No matter what type of cellphone user you are, MONEY found a mobile plan that's right for you.
Haven’t shopped for phone service recently? You’re in for a shock. “In the past year plans have changed more than in the previous five,” says Logan Abbott of comparison site Wirefly.com.
Forget choosing among the Big Four and their handful of offerings: Today’s market is made up of an overwhelming mob of carriers and options. And as if that isn’t confusing enough, the recent news that the Federal Trade Commission is accusing T-Mobile of “cramming,” or billing customers for unauthorized services, may have you wondering if your provider is ripping you off. (The short answer: It may have in the past, but these days, probably not. For more, read Time’s story on cramming and how to spot it.)
Perhaps the biggest change to the industry is the shift away from two-year service contracts. Now you can choose a contract plan, with a discounted phone and high monthly rates, or a cheaper option that requires you to pay upfront for a new phone or bring your own. (Phone compatibility varies.) We found that noncontract plans came out on top in nine of 10 categories. Plus, the longer you keep your phone on a noncontract option, the better the deal gets.
The rise of smaller carriers also looks like good news. These firms have finally become a viable option, with access to the newest phones and reliable coverage, thanks to arrangements that let them use big companies’ nationwide networks. One potential downside is that the larger firms usually prioritize their own users, so the little guys’ customers may have to contend with less coverage or slower data speeds, says Mike Dano of cell news publication Fierce Wireless. Unless you use a ton of data, though, it’s not much of an issue.
Overall, cell coverage has improved. Verizon and AT&T still generally have the broadest networks, though “everyone has gotten better in the last six to 12 months,” says Bill Moore, president of service-rating firm Root Metrics. To see which carriers’ networks have the best performance where you live, go to Rootmetrics.com and enter your address.
For cellphone users, this all boils down to one thing: There’s probably a better, cheaper plan than the one you have today.
To help you find it, MONEY parsed more than 75 options from a range of carriers. We started by grouping plans into categories based on features such as talk, text, and data packages. Next, we added up the price of two years of service, plus the cost of a 16GB iPhone 5s for each plan member for all 75+ option. We used the phone price offered by the carrier (full price for noncontract plans and subsidized prices for contract options), then sorted these results by price. Finally, we factored in phone choice, as well as network quality and customer service scores from Root Metrics and J.D. Power.
All family plans are for four people. We consider up to 1GB of data per person light use, 2GB to 3GB average, and 5GB or more heavy. All plans are chosen based on domestic use. For information about international use, read our story on using your cellphone abroad.
Best for Light Callers
If you only use your phone for calls, texts, and occasional web surfing, you likely don’t need more than 1GB of data. Cricket offers you the best price.
|Two-year cost with phones||$1,610*||$5,000*|
|Can you bring a phone?||Yes||Yes|
|Data||500MB||500MB per person|
|Data overage?||Speed slows||Speed slows|
|Network||AT&T 4G LTE||AT&T 4G LTE|
|Comment||Smartphone options start at $50||Includes the option to
pay off new phones over time
Best Individual Plan: Cricket Basic
Sign up for auto bill pay, and this plan drops to $35. Cricket, now owned by AT&T, offers a range of phones, and, like many noncontract options, lets you bring your own. Go over your data limit? The carrier will slow your service rather than charge you extra.
Glitch: Cricket taps into AT&T’s network, but its data speed is slower than that of the larger carrier.
Best Family Plan: Cricket Basic
For a family that doesn’t use that much data, Cricket’s price is a head-turner—especially when you consider that it includes taxes and fees. The carrier’s use of AT&T’s cell towers gives it greater reach than many providers in this price range.
Glitch: Unlike the majority of family options, you cannot add tablets or other devices to this plan.
Best for Typical Users
Do you use your phone to post on social media, browse the web, and get directions when you’re on the move? Chances are you still only need 2GB or 3GB a month. These plans will offer you the best value.
