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CNET: “Sprint the winner if AT&T absorbs T-Mobile?” (YES! Obviously!)

June 6, 2011

I’ve been saying this ever since AT&T announced the T-Mobile purchase in March:  T-Mobile disappearing will only spur Sprint’s growth!  Now CNET is on the trail …

June 6, 2011 5:39 AM PDT
Sprint the winner if AT&T absorbs T-Mobile?
by Roger Entner

Roger Entner is the founder of Recon Analytics, responsible for all aspects of the firm’s research, consulting, and operations. He previously served in leadership roles at Nielsen, IAG Research, Ovum, and the Yankee Group.

The article’s author states in the beginning that opponents of AT&T swallowing T-Mobile have erroneously warned the merger will lead to inflated prices:

Entities such as the Consumers Union are prognosticating that the disappearance of T-Mobile USA ‘will likely lead to higher prices, not just for T-Mobile customers, but for all customers,’ as it would eliminate the ‘largest low-cost provider’ in the wireless marketplace.”

Calling T-Mobile “the largest low-cost provider” is factually incorrect in two areas:

  1. It’s not the largest low-cost provider – Sprint is.  And really, that’s of the big-4 wireless companies.  Officially, Sprint isn’t the largest low-cost provider, although it owns one of the lowest-cost providers, Boost Mobile.  When you compare costs and number of customers, Boost, Leap Wireless, Metro PCS, and Straight Talk are the largest low-cost providers.  T-Mobile isn’t even in the discussion.
  2. Of the big-4, T-Mobile isn’t the lowest-cost provider – Sprint is.  Compare the two plans, Sprint’s $79.99 ($69.99 + “$10 Premium Data add-on charge“) vs. T-Mobile’s $79.99, and see which plan gives you more.  On T-Mobile’s plan, the potential for overage charges is tremendous with their limited 2GB data.

That’s why the article says:

… quick research gathered from the Web sites of various wireless providers presents a set of facts that do not support claims that T-Mobile is the lowest-cost provider.  Furthermore, trend lines for wireless pricing before and after wireless mergers do not support the theory that the merger will lead to price increases.”

And then the real hammer drops:

In fact, Sprint’s Boost Mobile, Leap Wireless, Metro PCS, and Straight Talk are all gaining customers, while T-Mobile’s higher-priced services are losing customers.  It is highly doubtful that Sprint, Leap, Metro PCS, and Tracfone will raise prices while competing vigorously against each other for customers at the low-cost end of the market, just because a higher-priced competitor is no longer competing.”

The best way to describe T-Mobile at this time is as ‘the most expensive low-cost phone provider’ — an oxymoron indeed, and the exact reason for T-Mobile’s customer losses.  The root of T-Mobile’s current churn and customer drop-offs lies in the lack of focus on a clear consumer segment.  The provider’s plans are too expensive to appeal to customers who seek low-cost plans, while it is unable to provide a network that will satisfy the demands of customers who are willing to pay a premium.”

I’m also obligated to add that T-Mobile is the most egregious liar in the wireless market, aggressively touting a “truly unlimited” plan that is truly limited (unlimited talk and text, with a 2GB data limit), along with their “4G” service that isn’t close to 4G.  They fool a lot of customers to get them in the door, but then customers find out the truth and take their business elsewhere.

And it’s very easy to go elsewhere:

In virtually every market, where T-Mobile is active, Sprint’s Boost service is available, as is Straight Talk.  Additionally, either Metro PCS (covering approximately 100 million Americans) or Leap Wireless (covering approximately 95.3 million Americans) are also active in these markets, providing cheaper service plans that directly compete with T-Mobile USA’s offerings.”

Very few people are limited to T-Mobile’s unlimited dishonesty and high prices.  (You can put AT&T and Verizon at the top of the high prices column.)

