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

Shares of Verizon and AT&T are struggling today, taking the Dow lower.

Jan 9, 2014 at 2:00PM

The Dow Jones Industrial Average (DJINDICES:^DJI) is drooping in midafternoon trading, down 36points to 16,426. Plenty of Dow tickers are heading upward, but the two telecom giants on the blue-chip index are holding the index back. Verizon (NYSE:VZ) and AT&T (NYSE:T) are vying for the dubious honor of being the Dow's worst performer this afternoon; just before 2 p.m. EST both were down about 1.91%.

John Legere Introducing Jump

T-Mobile CEO John Legere may not always look or act the part of a traditional CEO, but other telecoms can't ignore his antics. Image source: T-Mobile.

The telecoms are suffering because a smaller competitor made itself look good last night. T-Mobile (NASDAQ:TMUS) CEO John Legere took the stage at the prestigious Consumer Electronics Show to preview subscriber counts for the fourth quarter, and to unveil another round of T-Mobile's "Uncarrier" strategies.

T-Mobile added 1.6 million subscribers in the holiday quarter, a sharp break from the year-ago period when the mini-major carrier lost 32,000 users. The company also reported strong subscriber additions in the third quarter, next to weaker results for Verizon and AT&T, which sent the Dow stocks lower while T-Mobile surged. Of course, T-Mobile shares jumped as much as 1.9% on this news as well, though the stock was down 1% in afternoon trading Thursday.

The fourth-quarter gains were powered by T-Mobile's unconventional tactics under the "Uncarrier" banner, which includes the end of contract lock-ins, small but totally free data plans for tablets, and a quicker handset upgrade cadence. The latest addition is a promise to pay off early termination fees charged by AT&T, Verizon, or Sprint (NYSE:S) when users jump ship to T-Mobile before their existing contract terms have been fulfilled.

Sprint shares took the T-Mobile assault harder than either of the two market dominators, sinking nearly 4%. The third-largest carrier was explicitly named as a target in the termination fees program, which is designed to make it easier to jump from other carriers to T-Mobile. AT&T announced a similar program ahead of T-Mobile, most likely responding to rumors about the upcoming Magenta announcement, but did not include Verizon or Sprint accounts in its version. It's pretty obvious that T-Mobile's tactics are making the big boys sweat.

And today, that's enough to change the structure of the mighty Dow Jones Industrial Average. Not bad for a foul-mouthed iconoclast who's trying to reshape the American wireless market from below. Legere might not destroy Verizon and AT&T, or even Sprint, but he's certainly forcing them all to change the way they do business.

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Fool contributor Anders Bylund has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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