Straight Talk Unlimited
T-Mobile Simple Choice 3 GB
|Two-year cost with phones||$1,730||$5,952|
|Can you bring a phone?||Yes||Yes|
|Data||3GB||3GB per person|
|Data overage?||Speed slows||Speed slows|
|Network||Multiple 4G LTE||T-Mobile 4G LTE|
|Comment||Sold at Wal-Mart and online||Will pay your termination fee
if you switch carriers
Best Individual Plan: Straight Talk Unlimited
This plan is just $41.25 a month if you pay for a year upfront. Straight Talk uses all four big carriers; the network you’ll use depends on your phone and area, says Dennis Bournique of PrepaidPhoneNews.com.
Glitch: Like most low-cost carriers, Straight Talk may not allow you to tap into another provider’s network if you venture out of its service area.
Best Family Plan: T-Mobile Simple Choice 3GB
At this price point, it’s a duel between Cricket and T-Mobile, and for those who seek faster data speeds, T-Mobile wins out. Does someone in your clan have a tablet? You can add it, and 1.2 GB of data to use with the device, free through 2014.
Glitch: This network is fast in many metro areas, but it isn’t as broad as those of Verizon and AT&T.
Best for Bargain Hunters
Users who want a ton of data at the lowest possible price should check out these options.
Metro PCS Unlimited
T-Mobile Simple Choice 5G
|Two-year cost with phones||$2,089**||$6,912|
|Can you bring a phone?||Yes||Yes|
|Data||Unlimited||5GB per person|
|Data overage?||None||Speed slows|
|Network||T-Mobile 4G LTE||T-Mobile 4G LTE|
|Comment||Top customer service marks from J.D. Power||T-Mobile’s network speed has improved recently|
Best Individual Plan: Metro PCS Unlimited
This affordable offering from T-Mobile-owned Metro PCS is one of the few true unlimited plans still available today. “Their data isn’t throttled at all, and it is fast,” says Bournique.
Glitch: The carrier doesn’t sell iPhones, but does offer the popular Samsung Galaxy S 5.
Best Family Plan: T-Mobile Simple Choice 5GB
Finding a competitively priced plan that combines a boatload of data with a fast network isn’t easy. Simple Choice, however, is a good pick, particularly in cities, where T-Mobile is at its fastest. The plan also includes a perk for international travelers: free data when abroad.
Glitch: T-Mobile can be patchy in rural areas.
Best for Power Users
If you’re willing to pay more for the most reliable networks, buy one of these plans.
Verizon More Everything
AT&T Mobile Value Share
|Two-year cost with phones||$3,080||$7,640|
|Can you bring a phone?||No||Yes|
|Data overage?||$15 per GB||$15 per GB|
|Network||Verizon 4G LTE||AT&T 4G LTE|
|Comment||iPhone 5s is $200||Option to pay off phones
over two years vs. upfront
Best Individual Plan: Verizon More Everything
The only contract plan in our guide, this More Everything option costs the same as AT&T’s competitive plan (and less than other high-end Verizon options). Given the choice, we recommend the speed and reliability of Verizon’s widespread 4G LTE coverage for heavy phone users.
Glitch: Watch those hefty overage fees.
Best Family Plan: AT&T Mobile Share Value
Though similar in price and features to Verizon’s noncontract plan, AT&T noses ahead because more phones are compatible with its network. Also, note that AT&T bested its big rival in J.D. Power’s wireless customer care survey.
Glitch: Yes, it’s $40 more than you’d pay with T-Mobile, but AT&T has wider coverage.
Best for Frequent Upgraders
Always want the latest phone? Go with AT&T.
|AT&T Next 12|
|Two-year cost with phones||$2,340|
|Can you bring a phone?||No|
|Data overage?||$15 per GB|
|Network||AT&T 4G LTE|
|Comment||Only AT&T has the Amazon phone|
Best Plan: AT&T Next 12
Insist on having the latest phone? Try AT&T. Next costs the same as a similar Verizon plan, but AT&T wins, since it’s “the leader in getting the hottest devices,” says CNET writer Maggie Reardon. On this plan you lease your phone over 20 months and must return it if you upgrade sooner.
