Verizon Will React Rationally to T-Mobile Threat

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Verizon Wireless is being careful not to panic as it sees T-Mobile make staggering improvements in its number of wireless customers.

T-Mobile USA last week announced that it added 1.3 million new customers in the first quarter, more than AT&T’s and Verizon’s gains combined. America’s fourth-largest operator still has less than half of the total number of subscribers that each of its bigger rivals have, but it’s “uncarrier” strategy – introduced a year ago – certainly appears to be paying off. The Bellevue, Wash.-based company did away with smartphone subsidies and two-year contracts for new customers in favor of device payment plans and lower monthly fees.

Verizon, still the nation’s biggest wireless operator, has an eye on T-Mobile, but isn’t ready to abandon service contracts like its smaller rival has done.

“We will react rationally and where we think we need to react,” said Fran Shammo, Verizon’s executive vice president and chief financial officer, at the Jefferies Technology, Media and Telecom Conference. “The key to any competitive move is not to overreact to a competitor.” (His full presentation can be heard by registering for this Webcast.)

Instead, the carrier has been matching its rivals step for step with new, less-expensive wireless plans, including a new $60 entry-level plan that it has since reduced to $55, Fierce Wireless noted.

Shammo deflected a bit from the total numbers on which analysts have been focusing, pointing out that it added 866,000 LTE smartphone customers who typically use more data and increase the company’s average revenue per user (ARPU). He also noted how Big Red saw big gains in another wireless segment – machine-to-machine (M2M) communications – which was up 40 percent compared to the year-ago quarter.

“There’s more to the ecosystem than just the smartphone category,” Shammo told conference attendees.

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