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T-Mobile’s Legere shakes up mobile industry – and investor confidence

Daily Ticker

Separating T-Mobile's (TMUS) great CEO from a less great stock, No. 4 U.S. carrier T-Mobile has been on a tear lately, adding 4.4 million customers in 2013, more than any other U.S. carrier. And CEO John Legere’s price-cutting, pro-consumer “uncarrier” strategy has just dominated the attention and coverage of the industry.

Related: T-Mobile's Blunt-Talking CEO Shakes Up the Mobile Industry

But this week, the company reported fourth quarter financial results and it didn’t look so alluring to stock investors. As I discuss in the above video with Yahoo Finance Editor in Chief Aaron Task, investors are
in for a bumpy ride, at least in the short term. The stock dropped 5% and is now off about 10% year-to-date after having a great 2013. T-Mobile’s fourth quarter revenue of $6.83 billion was up
10% from last year but about 2% less than Wall Street expected. On the highly adjusted earnings basis, T-Mobile's adjusted profit was $1.2 billion, slightly above what Wall Street expected due to lower spending on building its network. And on a GAAP basis, T-Mobile lost $20 million.

The bigger carriers, Verizon (VZ) and AT&T (T), are reacting more and more quickly to Legere’s moves to cut prices and improve the customer value equation.

Related: T-Mobile Drops Long-Term Contracts and Phone Subsidies: More than Just a Gimmick?

Both have cut prices for their best customers and partially copied Legere’s efforts. The brash T-Mobile CEO dismisses the reactions and belittles them on Twitter but the larger carriers are sacrificing real revenue as they attempt to stave off the uncarrier strategy. AT&T announced it was cancelling international texting fees to many countries, a once highly lucrative income stream, after T-Mobile initiated such a move for its customers. And Verizon offered to slash $20 per line off bills for some of its customers.

Related: T-Mobile offers new bank-by-phone program

So the question is growing whether T-Mobile can sustain its success and at what cost. Farhad Manjoo, the New York Times personal tech columnist, praised Legere on Wednesday but his words may be chilling for T-Mobile investors: “Nobody knows if T-Mobile’s aggressive pricing will lead to a permanent change in
the way cellular service is sold. But I, for one, am happy to see it die trying.”

Die trying? That’s not what T-Mobile’s investors want to hear.

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