Commentary

Apparently, It Isn't About the Network for Sprint and T-Mobile

According to quarterly results posted from Sprint, it is losing its valuable postpay customers even though it has a high-speed 3G EV-DO Rev. A (i.e., fast) wireless network up and running across wide swaths of the US. During the same quarter, T-Mobile, which currently operates a GPRS/EDGE 2G/2.5G (i.e., not so fast) network in the US passed the 25-million-customer mark by adding 901,000 postpay customers and seems to be on a growth rampage. Um, what gives here?

According to quarterly results posted from Sprint, it is losing its valuable postpay customers even though it has a high-speed 3G EV-DO Rev. A (i.e., fast) wireless network up and running across wide swaths of the US. During the same quarter, T-Mobile, which currently operates a GPRS/EDGE 2G/2.5G (i.e., not so fast) network in the US passed the 25-million-customer mark by adding 901,000 postpay customers and seems to be on a growth rampage. Um, what gives here?How is a company that runs a network with older, slower technology managing to do so well? T-Mobile will likely point to its recent high customer service scores, which it seems to rake in every quarter from J.D. Power and Associates. And honestly, all of the T-Mobile subscribers I know rave about its customer service, network coverage issues be damned. T-Mobile will also claim its myFaves program and new 2-year contracts are doing their share to bring in more of the valuable postpay customers, which represented 87% of its recent 901,000 additions.

At Sprint, most of the customer losses were postpay subscribers to the Sprint Nextel iDEN network, which has one of the industry's highest average revenue per month figures. Sprint has been accused of bungling the network integration, which has not been going so smoothly. Analysts believe Sprint should migrate subscribers to its CDMA network with urgent speed so it can turn off the iDEN network and free up that spectrum to strengthen its CDMA network. On top of that, a study released just last week says that Sprint's network has the fewest dropped calls. Any way you look at it, though, it's bad news for Sprint that the Nextel subscribers are jumping ship completely for other network operators.


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Churn, which measures how many customers leave a given carrier each month, was nearly identical at both. Sprint posted a churn rate of 2.3% and T-Mobile posted a rate of 2.1%. These figures are higher than both Cingular and Verizon Wireless's, which are 1.5% and 0.89%, respectively.

T-Mobile, though, still has a lot of ground to cover. Its 25 million customers are less than half of Sprint's 53.1 million, Verizon's 59.1 million and AT&T's 61 million. T-Mobile's customer service may rate well, but numbers are numbers. And its technology is behind that of the three larger carriers, which all have high-speed networks covering much of the US. T-Mobile has announced plans to use its recent AWS auction winnings to put up a high-speed 3G network.

How that network will perform in comparison to the others' networks and what it might mean for T-Mobile's growth are unknown at present. Either way, T-Mobile will keep on keeping on with its friendly service.


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