AT&T strikes back at upstart T-Mobile as wireless price war looms

Let the wireless price wars begin.

On Friday AT&T announced plans to offer customers of smaller upstart T-Mobile, which it tried and failed to buy in 2011, credits worth as much as $450 to switch.

According to Dallas-based AT&T, the second-largest wireless provider, T-Mobile customers who trade in their current smartphone will receive a promotion worth up to $250 and can get an additional $200 per line when they transfer their service.  

The timing of the move is curious for several reasons. First, T-Mobile, the fourth-largest carrier, has surprised the industry over the past few months by gaining customers at the the expense of its larger rivals. T-Mobile also is expected to make a major announcement at next week's Consumer Electronics Show in Las Vegas that some media reports say may be a marketing program to encourage entire families to change providers.    Japan's SoftBank, which recently acquired Sprint, is reportedly considering making an offer for T-Mobile, even though some pundits think it would be blocked by antitrust regulators.

"AT&T hasn't really done anything" to respond to T-Mobile's recent customer gains, says Jeff Kagan, an independent telecommunications analyst. "They have taken it on the chin time and time again.... They are not doing this to be offensive. They are doing this to be defensive."
 
AT&T's lead over T-Mobile seems pretty secure. Even if Sprint is able to merge with T-Mobile, the combined company would have 53 million "post-paid" customers, which are the most creditworthy and profitable. On that basis, AT&T has 72 million customers and Verizon has 95 million.

As Reuters noted, AT&T is considered to be especially vulnerable to T-Mobile marketing since both companies use the same network technology, making it easy for customers to switch. Wall Street analysts are expecting T-Mobile, which is 67 percent owned by Germany's Deutsche Telekom, to post a 437 percent gain in revenue in the current quarter.  AT&T's sales are expected to gain about 1 percent while Verizon is expected to increase 3 percent.

AT&T denies there is anything unusual in its T-Mobile offer. A company spokesman is quoted by CNET (which, like MoneyWatch, is owned by CBS Interactive) saying, "As you know, there are handset promotions all the time." He noted that AT&T has a similar offer for Sprint customers.
 
For wireless customers, this means lower prices. In fact, Kagan says the  deals may continue until T-Mobile gets acquired.
  • Jonathan Berr

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