T-Mobile Offering $10 Data Plan Credit for One Year
These kinds of business tactics
are what puts a company under. T-Mobile has to generate a certain level of revenue in order to continue operating profitably, and offering rate plans - especially data plans - for dirt cheap is not the way to do it. I understand that T-Mobile's business plan has long been to offer good service at below-market prices, but I think it's very clear now that doing so spells death to a wireless company. Especially having to cater to consumers' insatiable demand for all things data, these credits are stupid. I'd like to see an accurate ARPU figure for T-Mobile, and then compare that to the $120/year they'll be losing. My bet is it has a significant impact upon the gross margin; so much so that they may only break even after all operational costs.
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Why not? Surely Deutsche Telekom would not sit idly by while T-Mobile America efficiently disassembles what's left of its business. It is important to remember that, while not probable, the FCC and/or DOJ could strike the entire merger down, in which case offering these unsustainable rate plans would not be conducive to prolonging T-Mobile's existence. And before you argue that T-Mobile would benefit from the strikedown because AT&T would be required to pay $3 billion in cash as well as divest spectrum, please note that T-Mobile's annual revenue is many billions of dollars (I don't have exact figures at the moment, but I estimate their annual revenue is roughly $5-10 billion), and a $3 billion cash transfer would only serve as immediate and ...
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I agree but T Mobile tried a risky strategy....they needed to increase revenue to have the money to improve their network, raising their rates isn't feasible because it would increase churn and ruin their reputation as the budget friendly carrier...
So they tried going for broke by slashing prices to the bone and doing whatever it took to increase their customer base, the apparent hope being that they could make up for the loss by volume.....
It didn't work....and oddly enough it didn't work because when something is priced too cheaply people don't value it.....look at Apple, why do they have the reputation they do? Isn't it at least partly because their products cost such an ungodly amount of money that people assume they simply MUST ...
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So they tried going for broke by slashing prices to the bone and doing whatever it took to increase their customer base, the apparent hope being that they could make up for the loss by volume.....
It didn't work....and oddly enough it didn't work because when something is priced too cheaply people don't value it.....look at Apple, why do they have the reputation they do? Isn't it at least partly because their products cost such an ungodly amount of money that people assume they simply MUST ...
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That's a semi-valid point, but let's not forget who T-Mobile's target demographic is: the flamboyant, young generation of hipsters who want all the best at the lowest of prices. Introducing astronomically high prices for products aimed at wealthier consumers works well for companies like Apple, because, well, the customers have the money for it. T-Mobile decided not to go down that path a long time ago, but due to the rise of prepaid and MVNOs, there isn't much room left in the market for T-Mobile.
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Look to Metro PCS that offers unlimited 4G data profitably for $60 per month. Once the subscriber is earned, the cost to maintain them is minimal. In fact per T-Mobile's own Q1 profit statement the cash cost per user is $25 per month. Anything above this is pure profit.
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For each new customer on most major networks it takes them 18 months to break even, after that it is where the profit starts.
Why?
Advertising cost, subsidizing the cost of phones, and other minor factors but mostly the first two items.
So that's why most upgrades are every two years (or close to it), even Verizon dropped the 1 year upgrade for the primary line now.
So you get new equipment at your two years mark? Why a discount? Well it cost far less to keep a customer than get a new one. Thus they will give you a discount, though usually not as good as a brand new customer discount.
Why?
Advertising cost, subsidizing the cost of phones, and other minor factors but mostly the first two items.
So that's why most upgrades are every two years (or close to it), even Verizon dropped the 1 year upgrade for the primary line now.
So you get new equipment at your two years mark? Why a discount? Well it cost far less to keep a customer than get a new one. Thus they will give you a discount, though usually not as good as a brand new customer discount.
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The cash cost per user includes these expenses which is why churn is such an important metric. It costs about $300 per add which includes overhead and phone subsidies. It does not take 18 months to turn a profit.
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I am no longer in the wireless industry, but while I was, 18 months was the generally accepted time period for which it takes a wireless company on average to produce a profit. Seeing as I've been told this by supposedly veritable sources (including representatives working directly for a variety of wireless companies), I need to see a reliable source for the above statement. If it is of personal opinion, disregard this comment entirely, as I do not wish to argue a fallacy. If, however, you can indeed procure a source, I am most interested to read it.
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The most reliable source is T-Mobile's own earnings statement readily available on their website. 🙄
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I don't know why you find it necessary to act condescendingly. I suppose I shouldn't be surprised; after all, the internet is chock-full of arrogance, ignorance and hubris.
Thank you for attempting to provide an intelligible debate. However, your efforts have unfortunately been in vain.
Thank you for attempting to provide an intelligible debate. However, your efforts have unfortunately been in vain.
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Using hearsay to make an argument against a company's own figures seems silly. The 18 month argument has been around since the early days of wireless. It's what the companies repeatedly told representatives to justify a long term contract with huge early termination fees. It made it more palatable for those representatives.
As far as being condescending, that is not my intention. Because I'm using figures so easily accessible I assume anyone who'd want to have a discussion would access them.
As far as being condescending, that is not my intention. Because I'm using figures so easily accessible I assume anyone who'd want to have a discussion would access them.
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You assume those figures are easily accessible. I don't have access right now (as I am working), so I can't verify. I just find it highly suspect that they would have blatant figures stating "HEY GUISE THIS IS HOW MANY MONTHS IT TAKES TO TURN A PROFIT." That kind of information being released to the public seems rather peculiar to me.
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Actually, I do not know T-Mobile's profit/ churn amounts. I used to work for AT&T Corporate. The numbers I have is what AT&T Sales, Marketing, and Customer Service went by. So I will not not argue/debate about a company's numbers that I do not have knowledge of.
Though, over the years I have learned to never go by what a corporation says, esepcially number-wise, as they will always try to find a way to put themselves in the best possible light or give them the most sympathy. Thus what they show or tell you is not always the whole story, nor even the truth in some cases.
Though, over the years I have learned to never go by what a corporation says, esepcially number-wise, as they will always try to find a way to put themselves in the best possible light or give them the most sympathy. Thus what they show or tell you is not always the whole story, nor even the truth in some cases.
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MetroPCS is a smaller, regional carrier....
Regional carriers can afford to offer lower prices than national carriers....the bigger the network, the greater the cost to maintain it.
Regional carriers can afford to offer lower prices than national carriers....the bigger the network, the greater the cost to maintain it.
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I don't mean to offend but there's something called economies of scale. Larger networks with more customers mean more profit with less overhead per user. AT&T merging with T-Mobile is as much about 33 million additional subscribers as it is about spectrum.
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"I don't mean to offend but there's something called economies of scale. Larger networks with more customers mean more profit with less overhead per user."
Then why do networks like Metro PCS have a higher profit margin than at&t, Verizon etc?
Then why do networks like Metro PCS have a higher profit margin than at&t, Verizon etc?
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This forum is closed.
