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T-Mobile: iPhone 4S launch killed us as contract customers fled

By | February 23, 2012, 2:41am PST

Summary: T-Mobile ended the fourth quarter with 33.2 million customers, down from 33.7 million at the end of the third quarter.

T-Mobile just couldn’t compete with the barrage of iPhone 4S devices coming from rivals AT&T, Sprint and Verizon.

The company said that it ended the fourth quarter with 33.2 million customers, down from 33.7 million at the end of the third quarter.

In addition, T-Mobile saw net customer losses of 526,000 in the fourth quarter. In the third quarter, T-Mobile added 126,000 net customers.

The problem? T-Mobile doesn’t have the iPhone 4S. The company said in a statement:

The sequential and year-on-year increase in customer losses is a result of intense competitive pressure from the launch of the iPhone 4S by three nationwide competitors in the fourth quarter of 2011. In addition, higher connected device deactivations contributed significantly to the net customer loss in the fourth quarter of 2011, including a nearly 265,000 deactivation related to one customer with a yearly service revenue impact of less than $1 million.

What’s unclear is T-Mobile’s path forward. CEO Philipp Humm said that the company will invest to grow the business and bolster its network. Humm also noted that “not carrying the iPhone led to a significant increase in contract deactivations in the fourth quarter of 2011.” T-Mobile is also planning a “challenger strategy” as well as an LTE rollout in 2013. However, those moves are really table stakes.

T-Mobile was planning to merge with AT&T, but regulators shot down the deal. Now T-Mobile is twisting in the wind a bit. The figures are a bit ugly:

  • Contract net customer losses were 802,000 in the fourth quarter.
  • Churn spiked to 4 percent in the fourth quarter, up from 3.2 percent in the third quarter.
  • Contract churn was 3.1 percent, up from 2.4 percent in the third quarter.
  • On the bright side, T-Mobile is adding prepaid customers, but those users aren’t the most profitable for the carrier.

T-Mobile reported fourth quarter OIBDA (Operating Income Before Interest, Depreciation, Amortization and Impairment) of $1.27 billion on revenue of $5.18 billion, down from $5.36 billion a year ago. The company didn’t report a net income figure.

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Topics

Apple iPhone, Apple iPhone 4S, T-Mobile, Customer Loss, Smart Phones, Consumer Electronics, Personal Technology, Larry Dignan

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic.

Disclosure

Larry Dignan

Larry Dignan has nothing to disclose. He doesn’t hold investments in the technology companies he covers.

Biography

Larry Dignan

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CNET News.com. Larry has covered the technology and financial services industry since 1995, publishing articles in WallStreetWeek.com, Inter@ctive Week, The New York Times, and Financial Planning magazine. He's a graduate of the Columbia School of Journalism and the University of Delaware.

For daily updates, follow Larry on Twitter.

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Molehills
bergmann620 13th Apr
I guess I should have phrased better. I don't get 4G everywhere. Of course, I was on Sprint, so their 3G was only ever as fast as 2G is now on T-Mobile. I also don't get amazing reception in my office- which is dead in the center of a multi-story building. I didn't get reception there with Sprint, either. Unlike before, I don't have to worry about my phone battery lasting 2 hours, my phone doesn't experience slowdown when placing a phone call, and I can access my exchange mail without jumping through hoops.
View in thread
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Wow! Just when I finally think i have a grasp on Apple's
James Quinn 23rd Feb
incredible power and influence a new article blows my perceptions away once more again.

Pagan jim
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That may change as investors
William Farrel 23rd Feb
@James Quinn
care more about their money then they do any particular device.

Seeing that the iPhone is costing carriers money, and investors are starting to call them on that, it'll be interesting to see what happens with the price in future iPhones.

With all the recnt articles in the news of late, sadly it looks as though with Jobs' passing, the wolves are starting to gather at the gates
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RE: T-Mobile: iPhone 4S launch killed us as contract customers fled
DannyO_0x98 23rd Feb
@William Farrel
And yet, the US carrier who does not have it is saying that that is costing them money.

What's a carrier to do? Subscription music services?

But seriously, let's say on balance, AT&T is really losing money because of all those customers (and not cherry-picking data to make some cue-the-violins case about the mean FTC or to set up a data plan price increase), do they stop carrying the iPhone? And give the customers who got onto AT&T for the iPhone, like me, less, indeed, no reason to stay? I'd wait out my contract, wait for the next model and be off AT&T in a flash.

If the investors in the carriers want to blame Apple because it brought them customers and their companies' managers couldn't figure out how to profit from that, well, okay. Just more of our weird world where people earn big bucks to go away and stop driving their businesses into the ground.
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This is not a surprise
rhonin 23rd Feb
@William Farrel
Sprint paid through the nose to get the iPhone 4S and is struggling to break even on the cost, TMo is complaining that the combined carrier and iPhone onslaught is hurting them, and Verizon and AT&T are..... Not sure whatvthey are doing.

