T-Mobile in the pink as it hurts rivals

It is two years since T-Mobile US, the smallest of the US's four big wireless groups, declared it would become an "uncarrier", ripping up monthly contracts and sparking a bruising industry price war. Since then it has added 14m new customers, cementing its status as the fastest-growing mobile network in the US and inflicting significant pain on its rivals.

On Tuesday, the company announced that in the last quarter it had added a further 991,000 of the most lucrative "postpaid" phone customers, those who pay for their wireless service on a recurring monthly basis. Its investor materials were emblazoned with a message written in pink block capitals: "WE WON'T STOP." It was as much a warning to its rivals as it was a pledge to shareholders.

If Sprint, the number three network, lost postpaid phone users in the first quarter, as analysts expect, it would mean T-Mobile accounted for all the growth in the most hotly contested segment of the industry.

Verizon and AT&T, the largest operators, lost more than 400,000 of these consumers during the first three months of the year, as they opted to protect profit margins rather than offer deep discounts to stop people defecting to smaller networks. The top two carriers seem "resigned to not chasing every subscriber", says Amir Rozwadowski, an analyst at Barclays.

Many analysts have previously worried that T-Mobile was adopting a "scorched earth" business plan that put customer growth ahead of returns for its shareholders, including Deutsche Telekom, which owns 67 per cent of the company. Now many recommend that investors buy the stock.

T-Mobile reported a loss of $63m in the first quarter, the result of a push to win new customers, but it expects to post a profit in each of the remaining three quarters. Its shares have added 26 per cent this year, compared with 8 per cent for Verizon and 3.4 per cent for AT&T.

Verizon and AT&T insist they will fight to hold on to their best customers, while suggesting they are sanguine about losing less profitable users with lower credit scores.

Yet Braxton Carter, T-Mobile's chief financial officer, insists the company is not being built on a subprime customer base.

"We have falling rates of bad debt and we are at an all-time high in terms of what people are paying us," says Mr Carter, adding that the "churn" rate at which people are quitting T-Mobile's network was at a record low of 1.03 per cent in the first quarter.

"We don't really compete on price. It is more about solving the pain points for wireless customers, and applying innovative marketing strategies."

Those strategies have been the hallmark of John Legere's tenure since he became chief executive in September 2012. He has cultivated an image that is more rock star than company man, with long hair and a uniform that consists of a bright pink T-shirt and black jeans. His public speeches are peppered with profanities while his Twitter account, updated several times an hour, has 1.3m followers.

For the average customer it all reinforces the idea that T-Mobile is a different type of corporation.

Mr Legere, who spent almost two decades at AT&T, is not the first telecoms executive to pick a public fight with larger competitors.

"He is one of many . . . in the mobile world who has used the media to exhibit competitors as dinosaurs. There is nothing new to market oneself as the consumer-friendly operator," says Roslyn Layton, an analyst at Strand Consult. She points to Xavier Niel, the French telecoms entrepreneur who has turned his Free Mobile service into one of the country's biggest operators.

However, Mr Legere does not have a monopoly on disruption in the US. Sprint, which is set to lose its number three spot on the telecoms podium to T-Mobile, is fighting hard to turn round its sagging fortunes under Marcelo Claure, recently installed as chief executive.

Google also recently launched its own wireless offering, Project Fi, a service that charges customers only for the data they use.

Neville Ray, chief technology officer at T-Mobile, insists the company is relaxed about the Google project, which piggybacks on his company's network and Sprint's. "It's another chance for the rules to change again, and that tends to favour T-Mobile. To put it another way, we will watch and learn from the public reaction," he says.

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