Three days after Sprint poured iced water over the US wireless market with the launch of its aggressively priced shared-data plans, T-Mobile US (T-Mo) directly responded yesterday with a press release entitled, “T-Mobile Urges Its Customers to Rescue Sprint Customers”. Taking up the ice water challenge from Sprint, T-Mo is now offering incentives to its own subscribers to bring Sprint subscribers (and those of the other nationals) to its own network. The press release then goes on to describe why it feels its unlimited plans and network are far superior to Sprint’s. What was Sprint’s response to this? Not much later in the day Sprint poured more cold water onto the market with the launch of a $60 unlimited data plan saying, “This plan provides consumers unlimited talk, text and data while on America’s Newest Network for just $60 per month, a $20 savings compared to T-Mo's $80 per month unlimited plan.” (Neither AT&T nor Verizon offer unlimited data plans.) But T-Mo CEO/President John Legere is not one to sit idly by without at least a comment. Dripping with irony, his Tweet that followed reads, “Wow – lucky new @sprint “unlimited” customers! You can get the lowest priority on the slowest network!”. This seems to be a touch more than a price war, no?
In any case, what is emerging is the bifurcation of the wireless market. We have the value guys—Sprint and T-Mo —fighting it out on price, and the premium guys—AT&T and Verizon--who are, for the moment, betting that network quality and service offerings, e.g., content, will be enough to keep their subscribers swimming past the bait. That said, the moves by Sprint and T-Mo are pretty substantial. When T-Mo originally launched its suite of un-Carrier plans, the others responded. Although the big two may enjoy watching the fireworks coming from across the railroad tracks for now, over time they probably have to do something. In general this price war is negative for the industry and portends increased spend on networks and spectrum. For credit investors it means that we can expect to see primary issuance this fall from the nationals. In addition, it means that operating cash flow could be pressured by increased capex spend; increased subscriber retention and acquisition costs; and year-on-year declines in average revenue per user (ARPU).
US wireless industry: voice is dead, long live data
Rolling into the new ISDA protocol