T-Mobile CEO Steps Up Twitter War With AT&T

John Legere has not been shy as to his opinion on what he thinks of his competitor's "best ever" pricing plan.

Aug 27, 2014 at 3:30PM

While T-Mobile (NASDAQ:TMUS) CEO John Legere has focused most of his recent Twitter vitriol on Sprint (NYSE:S), he can never resist taking a dig at AT&T (NYSE:T). Legere has built his company, which has been adding subscribers every quarter for nearly two years, by being willing to attack his competitors.

AT&T is a favorite target because the company has managed to remain part of the big two in the mobile phone world, along with Verizon (NYSE:VZ), despite offering higher prices. These price disparities have grown in recent months as T-Mobile (and now Sprint) have aggressively lowered costs for some plans.

Though Legere has advertised this fact extensively through raucous commercials that push price and the company's "Un-Carrier" branding, one of his go-to tools has been waging a one-sided Twitter war. AT&T and its executives have stayed above the fray, which has not stopped Legere from lobbing Tweet grenades even when there is no particular news reason to do so.

That Tweet is just one example of Legere's targeting of AT&T on Twitter. In August alone he repeatedly went after his rival (along with Sprint and Verizon) on the social media service, though it should be noted that his posts with the most retweets were generally his ones touting T-Mobile deals not the ones going after his competitors. 

What is T-Mobile doing?
In boxing, lesser fighters have always tried to get better-ranked pugilists to notice them. A brash challenger who calls out the champion subtly elevates himself to the level of the titleholder. If the champ takes the bait and gives him a fight, the upstart can either take the title or at least prove he belongs in the same ring.

In the case of Legere and T-Mobile, he's calling out the industry leaders  both to elevate his company and to gain public trust. By saying AT&T charges too much he has effectively broken the unspoken code of the mobile phone business. AT&T and Verizon have been content as co-leaders for years. They run ads based on network quality or touting branded offerings, but they never do anything to upset the apple cart of how the industry operates.

It's very similar to how cable companies have always worked. There might be competition for customers (though cable companies often have geographic monopolies) but everyone offers roughly the same prices. The satellite companies shook up cable a little bit as they did cut prices, but fears of unreliability largely made them fringe players. The same had always been true in mobile phones where the low-cost options were dubious, little-known companies.

By breaking tradition and saying, "Hey, we can charge less and still make money," while simultaneously casting his company as a worthy alternative, Legere has given customers a real option. 

T-Mobile has added at least 1 million subscribers in each of the last five quarters. The growth for T-Mobile has not had a major impact on AT&T or Verizon, which both gained millions of wireless phone subscribers in 2013 (more than 5 million for Verizon and nearly 3 million for AT&T).

Legere may have gotten T-Mobile in the ring, but he's still more cute annoyance than legitimate threat. That's why even when his real focus is on taking customers from Sprint in order to move into the No. 3 spot, he's still taking shots at AT&T.

AT&T's offer vs T-Mobile's
Of course, if you live someplace that is well-served by the T-Mobile Network, Legere is correct in saying that his company has a better offer. For $100 T-Mobile is offering users four lines with unlimited talk, text, and data. The plan includes 10GB of 4G LTE data (2.5GB per line). After a phone uses its 4G allotment, it still gets data for free with no overages, but delivery speeds slow down.  

AT&T's plan is identical except for two major things.
  1. After the data allotment is used, overage charges apply.
  2. It costs $60 more per month.
Both companies are offering their family plans without device subsidies. That means customers must either bring their own phones, buy them for full price, or finance them (usually over 24 months). Both show almost identical device prices (aside from some refurbished models) so that's not really a factor.
 
As for networks, RootMetrics recently released its detailed ratings of the various carriers for the first half of the year. Verizon was on top with a score of 81.6 (out of 100), while AT&T was next (79.5), and T-Mobile came in third (71.5). In those rankings, AT&T has a clear edge over T-Mobile in all categories -- specifically "coverage," which the research company defines as "reliability plus speed." There are clearly still some holes in the T-Mobile network, but the company has been gaining on its rivals and it continues to pour money into improvements.
 
Can T-Mobile take down the giant?
If price is the only factor then T-Mobile clearly has it over AT&T. The problem is that while more people are taking T-Mobile seriously, the company is still seen by many as a small-time player and the deficiencies of its network sometimes back that belief.
 
Legere is right to keep slinging rocks at the giant that is AT&T but it will likely take more than price to win market share at its bigger competitor's expense. If T-Mobile can continue adding customers who have a good experience when its comes to network reliability, and they then spread Legere's gospel, then T-Mobile can be a real player. 

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Daniel Kline 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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