T-Mobile Takes the Fight to AT&T and Verizon Yet Again

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2013 was a pivotal year for telecom comeback kid T-Mobile  (NYSE: TMUS  )  and the larger U.S. telecom market as a whole.

Larger incumbents like AT&T  (NYSE: T  )  and Verizon Communications executed deals aimed at furthering their dominance of the U.S. telecom market, while Sprint orchestrated a number of deals aimed at completing its multiyear turnaround.

However, for my money, the most important storyline affecting the U.S. telecom market last year was the resurgence of once-outcast T-Mobile. In many ways, T-Mobile has been the primary antagonist toward the telecom establishment's big three: AT&T, Verizon, and Sprint.

As part of its efforts, it has challenged and upended many of the norms the likes of AT&T have held so near and dear. And if a recent announcement from T-Mobile proves true, names like AT&T and Sprint should be very concerned.

Source: T-Mobile.

I'm baaaack
Earlier this week, T-Mobile reported its preliminary fourth-quarter results, and as you might expect, they proved quite impressive indeed.

The report marked the third consecutive quarter in which T-Mobile added more than one million net subscribers, bringing T-Mobile's total net subscriber gain for all of 2013 to a hefty 4.4 million. This figure is impressive in isolation. However, the true extent and magnitude of T-Mobile's turnaround is perhaps best viewed through what's in many ways the lifeblood for major telecom players: postpaid wireless subscribers. In the fourth quarter, T-Mobile added 800,000 branded postpaid wireless users. This represents a 34% increase from the third quarter of 2013 and an astounding improvement from T-Mobile's loss of 511,000 branded subscribers in the fourth quarter of 2012.  

So, how has T-Mobile executed such an impressive 180-degree turn in so little time?

Attacking the old guard
As part of its comeback strategy, T-Mobile has put the industry old guard -- primarily AT&T, and to a lesser extent, Verizon and Sprint -- directly in its crosshairs.

The centerpiece of T-Mobile's assault on the U.S. wireless industry has been its "Un-carrier" plan that it unveiled last year at CES. As part of the new marketing push, it has been eliminating fees that wireless companies such as AT&T include as part of their wireless plans like annual service contracts, free international charges, and early contract termination fees. 

Telecom companies like AT&T have taken notice of T-Mobile's recent success and decided they need to return fire. Recently, AT&T announced that it would offer customers as much as $450 in credits in order to switch from T-Mobile to AT&T's wireless services. Clearly, there's isn't much love lost between the two. 

However, T-Mobile, never one to go down without a fight, countered AT&T's moves quickly. This Wednesday, T-Mobile announced that it would pay users as much as $650 in total compensation in order to ditch their carriers in favor of its own services. Many already questioned how long T-Mobile's price competition could go on against its deeper-pocketed rivals like AT&T and Sprint.

T-Mobile's comeback in the U.S. telecom market has been nothing if not brash, led by outspoken CEO John Legere. And T-Mobile appears intent on keeping the pressure on its industry rivals for the foreseeable future.

This week at the Consumer Electronics Show in Las Vegas, Legere remarked, "We are either going to take over this whole industry, or these bastards are going to change." 

Either way, T-Mobile's resurrection in the U.S. telecom space will certainly be interesting to watch for investors and consumers.

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  • Report this Comment On January 12, 2014, at 11:40 PM, Gridlocked wrote:

    With Verizon & AT&T having better actual coverage all they need to do is stay close to T-Mobile promo wise till T-Mo has no cash flow to continue upgrades to their network just like they were before AT&T blessed them with the $3 billion breakup fee and spectrum gift.

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Andrew Tonner

Andrew Tonner is a tech specialist for The Motley Fool. He is a graduate of The University of Arizona with a degree in Finance.

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