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Communications Infrastructure

Fritzsche's Forum

Team Magenta = An Army With A  Multi-Pronged Formation

November 13, 2023 | Now that the large cap telecom players have all reported Q3’23 earnings, it is a good time for reflection to review the lessons learned and trends which abound in the space.

When I was an analyst I followed T-Mobile.  While everyone was focused on the unique culture and funny (sometimes a bit off color) tweets made by its old CEO, what always struck me about this company was its tenacity and focus on the overall ‘mission.’  Going back to my undergrad history degree, perhaps the best analogy for T-Mo is the Roman Army who – with tremendous grit and resilience – conquered much of the Mediterranean.   One of the marks of this army that is most cited in any historical reference was its use of multi-line formations. 

Reading the transcript of TMUS’s Q3’23 report, this multi-line formation was easy to see….for those who were listening. 

Here are the three key formations of this company to take note of:

FORMATION # 1 – Fiber - First, on fiber, simply put, TMUS has many options yet not being married to any.  We know TMUS has the deepest spectrum of the Big 3 operators (even though it is still waiting to collect on its winnings from Auction 108).  This allows it to push hard on FWA.  However, when asked on its fiber strategy, management did not rule it out, but stayed true to prior talking points that it will be “capital-light” and “generally off-balance sheet.”  While we can maybe read something into the word ‘generally’, it confirmed it is NOT the dance partner with JANA Partners in JANA’s stated position involving Frontier Communications (FYBR).  T-Mo is at the fiber dance with many a partner. See Mike Dano’s great write up here for more on this: (T-Mobile's open access fiber strategy gets clearer (lightreading.com)).  By not putting a ring on any of these companies’ (proverbial) finger, it is allowing itself to keep options open and see where the market goes before making a bet with its precious free cash flow to go down the wrong path.   They have (wisely) noted that movie does not end well.

FORMATION # 2 – Enterprise -  Enterprise has always been AT&T and Verizon’s lunch table and like Regina George in Mean Girls, they did not let anyone else in.  For the past few years, T-Mobile has continued to talk about its plan to penetrate this segment.  Like its consumer strategy, the plan has been to address the pain points that enterprises see with their wireless solutions and build brand loyalty.  That they have! In Q3’23 T-Mo posted its highest enterprise postpaid quarter….ever.  While admittedly some of this growth is driven by lower price, other initiatives and solutions including the embrace of 5G private networks in certain verticals are clearly gaining some mind share among enterprise users.

FORMATION # 3 – Painting the Map – When I covered T-Mo, it was much more an urban centered story.  They did great in NYC, but not so much in Westchester, amazing in the Chicago Loop, but not great in North Shore….you get the drill.  Back then, fly over states were not part of their magenta map.  This is something Verizon very much targeted T-Mo for in its own advertising, highlighting this weakness to customers. In three short years, much has changed.  In Q3’23, T-Mo won the highest share of switchers in smaller market / rural areas of any wireless carrier. Given its front-footed-ness on spectrum (Auction 107, 110 and 108) these past few years, the map may be (almost) as much magenta as it is red (Verizon) and blue (AT&T)!

Much has changed in three short years. If these formations continue to mobilize, it should definitely allow T-Mo to continue to conquer some unchartered territories. T-Mobile is most definitely walking the walk on “being all it can be.”

Happy (belated) Veterans’ Day to all our Veteran Fritzsche's Forum readers.  A tremendous thank you for your service!

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