T-Mobile Aims To Keep Subscribers with a $50 Plan

posted on Thu Feb 19, 2009 6:09PM EST

A price war is erupting as the nation's major wireless carriers struggle to attract new customers and keep the ones they have. Just last month, Boost Mobile (a subdivision of Sprint) announced it would offer an unlimited calling plan for a flat $50 fee.

Now T-Mobile has announced it is testing a similar program in the San Francisco area and will roll it out across the country over the next several weeks if it proves popular. Included are now-standard features like voice mail, three-way calling, and caller ID.

According to reports, T-Mobile isn't planning to advertise the new service, but is contacting current subscribers by phone and mail. The company is also testing related plans, including Family Unlimited ($90) and additional Unlimited Lines for $40 each. As a further sweetener, T-Mobile is offering a $135 rebate to each person who switches service from a T-Mobile competitor.

A Sustainable Price Point?

Given the intensely competitive cellular market, the obvious question is how sustainable a $50-per-month plan will be for mobile companies struggling to generate revenue. T-Mobile, for instance, reported last quarter that it added just 621,000 subscribers, its worst showing in nearly two years.

"It will be hard for carriers to make money long-term at that price point and usage model," said Michael Gartenberg, a vice president at Interpret. "Sprint seems to be going after new customers who could be enticed by the low plans, specifically for Boost; but the $50 plan is not generic to their other offerings."

Read the Fine Print

Although consumers won't need to sign up for a new contract or extend their existing contract to take advantage of T-Mobile's offer, some restrictions apply. For instance, if customers want data and text capabilities in addition to unlimited calls, the cost of the plan rises to $85 (but as T-Mobile points out, that's still $15 below Sprint's similarly packaged services). More important, T-Mobile is only offering the $50 deal to people who have been T-Mobile customers for 22 months or longer.

"In the case of T-Mobile, it looks more like a loyalty program designed to keep customers, as opposed to something designed to attract new ones," Gartenberg said. "It's only for customers who've been with T-Mobile and are in good standing. Those are precisely the folks you don't want to lose."

Sprint officials have told media representatives that the Boost Mobile flat-fee program is aimed in part at the lower end of T-Mobile's customer base. The announcement by T-Mobile, combined with the previous quarter's anemic sign-ups, suggests the Boost program is having an effect.

Among other worrisome signs, T-Mobile reported its churn rate (a measurement of the number of subscribers leaving the service at the end of their contracts) has risen in both of the last two quarters.

T-Mobile Aims To Keep Subscribers with a $50 Plan by NewsFactor: Yahoo! Tech

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