AT&T Comes Out Swinging in 2014

AT&T is dropping prices for its shared data family plans, likely in response to T-Mobile's latest moves.

Feb 4, 2014 at 7:00PM

Tech investors may find it hard not to track the telecom industry these days. In what could be a dull segment of the market for investing, the sparring match between AT&T (NYSE:T) and T-Mobile (NASDAQ:TMUS) has kept things pretty interesting.

AT&T's latest punch came over the weekend when it announced that shared data, talk, and text family plans would start at $130 per month for two smartphones, plus $15 for each additional device.That may not sound very interesting, until you consider that the $160 monthly price for a family of four is 20% less than AT&T previously charged. That's quite a price decrease, and it's likely a reaction to T-Mobile's aggressive marketing moves.

T-Mobile has been throwing everything it has at the competition for more than a year, and it seems to be paying off. The company has eliminated service contracts, gives free tablet data for life, added free international roaming, and most recently offered up to $650 per line for customers to switch from rivals to its network.

That last move has likely fueled AT&T's most recent price cut. In the past T-Mobile hemorrhaged customers to competitors including A&T and Verizon Communications, but in fourth-quarter 2013 it added 869,000 postpaid subscribers. With T-Mobile's efforts paying off, AT&T's new plan is aimed at keeping existing customers happy with the plan they've got.

So how will AT&T pay for its price cut?

As Fierce Wireless pointed out, an analyst at New Street Research thinks the price cut will lower AT&T's EBITDA by 1% to 2%. To offset the drop, the company would either have to increase gross subscribers by 500,000 to 1.3 million or decrease its churn rate. In the last quarter of 2013, the company gained 566,000 wireless postpaid subscribers and had its lowest fourth-quarter postpaid churn rate of 1.11%.

Lowering the churn rate below its current figure could prove difficult, not just because it's already low but also because of all the additional competition from T-Mobile. To its credit, AT&T's lowest ever fourth-quarter churn rate may prove it was able to fight off T-Mobile relatively well in that timespan.

Increasing customers in order to pay for AT&T's new pricing strategy won't be easy, as T-Mobile's aggressive $650 per line offer seems targeted directly at AT&T. In the fourth quarter, AT&T's net postpaid subscriber growth dropped about 20%, year over year. T-Mobile's advertising initiative has been relentless -- the company bought several major commercial spots at the Super Bowl to push its no-contract marketing.

Foolish thoughts
With 2014 just getting started, we're likely to see a lot more back-and-forth between the two companies this year. Though T-Mobile is certainly a scrappy competitor, it's fighting an uphill battle.

AT&T investors need to keep an eye on how willing the company is to sacrifice revenue in order to retain its current customers. With the company seemingly frightened by T-Mobile's moves, it'll have to balance aggressive competitive strategies without losing sight of long-term growth.

There's 1 stock to own in 2014
As T-Mobile and AT&T battle it out this year, there's one stock that's poised for big gains in 2014. The Motley Fool's chief investment officer has selected it as his his No. 1 stock for 2014 and you can find out which one it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.


Fool contributor Chris Neiger 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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers