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earlier in the year it was breaking free from bullying telecom carriers who lock up consumers with fee-laden two-year contracts. In fact, T-Mobile's second-quarter earnings indicate the company may be chipping into what some had called a wireless industry duopoly.
T-Mobile said it gained 688,000 new post-paid subscribers, nearly quadrupling Wall Street's expectations, and over 1 million total subscribers in the quarter as consumers flocked to the burgeoning network and its less restrictive smartphone contracts.
That subscriber growth was greater than
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second-quarter results and indicates T-Mobile may have turned a corner in its competitive position with telecom giants that have consistently picked up wireless market share as consumers take up high data intensity smartphones.
Continued subscriber growth at T-Mobile in coming quarters could show the company is breaking into AT&T and Verizon's market share. At this time two-years ago, AT&T's proposed $39 billion acquisition of T-Mobile indicated that the U.S. wireless market was moving towards a duopoly.
Regulators balked at the deal and T-Mobile has spent the last 12 months closing a merger with MetroPCS, introducing the
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iPhone to its network and revamping its pricing strategy. Given T-Mobile's recent subscriber growth numbers, the company finally appears to be a credible and low-cost alternative to AT&T and Verizon in the eyes of consumers.
Those betting on a duopoly of AT&T and Verizon might be in for a rude surprise.
T-Mobile's wireless margins are less than half of either of its bigger rivals, indicating the company's increasingly viable network could cut at overall industry profit margins.
, once a candidate for bankruptcy, recently forecast that starting in 2014 it will be able to post overall subscriber growth. The nation's third leading telecom has chronically lost subscribers and wireless industry market share to AT&T and Verizon in recent years. However, a merger with Japanese telecom
has helped to recapitalize the company and put it in a position to complete a multi-year upgrade to its wireless network.
T-Mobile's results and Sprint's forecasts indicate that 2013 was a year of consolidation in the U.S. wireless industry, which has put the industry's third and fourth players in a far-better competitive position. If that is so, 2014 could be the year when a tide of market share gains made by AT&T and Verizon turns toward low-cost carriers.
"We are witnessing what happens when the first credible price cutter arrives in an overpriced and saturated market," Craig Moffett, a telecom analyst at Moffett Research, said in a note reacting to T-Mobile's earnings.
For the full year of 2013, T-Mobile is projecting up to 1.2 million subscriber additions and adjusted earnings before interest, taxes, depreciation and amortization to be in the range of $5.2 billion to $5.4 billion, including pro-forma MetroPCS results.
Those forecasts indicate to Moffett that estimates for T-Mobile's full-year earnings are too low and estimates for the rest of the industry are too high.
"Be afraid. Be very afraid," Moffett recommended to those who expect a maintenance of the 50% wireless margins posted by Verizon and similarly high results from AT&T.
T-Mobile shares were rising nearly 4% in early Thursday trading to $24.86, while AT&T and Verizon shares were falling less than 1%. Since listing as a merged T-Mobile and MetroPCS in May, the company's shares have risen over 50%.
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-- Written by Antoine Gara in New York