Glitch: If you haven’t yet paid 60% of the old phone’s value, you must pony up the remainder to trade up to a new model. Still, that’s cheaper than buying two phones at retail price.
Best Basic for Couples
If you and your spouse don’t use your phones a lot, Consumer Cellular has the best plan for you.
1,200 minutes/1 GB
|Two-year cost with phones||$2,740|
|Can you bring a phone?||Yes|
|Data||1 GB shared|
|Data overage?||25 cents per MB|
|Network||AT&T 4G LTE|
|Comment||Sold at Sears and online|
Best Plan: Consumer Cellular 1,200 Minutes/1GB
This Consumer Cellular option is dramatically cheaper than competitive plans, making it a great pick for couples who don’t spend a ton of time on their phones. The carrier also has a reputation for good customer service. A bonus: Consumer Cellular recently added new phones, including the iPhone, to its device lineup.
Glitch: This is one of the few plans that still caps talk minutes and text messages, though you can pay to add more.
Find a great plan that requires you to switch carriers? Read more about how to break up with your current provider here.
Switching to a new carrier is getting easier. Thinking about a swap? Take these steps before you make the move.
1. Make sure you won’t regret ditching your current plan.
If you are one of the lucky ones who still has a true unlimited data plan, you may want to hold onto it. AT&T and Verizon no longer offer unlimited plans, and users who run over their allotted gigabytes can rack up big charges. Sprint still has a plan it refers to as “unlimited,” but the carrier has started slowing data speeds for its heaviest users. Many smaller carriers will also slow your data speed if you go over your plan’s monthly allotment. T-Mobile still offers an unlimited plan, but at a starting rate of $80 a month, it’s not cheap.
Of course, you may not actually need all that data. Before you make a decision, look back over your monthly bills to get a sense of how many gigabytes you actually use. It may not be as much as you think. “Most of the time people don’t use gobs of data,” says Kirk Parsons, senior director of telecom services at J.D. Power. “Between 1 and 2GB, that’s the sweet spot.”
For light or average users, a new, data-limited plan may meet your needs and cost less than what you pay today. In that case, make a move. On the other hand, you could discover that getting a new plan with a large enough data package would actually increase your monthly bill. If so, sit tight.
2. Find out what a switch will cost you.
Watch out for the dreaded early termination fee. If you’ve signed a two-year contract with one of the big four carriers, you could be on the hook for between $100 and $350, says Jon Colgan, founder of Cellbreaker, a startup company that helps people break their cellphone contracts.
Fortunately, there are a few ways out. A few carriers have started offering early termination fee “buyouts” to encourage customers to dump their old carriers. For example, T-Mobile promises to rebate your fee if you switch. The catch? You have to turn in your old phone and buy a new one from the carrier.
You may be able claim that the carrier breached the terms of the contract, which could allow you to switch without paying an early termination fee. Some examples: your carrier increases your bill or changes the terms of your service, or your phone constantly drops calls. For a price, Cellbreaker will help you through the process.
Now that noncontract plans are offered by most carriers, you no longer need lock yourself into another two-year contract if you’d prefer to have more flexibility in the future.
3. Determine whether your current phone is compatible with the new carrier’s network.
Until recently, if you wanted to jump to a new carrier you often had to buy a new phone. That usually meant paying the full price upfront (an iPhone runs about $650 ) or signing a new two-year contract and paying off the phone over time.
Now there’s another option. Sort of. Assuming your current device still works, you may be able to continue using it, since many providers now allow you to set up other phones on their network. But there’s one big caveat: not all phones will work on every carrier’s network. Today’s big providers (and thus the smaller carriers that buy into their networks) use different technology. So an iPhone you buy from Sprint is wired slightly differently than one purchased from AT&T, says Roger Cheng, the executive editor of technology news site CNET.
