T-Mobile CFO explains financial reasoning for termination fee offer
Thursday, January 9, 2014 @ 12:09pm
| The chief financial officer of T-Mobile has explained part of the mathematics and the reasons behind the Early Termination Fee (ETF) payment offer the carrier revealed at a CES press conference yesterday. Despite offering up to $350 per line transferred from the three other carriers, T-Mobile expects to pay considerably less than that figure on average.
CFO Braxton Carter estimates that the average ETF payment would be less than $150 per line, less than half the headline amount. In an interview with CNET, Carter advised that some customers transferring will be far into their existing contracts, and would not have high ETFs, and in some cases no ETF at all. The entire plan is being viewed as an overall positive move, with the short-term financial burden per-customer in theory recouped in the long-term by the customer using the service, and despite the potential outlay, Carter believes it won't affect long-term revenue and earnings of the company. Devices traded in by customers under the arrangement will also earn some more money back to the carrier, with T-Mobile refurbishing and reselling the devices.
T-Mobile CEO John Legere revealing early termination fee payment plan on-stage
During yesterday's event, CEO John Legere referred to the ETF plan as a "Get Out of Jail Free Card" for families, and called family plans "nothing more than a contract on super steroids with staggered dates. A complete life sentence."
At the same interview chief technology officer Neville Ray talked about T-Mobile's recent $3 billion purchase of 700MHz A-block spectrum licenses from Verizon, something Verizon had to do in order to perform a separate spectrum purchase. The new spectrum operates at a much lower frequency compared to what is normally used by carriers, though is capable of traveling a longer distance, and so can cover a wider area and expand T-Mobile's coverage even farther.