BlackBerry and T-Mobile: the end of the affair

Guy Daniels
By Guy Daniels

Apr 3, 2014

Who’s in the driving seat, the carrier or the device manufacturer? It’s an age-old question with no clear answer – instead, a mutual distrust born out of necessity is the usual apparent relationship. But sometimes, this marriage of convenience can end in divorce.

Back at the dawn of time, Nokia tried to brush the operators aside and launched Club Nokia as a way of creating a direct relationship between handset vendor and user. This was when Nokia reigned supreme and was by far and away the number one brand of choice. Yet the operators won – they did, after all, offer generous handset subsidies and were Nokia’s biggest customers, so the vendor retreated and the club died a quick death. No-one messes with the value chain.

Even when Apple utterly disrupted the mobile market with the launch of the iPhone, operators were still a key part of the business. Steve Jobs might have been famously disparaging of telcos, but he still had no choice but to do business with them. For their part, telcos might have hated the financial terms imposed by Apple, but they still had no choice but to do business with them.

As we said, it’s a marriage of convenience. So it’s terribly sad and tearful when partners decide they can no longer live with each other and decide to split. Or, in the case of BlackBerry yesterday, walk out on its partner T-Mobile USA.

“BlackBerry has had a positive relationship with T-Mobile for many years,” said John Chen, BlackBerry CEO. “Regretfully, at this time, our strategies are not complementary and we must act in the best interest of our BlackBerry customers. We hope to work with T-Mobile again in the future when our business strategies are aligned.”

We are sure that this explanation wouldn’t satisfy the divorce attorneys out there, and that some courtroom drama would surely result.

The company issued a release saying “it will not renew the T-Mobile US license to sell BlackBerry products when it expires on April 25, 2014.” Although no specific reasons were given (other than the nonsense about uncomplimentary strategies, which we sure ain’t buying), you don’t have t look too far to see where the trouble began.

In February, T-Mobile USA ran an ad campaign offering BlackBerry users the chance to switch to the latest iPhone 5S for no upfront fee and just $25 a month. It was headlined “Get the tools to do more” and added “Switch to iPhone 5S and get powerful communications and productivity apps”. But isn’t that what the BlackBery is supposed to offer: powerful communications and productivity apps?

Not surprisingly, BlackBerry’s new CEO was a little upset; even after T-Mobile modified the scheme to allow users to upgrade to a new BlackBerry instead.

“We are outraged,” wrote Chen on his blog. “As we were never told of their plans in advance, I can only guess that T-Mobile thought its ‘great offer for BlackBerry customers’ would be well received. T-Mobile could not have been more wrong.”

He added: “To T-Mobile, I would like to remind you that our long-standing partnership was once productive and profitable.”

T-Mobile CEO took the bait, and tweeted his cheeky (although very funny) response: “Was going to engage John Chen on Twitter, but turns out he’s not here. I'll check MySpace.”

Oh to be a fly on the wall in BlackBerry HQ when Chen saw that…

And so we have reached this impasse. Could the two parties be reconciled? Will they kiss and make up? BlackBerry, whilst struggling to (let’s be honest) stay in business, has decided that it can afford to drop an operator customer and all the sales that go with it. But that’s probably not a lot, given T-Mobile’s position relative to its three larger US rivals.

For its part, T-Mobile has remained quiet, and there have been no more incendiary tweets. But according to a leaked internal T-Mobile field sales memo, the carrier saw a 15-times increase in BlackBerry trade-ins with 94 per cent opting for a non-BlackBerry device. Sounds like a very successful campaign, and further indication of the declining popularity of BlackBerry devices.

Last week, BlackBerry reported Q4 revenues of $976 million in revenue, a 64 per cent decline on the same period last year and 18 per cent down on the previous quarter.

But despite the radically new BlackBerry 10 launching last year, sales of the older BB7 devices still outsell BB10 ones – of the 3.4 million devices it sold in Q4, 2.3 million were BB7 phones. It made an annual net loss of $5.9 billion on sales of $6.8 billion. There was a $1.6 billion inventory recovery charge for the year, plus a $934 million inventory charge for the Z10 alone.

As it works hard towards securing its recovery, BlackBerry could well do without votes of no confidence from telcos.

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