T-Mobile’s Business Push, Technology Advantages, and 5G Slicing with Daryl Schoolar

Full Transcript

Don Kellogg 0m10s

Hello, and welcome to the two hundred and twenty eighth episode of the week with Roger, the conversation between analysts about all things telecom, media, and technology by Recon Analytics. I'm Don Kellogg, and with me as always is Roger Entner. How are you doing, Roger?

Roger Entner 0m22s

I'm great. How are you?

Don Kellogg 0m24s

I'm good. So, Roger, one of the things that we track in our data is perceptions around different carriers, but we're also able to see reality, right? Both in terms of what we see from carrier financials, but also other data sources we track. And there's some really interesting differences there in terms of what the average person on the street would think about a given carrier and the reality. A lot of that has changed recently over the last two, three, four years.

Don Kellogg 0m47s

So I thought we could talk about it. What do you think?

Roger Entner 0m50s

Yeah. Well, things change all the time, right?

Don Kellogg 0m53s

Well, unless they stay the same, right?

Roger Entner 0m55s

Yeah.

Don Kellogg 0m56s

So we've got perceptions around who has the best value, perceptions around who has the best network, the best deals, that sort of thing. What is kind of the word on the street and then like what do we see in the data? What do

Roger Entner 1m8s

we see, right? When we go down memory lane and four gs, right, Verizon was seen as having the best network and having the highest prices. Or T Mobile was seen as being really cheap, and you pay for it by not having a great network the moment you step out of the downtown area of a city. Right? And AT&T, you had good choice.

Roger Entner 1m37s

They had a really good and large handset portfolio, for example. And when we forward to now, we see in our perception data that for customers that have not changed wireless carriers, a lot of these perceptions stay the same. Whereas for people who are switching, these perceptions are different. And then especially when we look at network, we see a lot of the drive testing report saying T Mobile has the fastest five gs network, right, five gs network. AT&T has a very reliable network.

Roger Entner 2m21s

Verizon has a great overall network. How does this all fit and where do they go? You know, whereas reality today, right, it's Verizon is offering lower cost prices than T Mobile does. T Mobile now has, for one and two lines, the most expensive price plans in the market. And if you're on five g, where they have five g, they're probably the fastest, but does it?

Don Kellogg 2m49s

Right. But I mean, I would I would clarify a little bit, right? Like, when we talk about MRC or monthly recurring charge, right, like what you just said is true, right? T Mobile has the highest MRC plans in the industry. Right?

Don Kellogg 3m0s

Mhmm. So if you wanna get a super ultra premium plan and pay as much as possible, T Mobile is actually the carrier that's selling that right now.

Roger Entner 3m7s

Yep.

Don Kellogg 3m7s

If I put my T Mobile hat on the the argument I would make was they would say, well, they also have some of the least expensive postpaid plans available as well. Like, the essential plans are very, very price competitive. They're also a little restrictive. And I view them more as like a doorbuster. And what we see from the ARPU and the ARPA numbers when we look at the carrier financials is like, we know not a lot of people are getting on postpaid or getting those T Mobile essential plans because their ARPA's gone way up.

Roger Entner 3m33s

And they're telling you in the earnings call that 60% of their customers are picking their most expensive plans.

Don Kellogg 3m39s

Right. So the question is like, do you get credit for having the lowest price plans if nobody chooses them?

Roger Entner 3m44s

Right, when a tree falls over in a forest and nobody hears it, did it actually happen? Right? T Mobile does a really good job of getting people onto these high priced plans. And we've done the analysis. In our survey, we see for T Mobile customers that are with T Mobile longer than a year, there is a substantial difference in what they pay compared to the other carriers.

Roger Entner 4m12s

And for the customers who are with them for less than a year, there's no distinguishable difference in what T Mobile and AT&T and Verizon customers pay.

Don Kellogg 4m23s

Right. So there is a legacy price advantage within the customer base. There's a

Roger Entner 4m28s

There's a halo going on.

Don Kellogg 4m29s

I mean, there's a reality too. Right? Like, if we if when we ask folks how much do you pay, if you've been there for longer than a year, then there's a higher likelihood that you're paying less than peers at AT&T Verizon. If you're a recent switcher, and again, you know, they changed their price plans about a year ago, right, where they raised prices a little bit, right, with the Go five g and Go five g Next plans.

Roger Entner 4m50s

And T Mobile is very deliberate that they want to become or want to be seen as the premium provider in the market with the lowest prices, or at least with the best value, right? And value, they throw the kitchen sink of, I don't know how many things that they put in into their price plan. You're a customer of T Mobile. How many of these 23 things, and I'm making that number up 23, do you actually use?

Don Kellogg 5m18s

Well, I use I use Netflix. I was on a flight yesterday and I used the free WiFi

Roger Entner 5m23s

Mhmm.

