How low will the wireless carriers go?

The gloves are off in the U.S. wireless industry as carriers continue to offer ever-increasing discounts to convince consumer in this maturing market to change providers. 

Fast growing T-Mobile struck again yesterday, announcing at the consumer electronics trade show, CES, that people who switch their service could receive credits of as much as $650 to cover early termination fees. 

Last week, AT&T announced it was offering credits of as much as $350 to entice T-Mobile customers to switch. The Dallas-based company denied that the offer was a reaction to T-Mobile's superior growth and noted that it has a similar marketing program to entice Sprint customers.

T-Mobile's pugnacious CEO John Legere, who became a Twitter folk hero this week after getting thrown out of a CES party hosted by the carrier's one-time suitor turned bitter enemy AT&T,  scoffed at that notion.

Some analysts agree. "It's very clear that T-Mobile under John Legere has been very aggressive in attacking the market," said Phil Goldstein, editor of FierceWireless, a site that tracks the industry, in an interview. "The market in the U.S. is pretty saturated. What you have are of carriers competing for switchers. There is not a lot of traditional growth to be had out there."

In August, T-Mobile posted its biggest customer growth in four years. AT&T is seen as particularly vulnerable to T-Mobile's growing strength since both companies use the same network technology, which makes it easy for consumers to switch providers.   

Verizon remains the top wireless provider, and so far remains above the fray. It reported post-paid churn rate, a measurement of people quitting, of 0.91 percent in 2012 while AT&T's was 1.08 percent. Although T-Mobile's rate was 1.58 percent as of August, that represents a 50 percent decrease, a huge improvement. Sprint's churn was 1.99 percent as of the third quarter.

Over the past few weeks, there have been a plethora of media reports that Japan's SoftBank, which gained control of Sprint last year, was also interested in acquiring T-Mobile, which is controlled by Germany's Deutsche Telekom. Some analysts have argued that such a transaction would have difficulty getting approval from antitrust regulators. Merging the companies' networks, which use different technologies, also wouldn't be easy, analysts have said.

"Sprint has been losing money for a long time," Goldstein says, adding that analysts don't expect the Overland Park, Kansas company to be profitable until next year at the earliest. Sprint's stock fell 6 percent to $9.42 on Thursday due to an analyst downgrade.

"I would not expect Verizon to engage in any kind of price war," Goldstein says. Verizon doesn't have to because it enjoys a commanding lead in the market. The company has 95 million customers, well ahead of AT&T's 72 million. AT&T will aggressively market to pre-paid wireless customers after it closes its $1.2 billion acquisition of Leap Wireless. If Sprint and T-Mobile do combine, they would have a combined 53 million.

The good news for consumers is that the competition should lead to more deals coming from T-Mobile, Sprint and AT&T. What the price war means for the companies' business results is yet to be seen.