T-Mobile is a wireless cell phone service company owned by Deutsche
Telecom(DT) AG in Germany. Currently, T-Mobile is the fourth-largest wireless
carrier in the United States. In 2011, T-Mobile agreed to sell out to AT&T. However,
the U.S. Department of Justice blocked this acquisition due to antitrust issues. T-
Mobile is left with solving their own problems that are outlined below.
T-Mobile has several symptoms as a result of the underlying problems. Many
subscribers to T-Mobile are unhappy, resulting in a large number of them to drop
the carrier. This unhappiness is caused by several problems. The first of these is
that many subscribers are looking for higher-end smartphones, such as the iphone,
which are not carried by T-MobileUSA. In relation to this, these high-end
smartphones are now compatible with a 4G wireless network. Currently, T-Mobile
claims to offer a 4G network but it does not meet industry standards, causing
countless problems and complaints from their users. T-Mobile is not currently
willing to spend the money to expand this network, as it would require them to
decrease their current presence in Europe. DT is also still considering the option of
selling T-Mobile USA to another company in an effort to expand into the 4G
spectrum. Without a 4G network and a spectrum to expand on one, T-mobile will
not be able to compete in the future. Consumers are moving toward more data-
centric devices that require more data capacity within that network and T-mobile is
lacking on the technology to provide them with it.
In order to determine T-Mobile’s current position in the market, we must
first consider the environmental factors that affect said market. The following
PESTEL Analysis outlines the political, economic, social, technological,
environmental, and legal factors that may affect T-Mobile and the wireless cell
phone market in general.
There are no serious political factors within the developed countries that are
affecting the telecommunications industry. There are some government regulations
within some of these countries as to how phones can be used and distributed they
do not seriously affect the industry. Within some developing or undeveloped
countries, the government has made laws and regulations which prevent some if not
all cell phone usage among its people.
Over the past five years, the telecommunications industry has experienced
rapid growth in market value. The industry’s total yearly revenue has grown from
$69 billion in 2005 to $95.8 billion in 2009 and the industry is expected to continue
to grow at this rate through 2014. Although most of the developed countries are
experiencing growth in the phone market, India, China and some of the other
developing countries are experiencing significantly more growth in the phone
industry than the developed countries. Currently, the Asia- Pacific mobile phone
market is larger than the European and North American markets combined. The
Asia-Pacific region holds over 55% of the market while the European and North
American Market control 27% and 18% respectively. (Datamonitor)
In today’s world, cell phones have become a major part of the culture of the
developed countries, especially America, The U.K. and Japan. The cell phone today
has become almost a necessity for people’s working and social lives. Over the past
ten years cell phone have reached demographics that were once untapped as much
younger and much older people today are having cell phones.
Technology within the telecommunications industry is constantly evolving.
The major mobile phone producers are releasing new models every month or even
faster. The top service providers are always trying to better their networks by
increasing the speed and efficiency. With the implementation of the smart phone, a
new window of opportunity has been open for the usage of cell phones
In some of the developing and undeveloped countries, there are areas that cannot
support a normal cell phone due to the lack of cell phone towers in the area making
that region unreachable for phone service providers.
Most of the environmental impact of cell phones occurs during the
manufacturing process. During the manufacturing process, several precious and
rare metals are extracted from the earth then refined in factories which extract
pollution in to the air. Because of the recent “Go Green” movement in the United
States and several other countries around the world, several big players in the
mobile phone industry are promoting the recycling of phones and making phones in
a more environmentally friendly way. (Secret Life)
Researchers have questioned the safety of cell phone usage. Many researchers have
speculated whether the radiofrequency energy exposed to the cell phone user when
it is close to his/her head could cause cancer. As of now, there has been no clear
scientific evidence proving whether cell phone usage causes cancer. ("Cell phones
There are no real regulations on the sale of cell phones, but in recent years
U.S. states have imposed laws on cell phone usage in cars. Some states have banned
phone calls and text messages in cars while other have only made it illegal to text or
make a phone call without a headset.
Because phone technology changes rapidly, there are always issues with patents
and trademarking on new technology. Phone creators are always fighting to protect
their innovations similar to other product markets
Porter’s Five Forces Analysis
In an assessment of the industry’s profitability potential, it can be
determined that the wireless phone industry can be very profitable. When viewing
rivalry amongst competitors, T-Mobile USA has lost 6.7% of its contract customers
(O’Brien, 2011). This loss of contract users was mostly contributed to T-Mobile not
carrying the iPhone. T-Mobile lost about 390,000 of their contract customers to
their competitors (O’Brien, 2011). This market is extremely sensitive to
competition. Even though switching costs for consumers can be high, with new
contract fees, security deposits, and the purchasing of new phones, value perceived
by the customer is highly influential in the industry.
