Inside T-Mobile’s Big, Brash Comeback
The crowd in the ballroom at the Westin New York at Times Square on this February afternoon is in a partying mood well before sundown. They’re enjoying the buzz of being an elite crew: some 200 employees handpicked by managers as top performers. They’re nodding their heads to a pounding soundtrack (Beck’s “Wow,” “Havana” by Camila Cabello and Young Thug, some Coldplay). They’re competing in cheering contests. And they’re antsy for the big moment when they’ll pull the triggers that set off a fusillade of confetti cannons.
This is definitely not what most companies do on quarterly earnings day. But the company hosting this bash is T-Mobile (TMUS), the formerly downtrodden wireless carrier—where rebounding employee morale and rising revenue are almost inextricably linked.
After one last cheer-off, the star of the show arrives. John Legere, T-Mobile’s tirelessly trash-talking, 59-year-old CEO, stalks in with a phalanx of senior execs, to the beat of a standing ovation. He quickly gets to the point: “Rowdy crowd? There’s a good reason to be rowdy … We announced results today that were just phenomenal, the best financial results since I’ve been CEO here.”
It’s true: Despite a year marked by a major disappointment—merger talks with rival Sprint broke down in November, with no deal—the numbers T-Mobile has just announced are formidable. Its 2017 revenue was $40.6 billion, up 8% from 2016, and more than double its total in 2012, the year Legere took over; net income, meanwhile, reached a record $4.54 billion. While it remains far behind Verizon (VZ) and AT&T (T) in number of subscribers, T-Mobile, which makes its debut on the Fortune Best Companies list this year, has undeniable momentum. It’s intent on shaking up both the wireless world—it has its eye on other acquisitions—and the cable industry, with a tantalizing move into mobile video.
That success, insiders and industry experts agree, is fueled by rah-rah rallies like this one. The crowd chants “Are you with us?,” a slogan from the diversity-themed ad T-Mobile unveiled during the Super Bowl. The confetti cannons do indeed fire confetti. And then it’s question time: For 30 minutes, Legere and his team field inquiries from employees in the ballroom and others watching via webcast. Legere keeps the pace rapid and the tone solicitous, doling out cash rewards (peeled off a stash of rolled-up $20 bills) for those brave enough to query him. Some questions are jokey (Have we bought stock in confetti cannons?), but others are sincere and probing. Afterward, dozens of employees line up to shake hands with the CEO and pose with him for pictures. Legere hangs around for almost half an hour until the entire line gets through.
“He’s like an amazing person, different from everyone I’ve ever seen as a CEO,” Donald Smith, who works in a T-Mobile store in the Bronx, says after snapping a selfie with Legere. “He seems like he actually cares.”
Legere certainly cares about making a ruckus. Famously brash and competitive, he’s best known for castigating his competitors (he routinely dismisses AT&T and Verizon as “dumb and dumber”), uttering public profanities, and engaging in the occasional Twitter war—including with then-candidate Donald Trump, in 2015, in a spat over tweets in which Trump criticized mixed-martial-arts star Ronda Rousey. (After the election, Legere said he had “got way past” the feud and was optimistic about the impact of a less restrictive regulatory climate.) Still, there is method to Legere’s madness, and it has helped T-Mobile become the fastest-growing and best performing wireless company during his tenure.
Legere came on as CEO at the end of 2012, a low point for the company. T-Mobile, then a subsidiary of Deutsche Telekom, was shedding customers as it waited to be acquired by AT&T—only to see regulators block the $39 billion deal. Legere quickly shored up the business with savvy moves. T-Mobile got a deal with Apple to sell the iPhone. It bought more spectrum rights to improve its network. And in 2013 it went public, so its stock could be used for dealmaking. (Deutsche Telekom remains the majority owner.)
Just as key to T-Mobile’s success was its decision to make an enemy of its own industry, launching a messaging war in which Legere’s f-bomb-throwing was central to the assault. (Its opponents’ flacks used to respond with indignation; now they rarely take the bait.) The strategy: Get rid of typical plans and prices. Embrace customer desires and eliminate their pain points. That meant no more two-year contracts, no more roaming fees, no more incomprehensible charges at the bottom of every bill. Most significantly, T-Mobile was far ahead of AT&T and Verizon in 2016 in scrapping monthly data limits and the annoying overage charges they generated—forcing its bigger rivals to follow suit.
