T-Mobile executives sang a familiar tune in their third-quarter earnings call: They blasted Sprint. The target of CMO Mike Sievert was Sprint’s bare-bones pricing model. “Sprint came in with a scorched-earth pricing model, but I don’t think customers are willing to trade off service for scorched-earth prices,” he said in October. “We’re trying to find that balance of what customers are willing to pay and what services they want.”
That balance, apparently, is a family plan with unlimited 4G LTE data with its own scorched-earth price. On Tuesday, T-Mobile announced an industry-low family plan price: $100 a month for unlimited talk, text, and data for two lines (extra lines cost $40 each). By comparison, a comparable Sprint plan costs $120 per month.
T-Mobile is pitching the plan as one based on simplicity, not a low price. “People are saying loud and clear that they hate the confusion and complexity of the carriers’ shared data plans, and they should,” CEO John Legere said in a statement. “These plans … threaten you with punishing overage penalties unless you police your own family’s data usage or up your data bucket and spend more every month.”
While the plan is simple — there’s no price-matrix interpretation required — the price can’t be ignored, especially given the struggles AT&T and Verizon are experiencing as a result of the industry’s current fondness for cheaper plans and promotional offers.
“(T-Mobile) has said in the past it’s not waging a price war, but the move (Tuesday) is a pretty aggressive price move,” says Gartner telecommunications analyst Bill Menezes.
Tuesday’s announcement fits with T-Mobile’s relentless grasp for subscribers. The approach has been costly — T-Mobile shed $93 million in its latest quarter — but effective. The company is adding subscribers at the fastest clip in the industry. Nonetheless, its subscriber base remains smaller than those of Verizon, AT&T, and Sprint, but it barely trails Sprint and is poised to eclipse it soon.
In its third-quarter earnings call, T-Mobile was trying to distance itself from a value-oriented image, a marketing tactic Sprint has wholly embraced. But the new family plan strongly leverages price and convenience to earn more subscribers. Menezes says the timing of the move will entice holiday shoppers looking for a new phone and plan at a tolerable price point.
For the plan to be successful, T-Mobile will have to retain the customers it lures. Though most families don’t require unlimited data, Menezes says, T-Mobile is trying to attract high-volume data users, namely young customers who will also be drawn by T-Mobile’s already unlimited music streaming. These features are important because if price remains a driving factor, that’s a battle T-Mobile will likely lose to its competitors.
“AT&T and Verizon are big enough to withstand this for the long haul,” Menezes says. “The turning point is when T-Mobile’s pain becomes self-inflicted. It, at some point, has to show profitable growth, not just growth.”
Wall Street hasn’t been thrilled with T-Mobile’s announcement: shares have fallen more than 6 percent since the company announced the new plan.