THE STATE OF T-MOBILE: Virtually
everybody in the entire world recognizes that ringtone. For many of us, that ringtone is
not just reminiscent of a certain company but an entire time period, the early 2000s.
A time before smartphones and smartwatches and smart everything. Computers and cell phones
were just starting to gain popularity amongst the general public, and ringtones were a fashion
statement, not something that you would apologize for. But, as smartphones became more mainstream,
the popularity of ringtones fell off a cliff and with it went the popularity of T Mobile.
This trend was only made worse by the 2008 financial recession which caused the stock
to sell off 86%. Things got so bad that T Mobile even agreed to being bought out by
AT&T for $39 billion in 2011. But, that deal was stopped by the US government. With nowhere
left to go, T Mobile just continued its death dive, and during the worst of it, T Mobile
was writing off everything they had leading to losses of over $7.5 billion. At this point,
you would think that it was just a matter of time until T Mobile filed for bankruptcy,
but then came a new CEO, John Legere. Hopes weren’t that high given that John didn’t
have much to work with, but somehow, over the next 8 years, John would stage one of
the biggest comebacks of corporate history. Since then, T Mobile has grown a mind boggling
1900% or 20X. And they have transitioned from being the ones who needed a bailout to being
ones handing out bailouts. Likely the best example of this is their merger, or basically
acquisition, of Sprint which propelled them to not only be telecom juggernaut, but be
the largest telecom company in the world period. They currently stand at a valuation of $186
billion, and fun fact, the recession hasn’t affected their stock price whatsoever. They’re
literally floating around all times highs as we speak. So, here’s how T Mobile went
from being so popular that they were a symbol of a time period to near bankruptcy to becoming
the largest telecom company in the world.
NOT SO HUMBLE ORIGINS: Taking a look back, the story of T Mobile
doesn’t actually start in America, it actually starts in Germany, and to this day the original
T Mobile or Deutsche Telecom is still a German giant. In fact, they’re the 6th largest
telecom company in the world and they trace their roots all the way back to 1866 to Germany’s
national postal service Reichspost. While the organization was technically a mail service,
they were really more of a communications business. So, after the invention of telephones,
Reichspost was one of the first to adopt the technology and spread it across the country.
But the real rise of Reichspost didn’t come till the rise of Mr. Small Moustache in the
1930s and 40s. Mr. Small Moustache was well aware of just how critical robust communication
was in trying to challenge the world powers. So he spent a lot of resources to build up
Reichspost, and before Germany started losing, Reichspost was stronger than ever. For obvious
reasons, the allied forces weren’t fans of this, and after they took over, they would
shut down Reichspost in 1947. They would split up the organization into a few smaller organizations,
the most notable of which were Deutsche Bundespost in West Germany and Deutsche Post in East
Germany. These two organizations would essentially remain as state owned monopolies up until
the fall of the Berlin Wall. Just a couple of months before the collapse, West Germany
would split Duetsche Bundespost into three sectors which included a postal service, a
postal bank, and of course, a communications service. After the fall of the Berlin Wall,
these sectors would basically absorb the remains of the East German services. And given that
capitalism was now the prevailing idea across the country, Germany would eventually decide
to spinoff these sectors into public companies at the beginning of 1995, leading to the creation
of Deutsche Telekom. Around the same time, an American wireless communications company
called Western Wireless was starting to gain a lot of traction. Western Wireless was founded
in 1988 and they were an early mover when it came to wireless technology. I mean, “wireless”
is literally in their name. Given that Western Wireless didn’t have the infrastructure
to compete against AT&T in the traditional telephone market, they spent all of their
effort on the wireless market and more specifically the rural wireless market which was regularly
overlooked by larger providers. It turns out that this was actually super lucrative, and
Western Wireless would eventually grow to compete in even non rural areas. In the meantime,
given that Deutsche Telekom was now a corporate entity focused on profits, they would shift
their focus on aggressive expansion. They expanded to basically every European country
you can think of from Austria and Croatia to Slovakia and the UK, but for the purposes
of this video, we’ll focus on their expansion to the US. This came in 2000 with the purchase
of a subsidiary of Western Wireless called Voicestream Wireless for a ridiculous $50.7
billion. Fortunately, they would negotiate this down to $30 billion, but Voicestream
wasn’t worth anywhere near $30 billion either. Deutsche Telekom bought the absolute top of
the dotcom bubble, and when the crash came around, their stock would fall 90% and never
recover. But, on the brightside, they now owned what we all know as T Mobile.
GETTING DESTROYED BY AT&T: While Deutsche Telekom likely overpaid for
Voicestream by a full 10X, it wasn’t all bad news. At the end of the day, Voicestream
was still growing rapidly and Deutsche Telekom had a bunch of money that they could throw
at Voicestream to try to win the US market. In the early 2000s this worked out great,
and this is why we all remember the T mobile jingle to this day. But, T mobile had one
major weakness which is that they weren’t actually doing anything particularly noteworthy
or innovative. They were basically just riding the wave of wireless adoption. And while this
worked out decently while the market was still exponentially growing, the same could not
be said about the mature market. You see, once the cool factor of having a cell phone
wore off, people actually started to value the quality of the connection. And let’s
just say, the quality of T Mobile was absolute garbage. While this made customers quite mad
and irritated, it wasn’t enough to kill T Mobile altogether. Something that was enough
to kill T Mobile though was AT&T. AT&T had been watching this whole saga from the sidelines.
