Early this January, major wireless carriers started offering price drops and discounts for their customers all over the country. While consumers seem happy about the recent developments, many Wall Street investors are concerned that the recent price war may bring about a considerable decline in wireless profits this Q1.
A few years ago, it would been unheard of for the top wireless carriers in the country to announce the kind of price drops that the market has seen in recent weeks. The current price war started a few months ago by T-Mobile, which started an aggressive marketing campaign to lure over more customers as part of the company's efforts to gain more market share. However, other wireless carriers soon joined the fray in an effort to keep T-Mobile at bay. T-Mobile is currently ranked as the fourth largest carrier in the U.S.
Back in Jan. 3, AT&T retaliated with a tempting offer to take a chunk out of T-Mobile's market share. AT&T is currently the country's second largest wireless carrier in terms of market share. Shortly after AT&T's move, Sprint Corp also announced a series of discounts focused on their family and friend bundle plans. With Sprint's latest offers, the opening salvo in the 2014 price war were fired. However, the responses of AT&T and Sprint may have come a bit late considering the T-Mobile reported record sales over the past three quarters. This is a considerable achievement for a company that has seen over 4 years of dwindling market shares. T-Mobile also announced a payment plan that would cover the early termination fees of customers switching over from other carriers.
With the recent series of price drops, customers are definitely happy. However, investors are growing increasingly concerned that the carriers may have taken things a bit too far at the cost of losing a considerable amount of potential revenues. In light of the recent movements of three of the largest carriers in the market, however, top dog Verizon has remained on the sidelines.
"You don't really buy loyalty that well in my view, and those customers will switch back," says Verizon Communications CEO Lowell McAdam, speaking out against the current price war at a recent investor conference.
Verizon remains optimistic that things will settle down and once the dust clears, it will remain ahead in the race.
