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

Full Transcript

0m10s Speaker 0

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 Antner. How are doing, Roger?

0m23s Speaker 1

Hey. I'm great. How are you?

0m25s Speaker 0

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?

0m37s Speaker 1

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.

0m56s Speaker 1

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.

1m30s Speaker 0

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

1m33s Speaker 1

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?

2m1s Speaker 1

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.

2m18s Speaker 0

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.

2m26s Speaker 1

It's on the voice portion.

2m28s Speaker 0

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

2m35s Speaker 0

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.

2m45s Speaker 0

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.

3m1s Speaker 1

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.

3m15s Speaker 1

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 and T and to Verizon to grab that customer advocate mantle. It is now lying on the floor. Right? And somebody gotta pick it up.

3m43s Speaker 0

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.

3m59s Speaker 0

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.

4m22s Speaker 0

So that's kind of a theoretical freedom.

4m23s Speaker 1

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

4m32s Speaker 0

That's still a lot of four

4m33s Speaker 1

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?

4m48s Speaker 1

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.

5m8s Speaker 1

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.

5m39s Speaker 1

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.

5m58s Speaker 1

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.

6m10s Speaker 1

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.

6m30s Speaker 1

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?

6m51s Speaker 1

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.

7m23s Speaker 1

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?

7m33s Speaker 1

Did you have to

7m34s Speaker 0

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.

7m58s Speaker 0

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?

8m4s Speaker 0

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

8m9s Speaker 1

I don't think so.

8m12s Speaker 0

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.

8m19s Speaker 0

The timing is poor.

8m20s Speaker 1

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.

8m28s Speaker 1

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

8m39s Speaker 0

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

8m41s Speaker 1

Yeah.

8m42s Speaker 0

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.

8m57s Speaker 0

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.

9m11s Speaker 1

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.

9m21s Speaker 1

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?

9m35s Speaker 0

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

9m38s Speaker 1

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

9m44s Speaker 0

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?

10m3s Speaker 0

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

10m11s Speaker 1

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 and 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.

10m33s Speaker 1

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.

10m52s Speaker 0

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.

11m6s Speaker 0

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?

11m21s Speaker 1

Yeah. You're getting sticker shock. Right?

11m23s Speaker 0

Yeah.

11m23s Speaker 1

You look at this.

11m24s Speaker 0

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

11m26s Speaker 1

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.

11m49s Speaker 1

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

11m58s Speaker 0

Back where it started with MetroPCS. Right?

12m1s Speaker 1

Yes.

12m1s Speaker 0

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?

12m11s Speaker 1

Yep. Alright. We'll see.

12m13s Speaker 0

Alright. Thank you.

12m14s Speaker 1

Thank you. Okay. Bye bye.