Will T-Mobile US Inc (NYSE:TMUS)’s Low-Cost Strategy Against AT&T Inc. (NYSE:T) Backfire?

It appears that T-Mobile US Inc (NYSE:TMUS)‘s latest price cut strategy will have limited impact on AT&T Inc. (NYSE:T), which continued its journey northward unaffected. Conversely, T-Mobile CEO John Legere’s attempt runs the risk of a backfire as the low price could erode its own bottom line. Despite the threats, T-Mobile proudly announced it’s another highly discounted wireless service targeting small and medium businesses.

Let this analyst breakdown the obvious technical-indicators for T.

Price war

The announced plan will enable businesses to take up the company’s services for $15 per line for 20 plus lines. The plan offers unlimited talk time, text and 1 GB of data. Moreover, the data could be upgraded to unlimited for as little as $30. In addition, the company said that the price for scaling up to 1,000 lines will drop by $10 per line. The said rates are as much as 40% lower than what is offered by AT&T Inc. (NYSE:T).

Who is gaining?

So far, T-Mobile’s strategy of no customer contracts, zero overseas texting charges, and roaming fees has worked well with the consumers. In the last two years, T-Mobile has increased its customer’s base to 55 million from 33 million. Legere shrugged off concerns that the new price strategy may have on its books. He said that there is no stopping from here and supported his view on the basis of the company’s successful fourth-quarter. IDC noted that T-Mobile has grown its market share in business services from 33% to 10% over the last one year. But, the question exists whether the company is gaining new subscribers at the expense of money. Is there any real money-making in the process needs to be seen.

Amid the doubts, Legere did not miss an opportunity to roll out new offers for the company’s consumers. He said that all the current promotional plans run by the company would be made permanent for its customers. He added that customers need not pay any higher price not there is any change in guaranteed terms. As T-Mobile kept announcing discounted deals, AT&T Inc. (NYSE:T) managed to gain 2.10% during the trade and settled at $33.59.

About the Author

Coper graduated from the University of Chicagi with majors in political science and journalism.

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