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Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

January 9, 2013 at 4:15 PM

CES: T-Mobile’s CEO on iPhone, Sprint and being the uncarrier

LAS VEGAS — With 150,000 people roaming the halls, it’s hard for anyone to stand out at the Consumer Electronics Show.

But T-Mobile USA’s new chief executive, John Legere, rose above the horde with swagger, enthusiasm and candor rarely shown by the suits holding court in the show’s warren of meeting rooms.

The telecom veteran was named head of the Bellevue-based carrier in September and immediately began a radical overhaul, merging T-Mobile with rival bargain carrier MetroPCS and announcing plans to take the combined company public later this year.

Legere’s been so busy he’s barely had time to explore the Seattle area since he moved to a downtown Bellevue apartment in October, though the avid runner did find time to place second in an Eastside Turkey Trot race in November.

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T-Mobile hasn’t traditionally had a big presence at CES, but this year it held a splashy press event that drew widespread attention, and not just because it was held in a mirrored room in the Venetian with a magenta and black Ducati motorcycle on a pedestal.

With a handful of baseball greats on hand, the company announced a broad partnership with Major League Baseball, providing ballparks with wireless communication systems and T-Mobile customers with exclusive content. T-Mobile also announced what it calls the first no-contract, monthly plans with unlimited, nationwide 4G data, for $70 per month.

But the buzz — and coverage by national media hunting for pizzazz at CES — was generated mostly by Legere’s sassy performance. He showed up in a T-Mobile T-shirt, cracking jokes about rivals and personifying the hip, edgy vibe that T-Mobile’s seeking with its “uncarrier” branding effort to raise its profile and differentiate from Verizon, AT&T and Sprint.

If it continues, Legere’s going to make T-Mobile spokesmodel Carly pretty jealous.

Legere was still sporting a black T-Mobile T-shirt under his blazer but he was a bit more reserved Wednesday when I interviewed him and T-Mobile’s new chief marketing officer, Mike Sievert, a Microsoft and Clearwire veteran.

Here are edited excerpts of our conversation:

Q: You’ve had quite a start at T-Mobile with series of big deals.

Legere: It just keeps going. I think the first three months of this year, four months, are going to be the same. I hope.

We’re having a ball. I think it’s good for our name and our company. Hopefully you’ll see the prominence and visibility surge, which I think is good for Seattle.

Q: You told Reuters that T-Mobile will start offering the iPhone in that period. Could you share your timeline?

Legere: I’m not sure I told Reuters everything they think I told them, but I in effect tried to explain to them the first half of this year is going to be action packed.

Without getting into some of the things that we don’t have exact dates on, we do highly, highly anticipate that our MetroPCS transaction will close. Around that will be an awful lot of fanfare … going public in a public stock and I think that will make us probably the fourth biggest publicly traded company in Washington.

Some of our launching of things … around this uncarrier way of doing business, we’ve set ourselves targets that are in the first half of the year.

Q: So the iPhone in the second quarter?

Legere: We haven’t given any guidance as to when. It will be 2013 but the whole marketing and approach to how that’s done is very much controlled by Apple. We’re going to stick to their rules which is, highly likely of course, when it’s announced it’s ready.

Q: I should have interviewed you last night. Have they reined you in today?

Legere: No, no one could rein me in. Listen, try me, on any topic, I’m highly opinionated. I will tell you that I’ve spent a lot of time with Apple. My first reactions were come on, give us a little more rein here, but I will say that in sitting with Tim Cook and his top team, their reasons for the way they operate are very driven by the customer. They’re very good at it. They know how to maximize demand, and maximize the marketing impact and get full impact on the experience for the customer.

So after sitting with him I kind of get his process. But it’s coming — come on, it’s already 2013.

Q: The iPhone did remarkable things for AT&T and led the smartphone revolution, but do you think its influence on carriers is moderating? Will it be the absolute cornerstone device going forward?

Legere: I don’t know. A lot of what we’re doing this week is meeting with OEMs and seeing their devices. It’s a fascinating time. The stuff that’s coming out is unbelievable.

For us, we’re in a little bit of a different situation. Whether or not Apple is the cornerstone, it’s still one of the dominant forces in the industry. For us our volume of door swings is just not the same without it.

When I talk about the strategy, the things we’ve got to do, I don’t stick this as, ‘Hey, this is how we’re going to transform the company.’ It’s one of six or seven things that’s important.

But equally or more important is the network and the customer experience and the uncarrier focus and how we take devices to market. In the middle is having that device.

That said, Samsung is a great partner and nobody could convince Samsung they’re not moving to the top of the heap. They’re feeling their oats; they’re playing really hard. I think that’s not only good for us it’s good for Apple because I think it’s making them respond.

Q: And you’ll be taking it to the market without a subsidy?

Legere: The whole uncarrier approach is to solve the pain points that customers have. Customers can’t stand the complexity of billing processes and billing plans and the unpredictability of the billing.

