T-Mobile's Jump aims to get a rise out of wireless rivals

CEO John Legere says he wants to shake up a "stupid, broken, and arrogant industry." That kind of radical sentiment may win him some new fans.

Roger Cheng Former Executive Editor / Head of News
Roger Cheng (he/him/his) was the executive editor in charge of CNET News, managing everything from daily breaking news to in-depth investigative packages. Prior to this, he was on the telecommunications beat and wrote for Dow Jones Newswires and The Wall Street Journal for nearly a decade and got his start writing and laying out pages at a local paper in Southern California. He's a devoted Trojan alum and thinks sleep is the perfect -- if unattainable -- hobby for a parent.
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Roger Cheng
5 min read
T-Mobile CEO John Legere wants to shake things up. Again. Sarah Tew/CNET

T-Mobile CEO John Legere hopes his competition starts chanting one of his oft-used catchphrases: "Oh s***."

Legere turned up the heat on his campaign against what he deemed the industry status quo, this time targeting the requirement to wait two years before upgrading to a new smartphone. Through the new Jump program, customers can upgrade their phones as frequently as twice a year.

"We're going to redefine a stupid, broken, and arrogant industry," he said during the company's press conference on Wednesday.

It's the latest move from a company that is attempting to define itself as the carrier on the customer's side -- a savvy endeavor at a time when consumers are seeing more restrictions and limitations. With a market share position that pales next to big players AT&T and Verizon Wireless, T-Mobile can afford to be unusually aggressive.

But unlike other challengers, T-Mobile isn't just competing on price, but shaking up entire business models in the hopes of convincing subscribers from rival carriers to make the switch. In doing so, it may win fans both with consumers and with the smartphone industry.

"It's moving T-Mobile in the right direction," said Avi Greengart, an analyst at Current Analysis.

Still, for now, T-Mobile represents a small annoyance to the big players in the industry, Verizon Wireless and AT&T. In the first quarter, T-Mobile had 34 million customers, compared to the nearly 100 million customers at each of the big two carriers.

Legere, however, had a warning for his competitors.

"What they do is throw you a little share," he said in a follow-up interview with CNET. "What happens is they create a monster."

T-Mobile recovery in process?
T-Mobile reports its second-quarter results on Aug. 8, so it was a little gun-shy about providing too many financial details. But it offered a few clues to indicate that it's on the right track.

Since T-Mobile shed its contracts at its Uncarrier event in March, customers have been more receptive, Legere said. The ratio of customers switching from AT&T to T-Mobile has swung back in a big way. In May, it led the way in net new customers in several major cities, including New York, San Francisco, and Los Angeles.

In a survey of likely switchers -- or people looking to change carriers -- 26 percent were interested in T-Mobile, higher than any other carrier.

Analysts believe T-Mobile will add contract customers for the first time in three years when it reports its results next month.

Legere added that when the company went public, he gave stock to every T-Mobile employee, something that fired up the workers.

"We're having a ball," he said. "We're just getting started."

Legere employed his trademark profanity-laden tirade on AT&T and Sprint. He mocked AT&T's popular series of commercials featuring children and the funny things they say by placing four chairs, each with an American Girl doll, on stage. He proceed to fake-ask questions about AT&T's "crappy" network.

T-Mobile executives also aimed their sights at Sprint, noting the slow build out of its 4G LTE network and the slower 3G network that many of its customers are stuck with.

T-Mobile Chief Marketing Officer Mike Sievert said that AT&T remained its primary target, largely because the phones on that network can be easily brought over to T-Mobile. But he noted that "a bull's eye has concentric circles," and that there was room to go after disgruntled Sprint customers too.

Haven for handset manufacturers
T-Mobile's new upgrade policy, which allows customers to upgrade their phones in exchange for a $10 monthly fee, may be a boon for the handset manufacturers.

"Our partners are delighted by it," Sievert said in an interview with CNET.

By enabling early upgrades, customers will be able to buy the latest and greatest phones more frequently, which only drives sales for the handset manufacturers.

T-Mobile, meanwhile, plans to resell those refurbished phones and expects to command a premium over other used-phone retailers because the carrier backs the products.

The Xperia Z is an exclusive to T-Mobile. Sarah Tew/CNET

The higher priced used phones will boost the perceived value of newer flagship smartphones, Sievert said.

There was another key stat that Legere disclosed that should have handset manufacturers excited about working with T-Mobile: the percentage of iPhones sold. He said that iPhones -- largely the iPhone 5 -- accounted for 29 percent of total smartphone sales in the second quarter.

That's important because it was the first time the iPhone was available on T-Mobile, and it was figured to be a big seller. But the fact that it accounted for less than a third of total sales is positive for every company not named Apple.

"If they can show subscriber growth, it will be a happy home for all of the other vendors," Greengart said.

T-Mobile declined to note whether the iPhone was the top-selling device in the period, suggesting the Galaxy S4 likely had some strong legs as well.

Sony and Nokia may have opted to bring their respective high-profile phones, the Xperia Z and Lumia 925, to T-Mobile, as a result of that opportunity.

Early upgrade a 'competitive weapon'
The early upgrade program will draw in hardcore smartphone users similar to how Sprint's unlimited data plan used to be a draw.

But T-Mobile continues to battle some image issues, particularly with its network. That's why the company carved out a chunk of time talking about the progress it had made with its LTE network, covering 157 million people in about half a year -- which it boasts is the fastest deployment ever.

"They're clearly focused on improving coverage," said Ross Rubin, an analyst at Reticle Research.

T-Mobile Chief Technology Officer Neville Ray talking about the increasing speeds available on its network. Sarah Tew/CNET

By pairing that LTE coverage with the early upgrade plan, T-Mobile hopes to turn some heads.

"This is an area that can be a competitive weapon for us," Sievert said.

In addition, the secondary market for used phones it would absorb could be turned around and sold to MetroPCS customers, getting them to switch networks faster -- another priority for the company. While higher profile devices may command a higher price, Sievert said the company was willing to take a loss on some of the used phones that come in.

"That's why it's called a good deal," he said.

It remains to be seen just how effective this program will be. But if it's as successful as its initial "Uncarrier" push, T-Mobile could be a force that the others should be sweating, if not swearing, over.