In order to currently enter the wireless phone market, a company will be
competing with the United States top four phone companies. These carriers are T-
Mobile, with 17.8% of the market share, Verizon Wireless, with 21.5% of the market
share, AT&T Wireless, with 25.9% of the market share, and Sprint, with 17.3% of
the market share (BillShrink). Between these four companies, 82.5% of the market
share is already occupied, making entry for new competitors highly difficult. These
companies are all capable of offering national coverage and they also all offer data
plans (BillShrink). With these companies occupying such a large portion of the
market, the threat of new entrants in this industry is considered to be low.
The wireless industry currently has threat of firms in other industries
offering substitute products. Firms like Google have led the development of the
mobile phone operating systems like Andriod (Android). Firms like Google have the
potential to build new technologies that compare and/or surpass what mobile
phone companies can offer to their customers. This is feasible only by small amount
of firms, making the threat of substitutes low for the time being.
Supplier bargaining power in the wireless phone industry is highly
influential on sales and revenue a firm can produce. Looking back to the release of
the iPhone, companies like T-Mobile, who had no access to the iPhone and could not
offer the device in their stores, lost customers to competing firms who were
carrying the product. T-Mobile was believed to be in an “unstainable position” due
to not offering the iPhone in their line of products (O’Brien, 2011). The number of
phones offered by a carrier directly reflects their market share. AT&T Wireless,
who controls the largest market share of 25.9%, also offers the largest number of
phones to their customers, 38 (BillShrink). Sprint, who has the smallest market
share of the top four companies, 17.3%, offers only 13 different mobile phone
devices (BillShrink). The availability of these products to mobile phone carriers
directly affects their sales, making supplier bargaining power an influential factor
when assessing the industry. Buyer bargaining power can also be assessed through
the number of devices offered by a firm. The larger selection a customer has, the
more likely they are to purchase from a firm. A firm’s success is heavily reliant on
the positioning of their services, their products offered, and the value presented to
customers. While this industry has the potential to be highly profitable, the
strongest forces that can diminish revenues are competition, supplier bargaining
power, and buyer bargaining power.
In order to more accurately determine T-Mobile’s position in the wireless cell
phone market, we have conducted a SWOT analysis. This will outline T-Mobile’s
internal strengths and weaknesses as well as external opportunities and threats and
will provide a basis for our decision.
Being the fourth largest cell phone service provider in the United States
(Troianovski, 2011), T-mobile has many strengths. In recent months, the company
has increased their presence in the 4G markets by increasing their network
capability to 42.2 Mbps (Miller, 2011), exceeding the industry standard for 4G
speed. Also, T-mobile is currently connecting via a HSPA+ Network, making their
phones capable of running on many more networks worldwide. Dropped calls are
rare at T-mobile, as they reach more Americans with voice coverage than any other
company. Accompanying the expansion of their data network, T-mobile had a sale
offering prepaid plans through Walmart designed for minimal voice minutes but
unlimited data and text (Leon, 2011). Between these plans and a change in customer
demand, T-Mobile´s prepaid customer base has expanded significantly and remains
a viable strength of the company. Marketing for T-Mobile is decorated with colorful
magenta logos and the T-Mobile girl sporting a magenta costume, usually a dress.
This marketing is a great asset to the company because it is unique and memorable.
T-mobile offers a wide variety of Android based 4G phones to their customers at
little to no cost. For innovation seekers, T-mobile offers the Samsung Galaxy SII,
which rivals phones such as the iPhone 4S and the Droid Bionic. T-Mobile possesses
many strengths that with keep them competitive in the cellular phone industry.
As we progress into an age of texting and data consumers are beginning to worry
about data speeds and network coverage. While T-mobile covers more than 96% of
Americans with voice, their 3G and 4G networks cover the smallest geographic area
compared to their competition. People believe 3G to be the standard for data; if T-
mobile cannot provide this to all their customers, than this is their largest weakness.
The phone product line offered by T-Mobile is narrow and outdated compared to
their competition. T-mobile’s Android based phones remain popular choices in
today’s cellular phone market, but the iPhone is what the consumers are currently
demanding. The top three cellular phone providers offer the iPhone, T-mobile
remains iPhone-less despite their ability to offer it on their 42.2 Mbps HSPA+
network. Additionally, Verizon and AT&T offer iPads with 3G capability. The current
status of the company could weaken the consumers perception of the company.
Current customers may feel there has been a loss of corporate direction and control,
while future customers may stray away from signing a contract with a high conflict
company. Negative perceptions and technological advances with remain the largest
weakness T-Mobile will face in the future.
