T-Mobile bags another 1.1m customers - can anyone stop the magenta army?

After Verizon struggled through Q1, it is becoming increasingly clear where its profits and customers have gone; T-Mobile has been pinching them again.

While it will come as little surprise CEO John Legere and magenta army of disruptors have romped away once again, perhaps the scale of the victory will be somewhat of a surprise. Over the course of the last month, competition has intensified in the US postpaid market as a flurry of unlimited data contracts have been released from all angles.

It would be fair to assume customers would stick to current providers considering the hassle of moving and the little benefit gained, though T-Mobile has continued momentum with another whirlwind performance. Over the course of the quarter, 798,000 branded postpaid phone customers we brought in, as well as 386,000 on the prepaid side of things. This brings the total now up to 72.6 million customers.

The numbers were slightly down on the same period for 2016, but to put things in perspective, Verizon recently announced it had lost 289,000 postpaid customers over the same period.

And if you listen to Legere and co. it’s only going to get worse for everyone else. Postpaid net customer additions for full-year 2017 are now expected to be between 2.8 and 3.5 million, up from the previous guidance range of 2.4 and 3.4 million. To support this momentum, another 3,000 stores will be opened across the US, as well as recently spending $8 billion, winning the biggest number of licenses, during one of the more complicated spectrum auction in memory.

Getting down to the bread & honey, total revenues increased by 11% year-on-year in Q1 2017 to $9.6 billion, with the team expecting this to be the 15th quarter in the past four years that T-Mobile has led the industry in total revenue percentage growth. Net income increased a mammoth 46% year-on-year in Q1 2017 to $698 million.

Market old-timers such as Verizon and AT&T may have laughed at the prospect of the eccentric John Legere taking them on after his appointment in 2012, but sh*t is getting real now. Legere is here and he’s not going anywhere. The rise also demonstrates that organizations can be successful through the simple idea of disruption and doing one thing properly.

Differentiation is one of the most prominent buzzwords circulating the industry as telcos search for lost profits, but T-Mobile is showing that you can focus on one thing and be successful at it. We’re not saying that differentiation is a bad thing, however unless you have a strong cash-cow to support bets elsewhere it will be very tricky task.

Google is a prime example of a successful differentiation venture with its cloud business unit. The team have the safety blanket of dominating online search revenues, therefore can dedicate more time elsewhere. Telcos are fighting on multiple fronts, attempting to recapture lost revenues from the dying cash-cow, as opposed to supplementing them. They are differentiating through necessity not desire, and it’s not necessarily a sign of a very healthy business.

T-Mobile’s moves in the recent spectrum auction show there is more the business can do in the wireless market. The team were relatively asset light in the low-band spectrum game, though this new swath of spectrum certainly creates another headache for the likes of AT&T and Verizon.

$8 billion was spent for an average of 31MHz of 600MHz spectrum that covers all of the US, 10 MHz of which, covering over one million square miles, is expected clear in 2017, with the new spectrum being put to use by the end of the year. By its own calculations, it now has more low-band spectrum per customer than any other major provider.

And now with the end of the spectrum auction, the FCC ban on merger talks is also over; the gossips of the industry can start plying their trade again. Will it be Sprint or Dish or a rogue unknown player we haven’t thought of yet? Legere commented on the positives of each of the potential bed mates during the earnings call, but it’s a bit of a guessing game for the moment. Satellite TV provider Dish would add some useful spectrum options, as well as content, while Sprint would add a chunky number of customers to the T-Mobile family.

Acquisition talk might be speculation for the moment, but T-Mobile has promised another Uncarrier incentive before the end of this quarter which might provide the incentive to push customer growth numbers back into the year-on-year increase. Legere might not be at the top table just yet, but he certainly is circling with intent. Be afraid, be very afraid.