T-MO­BILE CEO JOHN LEGERE IS CUT­TING THE CORDS THAT BIND YOU TO YOUR WIRE­LESS PROVIDER

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Tele­com an­a­lyst Su­san Welsh de Grimaldo knows bet­ter than to watch a pre­sen­ta­tion by John Legere when her daugh­ter is nearby. “Mommy, he’s swear­ing again!” the girl said the last time she saw the wild-haired man in the black leather jacket in a video on de Grimaldo’s home com­puter. Legere is the CEO of T-mo­bile, and if it seems like some ag­ing biker now oc­cu­pies the com­pany’s cor­ner of­fice, the grownups at Deutsche Telekom, T-mo­bile’s ma­jor­ity owner, prob­a­bly feel the same way; the 57-year-old Legere once opened a speech at DT’S head­quar­ters in Bonn, Ger­many, by say­ing: “I got a lot of shit on my mind.”

Legere is good at run­ning his mouth, but he’s been even bet­ter at run­ning T-mo­bile. Over the past three years, his at­tacks against wire­less providers AT&T and Ver­i­zon —“dumb and dum­ber,” he calls them—and more re­cently Sprint have forced the $188 bil­lion in­dus­try to change. Last year, the com­pany used lower pric­ing and sim­pler, more trans­par­ent ser­vice plans, plus an im­prov­ing net­work, to help win 8.3 mil­lion net new cus­tomers for the “T-mob”— and a mil­lion Twit­ter fol­low­ers for Legere. “They’ve re­ally out­per­formed,” says de Grimaldo, se­nior an­a­lyst at Strat­egy An­a­lyt­ics, a New­ton, Mas­sachusetts, com­pany. “But where does that go from here?”

Try fur­ther dis­rup­tion. Re­branded as “the Uncarrier,” TMo­bile has been glee­fully try­ing to dis­con­nect Ver­i­zon and AT&T’S high mar­gins by elim­i­nat­ing pain-in-the-ass bar­ri­ers that de­ter peo­ple from chang­ing cell­phone com­pa­nies. Once, we were locked into con­tracts and even paid out­ra­geous charges for us­ing too much data. Not any­more. “This is an in­dus­try that pisses off the cus­tomer,” Legere said at an em­ployee awards event in Los An­ge­les ear­lier this year. “We want to be fa­mous as a com­pany that goes in an en­tirely dif­fer­ent di­rec­tion.”

It’s al­ready hap­pen­ing. To­day, more than 83 mil­lion mo­bile sub­scribers have no con­tracts, up from ap­prox­i­mately

zero three years ago. And over the last two years, T-mo­bile has se­ri­ally elim­i­nated what it calls “pain points” in mo­bile ser­vice. Among the latest? Ex­tend­ing cov­er­age to Mexico and Canada with­out added charges. Ear­lier this year, the com­pany be­gan to al­low sub­scribers to roll over their un­used data, an im­por­tant play for young con­sumers. As a re­sult, com­peti­tors have been forced to cave on some of their more lu­cra­tive pro­grams. Up­grad­ing, which used to cost a for­tune, is now free, in­dus­try-wide. AT&T grudg­ingly al­lows its best sub­scribers to roll over some un­used data. And Sprint re­cently started us­ing soc­cer leg­end David Beck­ham to pro­mote its new no-con­tract “All-in” pric­ing plan, which largely fol­lows T-mo­bile’s lead.

For Legere, it’s all busi­ness, but things got per­sonal in Au­gust af­ter the T-mo­bile chief ex­ec­u­tive crit­i­cized Sprint on Twit­ter. "I am so tired of your Uncarrier bull­shit when you are worse than the other two car­ri­ers to­gether," Sprint CEO Marcelo Claure tweeted at Legere. His re­sponse: "You mad bro?" And then: "Think I hit a nerve at the end of a rough week? Maybe end of the Q is a hard day over there. @T-mo­bile num­bers speak for them­selves."

