T-Mobile CEO: Our iPhone experience will be 'dramatically different'
John Legere confirms that the iPhone is coming, a change that promises to lift a shadow long hanging over the carrier. But then there's the LTE question.
T-Mobile USA CEO John Legere is promising a "dramatically different" experience with the iPhone when it comes to his company next year.
Legere, speaking at an investor conference in Germany, was frustratingly light on details, but did confirm that T-Mobile would sell the iPhone. An earlier statement by parent Deutsche Telekom only said that-- a vague declaration of their partnership. Apple confirmed the deal but didn't add anything else.
For T-Mobile, getting the iPhone would fill the big gap in its portfolio. As the smallest national carrier in the U.S., it is often stuck with fewer product options than its competitors. For the most part, it has been able to offer a strong lineup -- except for the iPhone. The carrier has instead pushed to get consumers to jump over with their unlocked iPhones.
But now, T-Mobile will finally have the iPhone, dispelling a shadow that had long hung over the carrier. Legere said that some customers just won't come to a T-Mobile store if there's no iPhone, regardless of whether they plan to buy the phone.
Financially, Legere said, the 2013 expectations already assume the impact of the Apple deal, and that carrying the iPhone would add to cash flow and earnings before interest, taxes, depreciation, and amortization in 2014.
The deal also doesn't include the kind of volume commitments that Sprint Nextel made to Apple, Legere said, attempting to ease investor concerns that the iPhone would significant cut into earnings. Each time a new iPhone launches or the carriers see a spike in sales, they correspondingly see a hit on the bottom line due to the hefty subsidies they pay to Apple.
With about 33 million customers, T-Mobile could sell 4 million to 5 million iPhones in the first 12 months after the launch, according to RBC analyst Amit Daryanani. In comparison, Sprint sold 6.3 million iPhones in its first 12 months. The analyst added that T-Mobile could sell 2 million additional iPads as well.
Legere didn't say much more about the iPhone, but noted that "all the reports about what's going to happen are all wrong," and apologized for not being able to elaborate.
Legere hinted that T-Mobile would be able to sell the iPhone for an affordable price without a contract, saying that customers would pay "$99 for the most iconic device in the world." Instead, customers would pay an additional $15 to $20 a month for 20 months, easing the one-time cost. Customers could trade in the device at any time and get fair trade-in value.
Move to Value
The move is part of a broader shift to go completely toward its "Value" plans, in which customers pay full price for a phone in exchange for a lower monthly rate.
Under the typical "post-paid" model, customers sign a long-term contract in exchange for a break on their smartphones, but are locked up for two years paying higher monthly fees.
By making this move, T-Mobile will have to teach consumers about the potential longer term savings under its "Value" model, also known as prepaid or no-contract. The carrier will also have to make its best phones more competitively priced even without the subsidy, or consumers will just stick to the old model.
Legere said the move is the first step in T-Mobile's plan to disrupt the industry. He said there was an opportunity to tap into customers angry at contracts, unpredictable pricing, and the poor treatment of existing customers.
"There's huge room for a challenger to change in a way the larger players will not be able to follow," Legere said. "It's a big deal for customers and a big deal for our brand."
The launch could be timed with its big brand relaunch. Legere said the company will be out with a new "in-your-face" campaign when it finishes itsnext year.
"We want to get customers to say, 'I can't believe they did that,'" he said. "It will be a very fun period for us."
What about LTE?
Many wonder whether T-Mobile will be ready to handle the iPhone. With all of the other carriers offering an LTE-capable version of the iPhone, T-Mobile will be behind since its own LTE deployment doesn't begin until next year. In the meantime, it is upgrading its current network and moving its higher speed coverage to a frequency of spectrum that is compatible with current AT&T iPhones.
Legere said that the LTE deployment will be moved up, with the 4G network covering 100 million people by the middle of the year, rather than just the start of the roll out.
If it offers an LTE-capable version next year, T-Mobile will likely be in the same situation as Sprint, which sells the LTE-ready iPhone 5, but doesn't have LTE in a majority of its territory yet.
Updated at 1:56 p.m. PT: to include additional executive comments throughout.