Will Apple Benefit From the War Between T-Mobile and AT&T?

T-Mobile's (NYSE: TMUS  ) been on a tear recently. The company's Un-carrier moves have led to impressive customer gains. The company's success, however, hasn't gone without a response from the competition. AT&T  (NYSE: T  ) responded last week to T-Mobile's customer acquisition success with $450 in credits. But this week T-Mobile has jumped in with its own incentives for customers to switch to its network. As the carrier war for customers rages on, companies like Apple (NASDAQ: AAPL  ) , whose costly smartphones are highly dependent on subsidies, financing, and credits, will likely benefit.

T-Mobile's planned assault
T-Mobile has generated more than 1.6 million total customer additions and has reported positive branded postpaid net customer additions for three quarters in a row. Its success in acquiring customers follows T-Mobile's implementation of an aggressive plan to disrupt the industry. It's referring to the plan as Un-carrier -- and it's working.

"Our Un-carrier moves have clearly upended this industry," T-Mobile CEO John Legere said in a press release yesterday that highlighted preliminary fourth-quarter results. "Over the past 12 months, 4.4 million customers have come to T-Mobile in response to greater flexibility and choice. We have clearly struck a chord with customers and will continue to look for ways to expand on that in 2014."

T-Mobile has rolled out its Un-carrier initiative in four phases so far, beginning in March 2013.

  1. Introduced "Un-Carrier" plans that said goodbye to subsidies, replacing them with interest-free financing.
  2. Introduced a "Jump" program that allows subscribers to upgrade their phones at smaller intervals.
  3. Added international texting and 2G data in 100 countries to its Un-Carrier smartphone plans.
  4. Offered credits to customers switching from the three major national carriers.

The latest battle
The fourth phase of T-Mobile's Un-carrier moves, announced yesterday, looks like a response to AT&T's just-announced credits. T-Mobile's move offers credits to switching customers from AT&T, Sprint, and Verizon. But as The Wall Street Journal author Ryan Knutson said after AT&T announced its $450 of credits, T-Mobile was already widely expected to announce a similar promotion before AT&T's was announced. So who knows which carrier was planning to offer credits to switching customers first?

T-Mobile's credits are irrefutably more aggressive than AT&T's. They offer up to $350 in early termination fees per line (up to five lines per family) and up to $300 in credits for phone trade-ins. That's potentially $650 in credits per line for customers switching from any of the three major national carriers.


iPhone 5s.

Time for a new iPhone?
Since T-Mobile's announcement detailing the move said the deal would only be available at "participating T-Mobile location[s]," I called around to see just how prevalent the deal was. Every location I called was well aware of the deal.

The intense competition between carriers is great news for Apple investors. As long as they are fiercely competing for customers, the subsidies, interest-free financing, and credits that help drive iPhone sales will remain intact.

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  • Report this Comment On January 09, 2014, at 4:28 PM, metoo5 wrote:

    >> Apple, whose costly smartphones are highly dependent on subsidies, financing, and credits, will likely benefit.

    Um, no. The cost of many of the most popular smartphones are about the same price as Apple's. I just went to Amazon and checked the price of an unlocked Galaxy 4s: $529.99

    And Apple is playing a shrewd game with the so-called "subsidies" and "credits" since that is the way it is played now when only a minority wants to pay the total phone cost up front. But if this initial price offset, whatever you call it, were eliminated at some point Apple would not lose any of their current advantage since they are are the least dependent of all the handset makers on such tactics. I suspect Apple could even afford to spread the cost of the phone to consumers themselves at 0% if they wished.

    So the premise that Apple has costly products and is dependent on a "subsidy" is entirely bogus.

  • Report this Comment On January 09, 2014, at 4:30 PM, johnestromjr wrote:

    Dan, Good article but I wish you and others would quit calling the financing schemes "subsidies" because they are not subsidies.

    They are merely schemes to lure customers so that they will buy that smartphone they might otherwise not buy due to the high front-end cost. To get that sale the telephone companies provide financing [NOT subsidies] but the customer pays the FULL amount for that smartphone over the two year contract and the telephone giants create paper which they can keep or sell.

    Home and automobile financing schemes are NEVER called a subsidy - they are "financing" plans to provide you with what you want NOW rather than lose the sale. You pay the cost over a period of time. That is NOT a subsidy. If the telephone companies end those financing schemes they will either need to replace it with another financing scheme or lose sales. I don't think AT&T wants to lose sales - they make the bulk of their profits from selling air time or bandwidth.

  • Report this Comment On January 09, 2014, at 6:49 PM, dwilh51183 wrote:

    AAPL IS TANKING THEIR STOCK INTENTIONALLY SO THEY CAN BUYBACK 20 BILLION OF STOCK AT EARNINGS SEASON. THEY WANT TO BUYBACK SHARES AT LOWER PRICES SO THEY HAVE BEEN "SHORTING" THEIR OWN STOCK. ONCE BLOCKBUSTER EARNINGS ARE ANNOUNCED COOK HAS AUTHORIZED THE HUGE 20 BILLION STOCK BUYBACK PROGRAM TO KICK IN.WHY ELSE WOULD AAPL DROP $40 A SHARE ON NEWS OF GAINING 763 MILLION MORE CUSTOMERS, NEWS OF IPHONE SALES SOARING, NEWS OF AAPL HAVING THE TOP 3 SPOTS IN REGARDS TO PHONE SALES AT ALL 4 MAJOR CARRIERS, ...VERIZON,SPRINT , AT&T, AND T-MOBILE. AAPL ALSO HAS BEEN ON TRACK FOR 18% INCREASE ON IMAC SALES 50% INCREASE ON IPAD AIR , ALL GOOD NEWS .EARNINGS ESTIMATES HAVE BEEN RAISED BY MOST ANALYSTS EXCEPT A FEW FOOLS, SO THIS EXPLAINS WHY AAPL STOCK HAS BEEN WEAK SINCE XMAS

  • Report this Comment On January 09, 2014, at 8:06 PM, demodave wrote:

    dwilh, get off your meds and your all-caps.

    AAPL is just fine without the "shorting" that you imply.

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