Don Kellogg 5m23s

Which is a good value. I don't really engage with the T Mobile Tuesdays type stuff. And I'm I'm not a big streamer, so I don't use the other streaming options.

Roger Entner 5m31s

So you can

Don Kellogg 5m32s

get Hulu or or, you know, that kind of thing. I don't get free tacos.

Roger Entner 5m36s

You don't get free tacos.

Don Kellogg 5m37s

I don't do the free tacos. And I haven't used any of the travel type stuff, like the hotel reservations and things. It is nice when you travel internationally. You get a bucket of data without having to do anything.

Roger Entner 5m47s

Like the one time you travel internationally a year? I know, I always say that Americans are big into theoretical freedoms that they like to have, but never take advantage of. And T Mobile does a really good job with that. But there's the perception of them being a budget provider, and they're no longer. There's a perception of them not having a great network, and they have now a great network.

Roger Entner 6m12s

And it's almost the opposite when we look at Verizon that had like undisputedly by far the best network on four gs. On five gs, it's an argument, right? I think the drive testing points to T Mobile. On the other hand, four gs and five g, does the consumer really matter? No.

Don Kellogg 6m33s

Well, right, right. I mean, the dirty little secret, right, for the non standalone networks, is Verizon and AT&T, is that they're sitting on four g a lot of the time. Right? And four g is perfectly fine for almost anything you're gonna do unless you're, you know, downloading huge files, which people don't really do on their phones.

Roger Entner 6m50s

Exactly. Unless you download files, you don't need more than 25 megabits, which is like four ks video, which is on a mobile device overkill anyway. But you have a really, really hard time arguing with faster isn't better, right? And you have also industry wide a really hard time arguing that after spending so much money that five gs is like the thing, that, oh my God, if you're on four gs, no big deal, right? Five g right now still is a lot more important to the carrier than to the consumer from an experience perspective.

Roger Entner 7m27s

It's just the reality.

Don Kellogg 7m29s

Yes and no. I mean, I think it depends on the use case, right? Like, you couldn't and wouldn't do something like FWA on on four g.

Roger Entner 7m36s

Correct.

Don Kellogg 7m36s

Right?

Roger Entner 7m36s

That's why I said a lot more important Put on a phone.

Don Kellogg 7m39s

On a phone? Yeah. I agree with you.

Roger Entner 7m40s

On a phone? Yeah. Two killer apps for five g are FWA and my continuing running joke speed test. Other than that, you're good on four gs, right? It's just like as a carrier, you can't put an advertising campaign on it, right?

Don Kellogg 7m56s

I mean, if we're gonna get technical here with like a standalone, I think there's a lot of potential for slices in the future. But we're not quite there yet. Right?

Roger Entner 8m5s

I think we'll we'll be there sooner than than you think.

Don Kellogg 8m9s

But I mean, like, so we talk about, you know, like things like public agencies using slices or, you know, private companies using slices. I don't think there's at this point in time a clear use case for a consumer slice yet. That could totally change, right? But I think that's something that's on the horizon.

Roger Entner 8m25s

Yeah. And then AT&T has a really great reputation around the best deals for everyone. Really transformed the company and the fortunes. It got a little bit long on the tooth, because they're running the same thing for, I think Verizon, AT&T on the second or third price plan, since they came out with it, and they haven't done much. They came out with their guarantee, which we talked about earlier.

Roger Entner 8m49s

But I think a lot of customers recognize that the network policy for AT&T is good enough. And for a lot of people, enough is good enough. But for other people, it's not good enough, right? They want to have something that aspires for more. And when we look at results, all of them are executing against their goals that they're aspiring to.

Roger Entner 9m14s

And all of them are executing from their own goal setting really, really well. But when we look and extrapolate that further out, they all want to be something different than they are. With industry wide net adds coming down for various reasons, everything from fewer children getting into it, to less immigration, When there is no longer a high tide, but there is a low tide coming, not everybody is a winner. And it would be very, very interesting of how this all plays out, as most of the carriers are trying to be something that they're currently not, and how they're not perceived by a lot of people. And then we can throw in the cable guys, right?

Roger Entner 10m3s

Who view themselves as a premium service, and I don't think any a lot of people view it like

Don Kellogg 10m9s

I mean, I I view this as a spectrum. Right? Not to not to use a pun here. But, you know, on on one end, you've got the postpaid providers, and the cable providers are kinda in the middle Yeah. Between prepaid and postpaid, both in terms of how the customers interact with the device as well as how much they pay.

Don Kellogg 10m24s

Then And you've got folks on the prepaid side of the equation, right? And some of the most successful brands we've seen have been successful by poking a hole to some extent in the value prop for the postpaid providers, right? So like, the Mints of this world say, hey, you know, like you can pay, you know, $15 a month that you have to pay 40 for three months at once. Right? Yep.

