T-Mobile's Un-Success

T-Mobile US sort of reminds me of a hipster.

It certainly isn't the most conventional U.S. mobile carrier, coming in fourth place by size. But second-quarter results suggest it's growing more popular. The company reported revenue of $6.2 billion over the quarter, compared with $4.9 billion last year. Having completed its merger with MetroPCS and become a public company in May, T-Mobile US added 1.1 million net customers (including prepaid users) last quarter. And it's making a run at the big guys: The company added 688,000 contract users over the quarter, its first growth since the second quarter of 2010; AT&T, meanwhile, added only 551,000 contracts over the same period.

The key to T-Mobile's recent success -- and here's where the hipster analogy comes in -- seems to be the mix of offbeat style and very conventional, and cool, tools. Only a few minutes on the streets of Brooklyn are required to register the hipster affinity for iPhones. As of April, T-Mobile has those too. The addition of the Apple devices seems to be part of the carrier's recent success. IPhones accounted for 29 percent of the combined gross additions and upgrades. Moreover, 86 percent of units sold in the second quarter were smartphones, up from 71 percent last year. (Of course, smartphones themselves are growing in popularity; according to market-research firm comScore, the percentage of adult cellphone-owners in the U.S. with smartphones has increased from 20 percent to more than 58 percent over the last three years, as reported in the New York Times.) The carrier is also ahead-of-schedulein its work to expand its 4G LTE network (though it still lags behind Verizon and AT&T on that); slow phones aren't cool.

Then there's the unconventional bit. T-Mobile markets itself as "un-leashed" and the "Un-carrier." (Reminiscent of the classic 7-Up marketing campaign for the "Uncola.") It ended annual service contracts and provides ways to get more frequent upgrades and unlimited talk, text and Web. In a press release, Chief Executive Officer John Legeresaid: "T-Mobile's Un-carrier approach has clearly resonated with consumers. By fixing the things that drive them mad, like contracts and upgrades, and freeing them from the two-year sentences imposed on them by our competitors, they are choosing the new T-Mobile in unprecedented numbers."

Yes, un.

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    Zara Kessler at zkessler@bloomberg.net

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