February 25, 2011 | by Andrew Kameka
T-Mobile USA’s 2010 fourth quarter results were not nearly as pretty as Carly, the star of its 4G commercials. T-Mobile reported that it had a net loss of 318,000 customers in the last three months of 2010, which is more than twice as bad as the 117,000 customers lost during the same time period in 2009. It also followed the 60,000 net customers lost in Q3 2010.
T-Mobile USA is in trouble, and has been for quite some time. Magenta has languished in fourth place among the major carriers with few signs of a turnaround. High contract churn, which measures the rate of subscribers joining a network versus the number leaving for a competitor, lead to “significant contract customer losses in the fourth quarter of 2010,” according to CEO Philipp Humm.
Consider this for comparison: T-Mo had a 2.5 percent churn rate while Sprint had 1.86 percent, AT&T had 1.44 percent, and Verizon reported 1.01 percent in Q4 2010 (lower is better).
“We are not satisfied with contract churn,” added Rene Obermann, CEO of T-Mobile USA parent company Deutsche Telekom. “But we expect that the measures presented at the T-Mobile USA Investor Day in January will lead to improvements in 2011.”
What will it take for T-Mobile to reverse its course?
CEO Philipp Humm previously blamed the iPhone for T-Mobile’s high churn rate, saying that customers were leaving en masse for Apple’s flagship phone. But Sprint had a massive turnaround with the HTC EVO 4G and Samsung Epic 4G, and Verizon managed to stave off its iPhone defectors by promoting the Droid line of phones. T-Mobile failed to convince subscribers that it had a phone worthy of consideration over the iPhone and paid dearly for it. That could also spell future trouble because T-Mobile’s strategy is to become the best option for mid-tier and entry-level smartphones, hoping to be more competitive for people who want something more than a feature phone but less complicated and expensive as high-end devices.
Despite delivering aggressive calling plans, offering several free smartphones on contract, and rolling out a 4G network, T-Mobile continues to lose customers at a high rate. Advertising efforts have picked up since the company began promoting its 4G network and the phones that run on it, but that has so far been ineffective.
What can T-Mobile do to slow its losses and attract new customers?