T-Mobile is Making Wall Street Nervous (Good News for Consumers)

[dgstorm]

In case you haven't really taken notice, T-Mobile's "Uncarrier" initiative over the past year and half is kind-of a big deal. Not only has it been a boon to T-Mobile's bottom line by drawing in millions of new customers for the carrier, it has even been instrumental in AT&T switching strategies and offering more competitive pricing. In fact, it's because of this that T-Mobile is now making investors on Wall Street very nervous. Ultimately, that could prove to be good news for U.S. consumers.

Several financial analysts are worried that T-Mo's strategy could spark a massive price war between all of the carriers in the United States. They reason that if AT&T was willing to stand up and pay attention enough to offer competitive new price options in order to compete with T-Mobile, then it won't be too long before Verizon does the same. Even the "on the ropes" carrier, Sprint is getting in on the act and offering more competitive pricing. This could eventually erode profit margins with all the carriers. Here's a quote with more of the details,

While discounts are always welcomed by consumers, the intensifying competition is a new challenge to a U.S. industry long used to imposing its will on consumers, and analysts fear it could result in the loss of billions of dollars of revenue.

Investors had hoped AT&T and market leader Verizon Wireless would be able to shrug off T-Mobile's moves, since they already control about two-thirds of the market.

AT&T had previously said that T-Mobile's efforts only concerned the most cost-conscious customers, who are not its or Verizon's primary targets.

AT&T stayed on the sidelines for months in the face of public criticism of its services from T-Mobile's outspoken chief executive officer, John Legere. Now that the company is fighting back, even industry leaders could face tighter margins, say analysts.

"The most disappointing thing is that AT&T is reacting to T-Mobile," said Jefferies analyst Michael McCormack. "How long is it before Verizon reacts?"

Additionally, other analysts are echoing the same thing. Here's another quote,

Roe Equity Research analyst Kevin Roe sees the "unhealthy market dynamic" getting worse, since he is not convinced AT&T's incentives to T-Mobile switchers will end there.

"There's more to come, and it will continue until AT&T has market-share stability," said Roe, who believes the carrier will keep going until it can ease customer losses to T-Mobile.

Even if a full-fledged price war doesn't erupt, in the long run, carriers like AT&T and Verizon will find their churn increasing and will still have to spend more on advertising to combat this. This will have a bottom line effect on their profit margins, and will force them to get more competitive with pricing. For too long, "the big two" have grown fat and lazy dictating the price markets here in the U.S. at their whim. It looks like T-Mobile is having an effect which could ripple throughout the industry over time.

T-Mobile may not be using the "no more mr. nice girl" campaign anymore, but it still fits. In the end, Wall Street might be sweating, but consumers can start smiling.

Source: Reuters

 

[devdeuce]

Kudos T-Mobile! Verizon is getting out of hand and needs to be knocked down a few notches

 

[Dusty]

The problem with T-Mo...

The more they spend on ads the less they spend on towers. People will switch until they discover the dead zones and uncovered regions and then they'll just go to another provider.

 

[devdeuce]

That's just it, I'm pretty much forced to be on Verizon due to coverage in my area. A price war is exactly what i need.

 

[mountainbikermark]

The "new normal" economy and workforce has turned just about every American into a "cost conscious" consumer. Gone are the days when less value for the money are offset in the checkbook by the coming pay raise and confidence in ones job stability.
Yes it might make a slight ding in my ira overall but any price war will be a welcome thing in my household.

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s pen aholic in Beast Mode (Notetoo)

 

[Asgard]

I'm so sick and tired of VZW $#!* that I can't wait until march for my contract to end, I think I'm getting a Nexus 5 and look into the uncarrier thing so that they pay my ETF.
Supposedly, their coverage is good around the DFW area, so I might be fine with it. Don't know if any of you can confirm this.

 

[xeene]

Good news for all of us, unless we have vested interest in att and vzw stock. I doubt vzw will ever come down to their past pricing, but any little bit helps.

 

[Dark Lazer]

I actually switched from Verizon to T-Mobile in November and I couldn't be happier. I pay about the same price but I get more for my money. And best of all my speeds are actually BETTER than I had when I was with Verizon, and I don't even live in a huge area that you would expect it from. Sure they definitely don't have the coverage that covers as much as Verizon, but I feel people are exaggerating and just echo the same thing because it's what people assume.

 

[akhenax]

This is the very reason why I wanted my next phone to be carrier agnostic. I would have loved to have moonlighted on Tmobile for a bit, to try out there service in parallel to me still being on Verizon. I might have to wait till next go round before I switch. I'm not on a contract anymore and Verizon can choose to boot me to the unlimited data curb whenever they feel like it.

 

[johnomaz]

US carriers charge so much more than other countries do for cell service. I hope a big price war starts. I switched to TMobile in October and have been happy. I don't get LTE everywhere like I did with AT&T, but the HSPA service for me is quite fast. I'm not carrier loyal though. I will happily switch carriers if a better deal arises.

 

[PereDroid]

I'm tired of hearing about how great VZW's network is. I live in the nations 45th largest city in the US...formerly the 28th... yes we lost some population to the suburbs big time... almost 2 million people in the county... 23rd largest MSA... and I get one bar at my house. Many areas I got no coverage. This is the nations largest network? And I live IN Cleveland... not some smarmy suburb.
The day my job stops paying my bill I am switching to Tmobile...

 

[Caesars]

T-Mobile is Def changing the American game, well thought out advertisement campaigns and lte/hspa in populated areas, I can't complain. For the same price or less, I'm getting unlimited lte. With the lower price "high end" phones such as the nexus 5 and MotoX, the future is bright for unsubsidized phone plans and finally that start of fair pricing on American networks.

Sent from my Nexus 5 using Tapatalk

 

[jspradling7]

US carriers charge so much more than other countries do for cell service. I hope a big price war starts.

That can be a double edged sword. Europes price wars have lowered prices but have almost killed network investment. Their network speeds will lag further and further behind the US and China markets (that are investing) as users increase. If the US follows suit and drops the prices, infrastructure investment will slow here too.

 

[kodiak799]

Whatever analysts this guy is quoting aren't very good at their job....AT&T didn't "respond competitively", they floated a placebo deal that would probably actually make them money - that's not a price war, that's creative/deceptive advertising.

 

[kodiak799]

That can be a double edged sword. Europes price wars have lowered prices but have almost killed network investment.

That is certainly one possible outcome. People always complain, but that VZW has the best network and highest prices are not unrelated.