T-Mobile will win the attention of business customers, if not sales

AT&T, Sprint and Verizon defend their plans

T-Mobile CEO John  Legere
Steve Marcus/ Reuters

T-Mobile CEO John Legere gets laughs for his raunchy talk in public, but others are taking his announcement of simplified pricing with "Un-carrier for Business" seriously.

Legere said Wednesday that T-Mobile's new pricing will cost businesses 42% less than using either Verizon Wireless or AT&T.

T-Mobile is also moving aggressively to expand its 4G LTE network to 300 million people by the end of 2015 while the company's profits are increasing more than those of competitors, "and that's what scares the hell out of them," Legere said.

That kind of tough talk used to turn off a lot of people over the two years that Legere has been making "Un-carrier" announcements. They include longtime analysts like Roger Entner of Recon Analytics, who in January blasted T-Mobile for its price-cutting practices which he said will eventually wreck profits for the entire industry.

But after the "Un-carrier for Business" announcement, Entner said Thursday he feels some admiration for what Legere is doing, even if T-Mobile's parent, Deustche Telekom, still plans to sells off T-Mobile.

"Legere executes well, and the company is growing faster than the industry and is keeping everybody on their toes and forcing them to innovate," he said. "They are doing it more profitably than I thought was actually possible."

The big concern for businesses considering the new T-Mobile pricing and plans will be more practical: Can workers actually get a signal as they work at home or drive to meet customers?

Legere admitted that more LTE buildout is needed to reach rural customers and provide in-building connections. "We're at a great spot, but we're not done and not even close," he said.

One advantage to T-Mobile's network for business users is that Wi-Fi calling is allowed, which can remedy some in-building connection problems. Legere said that 72% of T-Mobile's 55 million customers have Wi-Fi calling- and texting-enabled devices and make 7.6 million Wi-Fi calls a day.

"They do understand what they need to do with the network and are working on it, but it's a long and laborious process," Entner said.

Part of the solution could come in obtaining low-frequency bandwidth in future spectrum auctions, but Entner noted that T-Mobile's price cuts have lowered greater potential profits, which limits the amount of money that can be used to make auction bids.

The gaps in network coverage may hurt small and medium-sized businesses the most because of where they tend to be located at the edge of city centers. Small and medium-size businesses are the obvious target group for the new pricing plans.

While those groups might be the target audience, T-Mobile said there is no upper cap on the number of lines that can be purchased. The plans cost $15 per phone per month for up to 1,000 lines and $10 for any amount above 1,000. That cost includes unlimited talk, text and 1 GB of data per line per month.

In addition to that 1 GB, T-Mobile is offering businesses 2 GB for $10 a month per line or unlimited data for $30 a line. Pooled data options are available, starting as low as $4.25 per GB for a 1TB minimum and as high as $4.75 per GB for a 100 GB minimum.

Jack Gold, an analyst at J. Gold Associates, called the T-Mobile plans a "boon to small- and medium-sized companies that have a tough time navigating the market for corporate business plans." Part of the value is that the plans eliminate the need to negotiate with a carrier, and upfront pricing makes it easier for executives to budget in advance.

Gold compared the T-Mobile approach to going to a car lot to buy a car with an actual price posted, not just sticker price, "so you don't have to go in and haggle."

Still, T-Mobile's prices won't matter if workers find spotty coverage or if entire branch offices are out-of-network range, which wouldn't be inviting to guests who can't log on to the corporate Wi-Fi for easy Wi-Fi calling. Gold said he personally has to use Wi-Fi calls on his T-Mobile account from his home office in suburban Boston.

"If I didn't have their Wi-Fi app to do voice and text, I wouldn't be able to use T-Mobile," he said.

For this reporter working in the 150-mile-long and 50-mile wide Shenandoah Valley in western Virginia, T-Mobile is widely regarded as offering spotty coverage, even though the carrier has a number of stores in the valley.

Cost savings?

Entner said Legere's claim of 42% cost savings over business services from AT&T and Verizon "sounds too high," but even if it is much less, Legere has kicked off a conversation that businesses will start having with AT&T, Verizon and Sprint.

"Whatever the savings, T-Mobile has put themselves in the decision pool with other carriers and somebody will pay attention," Entner said. "From that perspective, Legere did a good job. Even if they don't get chosen, they win, because the customer can use T-Mobile's plan as a leverage tool against the other carriers, making them less profitable, which is a win."

Legere said that the overall U.S. wireless business revenue received by carriers was $83 billion last year, of which AT&T and Verizon had $72 billion, Sprint had $9 billion and T-Mobile had $3.8 billion.

Even with that amount of revenue, Entner said T-Mobile has so far "been a no-show with business customers, and the only direction for T-Mobile in business is up. Without cannibalizing its own base, Legere can be very aggressive on price because of genuinely impressive performance at T-Mobile since he started."

Carrier reaction

Gold suggested all three carriers will react to the T-Mobile business plans, with Sprint the most vulnerable. "They need to respond to this news, as they have to other T-Mobile initiatives," he said.

Sprint, with about the same number of overall subscribers but larger business revenues than T-Mobile, went after T-Mobile's fixed prices, calling them "rigid."

"It's good to see T-Mobile expanding their offerings to better meet business customer needs; however, the scope of their offering is limiting — especially the rigid pricing," said Sprint spokesman John Votava in a statement emailed to Computerworld.

Votava said T-Mobile's "bundled pricing for business is old school" and that Sprint uses "dynamic pricing [to meet] unique business needs at a price that businesses want to pay … At Sprint, our customers dictate their unique needs and we give them the best price possible, which in most cases requires dynamic pricing."

Sprint has a "Business Share" promotion that delivers more data than business plans from T-Mobile, AT&T or Verizon, he said.

Sprint also recently announced Workplace-as-a Service, which he said is "designed to allow businesses to refresh technology without over-provisioning or over-spending," he added.

Verizon didn't offer comment to the T-Mobile business plan, but instead pointed to its business offerings on its website that promote "flexible" business plans for "more customization, predictability and value."

AT&T spokesman Mark Siegel responded with a statement sent to Computerworld: "We provide businesses unparalleled performance, value and choice. Unlike many others, we offer comprehensive global services across wireless and wired technologies that no single competitor can match. Millions of business of all sizes turn to us to address their daily opportunities and challenges and we help anticipate those in the future."

Siegel added that AT&T serves 4 million business customers daily and serves as a one-stop shop for business customers for networking, mobility, cloud, security, hosting, application management, unified communications, VPN, Voice over IP and more. More than 20,000 retail sales reps and 2,000 business specialists provide 24/7 tech support for businesses of all sizes, he added.

"Our pricing is designed to offer our customers value on the solutions they need to run their businesses," Siegel said.

Copyright © 2015 IDG Communications, Inc.

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