Before you make a move, even if you’ve read that you can bring your old phone to the new carrier, call or visit the carrier’s retail store to confirm that your device is good to go. Typically, phones that run on AT&T and T-Mobile’s networks use the same GSM technology and can be used on either provider, says Cheng. However, Verizon and Sprint phones often cannot be used elsewhere. But nuances exist, so it is always worth double checking.
4. See how well the new carrier’s network works in your area.
Obviously, you don’t want to switch only to find yourself dealing with dropped calls or limited web access. But don’t just rely on what you’ve heard from friends about a carrier’s service (or lack of it). This is a rapidly changing area.
Nationwide, Verizon and AT&T still offer the broadest and fastest coverage. But T-Mobile is gaining ground in many cities, where it is at its fastest. You likely care less about the national network, though, than how well the carrier performs where you live. Your best source of local data is RootMetrics. The firm tests call, text, and data coverage, analyzing both reliability and speed, from smartphones across 125 urban areas. For the rest of the country, RootMetrics relies on crowdsourced reports. You can type in any address at rootmetics.com to see the results.
Travel a lot? Or live in a rural area with spotty service? Before signing up with a smaller carrier, find out if the firm offers domestic roaming, which allows you to access another provider’s network when your carrier doesn’t have coverage. Many do not, which could leave you in the lurch.
Considering switching to T-Mobile? The carrier recently announced a program allowing would-be customers to test drive their network with an iPhone 5s for a week for free. Learn more here. Just be sure to return the phone undamaged.
Got through the checklist and ready to make a move? See our list of the best cellphone plans to find one that’s perfect for you.
Allegations that T-Mobile made millions off scam text messages could tarnish its consumer-friendly 'Un-Carrier' image.
T-Mobile has spent the last year and a half telling us again and again that it’s not like the other wireless carriers. Stuck in fourth place in the market after a failed merger with AT&T, the company transformed into the “Un-Carrier” as a way to differentiate itself from rivals Verizon, AT&T and Sprint. The campaign is part disruptive business model, part slick marketing. T-Mobile has ended two-year contracts, eliminated automatic overage fees and prevented its customers from racking up huge data charges while traveling abroad. And T-Mobile CEO John Legere, once a buttoned-up executive at AT&T, now hurls vulgarities at his competitors and crashes their corporate parties, essentially trolling them the way we all wish we could when our phone bill comes in each month. It’s an effective one-two punch that instantly conveys that T-Mobile is a company run by real people that want to help the little guy.
The “Un-Carrier” image is now in peril, thanks to a lawsuit from the Federal Trade Commission claiming that T-Mobile profited from bogus charges for unwanted premium text message services on customers’ bills. The annoying spam texts for things like flirting tips and horoscopes cost $9.99 per month and were charged to customers via third-party companies in a process known as “cramming.” T-Mobile kept as much as 40 percent of the money from these fees, generating hundreds of millions of dollars, according to the FTC. The Commission also claims T-Mobile buried these charges deep in users’ bills and refused to refund some customers’ money when they complained. T-Mobile could be on the hook for millions of dollars to repay customers for the charges, according to the FTC.
T-Mobile, however, says the allegations are without merit. In a statement, CEO John Legere said the company stopped billing for premium texting services last year and has already launched a program to refund customers for fraudulent charges. “T-Mobile is fighting harder than any of the carriers to change the way the wireless industry operates and we are disappointed that the FTC has chosen to file this action against the most pro-consumer company in the industry rather than the real bad actors,” he said.
Whatever punishment the courts might levy, the real cost to T-Mobile is in how this legal battle could affect its image. The company claims to be on a righteous campaign to save customers from petty charges from their cellphone carriers. Burying unwanted fees for daily horoscopes in customers’ bills is the antithesis of the “Un-Carrier” ethos.