Legere’s ra­tio­nale for pick­ing fights with Ver­i­zon and AT&T is that peo­ple love their smart­phones but hate their phone com­pa­nies. “Part of my style is to set a com­pelling strat­egy and de­clare vic­tory,” he says. Be­com­ing the Uncarrier gave T-mo­bile cred­i­bil­ity to chan­nel the bile against AT&T and Ver­i­zon and win over cus­tomers. In­tro­duc­ing a rad­i­cally sim­ple pric­ing plan—and mak­ing the iphone avail­able—gave peo­ple a rea­son to switch.

In the process, Legere has turned his com­pany from fourth-place loser into a ris­ing power that re­cently over­took Sprint in sub­scribers. To get there, T-mo­bile bought 1.8 mil­lion sub­scribers out of com­peti­tors’ con­tracts. That’s a costly strat­egy that led to a string of un­prof­itable quar­ters. But sales also jumped 21 per­cent last year to $29.6 bil­lion.

The com­pany’s mo­men­tum has con­tin­ued this year. In the sec­ond quar­ter, rev­enue jumped 14 per­cent over last year.

By repric­ing the wire­less in­dus­try, T-mo­bile has also forced AT&T and Ver­i­zon to forego bil­lions in rev­enue to re­tain cus­tomers. Ac­cord­ing to con­sul­tant Chetan Sharma, data pric­ing plum­meted by 77 per­cent in 2014, even as data us­age rose. Now Legere is tak­ing aim at the lush profit mar­gins on cell­phone ser­vice that AT&T and Ver­i­zon have en­joyed, nearly 50 per­cent in some cases. “It’s al­most abu­sive!” he al­most yells. Legere sug­gests those pre-tax profit mar­gins should be more like 32 to 34 per­cent, which would cost Ver­i­zon some­thing on the or­der of $10 bil­lion.

Legere has chal­lenged his coun­ter­parts at AT&T and Sprint to ig­nore T-mo­bile at their peril; and it seems to be work­ing. In the first half of 2015, T-mo­bile ac­counted for nearly all of the in­dus­try's net new sub­scribers.

Nei­ther Ver­i­zon nor AT&T seem to have the stom­ach for an all-out price war. And that’s ex­actly what Legere and then-dt boss René Ober­mann banked on when they first talked strat­egy in early 2012. At the time, Legere was con­sid­er­ing the job. Hav­ing turned around Global Cross­ing, a ca­ble and broad­band in­fra­struc­ture com­pany that im­ploded in the dot-com bust of 2000, he had a rep­u­ta­tion for suc­cess. (He later sold the com­pany to Level 3 Com­mu­ni­ca­tions.) But Legere was also con­sid­ered a bit of a walk­ing land mine. His in­for­mal style didn’t mesh with Ger­man busi­ness cul­ture, and his strat­egy—guar­an­teed to lose money ini­tially—didn’t sit well with some share­hold­ers. “In the be­gin­ning, they were say­ing, ‘What the hell are you do­ing about this guy? He’s wreck­ing ev­ery­thing.’ And [DT] would say, ‘Lis­ten, I can’t con­trol him.’”

Nei­ther can AT&T and Ver­i­zon, which are in­stead do­ing the min­i­mum nec­es­sary—ver­i­zon just aban­doned con­tracts —to counter T-mo­bile’s tac­tics. When an­a­lysts asked Ver­i­zon Chief Fi­nan­cial Of­fi­cer Fran­cis Shammo about de­clin­ing sales and higher cus­tomer churn, he averred it was merely noise. “We’re not go­ing to chase ev­ery cus­tomer based on price.”

Go ahead and ig­nore us, says Legere. He thinks his steady stream of new cus­tomers can turn into a flood be­cause of the trust the com­pany is build­ing with con­sumers. The com­pany’s ris­ing prof­its—as much as $7.2 bil­lion this year—are ev­i­dence of what Legere sees as a pow­er­ful cy­cle de­vel­op­ing. “Growth does lead to rev­enue, does lead to [op­er­at­ing earn­ings], does lead to cash,” he says. “And I think it’s only in the past quar­ter or two that peo­ple started to see that our model works.” Case in point: In the first half of 2015, T-mo­bile ac­counted for nearly all of the in­dus­try’s new sub­scribers.

