Why T-Mobile Is Aggressively Expanding Its Retail Footprint

by Trefis Team
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T-Mobile (NYSE:TMUS) has been relatively aggressive with its retail expansion over the last several quarters. The company previously projected that it would grow its store count from about 3,900 stores at the end of 2016 to about 5,400 stores by the end of 2017, while noting that it plans to increase its retail footprint from covering about two-thirds of the U.S. to practically all of the country. Per a recent report from Wave7 Research, T-Mobile is likely to surpass AT&T in terms of the total number of retail stores it operates across the country, despite the fact that AT&T has almost twice the number of wireless subscribers. Below, we take a look at why the company is doubling down on its retail footprint.

We have a $66 price estimate for T-Mobile, which is slightly ahead of the current market price.

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T-Mobile’s Network Expansion

T-Mobile has been aggressively acquiring spectrum in lower frequency bands (700 MHz and 600 MHz), which is allowing the company to expand its coverage in rural and suburban areas where it has traditionally been weak. As T-Mobile expands its coverage, it needs to be able to cater to new customers in these regions by opening stores. Moreover, competition in these new areas where the company is opening stores is likely to be less intense compared to the metro areas where T-Mobile’s presence has been stronger, allowing for better returns on new stores. Real estate-related costs could also be lower. T-Mobile has indicated that its total distribution footprint could reach 260 to 270 million people by the end of 2017, marking an increase of 30 million to 40 million POPs from the beginning of 2016. T-Mobile already runs national advertising campaigns, and its brand is well recognized, and it’s possible that the growing retail footprint could help to convert this positive perception into subscriber additions.

Other Benefits Of Retail Expansion

Although businesses such as retailers and banks have been reducing their brick and mortar footprints amid competition from e-commerce companies and increasing digitization, the trend has been somewhat less pronounced in the wireless industry. For example, T-Mobile has indicated that many of its customers prefer to visit retail stores when they need to sign up for new wireless service, upgrade their smartphones, or receive technical support. Separately, these stores could become important to the carrier as it expands into new areas such as pay TV services. A larger retail presence could allow the carrier to better target and cross-sell these services (related: Does T-Mobile Have A Shot At Success In The Pay TV Market?).

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