The numbers show how well it all worked: Boosted by its 2013 acquisition of MetroPCS, T-Mobile’s subscriber base has grown faster than any other carrier’s, to 73 million. Since going public as part of that deal, its stock has soared, trouncing its rivals. Perhaps most important, its customers are loyal: According to a recent survey by Business Insider’s BI Intelligence, almost one-quarter of T-Mobile’s customers say they would never switch to a competitor for any reason, vs. 16% of AT&T’s customers, 15% at Verizon, and just 7% at Sprint.
T-Mobile has grown in wireless at a time when rivals have seemed to be looking beyond it. AT&T has been pursuing video customers, by buying satellite service DirecTV and agreeing to acquire Time Warner (though that deal has been held up by antitrust cops). Verizon is trying to shed costs, selling off major parts of its Fios network. Sprint, meanwhile, is struggling under a massive debt load; it slashed spending on network improvements last year.
In contrast, T-Mobile has stayed relentlessly phone-consumer-focused. And to make the effort pay off, top brass interact constantly with their frontline colleagues. “Legere spends a lot of time with the T-Mobile workforce, building morale and listening,” says Walt Piecyk, an analyst at BTIG Research who has followed T-Mobile throughout Legere’s tenure. “There are two types of people in this company: those who serve customers and those who serve those who serve customers,” adds Jon Freier, the executive vice president who oversees the company’s retail chain. “I’m in the second bucket.”
On a rare rain-free day in January, as sunlight pours into his 10th-floor corner office in the Seattle suburb of Bellevue, Legere is playing peacemaker.
His relatively small workspace is crammed and crowded. He’s got his NHRA auto-racing suit, in T-Mobile magenta; a cardboard cutout of Carly Foulkes, the ex-pitchwoman colloquially known as the “T-Mobile girl”; pictures of his two daughters; and cookbooks for his slow-cooking show, a surprise Facebook hit.
The current distraction, however, is a battle between a voice-activated Furby Chewbacca doll that has gotten stuck in a feedback loop with another voice-activated toy, a “Corporate Yes Man” doll. Every squawk and squeak from the Furby sets off the Yes Man (“Oh, yeah, I’m behind you all the way,” “Couldn’t agree with you more completely”), which gets the Furby talking again, triggering Yes Man, and so on. “This is so typical,” says Legere, trying unsuccessfully to shut off the doll debate.
Brashness wasn’t always typical for Legere. He built his career in various executive posts over 18 years at AT&T, and then at computer-maker Dell, where he ran sales in Asia and Europe. “He was always reasonably buttoned down,” says Rae Sedel, an executive recruiter at Russell Reynolds who has known him for more than 20 years. “I think he made a dramatic change.” Legere says some inspiration for his current approach came from his experience working for Michael Dell. He saw the PC mogul wading into crowds of shareholders and signing autographs at the company’s annual meeting, noting how a larger-than-life CEO could inspire loyalty and garner loads of free publicity. “I learned a ton,” says Legere. “He loved his customers, because he loved the subject matter and he loved everything about what they were doing.” Dell is happy to return the compliment. “You could see John had huge potential and a big future ahead,” the company founder says in an email to Fortune.
Legere’s first CEO stints, at the Asian unit of telecom-services company Global Crossing and then at the parent company, were anything but fun. As the Internet and telecom bubbles burst, Global Crossing careened into bankruptcy, and Legere laid off thousands of employees. The company’s Asian unit also paid to settle two sexual discrimination complaints during Legere’s tenure, after female employees alleged that Legere made belittling remarks and behaved aggressively in the company’s offices. (Legere did not comment on the settlements at the time; T-Mobile declined to comment for this story.) Managing the company’s decline took years, and Legere stayed on until he engineered its sale in 2011.
At T-Mobile he got to start over, at one of the biggest brands in a fast-growing industry—one with a major image problem among consumers. His first move as CEO was to draft a manifesto which began, “We’re not like the other carriers … we are unapologetically the un-carrier,” and included lines like, “We will give customers new phones right now instead of later.” Early on, Legere had a line installed in his office to listen in on customer service conversations, which he would do for hours, often late into the night. Most of his “un-carrier” ideas, like getting rid of contracts or dumping fees, came from listening to customers talk with staffers. “My entire strategy that I coined early on,” he says, “was listen to employees, listen to customers, shut the fuck up, and do what they tell you.”