For the entirety of the 1900s, they were the undisputed king of telecom. Even government
mandated breakups couldn’t destroy their power. But, now, all of a sudden, some rural
wireless network owned by some Deutsche company overseas was threatening AT&T’s dominance
in their home country. This was unacceptable, and AT&T was determined to put T Mobile back
in their place. But, to do this, AT&T had to make big bets, simply offering better service
wasn’t good enough. So, they looked back at their history at looked at how they got
so big in the first place, and the answer was that they were an unbreakable monopoly.
They had to recreate this monopoly and the perfect opportunity to do this came with the
iPhone. Apple wasn’t exactly an easy company to work with, but AT&T was willing to do whatever
it took. This included giving Apple full control of the software, paying out Apple for every
iPhone that was sold, and probably dozens of other clauses. But, in return Apple granted
AT&T with exclusive rights to the iPhone meaning that if you wanted to buy an iPhone in the
US, you had to buy it with an AT&T connection. This didn’t seem like a big deal given that
no one really knew how big the iPhone would get, but looking back, this was likely AT&T’s
best choice of the century as they were able to rebuild their monopoly for nearly 4 years.
It wasn’t till 2011 that Verizon would get their hands on the iPhone. And Sprint would
also partner with Apple later that year. Back in Germany, Deutsche Telekom had struck a
similar exclusivity deal with Apple like AT&T, but as for T Mobile US, well they were screwed.
They would essentially seek out a bailout from AT&T, but as we touched on at the beginning,
the government would block that from happening. It seemed like T Mobile was gonna to share
the same fate as most of its dotcom peers. In a last ditch effort, the company would
hire a new CEO named John Legere, and man, this guy would do the impossible.
THE RESURRECTION OF T-MOBILE: John wasn’t you’re typical CEO. In fact,
he was the exact opposite and he wasn’t afraid to admit that either. And the first
thing he noticed after he took over was the overly diplomatic nature of the telecom industry.
Everything was uptight, pristine, and closely monitored. This was the way that AT&T and
Verizon liked it, and so everyone followed suit. But, this strategy clearly wasn’t
working for T Mobile. Not to mention, T Mobile had none of the pristine advantages that AT&T
or Verizon had. They didn’t have a deal with Apple. They didn’t have a massive marketing
budget. And they didn’t have a strong network. In fact, they had a notably crappy network.
But despite this, T Mobile was trying to act like an equal peer to AT&T and Verizon. So,
John decided to take the opposite approach. Instead of trying to hide who they were, John
embraced it. He realized that people were fed up with AT&T’s predatory cell phone
contracts with loads of fine print and dozens of hidden fees. So, he made T Mobile into
the “Un Carrier”. And the first step in doing this was calling up Apple. John didn’t
ask Apple to give them a juicy deal. In fact, he asked for the opposite. He asked if they
could sell the iPhone for MSRP. Given that this didn’t seem threatening to AT&T or
Verizon, Apple had an easy time agreeing. And with that, T Mobile finally got the iPhone
in 2013 and they embraced who they were. Yeah, they were crappy, they were the cheap, and
yes having a T Mobile connection would probably hurt your social status. But, guess what,
they’re not gonna overcharge you or screw you over with the fine print. There was also
absolutely no contracts or cancellation fees. And for tens of millions of Americans who
had been screwed over by AT&T and Verizon for decades, this is exactly what they wanted.
But, this didn’t mean that people switched over instantly. In fact, it was a rather slow
burn because people didn’t quite trust T Mobile. I mean, there’s no way that a carrier
was actually acting decent and reasonable right? That breaks the laws of physics. So,
where’s the catch. Well, there actually was no catch, but the general public only
started to believe this once their daring friends and family confirmed that there was
no catch. This strategy destroyed T Mobiles margins as they lost out on all of the predatory
revenue. AT&T, for example, generally has net margins of 10%. Meanwhile, T Mobile was
barely able to crack net margins of 2-4%. But, something that T Mobile had that no one
else did was happy customers and this translated to exponential growth. In the last 10 years,
T Mobile’s annual revenue has rocketed from $5 billion per year to $80 billion per year.
And today, T Mobile has a total of a 110 million wireless subscribers which is about a ⅓
of the US population making them the world’s largest telecom company.
THE COMEBACK OF T-MOBILE: While T Mobile has maintained their generous
customer policies, they haven’t been as stubborn when it comes to maintaining their
crappy quality. Instead, they’ve invested much of their extra revenue back into growing
their infrastructure and making the service better. And today, they’re actually the
leader when it comes to 5G service. According to some research done by Opensignal, the average
5G download speed for T-Mobile was 150 Mbps. This was three times higher than AT&T and
Verizon who scored about 50 Mbps. And speaking from personal experience, 150 Mbps is actually
the lowside when it comes to T Mobile’s 5G speeds. If you live in popular suburbs
or urban areas, you can expect much faster speeds. For example, I live in Austin, TX
and I regularly get download speeds above 600 Mbps. I mean, that’s literally fiber
speeds right there. So, clearly, T Mobile is no longer just killing it in the affordability
sector, they’re also killing it in the performacne sector as well. And that’s how T Mobie went
from being a legacy German company who tried to win using their power and influence to
being the underdog favorite to being the global champion. It looks like doing the right thing
does end up paying off from time to time. Do you like your carrier? Comment that down
below. Also drop a like if all carriers were as decent as T Mobile. And of course, consider
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