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 forty second episode of the week with Roger, a 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 doing, Roger?

Roger Entner 0m23s

Hey. I'm great. How are you?

Don Kellogg 0m25s

Good. So, Roger, I thought this week we could talk a little bit about some new plans that are out there, Specifically, T Mobile's released a pair of new plans. And I think there's some interesting elements here. You wanna tell us about it?

Roger Entner 0m37s

Well, they made two out of three. Right? Traditionally, you had three plans of good, better, best. We had previously Go five gs plus then we had Go five gs next and then we had the regular Go five gs. Now we have experience beyond and experience more.

Roger Entner 0m56s

The next plan is called essentials, which is a traditional plan. But there's no more regular experience. So you have to experience more. What's really a big difference and a big departure is there are no more plans at T Mobile that have taxes and fees included that are unlike the front flagship offer. And, you know, that was a huge differentiation factor for T Mobile and a huge defining Un carrier definition.

Don Kellogg 1m30s

Right. I mean, the price is the price is the price. Right?

Roger Entner 1m33s

Correct. And it's another sign that the Un carrier spirit is somewhere in a corner in a corner in some abandoned conference room having a heart attack. And the EMT is in sight, getting them to the rescue. By moving them off their taxes and free included, yes, they lowered prices by $5 Okay, awesome. Just the fees part of this is $5.61 right?

Roger Entner 2m1s

So it's already by default at least a $0.61 increase for everyone in The United States. On average, local and state sales tax are 8%. That goes up to like 22% in Illinois.

Don Kellogg 2m18s

So let me stop you there. The way the taxes work on wireless is a little different, right, in the sense that the tax is on the wireless portion.

Roger Entner 2m26s

It's on the voice portion.

Don Kellogg 2m28s

The voice portion. Yeah. But it's generally, the carriers will assess it on roughly half of the MRC. Right? Give or take.

Don Kellogg 2m35s

Give or take. Right? So when you look at the tax percentages, and we've done work with the tax foundation on this, the percentages are relatively high, but you have to remember that it's only applied to Half. Half the bill. Yep.

Don Kellogg 2m45s

But that said, I mean, I totally agree with you that, you know, the rack rate for Go five g plus was $90 including taxes and fees. Experience more is 85 without taxes and fees. It's gonna be more than 90 after you pay your taxes and fees almost everywhere, if not everywhere.

Roger Entner 3m1s

Well, unless you're in a state without local and state sales tax like New Hampshire, bunch of others. Right? Mhmm. Not Texas, not Massachusetts, not California. But it's the signaling here.

Roger Entner 3m15s

And it was interesting that it gave away that kind of of that kind of thing. When you listen and read what's on on social media, what you kind of hear back is that people are saying, you know, the young carrier is becoming uncaring, which gives the opportunity to AT&T and to Verizon to grab that customer advocate mantle. It is now lying on the floor. Right? And somebody gotta pick it up.

Don Kellogg 3m43s

I think it's interesting. I think on one hand, it indicates that T Mobile thinks they have a lot of pricing power. Right? And if you look at what they've been doing with their quarterly earnings for the last three, four years, and I think that's probably accurate. On the other end, I totally agree with you that this is not a customer friendly move in a lot of ways.

Don Kellogg 3m59s

I do think it makes sense to talk a little bit about some of the good things about the plan though. Right? So they did increase the mobile hotspot, experience more 60 gigabytes instead of 50 for Go five g plus. And then Go five g next, would be kind of the precursor to experience beyond, went from 50 to 250. I think you'd have a really hard time finding anybody who uses their hotspots for 250 gigabytes of data.

Don Kellogg 4m22s

So that's kind of a theoretical freedom.

Roger Entner 4m23s

People are gonna use this to watch their Apple TV or Hulu on them in four k. Right? That's going to happen.

Don Kellogg 4m32s

That's still a lot of four

Roger Entner 4m33s

ks though. That's It's a lot of four ks. They're through that in a couple of days. You're going to blow through that in a heartbeat. But you're going to get free satellite service come in July, right?

Roger Entner 4m48s

So it's still in comparison. It's slightly more than the other carrier for one and two lines. But it's roughly in line. That pricing differential has disappeared. Now they have to argue much more like, oh, you're gonna get more with it because here is the kitchen sink.

Roger Entner 5m8s

And so pick whatever you want to. It's also interesting, my colleague Jake and I spent a whole day this week with financial analysts with who we exchange ourselves frequently. And it was very interesting when we talked about T Mobile, they're like, yeah. You know, they kind of put a little bit, got ahead of their skis in December when the financial analysts were surprised that they upped their subscriber numbers and they had a shortfall this quarter. But everybody thinks that they will make their numbers.

Roger Entner 5m39s

The numbers for '25 on EBITDA and revenue and profitability are almost like baked in. This will work, right? But it's just like setting a different tone. Nothing changes until something changes, right? One of the big problems with Verizon is they lost their network leadership.

Roger Entner 5m58s

And you and I were working with them for a really long time. For like a decade, they were threatening. What are we gonna do when we lose network leadership? Hey, it's there. You're suffering the consequences.

Roger Entner 6m10s

We see the numbers, right? And partially it died of lack of focus. The Verizon of today, they might not like to hear it, but they used to be the number one premier network leadership, technical advances. Every new development, Verizon was the first carrier who did it. That's now T Mobile.

Roger Entner 6m30s

And they're suffering the consequences. And they voluntarily surrendered it by not focusing as much and spending as much on it as they probably should. And T Mobile saw that as an opportunity and took it from them. And said like, we're going to be the best value with the best network. Well, they're there, I think, with the network, right?

