The latest shake-up eliminates international roaming rates for data and text messages and simplifies calling rates, the latest carrot dangled by T-Mobile.
If you're a frequent international traveler, you're going to want to pay attention to Uncarrier 3.0.
T-Mobile's latest shake-up puts international roaming rates in its sights, with the carrier eliminating fees for data and text messages entirely in more than 100 countries. It will also simplify the calling rates, charging a fixed rate of 20 cents per minute.
New and existing T-Mobile customers who are on a post-paid plan are eligible for the new international plan, which kicks off on October 31. The company also introduced a $10 Stateside International Talk and Text plan for US customers calling out to other countries. The plan includes calls for 20 cents (or less, depending on the country) and free unlimited calls to landlines in 70 of those countries.
Uncarrier 3.0 marks the third phase of CEO John Legere's plan to shake up the conventions of the wireless industry, one in which he has repeatedly slammed as arrogant, and AT&T specifically as "crap." He called out the excessively high roaming fees charged by the larger carriers, adding they likely carry profit margins at around 90 percent.
"People are scared to death to use your phone around the world," Legere told CNET in an interview. "We're taking a big stab and we're going to make the world your home network."
As the smallest national carrier, T-Mobile has had to stay aggressive when winning over new customers, and Legere has certainly kept the company busy. In March, T-Mobile eliminated contracts in exchange for reduced cellphone plans and in July introduced an early phone upgrade program. T-Mobile announced the new plan at an event in Manhattan featuring a performance by singer Shakira, who has signed on to a "multi-year partnership."
The plan is likely to attract regular travelers, customers who live near the US border and cross over a lot, and big businesses, who rack up large expenses when their employees go overseas.
"It's a no-brainer" for businesses, Legere said, adding he expects a lot growth from that area, where T-Mobile has traditionally been weak.
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The difference between what a T-Mobile customer will pay and what a customer at a larger carrier will pay is dramatic. Legere used his favorite punching bag, AT&T, to demonstrate the saving. If a customer uses 72 megabytes of data, makes 32 one-minute calls back home, and sends 36 text messages a day on AT&T without an international plan, the cost would be $1,150 if the person was in Canada. In Europe, the cost would jump to around $1,500.
T-Mobile's cost: $6.40.
T-Mobile is able to pull off this move because, Legere conceded, it didn't really make a lot of money on its international business. He called it a "multi-multi-billion-dollar revenue stream" but said T-Mobile didn't have much of a hand in it. Most customers will to pay the higher rates are either well off, or working for companies willing to foot the bill. Either way, they're more likely to be customers of AT&T or Verizon Wireless.
"This is a dead revenue stream for the carriers, but how do you just wake up and eliminate a 90 percent gross margin stream," Legere said. "But nobody's ever called the industry on it. "
T-Mobile will likely take a hit early on. Its international roaming revenue will disappear, although Legere said the company never generated a lot of it in the first place. The roaming costs will also go up. Legere said that the company would be able to get back into positive territory on an earnings before interest, taxes, depreciation, and amortization level within nine months, although that target assumes T-Mobile continues to add more customers.
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While the data is free, it won't be particularly fast. Customers can expect network speeds at around the same level that they get in the US after they are throttled. Chief Marketing Officer Mike Sievert said the average speed customers would get would be around 128 kilobits a second.
It's not enough to stream a video well, but can handle streaming music, e-mails, and social network status updates, he noted.
T-Mobile hopes to make some of its money back with "speed packs" that customers can purchase on the fly to boost their connection speed temporarily. For $15, a customer gets a single day's worth of high-speed data up to 100 megabytes, while $20 gets one week at 200 megabytes and $50 gets two weeks and 500 megabytes. The speeds are more accustomed to T-Mobile's HSPA+ networks, since international roaming with LTE isn't broadly available.
The low speed means it won't work as a long-term solution for customers looking to stay overseas for a long time, and T-Mobile said it isn't designed for people moving for a long stretch. Trips overseas can only last six weeks, and over a three-month period, half of the data usage must be in the US, weeding out potential people looking for a loophole.
The international roaming shake-up comes as T-Mobile said that it has hit its goal of covering 200 million people and 233 metropolitan areas in the US with LTE, giving it a legitimate 4G LTE market.
Legere said the announcements represent a "tipping point" for the Uncarrier proposition, luring in users who had shied away from T-Mobile because of the perception of poor network coverage.
The move puts pressure on the other carriers to match T-Mobile. While each have gone on to introduce a no-contract option and early upgrade plans, critics have noted that some of the plans aren't as attractive.
"It's certainly the start of an industry conversation," he said.