AT&T dials up efforts against wireless rivals
Eight years after T-Mobile US established itself as a scrappy disruptive brand, the US mobile market now looks very different. AT&T is now effectively the market challenger, having been relegated to third place in 2020. But AT&T seems happy to run with it, at least for now. Having lost ground in recent years, the brand once known as Ma Bell has been making changes to its business model, launching more attractive deals and investing in content, as it tries to build stronger customer relationships in an increasingly competitive market.
Late in 2020, AT&T began treating all customers to the same device promotions. In the US, post-paid wireless carriers typically offer spectacular smartphone deals only for new lines, often giving away smartphones for free to new customers, with monthly device credits cancelling out monthly device charges. It’s a clever way to encourage subscribers to stick around for 24 or more months to take full advantage of free-phone offers.
Many people find it odd that loyalty isn’t only not rewarded, but seemingly discouraged. AT&T is addressing this with a new philosophy for device promotions: all customers, existing and new, are entitled to the same smartphone deals. It’s a strategy that has enabled the company to bring its churn to an industry low, keeping more of its subscribers while attracting new ones. During the first quarter of 2021, AT&T reported impressive net post-paid phone additions of 595,000 and a post-paid phone churn rate of 0.76% (see Instant Insight: AT&T Results, 1Q21).
Taking a leaf out of AT&T’s playbook, Verizon recently introduced a device deal available to all its post-paid phone subscribers: free 5G phones for everybody, newcomers and long-time customers alike.
On 4 June, AT&T launched a 36-month financing programme for post-paid phones, bringing down the monthly cost to subscribers. Until now, AT&T has usually sold devices on a 30-month plan, whereas other carriers spread payments over 24 months. Longer, interest-free instalment plans should help AT&T to further lower churn, given that these plans essentially act as subscriber contracts, although longer payment plans also come with the risk of more defaults. The carrier’s 36-month plans are available to customers buying new phones.
Three-year instalment plans aren’t unheard of for top-end phones, but we expect that other carriers will be watching AT&T’s move closely and will eventually follow suit, allowing them to match monthly costs. And at a time when customers are holding on to their devices for longer than ever (see User Survey: Mobile Phone Buying, UK, 2020), AT&T’s move could well strike a chord with customers. Verizon, T-Mobile and regional carriers will need to manoeuvre to keep their subscribers given the shrinking pool of subscribers switching provider.
This latest play is a sign that a more competitive AT&T is emerging, one keen to set itself apart with a mix of attractive promotions, its 5G service and its WarnerMedia content powerhouse (see Insight Report: US Carriers Update on Strategy Following Crucial C-Band Auction).
This isn’t your parents’ AT&T: it’s become a more nimble competitor, taking chances and challenging the status quo.
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