TMo is swinging and will either fail or be gobbled up by something.
That is fairly obvious.
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RE: T-Mobile: iPhone 4S launch killed us as contract customers fled
HypnoToad72 23rd Feb
@William Farrel -

The passing of some senior marketer is immaterial. The system has ALWAYS been about the wolves. Nothing has changed, but someone may have managed to get people to buy into a false belief or paradigm...
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I see his point
John Zern 23rd Feb
@DannyO_0x98

A recent article had pointed out that carriers are losing money with the iPhone as they need to purchase them at $600 a piece.

Yes, it brought them customers, customers that they lose money on every month, as they do not make it up via the contract.

I wonder if the "unlimed plans" have gone away as the carriers want the extra income from capped plans?

And if you leave AT&T, then they would actually make more money as that is one less customer that they will lose money on.

Even Apple is content with low volume high profit computer systems, why would investors care if Verizon dumpped the iPhone and turned a higher profit, as you could go to AT&T, which in turn would lose them even more money each month.

It's the difference between having customers pay you fro your service, or having you pay customers for your service.
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RE: T-Mobile: iPhone 4S launch killed us as contract customers fled
Synthmeister Updated - 23rd Feb
@James Quinn
The iPhone simply showed everyone what the carriers really were: dumb pipes. They frittered away two decades with nothing more innovative than crappy OSes, convoluted cheap hardware, overpriced ringtones, ridiculous texting fees artificial limitations on their devices, and rotten customer service.

It is the carriers who cared much more about money instead of trying to innovate creative, enjoyable and simple devices or services--not Apple. Apple set about to create a device that they themselves would enjoy using--while earning them a profit, of course. The telcos simply set out to gouge the customer with creative, arcane and outlandish subscriptions and fees.
0 Votes
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Ding! Ding! Ding!
Robert Hahn 23rd Feb
Excellent point. Maybe instead of "dumb pipes" we should call their products "clear skies." That's to distinguish them from Clouds, and Cloud Services, which they were in the perfect position to provide from day one. Why should a Verizon customer have to use Google or DropBox or iCloud to shovel documents around when Verizon coulda/shoulda been there five years ago? It's as if the places were being run by guys who made their bones splicing tips and rings.
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RE: T-Mobile: iPhone 4S launch killed us as contract customers fled
Peter Perry 23rd Feb
Bull, I know a lot of people who bought into T-Mobile and almost all of them are leaving when their contract is up because the coverage is horrible and the customer service is worse.

Think about it, the iPhone has been around for 4 years and these customers pick now to leave? Not saying they didn't buy the iPhone, just saying it isn't the only reason to leave T-Mobile.
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RE: T-Mobile: iPhone 4S launch killed us as contract customers fled
jamboy34 23rd Feb
@Peter Perry - I was a faithful T-Mob customer for 6 years and yes the coverage wasn't the greatest but the customer service was second to none in my opinion. I spent 5 years as a month to month contract customer but finally left T-Mob in October 2011 and went to Sprint to get the 4S. Although anecdotal at best - 4 close friends of mine left T-Mob for the same reason!
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RE: T-Mobile: iPhone 4S launch killed us as contract customers fled
dave95. Updated - 23rd Feb
@jamboy34

Agreed. The excellent customer support is what I remember the most with T-Mo. I remembered when I was leaving a few years ago, they tried hard to convinced me there was some great phones coming that would be just as good as the iPhone. Really didn't want to leave but I also really wanted the iPhone. As many others.
0 Votes
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RE: T-Mobile: iPhone 4S launch killed us as contract customers fled
admiraljkb Updated - 23rd Feb
@jamboy34
Hehe. We did exactly the opposite thing at almost the same time. happy Oddly enough, I left Sprint at the same time for Tmobes for the same reason. (right after the ATT deal was cancelled they had a deal running for SGSII T989's for $99ea which "paid" for my early termination with Sprint). I was extremely pissed off that Sprint wasn't faithful to its loyal customers (and took away the early upgrade benefits for folks paying large bills) in order to finance the iPhone4s, which is causing it to lose money. Also anecdotal, but the Sprint customer service folks had indicated a lot of people quit over that.
0 Votes
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RE: T-Mobile: iPhone 4S launch killed us as contract customers fled
dhmccoy 23rd Feb
@Peter Perry

Easy one. The only choice was AT&T. Now you can leave T-Mobile and go to At&T, Sprint or Verizon. People have short memories. wink This is the *first* year that the launching iPhone was available on a carrier other than AT&T.

