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Tiny T-Mobile isn’t so tiny anymore

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T-Mobile CEO John Legere was a very happy man on T-Mobile’s(s tmus) first ever earnings call on Thursday. He had every reason to be in good spirits. In the second quarter T-Mobile accomplished something it hasn’t been able to accomplish in a while: it grew.

Legere listed off all of the positive numbers: the company added 688,000 net postpaid subscribers, second only to Verizon’s 941,000 additions (though Legere claimed T-Mobile was first if you only count phone connections); 300,000 net new wholesale connections from T-Mobile’s growing stable of mobile virtual network operators (MVNOs); and a postpaid churn rate — the percentage of customers that depart — of only 1.6 percent for the quarter.

t-mobile-iphoneThe iPhone, which T-Mobile finally landed in April, helped, but Legere said only 29 percent of customers who joined T-Mobile or upgraded to a new device picked Apple’s(s aapl) iconic device. It sold 900,000 iPhones in the quarter, and about 600,000 Galaxy S 4s. But no single device drove its growth.

Rather, Legere credited T-Mobile’s gains to changes in how it charges for mobile services and devices. T-Mobile completely eliminated contracts and phone subsidies in March, selling devices on financing plans (what it calls Un-carrier 1.0), and in July it launched its Jump upgrade program (Un-Carrier 2.0).

“Stay tuned for Un-carrier 3.0,” Legere said. “The fun is just beginning.”

The carrier lost 10,000 prepaid customers on the T-Mobile brand, but Legere said that many of those customers switched to T-Mobile’s new no-contract Simple Choice plans, which blurs the line between prepaid and postpaid. And then of course there were the 8.9 million new prepaid subscribers T-Mobile gained from MetroPCS.

If you add all those numbers up T-Mobile ended the quarter with 10 million more connections than it started out with, giving it a total of 44 million customers, which is saying something.

T-Mobile may still be the smallest of the Big 4, but it can no longer be described as small. It’s now about half the size of AT&T(s t) and Verizon Wireless(s vz)(s vod), and it’s only 10 million subscribers behind the No. 3 operator Sprint(s s). On the global stage it would actually be considered one of the world’s biggest carriers. To put 44 million subscribers in perspective, that makes T-Mobile US far bigger than Everything Everywhere in the U.K., Deutsche Telekom in Germany, and Orange in France.

Many smartphones featureWith scale comes certain advantages. Not only are there economic advantages in hosting more subscribers on the same network and backend infrastructure, but T-Mobile has a better shot of landing device exclusives, it can convince phone makers to optimize their devices for its network, and it has more leverage in negotiating deals will equipment vendors.

But scale does bring its share of headaches. The faster it grows the quicker T-Mobile maxes out the network capacity it’s already built. Right now AT&T and Verizon are on the constant hunt for new spectrum and looking for ways to LTE networks into new airwaves or reconfigure them for more capacity.

Spectrum was the primary reason for the MetroPCS deal, and T-Mobile has taken every other opportunity to buy up more strategic airwaves, winning, trading or purchasing licenses from AT&T, Verizon and U.S. Cellular(s usm). T-Mobile is going to build some hefty LTE networks — double the capacity of any current system in the U.S. — over the next year. It obviously has plans to grow into them.

Phones image courtesy of Shutterstock user Reno Martin

3 Responses to “Tiny T-Mobile isn’t so tiny anymore”

  1. But they penalize their old customers. My phone, that I got over 2 years ago from them, died. T- mobil told me I have to pay for my new phone but I am still under contract till October 2014 because I changed plan. If I want to leave I still have to pay $200 per line. Does this sound fair? It DOES NOT SOUND FAIR TO ME. Why do old customers have to be still under contact (old rule) but get no phones (new rules). One more thing, the way they advertise the new plans is deceiving. People read good all o it, also the fine print.
    I am a T-Mobile customer from 2004, as soon as my contract ends I will be out of there forever.

    • I would have to disagree with you, been customer since 2010 and T mobile service has been awesome for me. I just upgraded and have 4 lines with 2 Note 3 and note 2. I don’t think there is anything deceiving about their advertisement. About their unlimited plan, their data is unlimited but it slows down as soon as you hit 500mb, you can upgrade to their unlimited 4g data plan which is still much less than Verizon or AT&T.

  2. Virtuous

    TMo isn’t for me. I’m glad they’re growing instead of shrinking. Their so-called “unlimited” plans only allow 500 MB/month of mobile hotspot data. This is unacceptable for my needs. I”m using more mobile data on more devices, not less. I’m using fewer voice minutes and send/receiving fewer texts. Wifi in the public places I frequent is often slow or simply unavailable. AT&T Wifi always seems to be slow. Either AT&T can’t handle the demand or they intentionally throttle their speed. No wonder Starbucks is switching to Google.