What's Wrong With Verizon and AT&T Today?

The Dow Jones Industrial Average  (DJINDICES: ^DJI  )  is trading sideways today. A couple of technology giants are leading the index this afternoon, but the Dow's two telecoms have slammed on the brakes. AT&T (NYSE: T  ) and Verizon (NYSE: VZ  ) are the Dow's worst performers today by a long shot, down 1.5% apiece.

So what's going on in the cellphone stores on Wall Street?

Neither AT&T nor Verizon did much to deserve a drubbing today. Or rather, they already unveiled the facts behind today's drop when they reported earnings over the last couple of weeks. The final catalyst comes from much smaller competitor T-Mobile US  (NYSE: TMUS  ) , which reported third-quarter results this morning -- and managed to outshine its larger American rivals for once.

Would you buy a smartphone from Catherine Zeta-Jones? You wouldn't be alone. Image source: T-Mobile.

T-Mobile added 1 million subscribers in the third quarter, including 650,000 of the high-margin postpaid variety. By comparison, Verizon added 927,000 postpaid customers but only 481,000 postpaid phone contracts, and AT&T signed up just 363,000 new postpaid subscribers overall.

Moreover, T-Mobile seems to be stealing some of the juiciest customers available: 88% of T-Mobile's phone sales were smartphones, compared to 67% for Verizon. AT&T is holding its own with an 89% smartphone sell-through penetration.

So T-Mobile isn't exactly kicking butt and taking names indiscriminately. The ex-German operator is beating Verizon in customer quality but not quantity, and it's the other way around versus AT&T. But it's clear that the small fry is getting some traction against the Verizon-AT&T de facto duopoly, and telecom investors are getting nervous.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 05, 2013, at 4:42 PM, uncoveror wrote:

    Everything AT&T and Verizon do is obscenely overpriced, and trying to destroy net neutrality has not been a good PR move either.

  • Report this Comment On November 06, 2013, at 9:26 AM, glenns45 wrote:

    t mobile long term, I would not bet on it.

  • Report this Comment On November 06, 2013, at 11:50 AM, karlsmq wrote:

    they have real competition now, agressive new management that thinks out of the box, the easy growth for att and verizon is over,now they have to fight hard for every customer and they have to think out of the box to lure customers ,if they dont they will become less and less relevant going forward.att must look outside USA for growth ,and so does verizon.

  • Report this Comment On November 06, 2013, at 6:26 PM, joethegolfer wrote:

    Verizon doesn't know the first thing about why it's in business. A year ago I went to try to upgrade my phone; Verizon said I wasn't eligible for another 12 months. After going round and round with the store rep and realizing I was getting nowhere, our conversation ended this way.

    Me: How much do I pay Verizon per month on my current plan?

    Sales rep: About $85 a month.

    Me: And how much would I pay Verizon per month with the upgraded phone I want?

    Sales rep: About $165 a month.

    Me: So let me make sure I understand this. I'm perfectly willing to pay you an extra $80 a month, or $960 a year, and you won't take it?

    Sales rep: That's right.

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