T-Mobile USA’s $80 Unlimited Plan Avoids Price War
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T-Mobile USA, the US’s fourth largest carrier, is the latest to offer up a flat-rate unlimited, no-contract plan as it tries to shore up its deteriorating subscriber base.
The pricing of its “Even More” plans that appeared Monday are much less aggressive than analysts had expected—and feared. The industry had been bracing itself for a $50 unlimited all-inclusive plan that could have kicked off a price war. Instead, the carrier, owned by German telecoms giant Deutsche Telekom (NYSE: DT), is offering a $79.99 contract-free plan that includes unlimited talk, text and internet surfing, and a cheaper $50 one that only includes unlimited voice. As Reuters points out, this is actually only a 20 percent discount on its $99.99 two-year unlimited contract plan, which gives customers cheaper cellphones.
But how much will the new plans actually help T-Mobile to lure and keep subscribers? Larger rival Verizon (NYSE: VZ), the remaining holdout with no similar plan, said in its earnings call on Monday, that it had been carefully watching T-Mobile’s price changes, but that it didn’t see “a need to respond” to them. “We really don’t see it breaking new ground,” said Verizon EVP and CFO John Killian.
It’s a fair assessment, especially considering for $30 less, a customer can get a similar plan at Sprint’s Boost. Moreover, the plan probably won’t help with T-Mobile’s larger problem with its subscribers—it’s losing its more higher paying customers at a faster clip than its lower paying ones, and replacing those more lucrative customers with less lucrative ones. In its Q2 results released in August, T-Mobile USA, the carrier managed to add 325,000 new customers, compared with 415,000 in Q1, and 668,000 in the same quarter a year ago. Of those new net adds, 268,000 were prepaid customers. Most analysts believe that the pricing was better for the wider industry. Piper Jaffray analyst Christopher Larsen wrote in a research note, “...the new plans are more benign than investors’ initial fears and could relieve some pressure on wireless stocks,” but for T-Mobile the plans—stopping short of a price war—reveals how limited its options are in gaining new customers.
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