AT&T Inc. said it will pay T-Mobile US Inc. customers as much as $450 to switch services, an unusual move as the battle between the wireless rivals heats up.
T-Mobile has launched an assault on its larger rival under Chief Executive John Legere, who has taken aim at AT&T in television ads and in comments—sometimes profane—at public events. He also has put pressure on the company by eliminating lucrative carrier standbys such as contracts and high international roaming fees, while continuing to offer lower-cost unlimited data plans.
The moves by T-Mobile have helped it turn around years of customer losses and add more than a million of the industry's lucrative contract subscribers in 2013. Many of those customers came from AT&T, because the technology both carriers use is similar, making it easier for customers to switch without changing their phone.
AT&T's offer—which is available only to T-Mobile customers—comes days before T-Mobile was widely expected to announce a similar offering. "It has been in the works for a while, said Mark Siegel, an AT&T spokesman. "We think this is a very good way to offer T-Mobile customers who may have left us to persuade them to come back."
T-Mobile didn't immediately respond to a request for comment. But in a tweet Thursday night anticipating the move, Mr. Legere said, "Hmmm. if this rumor is true, I guess we are making AT&T a bit nervous."
AT&T's shares were down slightly Friday morning, while T-Mobile's fell more than 3%.
Under AT&T's plan, T-Mobile customers can get a $200 credit per line when they switch to AT&T. In addition, they can get an AT&T gift card of as much as $250 for trading in their smartphones.
The gift card can be used on AT&T products and services or to pay an AT&T wireless bill. Customers must stay with AT&T for 90 days before receiving the $200 credit. The offer isn't available to customers who buy a subsidized smartphone from AT&T.
There is more than a little theater to the offer. Jennifer Fritzsche, a senior analyst at Wells Fargo, said AT&T already offers a minimum of about $100 for trade-ins of smartphones that are less than three years old. The new deal's structure also means AT&T won't be saddled with expensive phone subsidies for people who switch.
Still, the offer shows how the wireless market has become more competitive after years in which market leaders Verizon Wireless and AT&T were able to impose more lucrative pricing plans and enjoy steadily rising revenue per user.
AT&T and T-Mobile were slated to be merger partners three years ago, but the Justice Department scuttled the $39 billion deal over concerns it would leave the market too concentrated. Antitrust officials wanted to preserve T-Mobile as a disruptive force in the market.
Last year, T-Mobile merged with smaller rival MetroPCS Communications Inc., secured the iPhone and worked to build a new, faster LTE network. The steps have improved its ability to compete with the main carriers.
T-Mobile's more aggressive approach could complicate Sprint Corp.'s hopes to merge with the company. Executives at both carriers have argued the Justice Department should allow a merger to create a stronger rival to AT&T and Verizon, and people familiar with the matter said Sprint is working toward a bid. But the Justice Department has asserted as recently as this spring that it likes the market's current balance of power with four national carriers.
Write to Ryan Knutson at Ryan.Knutson @wsj.com
and Everdeen Mason at everdeen.mason@wsj.com
04 Jan, 2014
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