Report Paper for T-Mobile US Inc.

Posted: August 26th, 2021

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Report Paper for T-Mobile US Inc.

Company History and Background

T-Mobile US Inc. is an American-basedwireless network operator whose majority shareholder is Deutsche Telekom, a leading German telecommunications company. Its headquarters are located in Seattle, Washington. In 2013, T-Mobile merged with MetroPCS and effective immediately. Itstarted trading on the stock exchange as T-Mobile US Inc. (Stanleyet al. 25).As per 2019’s fourth-quarter results, T-Mobile has 86 million customers, thusmaking it the third-largest wireless carrier in the USA. The company is involved in the provision of data and wireless voice serviceswithin the US, Puerto Rico, and on the Virgin Islands. In addition, it serves as the host network for numerous mobile virtual network operators(Stanleyet al. 25). Per the 2019 fourth-quarter financial results, the company posted total revenues exceeding $42 billion.

Since its establishment, T-Mobile has maintained a robust drive to expand the geographical coverage of its services. To attain this feat, the company has engaged in mergers and acquisitions. For instance, the company took over two major regional GSM carriers: Omnipoint Corporation and Aerial Communication (Stanley et al. 27). Through the acquisition of Omnipoint Corporation, T-Mobile expanded its services to the North-EasternRegion of the US (Stanleyet al. 27). Hence, following the acquisition of Aerial Communications, the company’s market effectively expanded to Kansas City, Pittsburgh, Orlando, Columbus, and Minneapolis.

In 2007, T-Mobile took over SunCom Wireless Holdings for $3 billion. Hence, this enabled further expansion of its customer share base with additional 1.5 million subscribers and effectively increasing, extending network coverage to Southern Virginia, Georgia, South Carolina, Puerto Rico, and the U.S. Virgin Islands (Stanley, et al. 33).This acquisition increased T-Mobile US Inc.’s dominance in America’s native network, henceforthmaking it a true nationwide carrier. In 2011, there was an aborted attempt of AT & T acquiring T-Mobile US Inc. for a whopping $39 billion because such a merger would substantially lessen competition within the US’ wireless market(Stanley, et al. 32). It is important to observe that besides investing in its ever-expanding wireless network coverage;the company has also been keen on expanding its product portfolio. Therefore, T-Mobile is now a leader in innovations around the mobile web and the Internet of Things.

T-Mobile’s Recent Publicity

For all the years that T-Mobile has been in operation, it has to a large extent avoided negative publicity. This achievement enabled the company to keep expanding in terms of its regional coverage(Stanley, et al. 25). Additionally, this positive publicity has been the centralreason as to why it keeps attracting more investors. As a rule of thumb, investors generally have high confidence investing in businesses that enjoy a positive outlook onthe market. Its ever-increasing stock purchase volumes on the NASDAQ is the evidence of great investment. As a result, the company’s net profits have kept improving over the years(Stanley, et al. 29). In all the regions in which it operates, T-Mobile has made it a priority to comply with the existing privacy laws both at the federal and state levels. However, there was an isolated incident in May 2019 where T-Mobile alongside the other four major wireless carriers was faced with class-action lawsuits over allegations of selling their customers’ data. As such, the companywas forced to compensate their phone subscribers up to $300 million(Stanley, et al. 37). Recent surveys have revealed that T-Mobile’s employees record the least industrial action incidences over the violation of labor laws, thussuggesting that this company is keen on complying with the existing labor laws.

T-Mobile’s Key Competitors

America’s wireless networks industry is a relatively crowded space. As such, T-Mobile faces significant competitors when going about its business. Nevertheless, the company has been keen on formulating and implementing strategic moves that have over the years secured its competitive advantage over its rivals. T-Mobile’s key competitors include AT & T, Verizon, and Sprint (Stanley, et al.30). Of these businesses, AT & T is the largest wireless carrier in the entire country. Verizon is the second largest followed by T-Mobile. Sprint comes thereafter.

As the third-largest wireless carrier in the US, T-Mobile US Inc. offers wireless service for cell phones and connected devices such as tablets and smartwatches. In 2018, it bought its layer3 TV, thusgiving it a start-up in the television distribution business. As the largest wireless network carrier, AT & T has remained a significant provider of phone services in the US and Canada throughout the 20^th century(Stanley, et al. 37). The company provides its services through a network of companies known as the Bell System. AT & T provides such services as voice, data, video, and internet telecommunications. Some of its renowned clients include private consumers, other businesses and government agencies. Verizon and Sprint have been keen on enhancing their wireless network coverage throughout America. Currently, negotiations about a merger between T-Mobile and Sprint are at an advanced stage with the expected date of closing the deal set for April 1^st, 2020 (Stanley, et al. 29). If this merger sails through successfully, only three worthy competitors will remain standing within America’s wireless network industry.

Porter’s Five Forces Analysis for T-Mobile US Inc.

