Verizon Stock – T-Mobile plays 5G card in competition with cable
If T-Mobile is concerned about cable companies encroaching on its space in wireless, it’s not letting on – not by a mile.
Comcast and Charter Communications operate as MVNOs using Verizon’s network. Last month, Comcast upped its game, adding a much more competitive multi-line service to its wireless offerings.
That led some analysts, including those at MoffettNathanson, to question whether that puts more pressure on carriers like Verizon and AT&T to respond more aggressively. The question came up during a MoffettNathanson session with T-Mobile executives on Thursday.
“I think there is a good healthy level of competition even today, and cable’s been playing in this space for a while,” said Peter Osvaldik, EVP and CFO at T-Mobile. “You’ve seen them do quite well.”
A couple things are happening with the cable companies, he added. “As we all know, net adds every period is really the difference between two very large numbers… gross adds and deactivations, and when you have a small base, as cable does, what they don’t need to worry about is that organic churn that you need to replace with gross adds.” That’s, in part, why they’re able to show the net adds that they are, he noted.
“I’m not surprised that they’re making pricing moves because frankly, as you look to the future…as 5G becomes more and more important in this twilight of the 4G LTE space, what do they have? They’re going to be riding on an inferior 5G network – already are – and the difference is getting bigger… every single day,” Osvaldik said.
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As 5G becomes a more important consideration for customers, “we find ourselves with just a set of cards that we’re extremely pleased to have as we continue to build this out,” he said.
Both Comcast and Charter Communications drew wireless wins in the first quarter of 2021. Comcast’s Xfinity Mobile business turned a profit for the first time, adding 278,000 wireless subscribers and ending the quarter with about 3.1 million mobile lines. Charter added 300,000 wireless subscribers and ended the quarter with nearly 2.7 million mobile lines.
It’s worth noting that the cable companies require customers to have a broadband connection in order to be a wireless customer. T-Mobile is among those in wireless who are trying to upend the home internet space with products and services that compete with cable, so they’re all going after one another’s traditional market, to some extent.
Emphasis on enterprise
T-Mobile’s wireless market share in the enterprise space is less than 10% while the other 90% is served predominantly by AT&T and Verizon.
At its virtual analyst day in March, T-Mobile laid out a plan to essentially double market share in enterprise, and more recently, EVP of Business Mike Katz wrote a blog post where he said T-Mobile already has relationships with 80% of the Fortune 500 companies. Katz also noted the top marks T-Mobile won through third parties like Ookla, Opensignal and umlaut for 5G speed and availability.
Asked about the network’s role in the small and medium (SMB) and enterprise sales cycle, T-Mobile President of Technology Neville Ray downplayed the role of the third-party data sources, saying RootMetrics was “like reading a 6-month-old newspaper.” (RootMetrics uses drive testing, which can make its data seem dated, but it’s also based on real-world tests rather than apps.)
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Many prospective enterprise customers get phones from T-Mobile and aggressively test the network. “They go out and do a lot of their own testing, and the great news is when they do that, more often than not, we win,” Ray said. It’s not just the 5G story; “it’s the fact that we have a killer LTE network underneath this thing.”
Ray said he’s been on many sales calls with T-Mobile, and in the early years, “you couldn’t get past ‘Hello’ because we didn’t have the nationwide coverage.” That’s changed now, including with LTE.
The piece that’s really stirring interest with business and enterprise folks is “they want the best. They want to understand 5G. They want the best performing equipment, devices, network, in the hands of their employees, and they’re starting to understand, actually it’s T-Mobile’s time.”
If an enterprise were to do a trial using Verizon’s millimeter wave 5G service, they would find the coverage is about double the prior availability on Verizon’s network – from about 0.4% to 0.8%, he said.
“That’s great for us,” he said. Adding the 2.5 GHz mid-band layer into T-Mobile’s coverage continues to evolve the conversation, and small, medium and large companies are looking at 5G to take them into the future.
T-Mobile is teeing up far more spectrum than the competition, according to Ray, and that’s not even in dispute considering the C-band spectrum that Verizon and AT&T won at auction won’t become available until late this year, and that’s just the first tranche.
T-Mobile now covers 140 million people with 2.5 GHz and expects to reach 200 million by the end of this year, “maybe earlier,” Ray hinted. By the end of next year, that mid-band layer will reach 250 million, or about 92% of the U.S. population. Speeds are in the 300 Mbps range.
Some use cases where 5G starts to matter the most include private networks, cloud services and slicing.
The one that personally excites Ray is wearables, an area that’s starting to garner momentum in the enterprise space, including in healthcare and industrials. When it comes to using augmented reality (AR) for training purposes, for example, it doesn’t mean the person needs to wear massive head gear on their head, but glasses can be used in their training exercises.
It’s not prime time yet, but in the next 12-18 months a lot of activity will be happening in the wearables space, Ray said, where a lot of the big tech players are focused.