The mobile industry may be entering a new and even more competitive phase as the carriers begin to battle over holiday promotional offers.
The trend towards better offers for consumers started with this year’s new iPhone 7. T-Mobile offered a much better deal than it had the year before, giving customers a free iPhone 7 with a trade-in of a one- or two-year-old iPhone. The other three major carriers quickly copied the free with trade-in offer, and most of them saw a significant jump in iPhone 7 sales compared to last year’s iPhone 6S.
Now with the holiday shopping season approaching, consumers can look forward to another round of deeper discounts.
And again, T-Mobile (TMUS) got the ball rolling with several promotional offers on Wednesday. Under one deal, new or existing customers can get four lines on T-Mobile’s new unlimited data plan for the price of two lines. Customers on older Simple Choice plans can also get the four for the price of two deal. And the discount doesn’t expire.
“When you switch to @TMobile, you keep that promotional pricing… FOR LIFE!! AKA – it’s time to switch!,” CEO John Legere tweeted.
T-Mobile’s unlimited plan, which automatically reduces the quality of streaming video, was introduced in August at a price of $120 for two lines, $140 for three, and $160 for four. Under the new promotion, four lines cost $120 a month. The carrier also announced deals on a range of devices, such as the Samsung Galaxy S7 phone and the UE Boom 2 wireless speaker.
The discounts come as growth is slowing more than ever in the mobile market, where there are already more active phones than the total population of the country. Over the past year, the industry has increased the number of regular monthly phone customers by less than 2%, analyst Craig Moffett has noted. Revenue from monthly service fees has been shrinking for the past two years, though less profitable revenue from selling phones directly to consumers has offset that decline, according to Moffett.
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So far, the other carriers have yet to react to T-Mobile’s cheaper service promotion. Sprint (S) has unveiled some device discounts, such as an offer to get a free Galaxy S7 with purchase of one at full price. But they are likely to counter T-Mobile, particularly Sprint, if the offer catches on, analysts said. AT&T (T) and Verizon (VERIZON) have tried to stay out of the discounting wars as much as possible.
“I don’t know that we’ll see all the carriers do this, but Sprint might well jump on board,” Jan Dawson, chief analyst at Jackdaw Research, says. The deep discounts on monthly plans could come back to haunt the industry, however.
“They will never make money from these free lines,” Dawson says. “Hardware discounts can be a way to secure new paying subscribers. The bet is presumably that those lines can be upsold over time, but there’s no guarantee.”