By definition, porters five forces refer to a strategic management tool that companies can use to analyze the industry within which they operate as well the underlying profitability levers in that industry. Therefore, the management team at T-Mobile US Inc. can make use of its porter five forces to comprehend how the leading five competitive forces do influence the company’s profitability. With this understanding, the company’s managers can then formulate and execute strategies geared towards enhancing T-Mobile’s competitiveness and its long term profitability in the American wireless networks industry. The five principal forces to be analyzed include:

1. The threat of new entrants.
2. Threat from substitute products
3. Bargaining power of suppliers
4. Bargaining power of buyers
5. The strength of competition.

            Each of these forces is discussed in detail below. It is important to note that for the managers of T-Mobile to be able to develop a strategic position within the US’ wireless networks industry, there is a need for them to reinforce the analysis of these five forces with market researches on the profitable opportunities within the technology sector.

            The Threat of New Entrants. From 2000 to date, there have been countless new entrants in the wireless communications market. These entrants have fiercely competed against each other as well as against older occupants of this space in a bid to gain a competitive advantage over the others (Manne et al. 6). As a result, consumers of wireless communication services have been treated to lower pricing strategies and improved the quality of services by T-Mobile US Inc. The many entrantshave equivalently increased the intensity of threat posed to T-Mobile. Nonetheless, the company has remained steadfast amidst the threats, and thus, has managed to build market barriers to help it safeguard its much-fought competitive edge over the new entrants.

T-Mobile can tackle the threat of new entrants in numerous ways. The first way is through innovating,new services, andproduct lines. These new products should be ones that can help the company acquire and expand their client market.Secondly, it can build on benefits accrued from economies of scale, which could ultimately help lower the cost of production in the long-term. Thirdly, building capacities and expanding onexpenditure on research and development could enhance its invention capacity.Hence, if all these are understood and executed, the new entrants will be less likely to dethrone a well-established and informed industry player like T-Mobile. 

             Bargaining Power of the Suppliers. Players in the telecommunication industry source their raw materials using the selected supplier.Dominant suppliers tend to reduce the margins that T-Mobile can earn in the market(Alrawashdeh 194). In the same breath, powerful technology suppliers have in the past used their advantageous negotiating power to extract higher companies in the wireless communication space. Thus, it is apparent that the higher the bargaining power of the suppliers, the lower the overall profitability of the wireless network services providers (Alrawashdeh 198). Therefore, it is an insight to T-Mobile to device possible strategies for outmaneuvering the high power suppliers. The objective can be achieved if thecompany builds an efficient supply chain with numerous suppliers (197). Secondly, the company can develop a dedicated supplier whose business depends on T-Mobile, thuseffectively diluting the possible strong bargaining power of the supplier.

            Bargaining Power of Buyers. Oftentimes, buyers of wireless networks,services, and products do demand a lot from their providers. For example, a customer might want to only buy from a provider that is giving out premium products and at the same time charges minimal prices. In the long run, T-Mobile’s minimum pricing would result in lower profits. Thus, T-Mobile needs to consider adopting strategies that can enable it to circumvent the pressure of buyers in the market (Asad 22). One way of achieving this is through the building of a large customer base. In this way, it is possible to address the buyers’ bargaining powerbesides seamlessly streamlining its sales and production processes (Alrawashdeh 198). The second way is through rapid innovation of new products which will prevent the defection of existing customers to T-Mobile’s rivals.

            The Threat of Substitute Products or Services. At the introduction of substitute products, industry profitability suffers a great deal. Substitute products threat tends to reduce when a company serves unique product than the existing ones in the market (Asad 7).As such, thethreats of substitute products can be avoided incase T-Mobile increases the switching cost for the existing customers. Secondly, the company can opt to become service-oriented instead of just focusing on being product-oriented(Asad 8). The third way is the in-depth comprehension of the core needs of all its clients instead of only focusing on what these clients purchase.

Strength of Competition. Like any other company, T-Mobile experiences the threat of competition in the industry within which it operates. Over the years, the wireless communications industry has become very competitive(Asad 8). Naturally, this fierce competition from both new entrants and the already industry players affects T-Mobile’s overall profitability (9). Therefore, to safeguard its profitability,the company can build a sustainable differentiation of its products and services. Secondly, the company can collaborate with its rivals to widen its market size. Finally, T-Mobile can also focus on building its scale of operations so that it is sufficiently competitive.

Potential Regulation/Country Specific Issues

For all the years that T-Mobile has been in operation, it has tried its level best to stay away from controversy by adhering to the existing state and federal regulations. There have been a few small regulatory complaintsand hitches, to which the company’s management team always took it upon themselves to resolve as soon as possible. At present, the possible merger between T-Mobile and Sprint has generated a lot of regulatory debate and concerns. Many market analysts have argued the biggest hindrance to this deal is regulatory as it stands to reduce the wireless network’s market to just three major players. That is Verizon, AT & T, and T-Mobile. 

What Makes T-Mobile US Inc. Successful?

