T-Mobile Q1: time to finish that 4G network

Monday 18 May 2015 | 15:25 CET | Background

T-Mobile Netherlands saw its revenues fall again in Q1. Sales were down 12 percent, or 6 percent if the impact of ending three MVNOs is excluded. This was the fourth consecutive quarter of decline, with revenues going from EUR 393 million in Q1 2014 (excluding Online but including MTV Mobile, *bliep and Simpel) to EUR 346 million a year later (excluding the three MVNOs).

We estimate from the 6 percent underlying fall that comparable sales were EUR 368 million in Q1 2014, or EUR 25 million less than the reported amount. T-Mobile confirmed to Telecompaper that the drop in sales was not just the result of losing the three MVNOs, but other, unspecified factors also played a role. 

If we break down sales according to consumer, business and other (wholesale etc.), then the picture is even more severe: consumer -17 percent, business -13 percent and other +68 percent. The latter is likely thanks to the wholesale agreement with Tele2, which not only is growing significantly but also carries high margins.

Churn and ARPU

T-Mobile emphasized the relatively good margins and free cash flow in its results. These are good, but over the long term growth is what's needed, and especially revenue growth. The operator notably expressed its dissatisfaction with the decline in the customer base. Still, the loss of 70,000 customers (of which 12,000 postpaid) is hardly shocking given the performance in recent quarters. Postpaid churn even improved, from 1.3 percent in the previous quarter to 1.1 percent.

Especially poor was the ARPU, dropping sharply from the previous quarter. Blended ARPU fell to EUR 22 from EUR 26, and postpaid dropped to EUR 29 from EUR 34. T-Mobile talked of price pressure, but this could mean various things:

  • Customers are migrating to cheaper plans, or high-value customers are leaving and being replaced by low-value ones.
  • The new packages announced in December 2014 (Stel Samen, Stel Bij) were launched commercially in Q1 2015. Any impact from this, such as lower out-of-bundle fees, is unlikely to be major in Q1. 
  • Ben, with its cheaper 3G plans for lighter users, is also unlikely to have a major impact. T-Mobile does plan to invest more in Ben this year, likely in response to Telfort and Simyo (KPN), hollandsnieuwe (Vodafone), Tele2, Ziggo and the other MVNOs.

4G and 4P

This all suggest to us that T-Mobile NL is suffering from two shortcomings, weakening its market position: it still doesn't have national 4G coverage and it doesn't offer fixed-line services (so no quad play). This means T-Mobile is losing customers, especially high-value 4G customers. T-Mobile is working to expand its fixed services on the business market, launching recently with Mitel the Cloud&Clear offer. It will not be so obvious what to do on the consumer market, where it would need to offer broadband and TV. Online has already been sold.

Of course, there is always a market for mobile-only, and T-Mobile is targeting this. This is smaller than the total market, and T-Mobile is not alone in this segment; the other providers can also deliver mobile-only. It still remains an attractive segment and offers T-Mobile a chance to profile itself, alongside network partner Tele2, which is also moving towards mobile-only.


T-Mobile's only choice is to speed up its 4G network in order to reach national coverage as soon as possible and fully profit from the new network. The recent results underline the need to hurry up. Using good spectrum (low bands), new technology (LTE-Advanced, LTE Broadcast) and a dense network (small cells), anything is possible - even fixed-line replacement services. 

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