If you were Verizon CEO Ivan Seidenberg, faced with suddenly becoming the number two mobile phone company in America following an AT&T/T-Mobile merger, what would you do? You could try to buy Sprint, and for all I know Seidenberg will do just that. You could make a counter-offer for T-Mobile, but that would just be too darned expensive. If I was Seidenberg, though, I would try to poach customers — millions of customers — from T-Mobile.
AT&T is paying $1300 per T-Mobile subscriber and by the time the deal is finished extra costs will probably raise that to $1400 or more. Were I Seidenberg, then, I’d spend right up to that level to snag customers from T-Mobile. Anything under $1300 is a bargain.
At a minimum, I’d match or beat whatever those T-Mobile customers are paying per month now, I’d cover their cancellation fees, and I’d replace all their phones for nothing. Got a smart phone? Have an iPhone 4! But why stop there? Have a feature phone? Have an iPhone 4! Or Android or Blackberry or Windows Phone — whatever you like.
All smartphones all the time at Verizon!
Then watch five million or more T-Mobile customers defect to Verizon, raising AT&T’s per-subscriber cost by $300, pushing break-even on the deal to 2016.
But hey that’s just me. Maybe Ivan’s a pussycat.
Isn’t free enterprise grand!
I assume you left out the tag?
Ah! Maybe Bob’s software left it out for you just like it did in my comment!
How do you type opening and closing pointed brackets on this site?
<“How do you type opening and closing pointed brackets on this site?”>
Good question. What type of markup is permitted?
Bob, AT&T should be damn glad you’re not running Verizon. That plan is hard to argue against.
AT&T is getting spectrum to repurpose to 4G, towers for greater coverage, backhaul network, other assets, and finally existing subscribers.
Even if Verizon pays the same amount per subscriber, they get only the subscriber.
Exactly — Didn’t Bob just say in his last essay that the 39B is really being spent for TMobile’s hotspots and WiFi? Then AT&T isn’t really spending $1300/customer at all. The real cost may be $100, with the other $1200 for infrastructure and backroom savings. In which case Verizon spending $1000 per customer is dumb and only marginally hurts At&T.
Would be a good PR move though. What’s the value of still being #1 in customer base?
They get the subscriber while at the same time hurting their main competitor. Each one makes the announced deal a little worse, and if they can take away enough of them then the deal is horrible.
That would be a very smart move which means Verizon won’t do it.
Of course, what would their current Verizon customer think of all these new T-Mobile customers coming in and getting better monthly plans and free phones?
Maybe they should just let them use their phones on the Verizon network (i.e., do the unlock for them at no charge)?
Phones from T-Mobile are GSM. Phones from Verizon are CDMA. The two are not compatible.
They are not paying for subscribers. They are paying for spectrum.
RXC — RIGHT ON!
I am a T-Mobile subscriber. I DO NOT WANT TO BECOME AN AT&T SUBSCRIBER.
What I really want is an all-you-can-eat plan from Verizon which is similar to SPRINT (and Virgin Mobile, et alia, which uses the Sprint network) with a free Android Smartphone with Honecomb.
We certainly don’t want to go back to the bad-old-days of AT&T as THE Phone Company (have you seen The President’s Analyst – remember Lily Tomlin’s operator: “We’re The Phone Company, sir … we can do anything we want.”)
The decreasing competition is bad for the American Consumer.
Do you think there is any way we can press the Government to block this merger as anti-competitive?
Bob, problem is AT&T can offer the same deal to its acquired T-Mobile customers as a “Welcome to AT&T” promotion. Actually, AT&T can probably offer even a better deal as their T-Mobile customer switching cost is much lower than Verizon’s.
But what if you are a T-Mobile customer and you hate ATT?
That line starts here. I swore off AT&T when it was SBC when it was SW Bell and their failed “Project Angel” wireless home broadband experiment left me shocked – shocked! – at their cluelessness. My T-Mobile contract has 13 more months and I won’t even consider AT&T.
Thats great …. love to see good cell phone wars 🙂
Ivan the Terrible.
Cringe the Clever.
As others have said, it makes so much sense, it virtually guarantees Verizon won’t do it.
Not to hijack this conversation, but Bob, I’d love it if you’d cover the whole “cost of SMS” thing. Why the hell can I download 5GB of data, email, IM app data exchanges, talk for hours, etc… as part of my plan, but I have to pay $10/mo for 250 SMSs???
I know short messages are a cash cow (there’s some website that talks about them being 60 million times more expensive than email, for example).
Can you, Clever Bob, come up with some kind of similar plan/scheme/strategy to motivate these greedy bastards to finally just start including unlimited SMS as part of a normal plan?
Why do we pay ridiculously high amounts for SMS service? Because the cell phone companies can get away with it!
Almost all of their customers get the $19.95 unlimited SMS texting, so instead of having to advertise a $64.99 per month rate, they can advertise it as $44.99.
They’ll stop charging for SMS once most of their customers start using GoogleVoice for texting rather than SMS itself.
The biggest practical problem is what would VZW do about their existing customers? They won’t be too happy about Tmobile refugees getting Tmobile prices on VZW’s network with nice new phones.
The US market is pretty much saturated. The only real way of getting more customers is to take them from someone else. This has to be done through some combination of phones, pricing, customer service and coverage. Ironically Tmobile was doing pretty well in most of those.
AT&T’s problem is they are too big, too slow, too arrogant, too stubborn, etc. They are buying T-Mobile to get the frequencies and infrastructure they need to catch up. They have over grown their network and it is taking them forever to upgrade it.
The best strategy is not to compete with AT&T, instead one should just leave them in the dust. Offer your customers a better service, simpler contracts, and a competitive price. If you treat your customers well, others will come.