“It does hurt T-Mobile’s brand because obviously it’s built around consumer-friendliness,” Chetan Sharma, a mobile industry analyst, says of the FTC complaint. “I was a bit surprised that T-Mobile didn’t just try to settle it.”
In Legere’s statement, the T-Mobile chief pointed out that deceptive charges from shady third parties have plagued the entire wireless industry for a long time. Last fall, T-Mobile, AT&T and Sprint all signed an agreement with 45 states to stop billing customers for premium text messages. Verizon did not sign the specific agreement but committed to the same principle. Meanwhile, the FTC is also pursuing non-carriers involved in cramming schemes, like companies that feed wireless carriers false phone numbers for billing, several of which it has already sued.
An FTC spokesman declined to comment on the cramming practices of other wireless carriers or whether the agency would file legal action against them as well.
It’s likely that T-Mobile’s actions regarding cramming were not out of the ordinary for the wireless industry—and the problem itself, a relic of the days when people bought digital goods through SMS rather than through online app stores, has mostly been eradicated. But this is supposed to be a company that’s about flouting the rules, not playing by them. A T-Mobile without the arrogant CEO and the customer-first mentality is just a fourth-place carrier with a wireless network that can’t stack up to AT&T’s or Verizon’s in many areas. Now that the company has been singled out by the FTC, it will be critical for T-Mobile that it proves it has customers’ best interest at heart.
“They should probably put out the data on [cramming] as to how big of an issue it is so people can understand the scale,” Sharma says. “The FTC’s lawsuit makes us believe that it’s a much bigger problem than it might be. Without the numbers, it’s very hard to say which way it is.”
The consumer watchdog says T-Mobile should have spotted text message scams hitting its customers
Update: July 1, 5:02 p.m. ET
The Federal Trade Commission accused wireless carrier T-Mobile on Tuesday of placing unauthorized charges on customers’ bills for unwanted premium SMS services such as flirting tips, horoscopes and celebrity gossip. T-Mobile generated hundreds of millions of dollars by taking a portion of the typical $9.99-a-month subscription fee charged for such services, according to the FTC.
Wireless carriers often agree to include third-party charges in customers’ monthly phone bills (AT&T customers, for instance, can pay for Beats Music as part of their cell phone plan). However, sometimes these charges are not authorized by customers and are hidden deep within their bills, a practice known as “cramming.” Several cramming companies targeted T-Mobile subscribers, but the wireless carrier continued to let them charge its customers even after there were indications of fraud, according to the FTC, which says up to 40 percent of the customers who were charged for these services asked for a refund. The FTC argues that figure should have indicated fraudulent activity.
Jessica Rich, the director of the FTC’s Bureau of Consumer Protection, said credit card companies typically investigate instances of potential fraud if at least one percent of customers claim they have been wrongly charged from a specific vendor.
“It’s wrong for a company like T-Mobile to profit from scams against its customers when there were clear warning signs the charges it was imposing were fraudulent,” said FTC Chairwoman Edith Ramirez in a statement. “The FTC’s goal is to ensure that T-Mobile repays all its customers for these crammed charges.”
Beyond allowing the charges to occur, the FTC also claims that T-Mobile made it difficult for customers to discover the charges on their own phone bills. The carrier also refused refunds to some customers or told them to try to get their money back from the scammers, according to the FTC.
The FTC will seek refunds for customers who were the victims of fraudulent charges, an amount that Rich says could be hundreds of millions of dollars. The commission will also seek a court order to ban T-Mobile from allowing cramming in the future.
The accusation of subscriber-duping undercuts T-Mobile’s customer-friendly “Un-carrier” marketing campaign the carrier has pursued in the last year. As part of that strategy, the company has gotten rid of cellphone plan mainstays, like two-year contracts and overage charges, while constantly vilifying its competitors as overly greedy.
