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Straight Talk Telecoms

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It has been a long time since telecoms had a big character, but John Legere, the CEO of US mobile operator T-Mobile seems to fit the description, as his predictions for 2016, released on December 30, 2015, show.

What is notable about Legere is his confidence. The telecoms industry as a whole seems weary and uncertain about how to address the challenges that it faces, but Legere sees enormous potential for growth and improvement – both in the services that T-Mobile provides to its customers and the returns it delivers to its shareholders.

The turnaround of the T-Mobile business under Legere’s stewardship has been remarkable. Four years ago its future was in doubt after its proposed takeover by AT&T had been rejected by US regulators. The improvement in the operator’s fortunes came after its acquisition of another US mobile operator, MetroPCS, and the introduction of a new strategy and business model, Un-carrier.

The central pillar of Un-carrier is the shift away from fixed-term mobile contracts and handset subsidies. The two other key elements are network coverage and quality – T-Mobile claims its LTE coverage is now as good as Verizon’s – and customer service.

In 2016 video started to become a core service for both fixed and mobile operators. Legere is highly critical of Verizon’s attempts to build its own mobile video service, describing Go90 as “the video service no one wants or asked for.” He contrasts it with T-Mobile’s own approach and its Binge On package, which zero-rates content from specific providers. Legere says that T-Mobile will add 24 new video services during 2016.

One of the themes of Legere’s predictions is his interest in – and passion for – new technologies and services. Whereas many telco CEOs seem to be ambivalent – or in some cases hostile – toward so-called “over-the-top” companies, Legere is passionate about Periscope and bullish about the take-up of mobile payments.

Ovum believes that telecoms operators’ role as retailers of a broad range of devices and their potential to run retail as a line of business will emerge as an important theme in 2017. Legere’s comments about sales of virtual reality and augmented reality equipment suggest that T-Mobile is one of those operators that see themselves as genuine retailers. Legere notes that T-Mobile was one of the first wireless operators to carry virtual reality equipment and predicts that sales will be five-times higher during 2016’s holiday season than this year.

Legere relishes T-Mobile’s status as a disruptor. He expects 2016 to be a breakthrough year for home IoT devices, “probably along the lines of what Google’s done with Nest – which is, of course, available at T-Mobile.” Even though T-Mobile is a pure mobile operator and most smart home strategies are being developed by fixed operators, it plans to play a role. “And, for T-Mobile, when we see these markets get ready for prime time, we’ll be ready to disrupt them just like we’ve done to the carriers everywhere else.”

Regardless of whether T-Mobile’s service and product initiatives are successful, the company’s positioning as the people’s champion will ensure that it continues to win business from AT&T and Verizon in 2016. Legere’s 2016 predictions are designed to further reinforce this anti-telecoms-industry image.

John Legere may be a big character, but his approach is also a highly sophisticated strategy designed to win the hearts of American mobile consumers who for years have had no real alternative to high fees and poor customer service.

Straight Talk is a weekly briefing from the desk of the Chief Research Officer. To receive this newsletter by email, please contact us.

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