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October 28, 2009
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T-Mobile USA, the US subsidiary of German telecom giant Deutsche Telekom (DT), has reportedly introduced a new unlimited wireless service plan that comes without any annual service contract. This move represents the company’s latest initiative to counter strong competition from its larger peers in the domestic wireless market.
Under the new service plan, customers can enjoy unlimited voice, text and Web access services for $79.99 per month without entering into any long-term contract. This represents a $20 discount on the company’s standard $99.99 unlimited monthly rate plan for a two-year service contract. Subscribers to the $79.99 monthly plan, however, have to pay more for their cellphone handsets than the regular contract-bound customers.
T-Mobile USA is the fourth largest US wireless carrier with 33.5 million subscribers. However, the company is contending in an increasingly consolidating industry. Verizon (VZ) has emerged as the largest wireless provider in the US following its acquisition of Alltel Corp while AT&T (T) is set to acquire the regional telecom operator Centennial Communications (CYCL). As such, T-Mobile USA is becoming increasingly isolated.
Due to their size and scale of operations, T-Mobile USA’s larger competitors are able to deliver services in a more cost-efficient manner, which is affecting the company’s position in the market. Moreover, T-Mobile USA is also losing customers to smaller rivals such as prominent unlimited service providers MetroPCS Communications (PCS) and Leap Wireless (LEAP).
The newly launched service plan (bundling voice, text and data) offers more flexibility to the customers than those offered by T-mobile USA’s larger peers. Both AT&T and Verizon market $99.99 per month unlimited voice plans with additional charges levied on data and text services. To facilitate the adoption of the $79.99 monthly plan, T-mobile USA is offering the customer an option to buy new mobile handsets in installments.
While T-mobile USA’s new initiative to boost customer retention may eventually prove successful, it is likely to reignite price competition among the incumbent wireless carriers as they aggressively attempt to protect their respective customer bases.
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Read the full analyst report on "CYCL"
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