In a statement, T-Mobile CEO John Legere said the FTC complaint was without merit. “T-Mobile is fighting harder than any of the carriers to change the way the wireless industry operates and we are disappointed that the FTC has chosen to file this action against the most pro-consumer company in the industry rather than the real bad actors,” he said.
The company is hardly the only wireless carrier that has allowed cramming. Last fall Verizon, AT&T, T-Mobile and Sprint all agreed to stop billing customers for unwanted charges from third-party services in most states. Legere also pointed out that T-Mobile already has a program in place to provide refunds to customers who felt they were fraudulently charged via cramming.
"Music freedom" looks like a benefit for subscribers, and that's the most dangerous part.
Most things that T-Mobile has done over the last year have made me feel warm and fuzzy inside, but I felt a pit in my stomach on Wednesday when the carrier announced that certain streaming music services won’t count against users’ data limits.
Instead of treating all music services equally, T-Mobile has decided that the most popular streaming music services should get better treatment. If you have a limited data plan on T-Mobile, you won’t come any closer to your monthly cap when using Spotify, Pandora, Rhapsody, iTunes Radio, iHeartRadio, Slacker Radio and Samsung Milk Music.
This is the most insidious type of net neutrality violation, because it’s being pitched as a benefit. Most users stand to gain from the free data, so they may not even care about the slippery slope they’re on.
T-Mobile is well aware that it’s picking winners and losers, so it’s telling users to vote on other services that they’d like to make the cut. This by itself is messed up — why should I have to petition T-Mobile to give preferential treatment to a particular music service? — but it also underscores why net neutrality is so important. New or obscure streaming music services will remain at a disadvantage for as long as T-Mobile doesn’t recognize them. This, in turn, makes it harder for these services to take off, enforcing a vicious cycle.
What’s really scary is that some tech pundits don’t even see this as a problem. Ross Rubin, an analyst whose opinions I usually respect, wrote on Twitter that the free music streaming is “not really a net neutrality issue” because T-Mobile isn’t favoring any one provider or setting up a “fast lane” for chosen services. But with wireless Internet, data caps are just as important as speed limits. The incentive to use unrestricted services is just as strong.
The good news, for now at least, is that T-Mobile isn’t charging music services for uncapped data, according to The Verge. And as the smallest of the major carriers, T-Mobile doesn’t pose a huge threat to the streaming music market on its own.
But by going down this road — and getting a warm response for doing so — T-Mobile is signaling to its competitors that it’s okay to dole out preferential treatment as long as customers see a short-term benefit. Once the hooks are in, T-Mobile could easily start charging these music services for their customers’ data use, and other carriers could start doing the same. AT&T has already set up a system to allow “sponsored data,” and Verizon has expressed interest in this business model as well.
And there’s nothing you can do about it. We currently don’t have any net neutrality protections in the United States, and it’s unclear whether wireless Internet will even be included as the FCC draws up new rules that can withstand legal scrutiny. Besides, if enough people feel good about what T-Mobile is doing, it’s hard to imagine regulators getting in the way. T-Mobile tries hard to look like it’s putting an arm over your shoulder, but “music freedom” is actually more of a stranglehold.
Wireless carrier T-Mobile will soon begin allowing customers to stream as much music as they want from services like Spotify and iTunes Radio. The company announced Wednesday that it will no longer count music streamed from select services towards customers’ monthly data usage limits.
The services currently included in the program are Pandora, iHeartRadio, iTunes Radio, Rhapsody, Slacker, Spotify and Milk Music. These options comprise about 85 percent of the music streaming traffic on T-Mobile’s network, the company said. Customers can vote via social media on other services they’d like to see included as well.
