What Is T-Mobile Doing With ETFs?
ETFs, in this situation standing for “Early Termination Fees,” are the meat cleavers the telecoms hold over consumers’ heads -- to prevent them from switching providers before their contracts are up. Billing itself as the “uncarrier,” T-Mobile has no contracts and, more importantly, no fees for early termination. (Since there is no contract it would be pointless, anyway.)
To emphasize the difference, T-Mobile created clever online ads like this one, advising AT&T (NYSE: T) that “Taylor” wants to “break up.” Underneath the catchy come-on lies an offer from T-Mobile to pay up to $350 in early termination fees -- as well as up to $300 for a new smartphone or other device, based on the value of equipment turned in.
Sprint’s response appears to be: “When in Rome …”
In April, Sprint enacted an identical strategy, via which it would pay up to $650 ($350 in ETFs and $300 for the old device) for customers willing to change from their current provider to Sprint.
T-Mobile’s disruptive strategies, including doing away with long-term subsidized contracts and buying out ETFs imposed by other carriers, were important because they could well pave the way for more positive treatment by regulators in a Sprint/T-Mobile merger.
Such a move has been touted by Softbank chairman Masayoshi Son, who has said it would help create a competitive third power in what is now a two-party, (Verizon (NYSE: VZ) and AT&T) wireless industry.
During his remarks, Son said, "At my home in Silicon Valley I say, oh my god. How can America live like this?"
Meanwhile T-Mobile, under the leadership of Legere, has decided to “ramp up” the disrupt by announcing its Un-carrier 5.0 initiative. The event is set to take place June 18 in Los Angeles, according to the International Business Times.
Although few details have emerged, T-Mobile said simply, “We don’t play it safe and sound.”
At the time of this writing, Jim Probasco had no position in any mentioned securities.
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