Author(s): Raghu Gopal
Marina Koytcheva, Peter Bryer
Customers or connections? Subscribers or subscriptions? What's the proper terminology when we talk wireless shop?
The recent announcement of a merger agreement between T-Mobile US and Sprint is certainly a major development for the wireless market in the US and globally.
The development of a potential merger between two large carriers was newsworthy enough to be covered by mainstream media sources in the US and beyond. But we found the wording used to describe the business combination could at times be misleading, and sometimes wrong. In fact, there's a jungle of terminology out there.
The BBC, for example, reported that T-Mobile and Sprint combined would have "130 million customers". Indeed, in our own initial assessment of the deal we compared the number of "customers" of each carrier, when the figures referred to connections (see: Instant Insight: T-Mobile and Sprint Agree Merger Deal).
The word "customers" might be loosely understood to mean the same as connections, but it can also refer to accounts: people or companies who buy services from a telecom company.
"Connections" and "subscriptions" on the other hand, cover every phone, tablet, smartwatch, reseller account and Internet of things connections including machine-to-machine implementations. This is different from people and companies.
The figure of 130 million comes from the reported numbers of the two companies. Deutsche Telekom, parent of T-Mobile US, uses "customers", and Sprint talks about "connections". So was it right to add the two together or were we all adding apples to oranges? We believe that when Deutsche Telekom speaks of customers it's referring to connections, just like Sprint. So although it's fine to combine the numbers reported by both carriers, the total represents connections rather than customers.
Nonetheless, it's unlikely that the combined carrier has 130 million individual customers. For one, considering that there are about 325 million people in the US, 130 million customers would translate to at least 40 percent of the population.
Our estimates suggest that T-Mobile and Sprint combined have 91.5 million phone lines: 61.5 million post-paid and 30 million prepaid. Together they would certainly be a big carrier, but this is almost 40 million fewer phone customers than is being widely reported. It will also have a large number of machine-to-machine connections, as well as reseller accounts — accounts of mobile virtual network operators.
The user taxonomy of the wireless business has never been completely clear, but we would advocate more clarity from those in the industry.
The GSMA, a trade group for the cellular industry, differentiates mobile subscribers from unique subscribers. This is an important distinction given the growing number of individuals who carry more than one phone. We believe that "user" might be a better word than unique subscriber. A large company that uses thousands of mobile phones is only one account, or subscriber, but distributes the handsets to thousands of users.
To make things even more complicated, there's also a difference between subscriptions and connections. Not all mobile connections in the future will be sold as subscriptions: some, such as Internet of things connections, might incur a one-off charge for the lifetime of the device they are linked to.
The bottom line is that it's important to remember that connections, subscriptions, customers and users are all different classifications. There's no doubt it would be useful to stick to a common convention, but sadly, this might just be wishful thinking.
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