Two of the biggest U.S. carriers apologized to investors recently for reporting lower earnings than usual and experiencing difficulties with retaining subscribers. Both Verizon and AT&T cited increased competition as the main reason behind their decreased quarterly churn rates and earnings per share. Although neither carrier referred to T-Mobile and Sprint by name, both mentioned their competitors’ aggressive price cuts and low-cost promotions had a huge impact on their strategy.
During an investors conference, AT&T CFO John Stephens said the carrier was forced to cut its prices and offer more competitive promotions, in an effort to keep subscribers. He added that strong marketing campaigns and affordable deals offered by other carriers forced AT&T’s hand. Stephens even warned AT&T may have a higher churn rate than usual, as some new subscribers may have left the carrier in favor of cheaper plans elsewhere. A carriers’ churn rate is determined by how many new subscribers it loses to competitors, and while AT&T typically manages to keep its customers, this year may be different.
Even though Stephens didn’t mention T-Mobile’s Uncarrier tactics or cite Sprint’s revamped offerings, it’s clear that the two carriers are the ones pushing AT&T to lower its prices and offer more deals to customers.
Meanwhile, Verizon told investors that the “highly competitive and promotion-filled” market could decrease the price of earnings per share, even though it’s still doing well with new customers. Big Red has simply had to work harder and fork over more money to keep its subscribers happy, now that they see other options on the market.
Neither carrier mentioned official numbers, so it’s hard to tell just how big an impact T-Mobile’s and Sprint’s price cuts and promotions will have on their larger competitors.
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