Oh those silly analysts are back in action with a Bloomberg report discussing the possibility that T-Mobile could lose as many as 1.2 million postpaid customer contracts during 2011. That number is over three times higher than the 390,000 subscribers T-Mobile lost in 2010. Amidst AT&T’s takeover battle with the Justice Department, T-Mobile would end the year with 33.5 million total customers with 25.2 million of them on contract.
Sanford C Bernstein & Co analyst Craig Moffett says that T-Mobile’s losses are partially due to the company’s unwillingness to get more aggressive with price cuts. Moffett believes that while T-Mobile has used price cuts in the past to attract customers a similar move today could be used by the Justice Department as showing T-Mobile helping to “suppress” prices for consumers.
“Cutting prices at this point would be very difficult because the DOJ has said their strategic importance stems from their role as a price cutter,” said Moffett.
In past years T-Mobile has offered promotional plans like the $39.99 1000 minutes rate plan or every phone free with contract in an effort to attract customers but faces an uphill battle today.
“T-Mobile is already in a difficult spot from a consumer perspective,” Entner said in an interview. “People will ask themselves, ‘Am I really going to sign a two-year contract with a company that may be on life support if the deal doesn’t go through?’”
The lone bright area where T-Mobile is gaining customers is on the prepaid side although prepaid customers remain less profitable than contract customers. Moreover, T-Mobile is unlikely to attract significant numbers of prepaid customers in order to boost the total number of subscribers.
T-Mobile continues to pour money into marketing with $115 million spent in the first quarter against the $111 million spent in the first quarter of 201. In the same period AT&T spent significantly more on marketing even while decreasing their own spending on wireless ads from $468 million to $356 million.
The fact of the matter is that T-Mobile remains “hand-tied” when it comes to pricing in order to not create a price gap between them and their largest competitors.
“They’re a bit hand-tied on pricing because they need to show the DOJ that the pricing gap isn’t that big,” Michael Cote of Cote Collaborative Inc. said in an interview.
The fact of the matter is that T-Mobile does seem to be in-between a rock and a hard place with efforts to keep the “business as usual” motto going all the while not making any drastic business decisions that could adversely affect their AT&T takeover. As has been the case this whole time we continue to wait and see what, if any deals AT&T can strike to try and push this through while the Department of Justice will continue to push its case forward. All of this will go on while we await for the FCC to render it’s own decision.