T-Mobile Makes Lemonade

In a number of ways, business strategy is nothing more complicated than “if you have lemons, make lemonade.”

So it is that T-Mobile US downplays the near-term importance of 5G, while Verizon touts it; dismisses the importance of fixed access as an important near-term 5G application; or minimizes new services initiatives such as Verizon’s mobile content and advertising business.

As many other mobile executives likely would argue, focusing on monetizing 4G investments before getting heavily into 5G makes sense, if a firm has been investing heavily in 4G recently.

Verizon arguably is at a different point in its 4G investment cycle, having been the first U.S. mobile operator to activate 4G. Verizon largely has recouped its 4G investment, so is preparing for 5G.

T-Mobile US arguably cannot do so; it has to recover a substantial portion of its 4G investments.

Similarly, Verizon, with a significant fixed network business, has different incentives to use fixed wireless than does T-Mobile US, which has no such network.

Also, T-Mobile US prefers its own “zero rating” of content consumption to becoming a content or advertising platform provider, as Verizon Wireless is doing.

That also is a function of business scale. If one assumes that every mobile service provider essentially will have to replace half its current revenues every decade, then Verizon, as a qualitatively-bigger contestant, needs to replace far more revenue than smaller T-Mobile US.

Verizon cannot rely on market share gains to do so. T-Mobile US believes it can, to a significant extent.

Simply, Verizon has to place bigger bets on growing new lines of business. T-Mobile US arguably cannot afford to do so, and has other options for growing revenues organically.

Simply, T-Mobile US is playing a different game. It probably cannot realistically hope to overtake either Verizon or AT&T for leadership of the U.S. mobile business. Parent Deutsche Telekom apparently still wishes to sell the asset, at some point.

So the “take as much share as you can in the existing business” makes sense for T-Mobile US. It does not make sense for Verizon, which really does have to create huge new lines of business.