T-Mobile Is Paying for Customers: Is It Sustainable?...
The goal of business is to make a profit, and the challenge for CEOs in highly competitive markets is figuring out a way to grow market share without giving away margin. Even though T-Mobile (NYSE: TMUS ) blew Verizon (NYSE: VZ ) and AT&T (NYSE: T ) out of the water in terms of subscriber base growth, first-quarter margins declined by 12%.
During the first quarter of this year, Verizon reported 549,000 new wireless customers and AT&T added 1 million new wireless subscribers, a far cry from T-Mobile's 2.4 million subscribers. That said, while EBITDA fell 12% for T-Mobile, it increased by 15% for Verizon and 11% for AT&T. So, top-line growth is strong at T-Mobile, but only because it's giving away margin.
The fourth largest wireless service provider added 2.4 million subscribers last quarter, up from an increase of 579,000 a year ago -- that's quite a jump. Indeed, it is the first time the company has added more than 2 million customers in one quarter, but at some point subscriber growth must turn into margin or the company will go out of business.
"quite a jump" ... no wonder i couldn't receive signal at Union Station Los Angeles.
Well, from the beginning, TMUS has been planning to sell itself to T or other wireless company (this was why T helped to setup TMUS -- initially T wanted to become the largest wireless company after merging with TMUS). If you know how so many Chinese restaurants and fast food shops pumped up their annual sales amounts in order to sell themselves to other self-employed dreamers at a much higher transaction prices in Southern CA in recent years, you'll understand why TMUS is willing to lose money in order to pumping her customer database -- don't know which wireless company will be broke in the same way as those dreamers who bought the Chinese restaurants and fast food shops.
You should do some fact checking before posting. TMUS is still offering up to $300 for device trade ins and up to $350 to cover ETFs. The cost of customer acquisition prior to this promotion was $350. They also took trade-ins prior to this promotion. That means the total cost for this promotion is exactly zero, plus advertising, which- you guessed it- they were also already doing.
Oh, and Sprint's copycat promotion was ignored because everyone left Sprint for the other carriers. That's why Sprint has the highest outgoing porting ratio of any carrier.