By any standard, T-Mobile Inc. is a successful company. It should not be lost on anyone that T-Mobile operates within a very competitive industry. Therefore, the continued success of this company is a product of some work of mastermind employed in its daily operations. One of the things that make this company successful is heightened employee morale,which translates into increased profits. Secondly, the company has put in place a low-cost supply chain model that has dedicated suppliers of raw materials and distributors. As such, high efficiency is observed within the company right from the time raw materials are received to the time a customer gets his or her ordered product. Thirdly, the company has been at the forefront of championing technological advancements by studying the latest telecommunication trends. The company has a laboratory solely dedicated to the research and advancement of Information Technology and telecommunication engineering concepts. Ultimately, these initiatives have managed to keep T-Mobile’s profitability on an uptrend.

The Risks That T-Mobile US Inc. Is Facing.

With the discussions about the merger between T-Mobile and Sprint currently at an advanced stage, the company is said to be facing the risk of this deal being rejected by the Department of Justice. Official reports from the DOJ indicate that this deal is unlikely to be approved within the current legal framework. The DOJ fears that this merger will breach the anti-trust law, since the conglomerate firm to be formed after the merger will most likely outdo the market share currently under Verizon and AT & T. Thus, it is feared that should the merge sail through, T-Mobile will have become a monopoly by design.

Analysis of Management Effectiveness at T-Mobile

Over the years, the management team at T-Mobile US Inc. has been keen on ensuring it grabs the available opportunities for ensuring company advancement. For example, the management team has a policy in place that seeks to recruit highly passionate and talented telecommunication engineering student while in their final years of study from Ivy League Universities. Massachusetts Institute of Technology and Stanford University top this list. The move to recruit very fresh graduates has proven fruitful as the company gets to indoctrinate the company values and visions into vibrant minds and in the process enable the career progression of these students. It is a well-established fact that it is easier to teach a fresh graduate the ways of doing new things as compared to teaching someone who is considering a career shift after staying in the job market for several years. Hence, the teams of fresh graduates that are recruited by T-Mobile get to grow within the company with most of them being cultivated into fine engineers.

Secondly, the management team at T-Mobile has been very keen to invest a significant amount of the company’s resources in research and development. We are currently living in the information age. Therefore, businesses must always be on the lookout for the latest software and market practices that can aid in advancing their profitability. By developing a well-resourcedresearch lab, the management team at T-Mobile has stood to reap the advantage of being the first industry player to come up with revolutionary products and services. For example, among its rivals, T-Mobile was the first one to introduce broadband services for the American market. Thus, it captured customers who wanted to enjoy streaming services. These customers numbered in their millions; hence, a clear indicator that the strategic move by the management team earned T-Mobile millions of dollars in revenues.

The third way through which T-Mobile has maintained its competitive edge over its rivals is the adoption of strategic mergers as has been observed in the past. Essentially, T-Mobile’s rise to the top has been characterized by mergers which expanded its geographical outreach(Stanley, et al.43). It is usually lost on the management teams of some companies that collaboration within the industry, instead of competition, actually results in more revenue inflows. Due to the mergers and acquisitions that T-Mobile has engaged in over the years, the company has fairly expanded its market size (54). As a result, it has transformed from being a onetimeregional mobile communications provider in the northern parts of the US to the current telecommunications giant that it has become (62). The increase in size and operations of this company have also reflected positively on the company’s performance as revealed by the books of account (See Appendix section about the financial health of the company).

Risk Management Strategies at T-Mobile US Inc.

Risks have been part of T-Mobile’s business operations for all these years. Basing on the reported financial success of the company, however, it is indicative that the management team has been keen to appropriately managing these risks to the lowest level with negligible threats on the company’s profitability (Stanley, et al.17). One such strategy was engaging the services of professional risk management experts – Driving Monitor. Way back in 2005, for example, this collaboration proved useful as T-Mobile was able to achieve a reduction in the total net costs of incidents among its company car drivers. As such, the company was able to reduce the total costs from $658,000 in 2004 to $555, 000 in 2005, and thus, saving a total of $100,000 within just a year.

T-Mobile has maintained a strong working relationship with the aforementioned Motor Fleet Risk Management Experts over the years. Due to that relationship, the company has been able to post an impressive financial performance as portrayed by the ratios shown in the appendix. Through the involvement of expert opinion-shapers like Driving Monitor and many others, it is expected that the best possible deliberations and the bipartisan decision thereafter will come out of the ongoing discussions on the T-Mobile – Sprint merger in a way that is beneficial to the customers served, the environment and America’s economy.

Works Cited

Alrawashdeh, Rami. “The Competitiveness of Jordan Phosphate Mines Company (JPMC) Using Porter Five Forces Analysis.” International Journal of Economics and Finance 5.1 (2013): 191-200.

Asad, Mohi. “Porter Five Forces vs Resource-Based View-A Comparison.” Available at SSRN 1986725 (2012).

Besen, Stanley M., et al. “An economic analysis of the AT&T-T-MobileUSA wireless merger.” Journal of Competition Law and Economics 9.1 (2013): 23-47.

Manne, Geoffrey A., et al. “ICLE Comments in Opposition to Petition to Deny T-Mobile-Sprint Merger.” Available at SSRN 3384792 (2018).

Appendices

Appendix 1

Long Term Activity Ratio

Appendix 2

Long Term Investment Ratio