AT&T, T-Mobile Play ‘Dangerous Game’ That Could Impact Profits

"Only the strong" will survive the tactics that AT&T and T-Mobile are employing to attract customers in the new year.

So says Yankee Group senior analyst Rich Karpinski, who is closely monitoring the battle over customers that America’s second- and fourth-largest wireless operators are using to kick off 2014.

AT&T last week announced a new offer that gives T-Mobile customers up to $450 per line to make the switch to AT&T. Customers just need to choose one of AT&T’s Next plans and activate a phone or buy one at full price. You get a $250 credit for each line that you transfer, and AT&T will give you a promotion card worth up to $250 for a smartphone trade-in, depending on how old your device is.

The strategy undercuts what we expect to hear from T-Mobile this week. It’s rumored that the company will announce plans to pay the $350 early-termination fee that AT&T charges (and other carriers also) if customers will make the jump to the Magenta Network.

This wouldn’t be the first time a U.S. operator tried to steal thunder from another by announcing a new program before a rival can get its own launch out the door," Karpinski noted, commenting specifically on a CNET story. "The same one-upmanship happened around shared data pricing, device financing and upgrade plans. But offering straight bounty dollars to switch reveals two things: Organic switches are getting harder to come by and recent changes in approach to device subsidies have relieved margin pressure enough for operators to feel comfortable putting those acquisition dollars right back into play again. Its a dangerous game, however, that could impact profitability."

T-Mobile has been successful thus far with its "uncarrier" strategy, which the company unveiled last spring. The company added twice as many new customers as AT&T did in the third quarter.

"Only the strong i.e., those operators with winning customer monetization approaches will be able to survive such costly tactics, which may be exactly why AT&T is pressing its advantage and T-Mobile is rumored to be mulling a merger with Sprint to beef up and ready itself for this next, more aggressive round of battle," Karpinski added.

Follow senior online managing editor @Craig_Galbraith on Twitter.

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