consultant.

Legere isn’t slowing down. Future un-carrier features are secret, Sievert says, but they will address remaining areas of customer frustration. “Our strategy is to make this an industry that customers love,” he says.

Analysts say T-Mobile could make further gains by offering better deals for families. The larger carriers introduced shared voice and data plans for families with multiple phones without giving a volume discount. Sievert will say only that he wants to “maintain the surprise factor.”

That sounds like further good news for mobile customers.

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