By analyzing T-mobile’s weaknesses we gain a better understanding of their
opportunities. Network expansion is a key component of T-mobile’s future. An
increase in coverage of the fastest HSPA+ network would have a positive affect on
customer service, a larger retention of current customers, and possibly the
introduction of innovators into the T-Mobile family. Comcast and Time Warner
Cable have considered the possibility of partnering with T-Mobile in an effort to
expand their data network (Ovide, 2011). The expanse of the prepaid market is a
great opportunity for T-Mobile to focus on a new business segment where they
already possess a large market share. T-Mobile has the opportunity to offer more
innovative hardware to the contractual customers while turning over older
hardware inventory through their prepaid customers. US Cellular just turned down
the iPhone after being unable to agree to the terms set forth by Apple, T-mobile
needs to acquire iPhones or more powerful Android based hardware if they are
going to remain competitive in the future. If T-Mobile does not plan to stay in
America, their final opportunity is to sell the company to another corporation.
Recently Sprint has shown their interest to acquire T-Mobile (Ovide, 2011);
however, with the courts rejecting the possible AT&T acquisition, this seems
T-Mobile faces many threats in coming years if they do not take advantage of some
of their opportunities. AT&T, Verizon, and Sprint are all expanding their 3G and 4G
networks, which are already larger than T-Mobile’s network. An increase in
domestic competition will have negative effects on T-Mobile’s customer base and
could be detrimental to their future. A recent change in consumer taste has caused
the trend in cellular service to shift from contractual customers to pay-as-you-go or
prepaid phone plans. This is a controllable threat considering T-Mobile currently
controls much of the prepaid market and has room to expand. The downturn in the
economy has caused consumers to stray away from contractual based plans for the
cheaper unlimited prepaid plans. T-Mobiles most vulnerable area is their potential
for takeover. If T-Mobile is not purchased by another cell phone provider,
companies like Google are ready to acquire T-Mobile in hopes of minimizing some of
their threats. A partnership with a cable provider appears to be the best way to
manage the threat of takeover and new entrants into the industry (Ovide, 2011).
Courses of Action
Given T-mobile’s current state in the market, we will assume that the
attempted acquisition of the company by AT&T does not go through. Analyst Jeff
Kagan explains T-Mobile’s next step if this happens: “AT&T has to pay T-Mobile $3
billion in cash and $2 billion in spectrum”. He continues, saying, “ That would let T-
Mobile grow into a healthier competitor”(Palenchar, 2011). This factors in to the
three alternative courses of action that T-Mobile will face:
1. Invest this new money into re-branding T-Mobile USA
2. Sell the company to another competitor
3. Create a partnership to expand wireless spectrum
Despite a steady decline in contract subscribers, T-Mobile has still gained
customers in one segment of the market: prepaid phones. T-Mobile does not need
to re-brand, but instead refocus its target to the fastest-growing, prepaid segment.
Anton Troianovski explains, “But so far this year (2011), T-mobile’s contract
customer base has been shrinking even as it has added prepaid users”(2011). In
addition to this, T-Mobile has added over 933,000 prepaid customers since June
Given this information, a possible course of action for T-Mobile to take would
be to focus more heavily on this fast-growing prepaid segment. This would, in turn,
mean focusing less on contract subscribers. Focusing less, however, does not mean
turning away from these users permanently. Keep in mind that T-Mobile is still the
fourth-largest wireless carrier in the country and it got there through these contract
subscribers. Despite this, the current trend in the wireless cell phone market is
pointing towards that prepaid segment and this is a huge opportunity for T-mobile.
Given that T-Mobile has had a 12 percent increase in the prepaid sector in just one
year shows that this segment is growing fast and does not show signs of slowing
down for quite some time.
Selling To The Competition
Despite the merger between AT&T and T-Mobile being blocked by the FCC,
DT may still consider selling T-Mobile to another competitor. Sprint CEO Dan Hesse
believes that the Department of Justice would allow a merger between Sprint and T-
Mobile to happen even if the deal with AT&T is blocked. Others, such as Shira Ovide
of the Wall Street Journal do not agree with Hesse and have research to back it up: “
Bernstein (Research Company) believes DOJ’s effort to kill an AT&T-TMobile deal
also rules out the possibility of any combination of the country’s four biggest
In addition to this, US Cellular is a possibility when it comes to buying T-
Mobile although, the $39 billion price tag would have to be decreased significantly.
In fact, not many competitors would be willing to pay anywhere near that price to
acquire T-Mobile which is most likely the reason T-Mobile accepted AT&T’s offer so
A final possibility for T-Mobile would be to expand their wireless spectrum.