There’s a list of pain points that are driven by the way we sell, the way we subsidize, the way we lock in through contract. We’re asking along with them, why? Why does it have to be that way? So [we're] starting by selling 100 percent value plan — separating the devices from the rate plan, and then providing much more transparency.

The trick is doing it in a way that we can still answer their biggest concern, which is getting in and out of the store with the lowest out of pocket cost.

Q: I wonder how you’ll fare against other carriers offering phones at lower initial prices, since buyers may not think about the hardware costs being spread across their contracts.

Legere: Across all carriers, the post cognitive dissonance — or the get home and be annoyed factor of ‘hey I didn’t get a $199 phone, I got a $399 phone and a rebate coupon and I just got my first month’s bill and it’s $750 and I’m really pissed.’ Then it’s a two-month fight and a continued set of fees and a dreaded two-year period to get out.

That’s in effect what happens with everybody. Value plan is the piece we announced, but we intend to question every variable in this until it’s so simple, until rate structures are two by two matrices, and the relationship with you is one that people join and get benefits for as opposed to getting locked in for unforeseen reasons.

We haven’t sorted all that out yet but it’s resonating with customers.

Q: You mentioned the secondary market for phones. Will T-Mobile start selling used or reconditioned phones?

Sievert: We’re going to see more and more of that. The devices are so powerful today. There’s a whole mindset of consumers who would love to pay $50 or $75 less and have the current, hot model of phone that’s just a few months old.

Q: Will T-Mobile approach to hardware subsidies prevent it from getting manufacturers’ flagship devices, similar to the way you didn’t get the Nokia 920?

Legere: I think the opposite. An anytime upgrade flexibility process will allow a customer now to choose, if they want to, to change devices every five months and not be dictated by rate plans. In my interactions so far with the OEMs, they find this exciting.

Q: For a while there was uncertainty about the MetroPCS deal, because Sprint expressed interest in buying the company. Has that passed, especially with Sprint distracted in its bid for Clearwire?

Legere: They are plenty busy with what they’re doing. But even before that, I think the MetroPCS shareholders see this as the right deal, the approval process is going very well, our integration process is way down the line, and we were very confident with or without somebody coming into the process that this deal would go forward. I have no doubts about it.

Q: Will it close in summer?

Legere: Spring.

Q: When are you going to flip the switch on your new LTE network?

Legere: The switch is flipped. I don’t know if it’s two days or two weeks, but Las Vegas is ready to come up. You’ll see a crescendo of markets throughout this year, so it’s coming.

Q: Is your LTE live in markets right now?

Legere: No [just] testing. This is the test market right now.

Q: Will you have different pricing for unlimited on LTE?

Legere: No, all you can eat.

Sievert: What the actual price point is, I can’t give you a forward-looking statement. I’ll tell you if you look in the rear-view mirror; it’s not been about trying to increase prices.

Q: When will you start selling phones with LTE capability?

Legere: Stay tuned. Real nationwide LTE coverage for us starts to be summer, mid-fall. By then there will be a significant change in the device portfolio of every carrier. I think you’ll start to see a different amount of LTE devices in the portfolio. This will be the year you start to see that in the portfolio.

Q: Will you overtake Sprint?

Legere: I don’t know. I think the best way to do it is go after AT&T and make believe they’re not there. If we execute on what we’re doing as the uncarrier, I think there’s plenty of room for market-share growth.

Q: What’s T-Mobile going to look like in five years, after you’re public and the mergers are sorted out?

Legere: I think we’ll still be a prominently Seattle/Bellevue-based company and I think we’ll have transformed the industry from the standpoint of how it operates. I would see that being a time by which we would be one of the top 10 places to work in the United States. I think the brand will migrate itself to being one of the more prominent brands in the United States.

What I don’t know is the tangential industry variables that will change and how we will flow into that. There are a number of carriers and tangential players that are going to merge into and industry that are based on wireless services at its core….

I haven’t quite sorted that out yet, where do the Amazons and the Googles and the Microsofts and the Apples and the various other players play? But I think a healthy, strong and growing T-Mobile, with our employees and our brand, [is] going to play prominently in that space.

Q: You mentioned the arrogance of the wireless industry. Is that a legacy of the old monopoly telecom model, and do you see T-Mobile continuing to play a spoiler role?

Legere: Yeah, 100 percent. I know a lot of the people that run the companies — these aren’t arrogant people — it’s just an old legacy structure. It’s not so much arrogance as it is the barrier to respond.

When your whole revenue stream is based upon a structure it’s very difficult to say, ‘Oh yeah, that’s not going to work anymore. Let’s throw it away.’ You wait, you try to hold on. It happens historically in so many industries. Until somebody comes in and asks the question. What we’re about right now is asking the questions that aren’t being asked.

That’s our role, but to be fair we’re doing it loudly and visibly for self-serving reasons, which is we’re small, we need to get attention, we need to get the spotlight on us so that we can capture an undue amount of the attention of the industry so customers will choose us.

We can’t buy the Super Bowl ads and have stadiums named after us, so we’re going to go straight to the consumer.

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