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7

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

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%.

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  (NYSE: 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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Read/Post Comments (2) | Recommend This Article (7)

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 January 10, 2014, at 1:35 AM, sliderw wrote:

    With so many drastic changes, T-Mobile has a decent chance to either disrupt its competitors or implode. Whatever the outcome, I applaud its boldness. And I root for it to succeed, thereby injecting more competition into the wireless marketplace to benefit consumers.

  • Report this Comment On January 10, 2014, at 3:34 PM, bigfoot wrote:

    There will always be contracts. This is how people will finance these high dollar (apple and samsung) phones. If you go into a T-mobile store the non-smart (dumb) phones are pieces of junk. And i am long apple and t-mobile.

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Anders Bylund
TMFZahrim

Anders Bylund is a Foolish Technology and Entertainment Specialist. Where the two markets intersect, you'll find his wheelhouse. He has been an official Fool since 2006 but a jester all his life.

Hypoallergenic. Contains six flavors not found in nature. Believes in coyotes and time as an abstract.

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