Competition increasing, Gross Margins Decreasin!

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Sprint's numbers up

US Mobile market shows signs of healthy competition

If you put the title to music you might well get the theme song for the US mobile market over 2014 and it looks like the jingle will continue into 2015.  Sprint just announced the additions of 967,000 connections in Q4 and reckons it’s almost turned the corner with postpaid phone net additions according to Total Telecom (here).

Sprint on Thursday revealed that it added fewer than a million new customers in the final quarter of last year, which should be enough to keep it ahead of T-Mobile as the third largest mobile operator in the U.S., for now at least.

The fact that Sprint’s prepaid net adds exceeded T-Mo’s – it posted 410,000 to its rival’s 266,000 in Q4 – comes as little consolation at a time when the big four in the U.S. are working hard to attract high-end contract customers.

“Sprint’s first priority is a return to customer growth and our results during the last quarter show we are on the right track,” said Sprint CEO Marcelo Claure, in a statement.

Sprint has been doing some very aggressive marketing campaigns of late trying to stave off the heat from close rival T-Mobile.  It seems that even the leading provider Verizon and AT&T are feeling the heat.  Both carriers have been cutting prices on data-plans to attract new subscribers or keep the ones they’ve got.  This article from The Motley Fool (here) indicates that Verizon may be conceding its premium pricing strategy and getting down and dirty ready to scramble for subscribers with everyone else.

Whether the CEO likes to admit it or not, Verizon (NYSE: VZ) is feeling the pressure from Sprint (NYSE: S) and T-Mobile (NYSE: TMUS) as they offer low-price alternatives to Big Red’s premium service plans. The company has offered several price cuts and limited-time promotions over the past year to attract new customers and keep existing ones from leaving.

The company’s latest price cut/data bump includes a 10 GB-per-month More Everything plan with a base price of just $80 per month. Comparatively, AT&T (NYSE: T) offers a similar plan for a base price of $100 per month. In October, Verizon offered a promotion that lowered its prices for high-data plans to the same prices as AT&T.  Is Verizon starting to abandon its premium pricing strategy?

Competitive friction is burning up some serious marketing dollars and the results are great for the consumer (not so good for the investors).  One obvious question arises…  If the market is so competitive, why do regulators feel so compelled to intervene?

 

 

 

 

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