Roger Entner 6m51s

But they're just throwing away the value part, which is like such an unforced error. I'm like, what are you doing? On top of it, when you look at the playbook, the existing playbook has about two years left to run. When you look at like where they are penetration in major metropolitan markets and in their small market rural area, two years easy runway where they just play the current playbook and they check-in the numbers. Bang.

Roger Entner 7m23s

Another x 100,000 numbers. Again, bang. It's like they baked it in, and they just like did this. I'm like, really? Really?

Roger Entner 7m33s

Did you have to

Don Kellogg 7m34s

Well, I mean, I think I think that the timing is problematic, and I agree with you. What I would say is that we've done a fair amount of research in terms of economic sentiment. We're not gonna talk too much about this. But in the environment we are in right now, an ultra ultra premium brand raising the prices for, you know, kind of your out the door plans may not be the best the best thing right now. We're, you know, we're showing that more and more folks are considering prepaid now.

Don Kellogg 7m58s

Yeah. As a response to what's going on with the economy. So I agree with you. I mean, we all know that these plans don't happen overnight. Right?

Don Kellogg 8m4s

This is something they've probably been thinking about for six months or a year or maybe even longer than that. Right? The carriers are constantly

Roger Entner 8m9s

I don't think so.

Don Kellogg 8m12s

Carriers are constant constantly looking at different options. Right? Nothing nothing just appears out of thin air. No. But But the timing with this is poor.

Don Kellogg 8m19s

The timing is poor.

Roger Entner 8m20s

Not a year in the works. Believe me. There's not a year. I would bet my whatever. This is not a year in the works.

Roger Entner 8m28s

This is six months in the right? This is certainly in the works as, like, this is some kind of plan we wanna do when we launch satellite. I think it was accelerated to make sure

Don Kellogg 8m39s

Satellite takes a long time to plan too, I would say.

Roger Entner 8m41s

Yeah.

Don Kellogg 8m42s

None of these plan construct my point, and I don't know and I don't think either of us knows how long they've been working on this. But none of these things happen overnight. Right? They're studied and and analyzed and everything else. I think the timing is poor given on where where we are with the economy and the kind of macro environment.

Don Kellogg 8m57s

You know, the Experience Beyond looks like a great plan if you're if you're willing to spend that much relative to some of the other plans that are out there or have have been out there. We know not a lot of people use two fifty gigabytes of hotspot. So the Starlink beta to me at least was underwhelming.

Roger Entner 9m11s

Not a lot of people go to two fifteen countries and destinations. Right. Right. Americans are big into theoretical freedoms. They wanna have more than they can eat.

Roger Entner 9m21s

The idea of an unlimited, you know, lunch buffet is not to eat unlimited amount. So it's gonna be interesting how this plays out. I don't think they will get more customers because of this plan than what they got before. Right?

Don Kellogg 9m35s

Yep. We'll see how it impacts churn or not. Right?

Roger Entner 9m38s

Well, this side will not impact churn because they're not raising prices on the base. This one will impact gross adds.

Don Kellogg 9m44s

Well, no. I I just I disagree because if you've got other carriers out there that are willing to give you good deals on devices without upgrading to the highest tier plan, which is generally speaking what T Mobile has been doing for the last year or two. If you're ready to get a new device and T Mobile wants you to up your plan, it doesn't include taxes and fees. I think there are lot of subs that will look at other options. Right?

Don Kellogg 10m3s

So I think it hurts the upgrade path based on kind of what their policy has been around extending device deals to the base in the past. So we'll see. By the

Roger Entner 10m11s

way, if you look at the device upgrade, experience beyond comes with it every year, a new device every year. And Experience More is every two years. At AT&T, it's every three years. I'm on the legacy upgrade plan where I pay $5 extra, I think, a month. And it's upgrade every two years.

Roger Entner 10m33s

They sunset their plan, and the new one is every year. And it's like $10 or $15 a month. And that's, for example, baked into this price. So when you do a true apples to apples, you get more value here on a dollar for dollar basis, without a doubt.

Don Kellogg 10m52s

Yes. But what I would say is for a lot of people who are on legacy plans, I happen to be one of these people. When you look at the increase between like kind of like a Magenta Max or or something like that. Right? And yes, you get a free device every one or two well, to two years depending no.

Don Kellogg 11m6s

But I know how much the devices cost. And if I look at the difference in the MRC over time, it's actually cheaper for me to just buy the device outright if I'm on a legacy plan. So, yeah, sure you get a quote unquote free device, but you're actually paying for it. You're just paying for it every month. Right?

Roger Entner 11m21s

Yeah. You're getting sticker shock. Right?

Don Kellogg 11m23s

Yeah.

Roger Entner 11m23s

You look at this.

Don Kellogg 11m24s

Well, doesn't pencil if you're doing the math on it.

Roger Entner 11m26s

Right? We do sentiment analysis on the internet and social media for all of these guys and look at what do people write about and things like that. They're like comparisons of like people like, here's the old plan, here's the new plan, dollars 60 difference. And they're like, holy cow. What we're seeing, I think in a nutshell is T Mobile becoming more and more carrier and less and less un carrier.

Roger Entner 11m49s

And here's another example of it's the same pricing construct now. Taxes and fees included is only now with prepaid providers.

Don Kellogg 11m58s

Back where it started with MetroPCS. Right?

Roger Entner 12m1s

Yes.

Don Kellogg 12m1s

It'll be interesting, and we'll keep following it. We'll probably have to wait until the '2 to see what the real impact of this is. I'm not sure about the timing, but, you know, more power to them if they can do this. Right?

Roger Entner 12m11s

Yep. Alright. We'll see.

Don Kellogg 12m13s

Alright. Thank you.

Roger Entner 12m14s

Thank you. Okay. Bye bye.