T-Mobile US Extends Assault on U.S. Mobile Market Structure

By Gary Kim January 09, 2014

As expected, the U.S. mobile business is becoming more unstable. Though reasonable observers might expect Sprint to make its own bid to disrupt U.S. market structure, T-Mobile US has been making the immediate assaults.

Early on, T-Mobile US broke from industry practices and moved to a “no device subsidy” model, shifting instead to an “installment plan” approach. T-Mobile US also lead the market by making it easier to upgrade devices more frequently.

Now T-Mobile US has launched an aggressive campaign to woo lucrative family plan accounts from other carriers to T-Mobile US, by paying customer early termination fees when accounts switch to T-Mobile US.

With an eligible phone trade-in, the total value of the offer to switch to T-Mobile could be as high as $650 per line. “We’re giving families a ‘Get out of Jail Free Card,’” said John Legere, president and chief executive officer of T-Mobile. “But now families can switch to T-Mobile without paying a single red cent to leave them behind.”

Nielsen research suggests up to 40 percent of family accounts hold back from switching because of high early termination fees.

Customers from the three major national carriers who hand in their eligible devices at any participating T-Mobile location and switch to a postpaid T-Mobile US “Simple Choice Plan” can receive an instant credit, based on the value of their phone, of up to $300.

They then purchase any eligible device, now priced at $0 down (plus 24 monthly device payments, for well-qualified customers).

After customers get the final bill from their old carrier (showing their early termination fees), they either mail it to T-Mobile or upload it to www.switch2tmobile.com.

T-Mobile then sends an additional payment equal to those fees, up to $350 per line. Trade-in of their old phone, purchase of a new T-Mobile phone and porting of their phone number to T-Mobile are required to qualify.

Though it is too early to tell how much churn activity the new offer will spur, the T-Mobile US gains might be substantial, if in fact ETF is a major barrier to switching behavior, as most believe.

The offer will hike T-Mobile US customer acquisition costs substantially. And the offer is likely to trigger a response from several of the other carriers. The net effect is more price competition.

Edited by Cassandra Tucker

Contributing Editor

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