AT&T Inc., one of the nation’s largest wireless providers, is starting the new year with an assault on rival T-Mobile US Inc., offering to pay T-Mobile customers up to $450 to switch to the AT&T network.
AT&T’s move is viewed by analysts as a preemptive strike against T-Mobile, which is said to be planning a similar announcement at next week’s Consumer Electronics Show in Las Vegas. It also signals what could become an industrywide price war that would ultimately benefit consumers, analysts said.
Every US cellphone company faces a stark problem — virtually everyone who needs a phone already has one, said Ramon Llamas, wireless industry analyst for IDC Corp. in Framingham. That leaves them with only one option to grow: luring customers from rivals.
So far, the other two cellphone giants, Verizon Wireless and Sprint, are staying on the sidelines. But Llamas said it is only a matter of time before they join in. “They’re going to have to,” he said, “just to stay competitive with everybody.”
AT&T said Friday it will offer T-Mobile defectors a $200 credit for switching to AT&T. They can also receive a credit of up to $250 for trading in a T-Mobile phone. The credits can be used to purchase a new phone from AT&T or pay for wireless service.
Ironically, AT&T and T-Mobile sought permission to merge three years ago in a massive deal valued at $39 billion. But antitrust concerns scuttled the deal.
Since then, T-Mobile has hired a new chief executive, John Legere, who has stunned the industry with his tough talk and aggressive strategy.
In a statement posted on T-Mobile’s corporate website, Legere called the AT&T plan “a desperate move” by AT&T. “I’m flattered that we have made them so uncomfortable . . . nothing has changed; customers will still feel the same old pain that AT&T is famous for.” Legere added that after he announced the company’s newest initiatives at next week’s electronics show, “the competition is going to be toast!”
Legere once described AT&T’s cell network as “crap” during a press conference, and called the entire cellular industry “stupid, broke, and arrogant.”
He’s backed words with action. T-Mobile has eliminated cellphone contracts, instead letting customers buy their phones up front, or through monthly payments.
Once the phone is paid for, the customer’s phone bill goes down — a big difference from standard cellphone contracts that keep on charging the same price.
The new approach seems to be paying off. T-Mobile signed up 648,000 new subscribers in the third quarter of 2013, second only to Verizon Wireless, which added 927,000, and much better than AT&T’s 363,000, or Sprint Nextel Inc., which lost 363,000 customers, according to data from the companies.
Charles Golvin, an independent analyst tracking the wireless industry, said that AT&T’s new offer is clearly a reaction to T-Mobile’s growth spurt. “They’re lost a lot of customers at T-Mobile’s hands,” Golvin said.
But AT&T could be well positioned to strike back, Golvin said. Its network covers more of the United States than T-Mobile’s. It’s also further along than T-Mobile in converting to high-speed 4G LTE wireless data technology.
Golvin said that AT&T is targeting people who may have defected to T-Mobile, but are now having second thoughts. “AT&T feels they have a compelling message to bring to these disaffected T-Mobile customers,” Golvin said.
Hiawatha Bray can be reached at firstname.lastname@example.org.