The iPhone Just came to Verizon in Feb '11.
0 Votes
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T-mobile lost me years ago because of the iPhone.
ssaha 23rd Feb
I was a T-mobile customer for 8 years, from 2001 to 2009. Before then I had a Nextel phone from my employer, and before that a Verizon customer. I switched to AT&T in 2009 precisely because it had the iPhone, and have been more than satisfied since.
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Customer Service is good.
Bruizer 23rd Feb
Coverage is horrid. But those were constant to improving. The 4S on Sprint, Verizon and AT&T pushed many to leave.
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RE: T-Mobile: iPhone 4S launch killed us as contract customers fled
Joel-r 23rd Feb
I though the Nokia lumia was going to start the WP 7 takeover? I guess not, after all . happy
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RE: T-Mobile: iPhone 4S launch killed us as contract customers fled
hotwirez@... 23rd Feb
I think that a lot of that churn was related to the potential that the AT&T purchase would have gone through. I know many T-mobile customers that left other operators because of the customer service and fair prices. I am one of them and I would not renew my contract during that period because I do not want to be an AT&T customer. I bought a smartphone outright rather than renewing.
0 Votes
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RE: T-Mobile: iPhone 4S launch killed us as contract customers fled
djlong 23rd Feb
I was going to either Android or iOS with my next phone after years of WinMo loyalty - and ever longer loyalty to Verizon (21 years). I considered T-Mobile because of price and decided to wait and see what Apple offered. The 4S announcement came and I decided to go with Sprint as my monthly bill would go down $50 (3-line family plan for 3 iPhones). T-Mobile didn't have it and Sprint did and Verizon wouldn't budge on price. That was the final analysis.
0 Votes
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RE: T-Mobile: iPhone 4S launch killed us as contract customers fled
ccrockett@... 23rd Feb
I've been with T-mobile for 7 years but once they implement the data roaming caps I am gone. They have crap coverage where I am but I put up with it because of their prices. BUT come mid April they are planning on caping the amount of data you can use while roaming, which for me is always. Sooooo... goodbye T-mobile and hello AT&T!
0 Votes
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So, to all you folks who
baggins_z 23rd Feb
Were against the merger because you said it would cost jobs, what are you going to do when T-mobile goes out of business and EVERYONE there loses their job? Never mind. You'll blame it on corporate greed.
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RE: T-Mobile: iPhone 4S launch killed us as contract customers fled
DannyO_0x98 23rd Feb
Don't forget, T-Mobile gets a big check from AT&T for that merger cancellation. Take a billion out to fund having a T-Mobile iPhone 4s and get back in the game.
-1 Votes
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RE: T-Mobile: iPhone 4S launch killed us as contract customers fled
bergmann620 23rd Feb
I just signed up with T-Mobile. The coverage isn't as good as I would like it to be...However,my Lumia 710 is so much more functional as a device than my Android device was. I'll take my lumps on coverage for having a phone I love.
0 Votes
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Feh
Robert Hahn 23rd Feb
Saying you'll "take your lumps on coverage" doesn't pass the smell test. By now most people have experienced a carrier that provided spotty coverage where they expected to make phone calls. They have had the calls suddenly end right in the middle of getting directions, or a phone number. They'd never do it again. Certainly not for some shiny new toy that will drop calls as rapidly as the old Moto KRZR when the carrier turns out to be marginal.

Which is to say, I don't believe you. I think you're posting a Nokia ad.
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Molehills
bergmann620 13th Apr
I guess I should have phrased better. I don't get 4G everywhere. Of course, I was on Sprint, so their 3G was only ever as fast as 2G is now on T-Mobile. I also don't get amazing reception in my office- which is dead in the center of a multi-story building. I didn't get reception there with Sprint, either. Unlike before, I don't have to worry about my phone battery lasting 2 hours, my phone doesn't experience slowdown when placing a phone call, and I can access my exchange mail without jumping through hoops.
0 Votes
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So, T-Mobile cites market manipulation?
HypnoToad72 23rd Feb
Besides, most 4s owners, especially those not lucky to have an unlimited plan*, will not be happy once they realize how much Siri gobbles up (bait'n'switch; Siri encodes your voice and transmits it to a server farm where the work is processed and answer sent back... just wait for video streaming to become more popular on 4g as well... ouch...)

* why are accounts allowed to grandfather in unlimited plans? Why the special treatment? Why can't all customers, who spend the same amount of money, have the same level of plan they get?
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One thing T-mobile does having going for it...
jvitous 24th Feb
..is GSM phones that are usable just about anywhere in the world. AFAIK, AT&T is the only other provider of such service, and I can't afford their astronomic domestic rates. Last time I checked, Verizon and Sprint had nothing that I could take overseas with me.

I'm currently without a contract, but that could change later this year when I'll need to get some sort of family plan. Again, whoever can offer the best suite of international options (both traveling internationally and calling to international numbers) at the best price is going to get my business.
1 Vote
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No true 4G anyone?
bcclendinen@... Updated - 12th Mar
You think this maybe also has to do that T-mobile does not have true 4G? It is more like 3.5G in speed. However, I find this acrtical conculsion dumb. Just as the stock market does not go or or down for one reason. Hundreds of thousands of custmers don't leave for one reason. Funny I actually switch to t-mobile and I have an Iphone. Not as good coverage but a little bit better on price.

Phone companies need to get out of selling phones at discounts. Anyone can do a basic financal analysis and find if you actually bought your new smartphone at reatail price and went to an equivlent pre-paid plan you would save money over the two years, plus not be locked in. Family plans seem to be a slight exception.

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