AT&T has offered a credit worth $200 to T-Mobile subscribers who will switch services.
The Texas-based telecommunications corporation has been doing different promotions for nine months already to take on its smaller competitor T-Mobile. This new promotion will surely fuel a price war that will surely benefit consumers but may also ignite mayhem with revenues in the industry.
This new promotion came into place in anticipation of a new marketing strategy by the German-based telecommunications corporation T-Mobile.
Craig Moffett, an analyst working with Moffet Nathanson, told Reuters that AT&T’s move is the “early makings of a price war” that will undoubtedly increase customer switching.
“Everybody's fighting for market share because there simply isn't an organic market share left to be had,” he added. “The natural upshot to any strategy that pays customers to change service is higher churn.”
Experts also think that the strategy could start a year of discounts from U.S. wireless network operators, which are increasingly reliant on price to compete as network advantages are hard to prove and they all offer comparable phones.
They are also concerned about the possible untimely unveiling of Sprint, the third largest network, which has been losing subscribers for years.
Even as experts had expected the two leading network carriers, Verizon Wireless and AT&T, to cringe from any aggressive responses to T-Mobile, Joseph Mastrogiovanni, a Credit Suisse analyst, stated in a research note that both carriers are now most likely to be under more stress to offer decreased prices.
"While the carriers try to remain rational while tweaking their plans and promotions, there is no doubt that they feel the need to get more competitive," Mastrogiovanni told Reuters.
He also added that AT&T's latest move could cut its revenue per share by a percent or two depending on T-Mobile's retort.
T-Mobile's Chief Executive Officer John Legere described to Reuters AT&T’s offer as a “desperate move by AT&T on the heels of what must have been a terrible Q4” and added, “I'm flattered that we have made them so uncomfortable!”
