T-Mobile Wants to Be the “Target” of Carriers

T-Mobile is making changes that could help redefine itself, amidst tough competition above from three larger carriers in the U.S. and below from national prepaid providers and smaller regional carriers. Some of the repositioning takes place next week with new prepaid handset and mobile broadband plans, and yesterday, the company shifted its stance on 3G data caps, reiterating a policy first announced in April of this year. Customers using more than 5 GB of data in a given month won’t pay overages, but will see data speeds reduced after the 5 GB limit is reached. With such changes and challengers in a competitive market, where exactly does the fourth-largest carrier fit in?

Above T-Mobile, the “Saks Fifth Avenue” type of carriers are clearly Verizon (s vz) and AT&T (s t). The two largest U.S. carriers account for more than 180 million mobile subscribers. Both offer far greater coverage area than T-Mobile, and since a cellular device is only as good as the network coverage allows, both carriers can command a price premium for their services. On the other hand, where T-Mobile does have coverage, it offers comparable or better service. With its rollout of a 21 Mbps HSPA+ this year, T-Mobile typically offers faster mobile broadband speeds than either Verizon or AT&T currently provide, although few handsets can take full advantage of such speeds. Of course, the competitors are stepping it up: Verizon is launching LTE service in over 38 markets this year, and in 2011, AT&T will start offering its own LTE service.

With 48.2 million subscribers, Sprint, too, is larger than T-Mobile, but chunks of the CDMA carrier’s subscriber base are made up of prepaid brands owned by Sprint as well as wholesale customers. Boost Mobile and Virgin Mobile, for example each resell Sprint services, and along with Assurance Wireless and Common Sense Mobile help add more than 11.2 million prepaid customers to the Sprint network. This mashup of prepaid and post-paid customers is akin to a nationwide convenience store chain, allowing Sprint to match up different customer types among many plans while balancing demand on its network. T-Mobile doesn’t have the luxury of strong prepaid branding, but does reward no-contract customers like myself; my monthly bill would be $20 higher if I had purchased a subsidized phone from T-Mobile, for example.

A number of smaller regional carriers follow T-Mobile’s 33.6 million subscriber count. Companies such as MetroPCS, U.S. Cellular, and Cincinnati Bell Wireless, which have roughly 23 million customers combined, come to mind. These are akin to “Sears:” plenty of aisles stocked with everyday needs and all at prices people can afford. You won’t see a vast array of smartphones on these shelves, because such devices are expensive and are best used on 3G networks. When you do see a smartphone here, it was likely already offered by the bigger players 6 to 12 months ago and isn’t the latest and greatest.

So where does that leave T-Mobile? I’d line it up as the “Target” (s tgt) of the U.S. cellular industry: walking the finest of lines between inexpensive everyday goods with some premium products while trying to offer value at the same time. It’s not the biggest carrier in terms of geographical coverage, but it does tout a cellular signal for 293 million Americans. Although it was late to the 3G game by being the last of the four major carriers to offer 3G data services, it now offers the fastest 3G speeds in areas with HSPA+ coverage. The data network is slightly less restrictive by comparison; instead of limited data buckets like AT&T offers or hard-capped limits like Verizon uses, T-Mobile allows for no-cost data overages. Lastly, T-Mobile has no prepaid brand to speak of, but new prepaid plans show that it can compete with the Virgin Mobiles of the world.

In a market where competitors appear focused on brand perception, T-Mobile is quietly combating everyone with pragmatic strategies appealing to the widest variety of consumers. Will such a war on fronts pay off, or might the no. 4 carrier in the U.S. be better suited to bunker down with one main focus? Given that it has neither sub-brands nor an inexpensive way to boost its coverage areas, the Target approach may be the best: good service at reasonable prices and the ability to turn on a dime.

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