The move will allow avid music listeners to do considerably more with their monthly data allotment. A person that streams music for 50 minutes a day uses about 1.5 GB of data per month just for that task, according to T-Mobile’s own data calculator. If unchecked, such use can lead to huge overage charges on competing carriers’ networks or throttled speeds on T-Mobile (the carrier eliminated overage charges earlier this year in favor of slowing down service for people who use more than their allotted data).
The new feature has similarities to AT&T’s Sponsored Data plan, which alllows companies to pay AT&T to let customers use apps or websites without eating into their monthly data allotment. Some have said that these concepts violate the ethos of net neutrality, which discourages companies from granting preferential treatment in the way they deliver certain types of data across the Internet — though net neutrality rules have not previously applied to mobile Internet use.
Unlike AT&T’s Sponsored Data program, though, T-Mobile will collect no fees from the streaming services that are granted unlimited streaming.
In addition to lifting data caps on music streaming, T-Mobile also announced a new streaming service of its own, called unRadio. The new, on-demand service, made in partnership with Rhapsody, has a catalog of 20 million songs and no ads. It will be free for T-Mobile subscribers with an unlimited data plan and $4 per month for subscribers with more limited plans.
The new programs are the latest steps in T-Mobile’s “Un-Carrier” initiative, which has introduced several disruptive concepts to the wireless industry, such as the elimination of two-year contracts and international data charges. The cost-cutting measures are making T-Mobile bleed money, but they also helped the carrier gain more new subscribers in the first quarter than AT&T, Verizon and Sprint combined.
Just the latest in John Legere's history of madcap soundbites
T-Mobile CEO John Legere is hardly known for speaking delicately, but his most recent outburst, at a Wednesday press event, might take the proverbial profanity cake.
Business Insider reports that Legere had harsh words for competitors AT&T and Verizon. “These high and mighty duopolists that are raping you for every penny you have,” he said. “The f—ers hate you.”
According to The Verge, Legere was particularly perturbed about news of Amazon’s reported decision to make its smartphone AT&T exclusive. “Amazon doesn’t know what they just signed up for,” Legere said. “Remember the Facebook phone?“
This isn’t Legere’s first tirade against other carriers. In March, he said that AT&T, Verizon, and Sprint’s subsidy model was “the biggest crock of sh-t I’ve ever heard in my entire life.” He also called AT&T “cr-p” at CES in January.
If Sprint goes through with its rumored acquisition of wireless carrier T-Mobile, it will acquire about close to 50 million wireless subscribers, a company that generates $24 billion in annual revenue and a loud-mouth CEO that is said to be the leading candidate for steering the new, combined company.
John Legere was once a buttoned-up corporate suit for the international divisions of companies like AT&T and Dell, as well as the CEO of the now-defunct telecommunications company Global Crossing Limited. But he dumped the typical executive attire in favor of a blazer, jeans and a magenta T-shirt when he took over the ailing T-Mobile in the fall of 2012. The unusual attire fits his brash corporate strategy, which is basically to dismantle all the money-making fees the wireless industry has baked into cell phone plans over the years.
Through its “Uncarrier” campaign, T-Mobile has eliminated two-year contracts, gotten rid of international data charges and offered customers huge subsidies to lure them away from competitors. At first, the moves seemed like a desperate ploy from a last-place company. But T-Mobile has steadily added subscribers as it has offered more headline-grabbing deals, racking up 2.8 million additional postpaid subscribers since Legere took charge. The other carriers have tried to stop the company’s rise by lowering prices and offering some bribes of their own, but that hasn’t blunted T-Mobile’s momentum. In the first quarter of the year, T-Mobile added more new subscribers than the other three carriers combined. “T-Mobile’s results since they started this almost two years ago speak for themselves,” says Bill Menezes, principal research analyst at Gartner. “It really has changed the way all the big carriers now offer their service.”
