It's Value vs. Premium Carriers in the US

Among the four main US carriers a pattern has emerged. On the one hand you've got T-Mobile and Sprint positioning themselves as the "value" carriers with lower prices and more flexible or inclusive plans. On the other side are AT&T and Verizon, the "premium" carriers that have many more subscribers and tout their networks in their promotions and ad campaigns.

Now it's not entirely black and white; Sprint is pushing 4G and the fact that it will be the first carrier with a working 4G network in the US. And both AT&T and Verizon have recently lowered prices. But basically those are the battle lines in the market. 

Last week, T-Mobile USA released Q4 and full-year results and grew subscribers by almost 400K:

In the fourth quarter of 2009, total customers increased by 371,000, compared to net customer losses of 77,000 in the third quarter of 2009 and 621,000 net new customers in the fourth quarter of 2008.  

The reason for that growth was largely attributable to T-Mobile's aggressive pricing:

Branded customer additions benefited from strong holiday sales and the launch of the new Even More and Even More Plus rate plans during the quarter. The Even More and Even More Plus rate plans offer industry-leading value with features including unlimited nationwide voice, text and data services, and include rate plans with and without contracts and subsidized handsets.

Sprint for its part has seen substantial gains on the pre-paid/no-contract side of the house (Boost et al.) but not on the post-paid, higher value customer side. While it has stopped the dramatic customer losses it has seen in recent quarters, there are no indications of growth there. And with AT&T and Verizon lowering prices recently Sprit is forced to defend it's position as value carrier:

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T-Mobile and Sprint now both have an array of strong handsets, which doesn't seem to be impacting their subscriber numbers in a huge way. Price will continue to probably be the lever that T-Mobile and Sprint compete with for the foreseeable future, notwithstanding Sprint's 4G plans. In order for the Sprint network to gain traction and attract new customers it will need to be noticeably much faster than rivals' 3G networks.

In the UK the merger of T-Mobile and Orange's UK operations has gained European Commission approval. More consolidation is coming to the US market and probably to one or both of Sprint and T-Mobile (as in the UK example).

I was somewhat surprised to see that T-Mobile now offers data-only plans, which I didn't think would happen (because of the potential for voice revenue erosion). Indeed, it portends the decline of voice revenues for carriers over time.

Sprint may be forced to match T-Mobile's more aggressive pricing in the near term. Meanwhile Verizon and AT&T don't seem to be compelled to match price reductions in the same way; they mostly respond to one another. But I wouldn't be surprised if we see another round of price cuts as T-Mobile and Sprint fight it out in the trenches. 

US mobile subscriber numbers:

  • Verizon -- 91.2 million
  • AT&T -- 85.1 million
  • Sprint -- 48.1 million
  • T-Mobile -- 33.8 million
  • Others -- 13 million (approx)