Even be­fore he fixed T-mo­bile’s sub­scrip­tion model, Legere took aim at its cul­ture, with equally good re­sults. In his first months on the job, he spent a lot of time at call

cen­ters lis­ten­ing to sub­scribers in­ter­act with cus­tomer ser­vice reps. At the same time, his man­age­ment team com­mu­ni­cated openly with the work force, so em­ploy­ees un­der­stood ex­actly where the com­pany was headed. “There was a sense that the only thing we could do to screw this op­por­tu­nity up was to keep do­ing what the com­pany was do­ing,” says Mike Siev­ert, T-mo­bile’s chief op­er­at­ing of­fi­cer.

To at­tract young store em­ploy­ees, who are vi­tal to selling phones to their mil­len­nial peers, the com­pany nixed pro­hi­bi­tions against pierc­ings and tat­toos, and out­fit­ted ev­ery­one in ma­genta T-shirts in­stead of dorky khakis and col­lared shirts, à la AT&T. Legere re­al­ized that past fail­ures didn’t mat­ter to these young­sters. “The av­er­age age in this com­pany is 28; there’s no in­sti­tu­tional mem­ory,” he says. At this point, they’re more in­ter­ested in money than a ca­reer path. So T-mo­bile raised pay in part by hand­ing out shares. “The bat­tle is on the street and in the store” says Jon Freier, T-mo­bile’s ex­ec­u­tive vice pres­i­dent of re­tail.

Last year, Legere also de­cided that T-mo­bile’s call cen­ters should be open on Christ­mas to help cus­tomers who re­ceived phones as presents. So he spent the hol­i­day at one of the cen­ters, dressed as Santa, and handed out gifts. To­day, he says, he makes him­self avail­able to em­ploy­ees and cus­tomers by email and fre­quently en­gages with them on Twit­ter. “Some of my online rants come back to haunt me,” Legere ad­mits. “[I tell peo­ple] ‘It’s very sim­ple: If we suck, fire us.’ I get that ev­ery day: Dear John, you suck.”

De­spite Legere’s suc­cess, T-mo­bile still faces a broader strate­gic prob­lem. The car­rier is less than half the size of Ver­i­zon and AT&T in an in­dus­try in which scale re­ally mat­ters. The only way to close the gap would be to buy or merge. That leaves out­fits such as Sprint, Com­cast and Dish Net­work as po­ten­tial part­ners. Although T-mo­bile has made big im­prove­ments in its net­work, in some places the com­pany is still short of spec­trum—the wire­less band­width

that makes mo­bile com­mu­ni­ca­tion pos­si­ble—which it hopes to buy at the fed­eral gov­ern­ment’s next auc­tion. And de Grimaldo notes that, un­like pre­vi­ous mod­els, the new­est iphone runs on T-mo­bile’s band 12,700 MHZ spec­trum, thus ex­pand­ing the com­pany’s mar­ket­ing po­ten­tial.

Legere vows that if T-mo­bile can get more spec­trum, he’ll amp up the com­pet­i­tive pres­sure, and con­sumers will ben­e­fit. “There’s so much work to do on solv­ing the prob­lems of this screwed up wire­less in­dus­try,” he says.

Hav­ing gone on the of­fen­sive in con­sumer wire­less, TMo­bile is also at­tack­ing the busi­ness seg­ment, where AT&T and Ver­i­zon have ben­e­fit­ted from long-term cor­po­rate re­la­tion­ships. T-mo­bile sees those as vul­ner­a­ble, and given that the com­pany has a neg­li­gi­ble share of an $80 bil­lion mar­ket, why not take a shot? “No one is say­ing that big cus­tomers are go­ing to switch to T-mo­bile if we’re 10 per­cent cheaper,” says Siev­ert. “But what if we’re 70 per­cent cheaper?”

Legere, of course, puts it more bluntly. “We’re bomb­ing their fac­to­ries. That’s what scares the crap out of them.”

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