Beyond overseeing strategy, Legere has given T-Mobile’s brand awareness a huge boost. He has almost 250,000 Twitter followers and regularly mocks his competitors by name. At the Consumer Electronics Show in January, he got kicked out of an AT&T party, generating tons of free press for his company. He issued a fake press release earlier this year in which he compared AT&T to Darth Vader. Is the rebel act all for show? Perhaps—Legere has been in the telecommunications industry for more than 30 years and at one point worked for current Sprint CEO Dan Hesse at AT&T. But Legere’s persona, authentic or not, aligns well with T-Mobile’s branding as a disruptor.
“Legere has been very successful in translating his personality style and kind of getting that across to the industry as someone that’s disruptive, someone that’s unorthodox in his presentation and his language,” says Wayne Lam, a wireless communication analyst at IHS technology. “He’s kind of personified that new T-Mobile brand.”
Legere’s marketing skills and business smarts have made him the primary candidate to lead the combined Sprint-T-Mobile, according to Bloomberg. “He’s seen as a dynamic figure who’s been successful at changign things in the cellular industry, and that’s really something that Sprint needs,” Menezes says.
Masayoshi Son, the CEO of Softbank, which owns Sprint, said last week at a tech conference that he admires Legere. Son has also indicated that he is fan of T-Mobile’s deep-discount strategy and believes it could be effective at scale. “I’m not content for Sprint to remain No. 3 because if we could grow bigger, we will offer aggressive discounts and services, just like we did in Japan,” he said earlier this year.
Still, T-Mobile is on a bit of a running clock because its effort to attract new customers is wildly unprofitable. The company posted a $151 million loss in the first quarter and missed analyst estimates for both earnings and revenue. A merger would instantly give the combined Sprint-T-Mobile about double the subscriber base, as well as the financial backing of Softbank, which generated more than $5 billion in profit in the 2013 fiscal year. The combined company would also have a more reliable network that would come closer to approaching the quality of AT&T’s and Verizon’s, Lam says.
Legere wins in a potential Sprint merger no matter the outcome. Either he becomes CEO of a larger telco that could legitimately compete with the top two carriers, or he gets a severance package of up to $42 million if he’s not hired at the merged company. Legere has said that a merger could be good for T-Mobile, but he’d like to stay in control. “I have no desire to turn T-Mobile into the son of something else,” he told Business Insider earlier this year.
Consumers hardly have such clear winning scenarios. There’s no guarantee that a larger, less desperate T-Mobile wouldn’t roll back its disruptive ambitions. The brand itself might eventually be swallowed whole by Sprint, which is what happened to former carriers such as Cingular Wireless and Alltel. And company consolidation is what created the fee-ridden industry that T-Mobile has so effectively disrupted in the first place. This four-horse race has been good for consumers, but there’s no telling how competitive dynamics may shift if the number of competitors dwindles to three.
“You’re eliminating a consumer choice,” Menezes says. “Any time you eliminate choice, I don’t believe that that’s good for consumers.”
The third and fourth largest mobile networks are reportedly nearing a merger that would help them stay competitive against industry leaders Verizon Wireless and AT&T
In a deal that would combine the third and fourth largest wireless telephone companies respectively, Sprint is reportedly close to acquiring T-Mobile in a deal that values T-Mobile at around $32 billion.
The acquisition, which would need federal approval, may happen early this summer, according to the Wall Street Journal, which reported on the deal Wednesday night, citing people familiar with the matter. The New York Times and Bloomberg also reported the story Wednesday.
According to those reports, Sprint would pay around $40 a share for T-Mobile, a premium of 17 percent on Wednesday’s closing price. It would also owe T-Mobile about $1 billion if the deal falls through, meaning Sprint’s making a big bet that regulators will allow the merger to pass unimpeded.
The Sprint/T-Mobile deal follows AT&T’s recent move to acquire DirecTV, which would reinforce AT&T’s position as the company’s second biggest wireless provider, following Verizon Wireless. Sprint and T-Mobile may in fact argue to regulators that joining forces is the only way to stay competitive with Verizon Wireless and AT&T in the long-term.