As stated earlier, if the AT&T deal does not go through, T-Mobile will receive $3
billion in cash and $2 billion in spectrum. Additionally, T-Mobile may consider
partnering with cable companies in order to increase this spectrum. Equity analysts
at Bernstein Research suggest that T-Mobile may look into a deal with Comcast and
Time Warner Cable for spectrum(Ovide, 2011).
Another possibility is a partnership with Dish Network. Marguerite Reardon
of CNET.COM explains this: “the company has recently asked the FCC to give it
permission to combine its spectrum satellite spectrum with terrestrial wireless
spectrum, which is an indication that it's planning to built a 4G LTE
network”(Reardon, 2011). A partnership between T-Mobile and Dish Network
would significantly increase capabilities for both companies, and would prove
beneficial for the currently struggling T-Mobile.
After evaluating the possible alternate courses of action, we have decided
that T-Mobile should pursue the rapidly growing prepaid market. In addition to
this, T-Mobile should also consider expanding their wireless spectrum through
partnering with a cable or satellite provider. However, due to large amounts of
opportunities still available, selling is not in T-Mobile’s best interest at this point in
The following reasons for this decision are outlined below:
The Prepaid Market
1. The prepaid cell phone market is the fastest growing sector of the mobile
2. The number of T-Mobile’s prepaid phone subscribers increased 12% from
June 2010 to July 2011.
3. As the fourth-largest wireless cell phone provider, T-Mobile as access to
numerous resources that current leaders in the prepaid market do not have.
Not Selling to Competitors
1. Possibility of the Department of Justice not allowing a merger, similar to the
decision brought about by the AT&T deal.
2. Extensive opportunities involving the prepaid wireless phone market.
3. Opportunities of expanding spectrum and becoming more competitive in the
wireless cell phone industry.
1. Increase in current customer satisfaction due to T-Mobile’s high quality data
network becoming available to a greater number of people. (T-Mobile’s
network has the highest capability in areas where coverage permits.
Expanding spectrum would make this quality available to more people.)
2. Increase marketing opportunities by shifting T-Mobile’s focus from voice
coverage to data coverage.
3. In the prepaid market, expanding spectrum will differentiate T-Mobile from
competition by offering a faster 4G network. This will result in increased
sales from the prepaid segment.
Given our decision for T-Mobile, we have provided an appropriate
promotional plan. The success of this plan will include the implementation of the
T-mobile will offer two tiers of service: prepaid and contractual. Due to the
potential of the market, the focus of T-Mobile will shift towards their prepaid
service. The prepaid plans will only offer 100 voice minutes. The increase in
spectrum will differentiate T-Mobile from other competitors in this market such as
Cricket. Additionally, T-Mobile will continue to offer contractual plans and will
differentiate these from prepaid plans by offering increased minutes available in
voice plans as well as more innovative hardware.
T-Mobile’s prepaid plans will be available through several outlets:
Independent electronic retailers, T-Mobile chain stores, and online at tmobile.com.
By offering prepaid plans at independent electronic retailers such as RadioShack
and BestBuy, T-Mobile can directly compete with other prepaid phone carriers that
are offered at these stores. By offering prepaid services online, T-Mobile makes
providing the service easier for both themselves and the customer. Additionally,
prepaid plans will be offered at T-Mobile chain stores along with contractual plans.
This will give customers an option when entering the store. Offering a variety of
plans in the same location gives T-Mobile the opportunity to meet different
Using the spectrum partnership with a cable provider to their advantage, T-
Mobile can redirect their marketing message towards an expanded data network as
opposed to past promotion of voice coverage. Taking this new focus into
consideration, using the existing advertisements involving the “T-Mobile girl” will
prove successful due to the recognizable nature of the campaign. By incorporating
information regarding prepaid plans into commercials already involving 4G content,
T-Mobile can increase awareness about their new service.
Prepaid plans will be priced at a comparable rate to current leaders in the
market. Current average prices in the prepaid market range from $50 to $65 and T-
Mobile plan it’s prices accordingly. T-Mobile’s differentiating factor will be the focus
of the data plan rather than competitive pricing. This superior data plan will instill a
higher perceived value in the mind of the customer. By offering a data plan
comparable to the ones available in contractual plans with other wireless phone
providers, T-Mobile’s prepaid plans will distinguish themselves among this fast-
In following through with this Advertising Plan, we expect T-Mobile to be the
leader in the prepaid phone market by 2013.
T-Mobile will not be affected by cannibalization. The company has already
suffered from a decrease in the amount of contract holders over the past several
years. The expansion of T-Mobile’s 4G network will help entice more prepaid sales,
but offering the same service to contract holders will prove to not affect this market
in a negative way. Contract holders will have access to more voice minutes and
more innovative devices, allowing this sector to still provide revenues for the com
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