AT&T Launches Preemptive Strike at T-Mobile US

Sustainable competitive advantage is quite difficult to attain in the telecommunications business.

One example: It has been rumored that T-Mobile US would launch, probably at the Consumer Electronics Show, a “switch to T-Mobile US” offer that would pay existing contract penalties for customers who switch to T-Mobile US.

But in a preemptive move, AT&T, which many believe would be hardest hit by the T-Mobile US offer, has moved first, offering T-Mobile US customers up to $450 per line when they switch to AT&T and trade in an eligible smartphone.

Beginning Jan. 3, 2014, under the limited-time offer, T-Mobile US customers who switch to AT&T can trade in their current smartphone for a promotion card of up to $250, which can be used toward AT&T products and services.  

T-Mobile US customers also can receive an additional $200 credit per line when they transfer their mobile service to AT&T and choose an “AT&T Next” plan, buy a device at full retail price or activate a device they currently own.

The promotion obviously will have an effect on marketing costs per acquired customer, but the value comes from the potential new customers AT&T Mobility can poach from T-Mobile US, which arguably will take some customers from AT&T with its offer.

Such promotions, a reflection of growing competition in the U.S. mobile market, will likely worry some market analysts, with the greatest attention likely focused on AT&T, which many believe is taking the brunt of the T-Mobile US marketing attack.

On the other hand, some will argue that the market could stabilize a bit if Sprint decides to make a bid to buy T-Mobile US, and the transaction is approved by the Federal Communications Commission and wins Department of Justice antitrust approval as well.

Most observers likely would agree that a U.S. mobile market featuring three large national providers is inherently more stable than the current market of four providers. Supporters of such consolidation would say the market cannot sustain more than three providers, profitably, long term.

Opponents would argue such a consolidation would necessarily reduce competition. The wildcard is what any new Sprint, fortified with T-Mobile US assets and customers, would do.

Most still expect Sprint to attempt a disruption of the U.S. market of the sort T-Mobile US already is engaged in doing. How Sprint would position itself in a three-player market is not totally clear.