That was quick. Just weeks after Sprint (NYSE:S) reportedly abandoned its ambitious bid to merge with T-Mobile (NASDAQ:TMUS) the two wireless carriers have already taken off the gloves and are preparing to duke it out on price.
Naturally, consumers are the primary beneficiaries of price competition, and the price war that is immediately breaking out confirms that regulators were right to pre-emptively voice opposition to the unofficially proposed merger. The two companies have each launched new campaigns to steal each other's customers, announcing the respective moves on the same day, no less.
The Un-carrier to the rescue
T-Mobile is very clearly targeting Sprint, or more specifically "beleaguered Sprint customers," with its latest Un-carrier move. Existing T-Mobile customers that "save" friends and family from Sprint will earn a full year of unlimited LTE data at no additional charge. The Sprint customer that switches over also gets the same offer. Anyone that already has an unlimited package will receive a $10 credit each month for 12 months.
Even though T-Mobile is going after Sprint customers, the promotion also applies for people switching from AT&T or Verizon. The campaign is in response to an offer that Sprint made to switchers, but T-Mobile points out that existing Sprint customers get no favorable treatment.
Sprint fights back
Meanwhile, Sprint announced a new $60 unlimited plan that is available to new and existing customers. The No. 3 carrier points out that that T-Mobile's comparable offering is $20 more expensive at $80 per month.
Sprint's new plan does come with a couple catches, though. In order to qualify for the $60 per month price, customers have to buy their device through an installment plan, pay full retail price, or bring their own device. In other words, Sprint isn't making the new plan available to anyone that currently has a subsidized device, at least until the customer's contract runs out.
Furthermore, customers on tiered plans will get bandwidth priority over unlimited customers. That means unlimited customers will be getting treated like second-class citizens during peak consumption times.
T-Mobile could become bigger than Sprint in a matter of months
T-Mobile has set out to overtake Sprint in total customers by year's end, and the Un-carrier is quite close already. T-Mobile has already become the largest prepaid carrier in the U.S., but it now wants to steal the No. 3 spot in terms of total subscribers from Sprint.
By the end of the second quarter, T-Mobile was boasting 50.5 million total subscribers compared to Sprint's 54.6 million. But T-Mobile is adding subscribers at a breathtaking pace, thanks to a plethora of aggressive promotions. T-Mobile is catching up fast.
At the end of the day, you are the one that comes out ahead. The net result of all of T-Mobile's Un-carrier initiatives over the past 18 months has been non-stop price competition. Ma Bell and Big Red have tried to resist as best they can, but inevitably consumers will call the shots by voting with their wallets. For now, Sprint has a lot more to be afraid of as the closest competitor in terms of market segmentation and scale.
Evan Niu, CFA owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. 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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