T-Mobile is doubling down on “do what they tell you” under an effort called “Team of Experts,” which has given call-center employees unprecedented authority. Under the plan, which launched last year, T-Mobile divided its customers into blocks of about 120,000, who are each assigned to a specific group of a few dozen employees at a specific call center. When customers call for support, they are routed to their assigned team, instead of being assigned to a random rep at the least busy center in the country, as is typical in the industry. There’s no transferring of calls elsewhere in a frustrating ducking of accountability. Reps are held responsible for the outcomes of their customer group, measured by metrics such as how frequently customers defect to another carrier or how often they call support, and reps and their managers are empowered to hand out service credits or alter bills.
“People in the industry told us we were crazy to do non-randomized routing,” says Callie Field, T-Mobile’s executive vice president in charge of customer care. But T-Mobile’s cost to serve customers has dropped by 9% overall since it was implemented, while customer satisfaction scores increased by 20 percentage points, Field says. Legere says that the customer-care team’s new responsibilities give them even more data they can use to assess how promotions are going or whether customers understand new plans. “These people talk to 20 customers a day; that’s your gold mine.”
Legere likes nothing more than to travel around the country and visit that gold mine, at the stores and call centers where most of the company’s 51,000 U.S. employees work. In 2016 he hit all 17 call centers, and these weren’t pleasure trips to hot destinations—the centers are in places like Meridian, Idaho, and Oakland, Maine. (Last year, amid the knotty negotiations with Sprint, he got to only two, something he’s rectifying this year.) On each visit, Legere holds an almost campaign-like rally, talking up new products and promotions or recent financial results and taking questions. While he’s at it, he gives away T-Mobile gear, signs autographs, and poses for selfies.
He’s also giving away money, his own money. (Legere made $20 million in 2016 and $24 million the year before, according to T-Mobile’s latest annual proxy filing.) He recently told workers in Meridian that if they beat all the other centers on three key performance metrics, he’d personally give them $40,000 to throw a party. When they ranked first on two and just barely came in second on the third, Legere made good anyway, stopping at a local bank branch to load up on $40,000 in small bills before visiting in January.
At an event in Nashville in early February for retail-store employees, Legere made a surprise appearance. “He walked in the door, and you would have thought it was Snoop Dogg,” says attendee Lindsay Carter, a store manager from Atlanta who was recently promoted to a regional sales job. In a Q&A session, Carter had a big question for the CEO. You completely dominated this industry in five years, she asked; in your next five years, are you going to run for President? “Uh, no,” Carter says he replied, as he handed her a $100 bill.
Support for the frontline staff goes far beyond the freebies. All employees get tuition assistance and paid time off. T-Mobile started offering spousal benefits and insurance coverage for gay couples even when it wasn’t legally required to, and it enforces a nondiscrimination policy that protects LGBTQ employees. The company was the lead sponsor for last June’s NYC Pride, one of the largest LGBTQ events in the country. “It’s not about trying to sell phones,” says Chris Frederick, managing director at NYC Pride, of T-Mobile. “It’s creating an inclusive culture year-round.”
All the attention breeds loyalty. Callie Field says annual turnover at T-Mobile’s call centers is just 23%, compared with 43% for the industry overall. Most call centers motivate employees through fear, punishing them for not hitting targets or spending too long on the phone, says Daniel Cable, a professor at London Business School who has studied the industry. In contrast, T-Mobile’s approach of “making people feel valued and more than a number is important,” he says.
Some of T-Mobile’s tactics, like Legere’s visits, run the risk of “seeming like a ‘one-off’ to employees without changing how the work itself makes them feel day-to-day,” Cable warns. And in other hands, Legere’s handouts of cash and gear could come across as plutocratic condescension. But Legere can carry it off, his fans say, in part because he identifies closely with the blue- and pink-collar customer service grunts. He grew up in the working-class city of Fitchburg, in central Massachusetts, the middle son of five kids. He attended a local Catholic high school and a big public college, the University of Massachusetts. “He didn’t grow up on the right side of the tracks,” says Sedel, the corporate recruiter. “He’s a self-made man. To get that kind of loyalty, you have to give in kind.”
