T-Mobile could have seen a substantial EBITDA increase over the past year if its “Team of Experts” customer service solution had already been in place, according to a new report from Strategy Analytics. That’s based on the carrier’s recent financial report, which is attributed an eight-percent cut to that metric to a renewed focus on customer service. Specifically, it saw a drop in churn by 15 basis points over the last year, landing that metric at 0.95-percent for postpaid service. In total, the analysts speculate that decrease could have equated to around 400,000 fewer lost subscribers over the period and around an $80 million increase to T-Mobile’s EBITDA. For comparison, the service provider also claims that as many as two customers are moving from one competitor to its own plans for every one T-Mobile customer moving in the other direction. Moreover, those and other figures associated with the solution – such as its 13-percent reduction in costs – are expected to increase over the coming months as the new support setup goes nationwide.
However, although T-Mobile attributes its churn rate to its new customer care solution and Strategy Analytics is optimistic about its efforts, there may also be reasons to be skeptical as to what that means for the carrier. While EBITDA can serve as a base metric for a company’s financial health, it isn’t necessarily a good indicator of valuation. The figure is almost always higher than the true profit margins because it doesn’t necessarily factor in every other financial aspect of running a company. For example, the solution has only been rolled out to a select few areas for now and is going to be very costly for T-Mobile to deploy on a significant scale. Not only is it a step away from the cheaper, almost universally used electronic Interactive Voice Response (IVS) in use by nearly every carrier but also won’t be script-based at all, with a direct focus on local representatives helping users directly. What’s more, there will almost certainly be further costs tied to facilitating those employees, though T-Mobile maintains providing more personalized care is precisely the point, regardless of increased costs.
Running the initiative is going to cut into profits substantially more than customer care will for competing providers. The bolstered EBITDA will be helpful in the short term for showing the overall health of the company in relation to the market. The Team of Experts customer care solution will almost certainly draw in new postpaid subscriptions and appears to be aiding in keeping the churn rate down, the same report indicates. All of that will help offset the cost of implementation but it isn’t necessarily likely to result in an immediate increase in profitability for T-Mobile once the service goes live on a national level.