The recent announcement of Blackberry (NASDAQ:BBRY) CEO John Chen, that they would not renew T-Mobile’s (NASDAQ:TMUS) license to sell Blackberry products, when it expires on April 25, 2014 may have consequences on both parties. However, the impact of this fall out will mostly affect the Blackberry loyalists who are on the T-Mobile network.
The Impact on Blackberry Users
Though the users of Blackberry who decide to stay on the T-Mobile network will continue to get all services and support required, eventually they would either have to shift to a new phone maker or a new network. Though there are various incentives that are being offered for a smooth transitioning, it will at the end of the day, be a forced choice something that no customer today will appreciate, not to mention the added monetary cost associated with it.
T-Mobile’s Retention Strategy
- Warning! GuruFocus has detected 1 Warning Sign with BBRY. Click here to check it out.
- BBRY 15-Year Financial Data
- The intrinsic value of BBRY
- Peter Lynch Chart of BBRY
Obviously, T-Mobile being a young carrier can ill afford to lose its Blackberry user base as it would be a huge setback for the carrier trying to compete desperately with the bigger players. So, it started with T-Mobile sending out letters to the Blackberry users that they could switch to iPhone 5S with a zero down payment scheme. Apparently that did not work out as planned. Finally, on Thursday, T-Mobile has announced a $100 credit to anyone who switches to other Smart Phones and stays with T-Mobile network.
T- Mobile CEO John Legere even resorted to tweeter to woo the Blackberry Loyalists who are already furious with these developments. He tweeted, “BlackBerry users, I’m hearing you loud and clear. Let me work with the team and get back with you.”
Blackberry too isn’t willing to let go of its loyalists so easily. The company is reportedly working with other carriers to offer lucrative deals to customers willing to move away from the T-Mobile Network.
The Impact on Blackberry
Many experts are saying that this move by Blackberry is like a nail in the coffin for the company who is battling hard to stay relevant. Blackberry is still trying to make a turnaround with its shift away from high dependence on its handset business. Currently, the company has less than 1 % share of the mobile phone market and could really avoid the public announcement of the separation which appeared a touch insulting for T-Mobile which is the fourth largest carrier in US. In reality, T-Mobile had already stopped retailing Blackberry handsets in its stores about 6 months back. So clearly, currently both the company’s are only concerned with how to retain, the customers that are affected rather than worrying about the new licenses.
To look at the larger picture, the partnership between Blackberry and T-Mobile wasn’t really meant to last. T-Mobile is a young carrier with young customer base who are not really interested in Blackberry whose users are mostly businesses. T-Mobile simply has not got the customer profile to suit Blackberry users either. So, though mostly inconsequential, this fall out at best is good for both parties as T-Mobile will now get a chance to up sell other handsets to the remaining users, and Blackberry on their part can focus on Carriers suiting their profile to retain and revive the dwindling sales of the company.