AT&T Mobility (NYSE:T) is ratcheting up its battle against T-Mobile US (NYSE:TMUS) by offering up to $450 in credit to customers who switch from T-Mobile to AT&T and trade in their smartphones.
Starting today and for a limited time, AT&T said it will give T-Mobile customers $200 in credit per line when they switch to AT&T and choose an AT&T Next device financing plan, buy a device at full retail price or activate a device they currently own. Customers must maintain service and good standing status for 90 days to receive the credit, AT&T said.
Additionally, AT&T is offering T-Mobile customers who switch the ability to trade in their current smartphone for a promotion card worth up to $250, which can be used toward AT&T products and services. AT&T said trade-in values will vary based on the make, model and age of the smartphone, "but many of the latest and most popular smartphones will qualify for a value of $250." AT&T did not say which ones.
AT&T pointed out in a press release that its LTE network now covers 270 million POPs. T-Mobile's LTE network is smaller right now, covering around 203 million POPs.
AT&T's offer highlights the increasingly contentious marketing battles among the nation's top carriers, and could also represent AT&T's efforts to stymie T-Mobile's impressive growth during the past several months. Additionally, the offer comes amid swirling rumors that T-Mobile plans to introduce a plan next week at the Consumer Electronics Show aimed at getting families to switch over to its network.
Indeed, commenting on a GeekWire report hinting at AT&T's new switching offer, Legere on Twitter said "Hmmm…if this rumor is true, I guess we are making AT&T a bit nervous. Good to know!"
AT&T, for its part, claims its new offer is not a pre-emptive strike against any T-Mobile plan. "Wireless has always been a very competitive industry and a move like this should not be unexpected," AT&T spokesman Mark Siegel told CNET. "As you know, there are handset promotions all the time."
He also said that "while this promotion is targeted to T-Mobile customers, Sprint and Verizon customers can get a minimum $100 trade-in when they choose Next, plus pay only $25 per smartphone on Mobile Share Value plans."
In a recent Twitter post, T-Mobile CEO John Legere said one of his 2014 New Year's resolutions is to "unshackle the family," presumably meaning family plans at other carriers. How T-Mobile might target such plans is still up in the air, but TMoNews recently reported on what might be in store. The blog cited an anonymous tipster who said that T-Mobile is working on a project codenamed "Houdini" that will give switchers up to $350 in credit when they switch to T-Mobile.
The tipster said the "emphasis will be on families switching" up to five lines regardless of when their contracts end. Further, the blog said that, according to the source, new customers will receive instant credit when they trade in a smartphone, then get a credit for the early termination charged by their old carrier when they submit the final bill to T-Mobile.
Family plans are typically regarded as "stickier" than individual plans, since they tend to offer more value and it's more difficult for families to move to a different carrier. Thus, customers on family plans tend not to churn as much.
T-Mobile is planning to host an event at CES on Jan. 8, where it is expected to unveil its "Uncarrier 4.0" plans. "While not a direct EIP/ETF pay off promotion, which is what we believe T-Mobile's 'Uncarrier' 4.0 promotion could entail, AT&T's promotion is clearly a pre-emptive action to T-Mobile's anticipated offer, and a response to competitive pressures," Jefferies analysts Mike McCormack, Kunal Madhukar and Tudor Mustata wrote in a research note.
Other analysts forecasted more market turbulence in the months ahead. "While the carriers try to remain rational while tweaking their plans and promotions, there is no doubt that they feel the need to get more competitive," Credit Suisse analysts Joseph Mastrogiovanni, Henrik Herbst and Michael Baresich wrote in a research note. "We have seen a number of pricing changes since 2012. We expect T-Mobile to continue to roll-out its uncarrier initiatives, which could include a similar switching promo. We also believe Sprint (NYSE:S) could become more active in 2014, as its network catches up to peers."
Strategy Analytics analyst Susan Welsh de Grimaldo wrote in a blog post that T-Mobile's biggest challenge "is a more price-sensitive customer base." She notes that Strategy Analytics' December 2013 U.S. mobile user survey "did not highlight any strong variation in future churn intentions between T-Mobile and AT&T customers (born out by the improving churn rate at T-Mobile during 2013), though price is a major factor when picking provider. Almost all T-Mobile customers considering churning over the next year have service price as one of their top-3 factors for carrier selection and almost half include up-front phone costs in that shortlist, compared with noticeably lower ratios at T-Mobile's big 3 rivals."
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