Of course, loyalty comes with accountability. Jon Freier, the head of retail, has copied Legere’s open Q&A format, giving out his own cell number so staffers can text him questions and concerns. But every store employee knows they have to be on their toes, because direct feedback from customers can reach the highest levels like never before. “If that person is walking out of the store not taken care of, John Legere is just a few keystrokes away,” Freier says. “You can take care of it, the store manager can take care of it, the district manager can take care of it, or John can take care of it.” (The implication, of course, is that you don’t want John, or Jon, to take care of it.)
Social media is central to Legere’s strategy of radical responsiveness. An avid, almost addictive tweeter, Legere has over 5 million followers on Twitter. There he posts jibes at competitors at all hours. (“Still not as scary as a @verizon bill” he wrote recently, linking to an article about the discovery of spiders with stinging tails.) But he also fields complaints in one of the world’s most visible forums. T-Mobile now deploys a social media team of about 300 people (up from 23 four years ago) called the T-Force to address whatever issue is upsetting a customer. As jokey as his persona may be, Legere says, his Twitter work is “very serious business.”
Back in November, after the Sprint deal failed, the mood among T-Mobile’s top ranks was downbeat. The deal could have generated cost savings of $30 billion for the combined company. But Sprint’s majority owner, Japan’s SoftBank, wanted to retain considerable control in the combined entity, and the two sides couldn’t agree how to value Sprint’s stock.
Two days after his last negotiating trip to Tokyo, Legere gathered a half-dozen top lieutenants at Canlis, a high-end Seattle restaurant with commanding views of the Cascade Mountains. Over multiple bottles of wine, he reminded the execs that the code names for Sprint and T-Mobile during the talks had been “Spain” and “Thailand”—and offered to buy any of them either an all-expenses-paid vacation for two, to either country, or a pair of Segway scooters or Vespas. (So far one executive has chosen Thailand, and two picked Spain. “No takers on the Vespas yet,” Legere says wistfully.) With their attitudes adjusted, the execs went looking for their next big move.
The success of that move may depend heavily on help from the executive in the office next to Legere’s. Chief technology officer Neville Ray oversees the team that builds and maintains T-Mobile’s network infrastructure, with a diverse staff that ranges from double-Ph.D.s in radio engineering to real estate experts to field technicians. Without naming names, Legere says T-Mobile is prepared to acquire some of the smaller U.S. carriers that are still independent. Integrating a new carrier would play to the strengths of the technical team, which won plaudits for its rapid assimilation of the MetroPCS network. Ray calls his crew “this bunch of crazies that really love this stuff.”
Ray’s engineers have also built bandwidth to enable T-Mobile to compete in ultrafast 5G wireless service, which is due to become the industry standard by 2020. That in turn could help the company take on an industry even less popular with consumers than the wireless industry was: cable TV. In December, T-Mobile announced the purchase, for $325 million, of Denver-based Layer 3, a startup whose content agreements and technology will enable T-Mobile to deliver cable channels and other programming over the Internet—to living rooms, or to subscribers’ phones.
The foray into video comes as growth in wireless is slowing: On that February earnings day, even as it boasted record profits, T-Mobile startled investors with low forecasts for new-subscriber acquisition. Meanwhile, a huge amount of video consumption has shifted from TV to the mobile phone (over 70% of video is now viewed on mobile devices, according to research firm eMarketer), and Legere believes that puts some of the pay-TV industry’s $100 billion of annual revenue in play.
T-Mobile hasn’t said much about its offering, which is due out later this year. Media watchers note that the company is diving into a crowded field, facing deep-pocketed rivals like Google’s YouTube TV, Sony’s PlayStation Vue, and AT&T’s DirecTV Now. “We are skeptical that yet another entrant in a declining video market can capture significant market share,” says longtime telecom analyst Craig Moffett of MoffettNathanson Research.
Still, it’s hard to count T-Mobile out: The cash flow from its wireless business, paired with Legere’s knack for us-against-them marketing, could be a winner again. “It may not be the Comcast killer in the beginning, but it will be for people that love TV but hate cable,” Legere says of the offering. “Everyone gets their wake-up call.”
A version of this article appears as part of the 100 Best Companies to Work For package in the March 1, 2018 issue of Fortune.