Analysts Question Whether T-Mobile’s Move to Cut International Fees Will Have Global Appeal
In moving to cut international roaming charges, T-Mobile is attacking a frequent complaint of overseas travelers.
However, such customers make up just a small part of the overall cellphone base.
“What’s striking about this announcement is that it’s much less universal in its appeal than T-Mobile’s other ‘un-carrier’ announcements,” Ovum analyst Jan Dawson said. “This announcement is really just for the segment of the market that either travels abroad or calls abroad frequently, which is a minority. Only about 15 million Americans travel overseas each year.”
The other big concern is the cost to T-Mobile of providing the free and low-cost service when it must pay fees to the overseas carriers onto whose networks T-Mobile customers will be roaming.
T-Mobile CEO John Legere insisted that the costs will be more than offset by the new customers — both businesses and individuals — that his company will win over by removing yet another pain point. Legere said that the overall financial impact of the new program will be only slightly negative, initially, and will pay for itself within nine months.
“There’s just so many pieces of data that suggest to us this is a huge issue and pain point but also a huge opportunity,” Legere said.
But if T-Mobile’s customers turn out to use more than occasional data overseas, Dawson said T-Mobile could take a bigger-than-expected financial hit.
Gartner analyst Carolina Milanesi said that T-Mobile currently has a small market presence among businesses, and its price-sensitive customers might not be the type to go overseas and use a ton of data.
“I think it is a bit of a calculated risk,” Milanesi said.
In addition to the changes made for customers traveling abroad, T-Mobile is also adding a $10-per-month plan that gives substantially discounted calls to those in the U.S. calling overseas, with free calls to landlines in 70 countries and unlimited texting to 200 countries.
“Although there are lots of countries included in the announcement, it’s clear that T-Mobile’s big push will be among the Hispanic community, which helps explain its use of Shakira to promote the new plans,” Dawson said. “That’s the largest community that calls overseas frequently, and this will be a huge improvement for them over what they have to do now to call home … As such, this is probably a bigger threat to TracFone … than it is to AT&T or Verizon, which will probably breathe a sigh of relief.”
One thing that is clear is that T-Mobile’s plans could add up to significant savings for those who travel abroad frequently. Although the free data is unlimited in volume, it is capped at 2G speeds. T-Mobile marketing chief Mike Sievert said the company will offer a series of options for those looking for a speed boost.
Upgraded packages will offer a day of faster access for $15, a week for $25, and two weeks for $50 — all with a decent-sized bucket of high-speed data.
“For those who do travel or call overseas, it’s hugely expensive or requires all kinds of workarounds to avoid the huge fees, so this is a real pain point for some customers, at least,” Dawson said. “And the way T-Mobile will implement it is pretty compelling — replacing those frightening texts you get when you first land in a foreign country with something much more user friendly.”