Don Kellogg 10m44s

Then you can get x y z service, and it's good enough, and it's a lot less than what the postpaid guys are charging.

Roger Entner 10m51s

Mint, without a doubt, has grown very significantly. What are they now? $3.03 and a half million? Yes, it's a million difference, but they're big fish in a small pond. From an industry wide perspective, where you have like in a year, what do we see gross ads like 30 something million?

Roger Entner 11m11s

I haven't looked recently. They're still moving in a small area, right? Verizon has like more than 10,000,000 gross ads a year. And Mint has maybe one, one and a half. And when you're so small and you're growing rapidly, your churn doesn't matter that much.

Don Kellogg 11m27s

Yeah, but I think they were big enough and enough of a pain in the ass for T Mobile to wanna get them off the board, right? And which again goes back to this value positioning, Yeah.

Roger Entner 11m37s

It made a lot of sense to make them part of the family, you know. Ryan Reynolds is always a hoot on television, and it fits into the personality of T Mobile. They are, you know, two found each other. They were looking for each other and they found each other. And they're good for each other.

Roger Entner 11m56s

It's gonna be really, really interesting because when you look at cable, really attractive priced mobile offer, They're winning a lot on price, but they're losing their bread and butter, their home internet service. Who FWA, right?

Don Kellogg 12m12s

Right. The cost of content is a constant challenge.

Roger Entner 12m16s

Yeah, but cable companies are no longer cable television companies. Cable companies are cable internet companies. And they're not even cable internet companies anymore, because everything they build new is fiber, Right? So they're going through a lot of changes.

Don Kellogg 12m32s

There are a lot of people that are still getting video from their I other cable Internet agree with you, they're cable Internet companies. But when you look at Bill Shock and like exploding whatevers and everything else, there are a lot of people that Yeah. That cite high costs, which include content as a reason why they leave.

Roger Entner 12m49s

Cable companies are making no money on content. They're literally passing that through.

Don Kellogg 12m56s

But we're talking about consumer perceptions here. Right? We're not talking about how cable companies are getting

Roger Entner 13m0s

less and less. You know, we're now down to like 40% of households having linear television. That perception, I agree with you, was there, what, five, six, seven years when 90% had

Don Kellogg 13m12s

Well, don't watch sports, so you have no reason to have a cable, like a linear bundle, right? But a lot of people do.

Roger Entner 13m18s

Lena do 60% of the people, or households, or they're getting their sports in a different way. That's why Amazon is getting into it. That's why Netflix is getting into it, all of that stuff.

Don Kellogg 13m30s

Content is still a major part of the cable division. But

Roger Entner 13m34s

it's pretty sad that 93 of the 100 most watched things are from a from a feature that runs over, what, twenty weeks a year only on Sunday.

Don Kellogg 13m48s

So you're talking about football driving the highest ratings?

Roger Entner 13m50s

I'm talking about football driving the highest ratings. So the only reason why you have TV is because you wanna watch Sunday afternoon, however many hours football, that's a bankruptcy declaration for linear television, which we all know.

Don Kellogg 14m4s

I'm not arguing with you on that. I'm just saying that cable still is inclusive of video and that's still a problem

Roger Entner 14m9s

for It's an opt on. It's not inclusive. The relationship between streaming video and cable is getting weaker and weaker and weaker. That's the reality.

Don Kellogg 14m22s

Agree. 100%. Yeah. But, know, like, we spend so much time, you know, we do this in wireless, and I think it happens in home Internet too. Right?

Don Kellogg 14m28s

We spend so much time talking about the folks who are moving. Right? Who are moving around. And we all often forget everybody who's stuck around for a long time. Right?

Don Kellogg 14m37s

And there are millions and millions and millions and millions of people who are paying more than they probably should for content from cable providers, and that provides an

Roger Entner 14m45s

opportunity people.

Don Kellogg 14m47s

Fewer and fewer, but still many and very, very quite a few, right?

Roger Entner 14m51s

Yeah. But they pay the same thing on YouTube TV and on FUBU and all of that stuff too, because it's not the cable company. So I have to protect the cable company. But, you know, we talk about things that change and things that don't change. I want to put a plug in that we in Recon Analytics, we have like a little book club.

Roger Entner 15m9s

And the book that we're reading is Same as Ever. It's about the things that never change. It's a really awesome book. It opened my eyes, it opened a lot of our folks' eyes. It's a really good book because we talk about the things that change.

Roger Entner 15m25s

It's as important to know about the things that never change. Anyway, that's my soapbox for the week and I get down from it. All right.

Don Kellogg 15m34s

All right. Well, we'll talk to you next week.

Roger Entner 15m36s

Awesome. Thank you.