As for the overall cost of wireless potentially increasing because of AT&T and T-Mobile merging, the data overwhelmingly kills that argument:

Based on Nielsen’s Customer Value Metrics collection of more than 60,000 wireless phone bills per month, the price per voice minute has held steady over the last two years, while the price per text message that consumers actually pay declined from about 2 cents to 1 cent per message, and the price per megabyte of data declined from 47 cents in the third quarter of 2008 to 5 cents in 2010.”

After those four devastating points, Mr. Entner concludes the whole situation will benefit Sprint:

What is perhaps even more interesting is that Sprint, while loudly opposing the acquisition, will in all likelihood be the biggest winner from T-Mobile’s disappearance.  It is already the best-positioned value provider in the wireless industry.  Sprint’s postpaid plans are providing great value, while its Boost brand is a leader in the disruptive unlimited segment, and its Virgin Mobile brand is well represented in the per-minute prepaid segment.  No other provider has as firmly anchored itself as the low-cost provider as Sprint has, and no other carrier in the U.S. has done a better job in improving its customer service.”

He goes on to say that “When the remaining, value-conscious T-Mobile customers are looking for a new carrier, Sprint and its fighter brands will be at the top of their consideration list

In the end, the article shows the brilliance of Sprint’s current position:

For Sprint, the merger (and opposing it) represents a win-win opportunity.  By opposing the merger, Sprint makes the lives of two of its competitors more difficult and increases the chance Sprint will secure extensive and favorable conditions on the merged entity.  If it succeeds in blocking the merger, Sprint will have forced AT&T and T-Mobile to waste an entire year of valuable management time that could have been used to make Sprint’s life more difficult.  T-Mobile would be in a particularly difficult position to reinvigorate a workforce and attract new customers.  After all, how do you gain customers when your company is viewed as uninterested in staying in the United States and without a vision for the future, but was forced by regulators to still compete?

The CNET article has a chart that compares the most popular low-cost plans, but the author makes the same mistake most people doit uses the headlines from the providers instead of using the fine-print (which is found in the “Terms & Conditions”) upon which customers are billed.  Yes, it’s true:  customers make purchasing decisions from headlines, but get billed under the fine-print conditions.  For integrity in the market place, customers should be aware of that.

Here are the specifics of the article’s chart errors:

  • T-Mobile’s $69.99 and $89.99 plans are for contract, not prepaid.  T-Mobile’s prepaid plans are $50 for unlimited talk and text and 100MB data, and $70 for unlimited data, although no details are given on where they cap that (which I’m confident they do, since they cap their contract plans).  While we’re at it, how does T-Mobile’s “low cost” $70 compare to a plan that offers more service at $50?  That’s a gargantuan $20/month difference, for less service!
  • Of the 4 prepaid companies’ plans, 3 are NOT for smartphones – only one of them applies to prepaid smartphones (Boost’s $50).
  • The $45 plan listed for “Leap Cricket” is NOT available for smartphones – they have a $55 plan, but even that isn’t unlimited for talk (no 3way conference calls allowed) and the data is capped at 1GB.  Cricket says numerous times on its site that the plan is unlimited, until you get to the “details page” that says at the bottom, “Rate plan contains a 1GB data usage level.  Once you reach your usage level your speeds will be reduced.”  Yet the CNET article’s chart says “unlimited.”
  • The $40 and $50 plans listed for “Metro PCS LTE” have data caps of 100MB and 1GB, respectively.  Yet the CNET article’s chart says “unlimited.”  If you want truly unlimited with MetroPCS, it’s $60/month.
  • Straight Talk’s plans don’t offer any current smartphones, and that company’s definition of “Mobile Web Access” is about 20 years old.  Use any fone they offer to surf the web, and you’ll quickly conclude that you can’t get a good internet experience with them.  So their $45 plan is not anywhere near the same thing as unlimited data with Boost’s $50 plan and Cricket’s $55 plan.

For a much more accurate plan comparison chart, go here.

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