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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