By Thomas Gryta
AT&T Inc. and Verizon Communications Inc. both warned they
have to work harder to keep their wireless subscriber count
growing, as tough competition from rivals prompts more customers to
leave.
Meanwhile, T-Mobile U.S. Inc., the No. 4 carrier in the U.S., is
keeping the heat on its bigger competitors releasing a new deal
Tuesday. T-Mobile CEO John Legere said in an interview he expects
to continue the carrier's run of strong growth in the fourth
quarter.
AT&T Chief Financial Officer John Stephens told an investor
conference Tuesday that the company's fourth-quarter "churn," a
measure of service cancellations, would be higher than it was a
year earlier, even though the company expects its overall
subscriber count to keep growing.
The warning comes after rival Verizon said late Monday that its
own profit is under pressure because of the promotions needed to
get customers to sign up and stick around. Verizon, which had been
slow to participate in the industry's ongoing price war, said more
of its customers were leaving for other carriers this quarter than
in the last quarter or the year-ago period as smaller rivals push
their own deals.
Telecom stocks fell Tuesday with AT&T losing 2.9%, Verizon
dropping 4.1% and Sprint Corp. falling 3.8%. T-Mobile, which
announced late Monday it would offer up to $1 billion in
convertible shares, was down 8.3%.
Meanwhile, T-Mobile is taking more customers than it is losing
to each of its competitors and expects that momentum to continue
through the fourth quarter into next year, CEO Mr. Legere said.
"You shouldn't expect any warnings from T-Mobile," he said.
In October, T-Mobile raised its projection for postpaid net
additions for 2014 to a range of 4.3 million to 4.7 million, up
from a previous estimate of 3 million to 3.5 million. In the third
quarter, T-Mobile gained 1.4 million postpaid customers and has
added more than 5.6 million customers since the beginning of 2013
in a saturated industry with little real subscriber growth.
The carriers are in a price war to try to attract new customers.
The latest comes from T-Mobile Tuesday in which the company is
offering cheaper unlimited data plans. Under the deal, two people
can get an unlimited data plan for $100, a $40 cut from its
previous rate. The cost of adding a new customer to the unlimited
plan is unchanged at $40.
Last week, Sprint said it would offer half-price wireless
service to customers switching from AT&T and Verizon.
AT&T has already cut prices for many of its customers
earlier this year, leaving it in a better position to fend off
rivals offering cheaper plans. The cost of promotions will hurt the
carrier's wireless-service margins in the fourth quarter,
AT&T's Mr. Stephens said. The carrier's wireless-service
margins for the full-year would be equal to or better than they
were a year earlier.
Meanwhile, Mr. Stephens said the company's debt level is rising
as the carrier pursues acquisitions of satellite broadcaster
DirecTV and Mexican carrier Iusacell. The company is also bidding
on airwave licenses in an unexpectedly expensive U.S.
government-spectrum auction.
The carrier plans to focus its use of cash on dividends and
getting indebtedness back in line with its target for the next
three years, he said. The move is a shift for AT&T, which has
spent billions of dollars in recent years using cash to repurchase
its own stock.
Write to Thomas Gryta at thomas.gryta@wsj.com
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