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The new year begun with a renewed tussle for customers between AT&T (NYSE:T) and T-Mobile. In 2011, both the entities were about to be merged through a $39 billion deal but the merger stalled due to antitrust concerns.

Development:

In the latest development AT&T has been offering T-Mobile customers up to $450, if the customer switches from T-Mobile to AT&T.

The reason behind the move is "very little subscriber growth for the industry", as there is hardly any-one in the country who needs mobile phone and doesn't have one. So, the new mobile subscribers are hardly coming by. If a company wants to gain customers then it must have to attract customers from rivals. Now days, most of the subscribers, which a carrier gains come from another carrier.

T-Mobile reaction:

T-Mobile's CEO John Legere termed the offer as a "desperate move by AT&T" after a "terrible Q4 and holiday for them". In-fact, the company sees the AT&T's move as an attempt to get back its customers that the company (AT&T) lost due to T-Mobile's "far superior network and added Un-carrier moves". He further added that the "Consumers won't be fooled..." as they "will still feel the same old pain that AT&T is famous for".

AT&T versus T-Mobile:

As of September 2013, AT&T is the second largest (109.5 million customers), while T-Mobile (45 million customers) is the fourth largest mobile carrier in the US.

Over the last few quarters, T-Mobile has led the US wireless industry in-term of net customer additions due to its Un-carrier strategy. However, T-Mobile lags way behind AT&T in-term of 4G coverage. T-Mobile began its 4G roll-out in October 2012 as compare to AT&T, which began its 4G roll-out nearly 12 months earlier in 2011. The end result of the delay by T-Mobile is that today the 4G coverage of T-Mobile is significantly lower than AT&T (explained below).

Conclusion:

Since the last few years, the company is preparing itself to take-on the competition by investing heavily and rapidly in its 4G network deployment and other related infrastructure. The company clearly understands that with the expected proliferation of data traffic (see the chart below) in the years to come, the network performance and speed (along with pricing) will become the ultimate factors behind the retention and addition of subscribers.

(click to enlarge) (Source: The company's documents)

With the latest move, the company's is specifically targeting T-Mobile's subscriber-base. Though it looks like that T-Mobile is not taking it as a threatening move, as T-Mobile believes that customers will not get attracted by the offer due to their past experiences with AT&T.

However, AT&T can gain some subscribers due to the attractiveness of the offer and also due to the reasons explained below.

  • More 4G coverage:

Due to the efforts made by the company during the last few years, today, the company has an extensive 4G coverage (see the chart below), which covers locations that hold nearly 288 million mobile users as compare to T-Mobile's 4G LTE coverage of locations that hold nearly 200+ million mobile users. This could work as a big advantage for the company as this means that there are number of areas/locations where the existing T-Mobile subscribers will not only get the benefits of the offer but also the superior network if they decide to switch to AT&T.

(click to enlarge) (Source: Company's website)

  • Network quality improvement:

It may well be the time for T-Mobile to change its belief about AT&T's service/network quality. The company (AT&T) over the last 24 months has been focusing heavily on its network quality and today the company has transformed most of its network to deliver 4G services that is supported by an upgraded fiber backbone.

  • Leveraging is strengths:

The offer also shows that the company is well aware of its strengths against its competitors, and the company is also learning the art of leveraging its strengths in a timely manner to gain customers. Now, it's almost certain that once the company's ongoing network up-gradation plans materialized in the near future, the company will concentrate much more aggressively on customer-acquisition, customer-retention, and revenue-generation.

All in all, an excellent and a very aggressive move by the company that will leverage its extensive 4G coverage advantage to gain customers. This may well be the early warning sign for the other competitors like Verizon (NYSE:VZ) and Sprint (NYSE:S), as the competition in the industry is all set to intensify in the times to come.

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This article reflects the personal views of the author about the company and one must consult its financial adviser before making any decision.

Source: AT&T: Getting Aggressive