AT&T Makes a Preemptive Strike Against T-Mobile

The new year is off to a truly interesting start in the telecom sector. AT&T (NYSE: T  )  announced today that it's offering T-Mobile (NYSE: TMUS  ) customers up to $250 in AT&T credit on a smartphone trade-in, as well as a $200 credit toward their new monthly service plan,  if they switch from T-Mobile. That's a total of $450 per line for T-Mobile customers who switch to AT&T.

This latest move will allow T-Mobile customers to use the $250 for products and services from AT&T, including new smartphones. T-Mobile customers can also keep their existing devices and still receive that $200 toward their service plan if they switch.

The new offer comes on the heels of a rumor that T-Mobile will pay up to $350 in early termination fees for customers of other carriers who switch to T-Mobile. T-Mobile is expected to announce this new incentive, or something else, at its next "uncarrier" event on Jan. 8 at the Consumer Electronics Show in Las Vegas.

The No. 4 U.S. carrier has been in battling AT&T and other rivals to lure customers to its new up-front pricing plans. So far the company's strategy has been paying off, but it still has a long ways to go against the competition. T-Mobile added 1.3 million net postpaid branded subscribers over the past two quarters, but that's compared to AT&T adding 1.2 million net subscribers in this past quarter alone.

T-Mobile has been very vocal in its fight against AT&T, with the company tweeting just a few days ago that one resolution in 2014 was to "give AT&T a break... or not."

Fuel to the fire
Just last month AT&T started following in T-Mobile's footsteps by reducing monthly charges for some no-contract customers and new customers who bring their own devices to the company's network. T-Mobile's low-cost monthly plans and no-contract service have pushed AT&T to lower its monthly plans for users who aren't receiving a subsidy for their smartphones.

T-Mobile may face a merger or acquisition from rival Sprint later this year, so the company has every incentive to beef up its subscriber base before that happens. DISH Network is also very interested in T-Mobile, but whether any merger or acquisition takes place, it's likely the company will continue making every effort to lure new customers. In 2013, T-Mobile launched free international roaming on its network and free tablet data for life to bring in new customers.

AT&T's new incentive plan for T-Mobile customers is a temporary solution, and it shows that the smaller carrier is getting under the company's skin. Investors on both sides should watch for how many T-Mobile customers AT&T snags during this temporary promotion. With T-Mobile expected to make a big announcement next week, it seems the carrier wars of 2014 are only beginning.

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  • Report this Comment On January 04, 2014, at 10:48 AM, MightyMinnow wrote:

    I backed Stephenson's risky long shot on T-Mobile. The reward outweighed the risk.

    I want him out now. Someone has to take the fall for the inconsiderate privacy intrusions and now he's in a pi$$ing contest. Its 100% business and he's ripe.

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Chris Neiger

Chris has covered Tech and Telecom companies for The Motley Fool since 2012. Follow him on Twitter for the latest tech stock coverage.

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