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AT&T offers $450 for T-Mobile users to switch

T-Mobile CEO John Legere, known for his tough talk, derided AT&T’s plan. “Customers will still feel the same old pain that AT&T is famous for,” he said.

Mary Altaffer/Associated Press/File 2013

T-Mobile CEO John Legere, known for his tough talk, derided AT&T’s plan. “Customers will still feel the same old pain that AT&T is famous for,” he said.

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.

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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 bray@globe.com.
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