Sprint’s unlimited plans are really nice. They could be a bit less expensive. Verizon should do the same. When you have simpler plans there are fewer extra/surprise costs. There are fewer customer service problems. Since I switched to a Simply Data Family plan, our phone bill has been exactly the same every month. It has been a joy. We’ve had no reason to call customer service.
AT&T is the master of complicated phone plans and contracts. Is that stuff really necessary? What purpose does it serve?
I am now the proud owner of a new Android phone — and I paid nothing for it. I have all the Internet bandwidth I need. I don’t have to count bytes.
Cringe, it’s like this:
I’m a former AT&T subscriber, left for T-Mobile in 2006. I can never go to Verizon. Why? They are just ‘evil’. AT&T runs their network in a mediocre fashion, has average-ish service, and is the player they are primarily because they gave Apple control in exchange for the iPhone franchise (which they now share). Verizon will take every advantage with their customer service, scrounge every penny, and give you enough network to keep you happy. If LTE gives you simultaneous voice & data, well, that’s where I’ve been with TMO for 18 months. TMO had been reduced to the value player while in fact delivering a seriously competitive product. Sprint is not a contender.
So my choices are AT&T – lackluster but mostly competent, or Verizon – guaranteed to take your last penny.
Will Verizon go after TMO subscribers? Watch them claw their way up Sprint’s back to get them. And it will be a YEAR before TMO subscribers need to be concerned about migrating, but the FUD will be hip-deep in no time at all.
I’ll re-up with TMO, and let AT&T make their play when it’s time. Verizon? remember how they locked the RAZR? Nothing has changed. They are relentless in pursuit of their subscribers’ wallets. Phantom data charges? Fees and add-ons? I hate being a piece of meat.
An individual verizon plan with data costs $90 * 24 months = $2,160
My totally uneducated guesses for their costs:
– “free” (to the customer) iphone costs Verizon $400?
– 2 years of services costs Verizon $200?
(So total verizon cost to steal 1 of these customers from tmobile in the manner you are proposing: $600)
Is it accurate to say that ($2,160 – $600 == $1560) is their profit per person over 2 years? And $200 more if they don’t give you the iphone for free? I guess I’m asking: Is the profit margin really that high?
$1300 is a lot of coin.
So say the average revenue per user is $50 with 30% profit. Thats 87months of pay off.
Or could Sprint just say $50 of free mobile plans for the next 26months.
$39Bill is a lot of risk. Great for the consumer in the short term….
“The best strategy is not to compete with AT&T, instead one should just leave them in the dust. Offer your customers a better service, simpler contracts, and a competitive price. If you treat your customers well, others will come.”
I couldn’t agree more. T-Mobile contracts were simple; Verizon’s require a PhD in advanced mathematics and their prices are hard to find (okay, EVERYTHING is hard to find) on their web site. I’ll probably have to stay with AT&T just because Verizon’s stuff is so complicated and filled with Gotchas. (Except for data which I get separately … from Verizon… )
The advantage of flat rate plans is dramatic reductions in per-subscriber costs … no billing to generate because there is no need to detail calls, SMSs, and data volumes … and without billing details there is very little customer support required to explain the charges and deal with customer complaints related to extra charges outside of free minutes and free messages.
My local Verizon shop moved me away from the iPhone, saying there were network problems with it.
Does Verizon want more iPhone customers ? Does AT&T want more non-iPhone customers ? Was the one person I spoke with just lying to get a better margin on an Android phone ?
The sales person you spoke to was probably lying to get a better sales incentive payment from the manufacturer of the phone. Apple doesn’t offer incentive payments to retail sales people but some of the Android manufacturers do.
AT&T wants the towers. Not facing a shortage of customers, but will pick up at least half of T-Mobiles and migrate them to fresh contracts in the process.
Super deal for AT&T. This is a five year build out in desperately needed markets and all available now. Time needed to reconfigure a tower is inconsequential compared to siting one.
So does that Verizon would pay the contract early termination fee for TMobile customers?
Why bother pursuing T-moblie customers at all? If Verizon’s service is as good as they claim, customers will defect to them naturally – no bribe necessary. And if Verizon’s service is not as good as they claim, the best way to attract new customers would be to spend that T-mobile bribe money on improving their service.
No piece of cake for the customer – sorry.
1) All postings from Tmo subscribers here were positive. Not the ‘well, it’s cheap, but bad service’ sort of thing…
2) In Germany, were Tmo comes from, putting an end to the U.S. adventure is regarded very positive news, though this means accepting a USD 10b loss, compared to what has been paid for the business a decade ago.
Conclusion: a player is exiting the market, who’s offer has been perceived a fair
deal for commentators here, however did not generate (enough?) earnings, therefore is being sold. Seems to me that this provides room to worsen things a bit …
The Tmo customers will be distributing themselves among the 3 remaining carriers all having better coverage, good for them. The AT&T customers will have better coverage and service thanks to the slightly expanded network, geographically and equipment-wise. Competition among the 3 largest carriers is essentially the same as it was before. Consumers won’t have to fast-forward through as many cell-phone ads as before. So there is a bright side.
As a T-Mobile customer for the last 10 years….FORGET IT!! I will never switch to Verizon no matter the price. T-Mobile is very good customer service, compare that to Verizon. T-Mobile prices are much better and the coverage has gotten better over the years so why switch to Verizon? For the iPhone? Give me a break.
Well you’re either switching to Verizon or to AT&T at this point…
From this perspective, it’s actually quite apparent why their economy has gone through 4 recessions in the last 20 years, and will continue to slide after the reconstruction blip. The aging population is the cause, not for the reason of an “aging-workforce” but “stubborn idealism” that is threatened like a guillotine on the younger workforce.
Well you’re either switching to Verizon
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