As the smallest nationwide operator in the U.S. and the last to get the iPhone, T-Mobile needs to make some bold changes. But eliminating phone subsidies, like it said it plans to do, will only make matters worse for the operator.
Take it from someone with experience. "It was a disaster," said Tracy Isacke, director of Telefonica Digital.
Earlier this year Telefonica and Vodafone both decided to get rid of subsidies in Spain. The customer hemorrhaging hasn't stopped. In September alone, Telefonica lost 253,520 mobile users. Vodafone has similarly been losing customers and in July brought back subsidies for what it said was a limited time.
If all operators in a market were to get rid of subsidies, the shift could work, said Omar Javaid, managing director of BBO Global and until a couple months ago a Motorola Mobility executive. But when one operator like T-Mobile makes such a dramatic change, it's an invitation for the competitors to actually increase their subsidies to try to win more customers. "If someone wants to drop subsidies, that's an opportunity [for the competition] to go for the jugular," he said.
In Spain, Orange, which retained subsidies, has been happily gaining market share at the expense of Telefonica and Vodafone.