While Verizon and T-Mobile have been moving forward mostly in lockstep, AT&T may well be laying the groundwork for a maverick jump away from its rivals.
And though it might take years for the company's ultimate strategy to pay off, there are growing indications that AT&T could potentially traverse the same "uncarrier" ground that T-Mobile trod in the early days of 4G, when the operator leveraged novel marketing and pricing strategies to set itself apart from the pack.
AT&T's gathering defection from the norm crystalized following the release of Apple's new iPhone 13. Unlike last year's unveiling, Apple spent precious little time talking about the 5G part of its new phone. That, according to the financial analysts at MoffettNathanson, has put even more pressure on the industry's wireless network operators.
"With the iPhone 13, the device, not the network, is the attraction," the analysts wrote in a recent note to investors. "The white space left for the carriers is, more than ever, promotionality and discounting."
And, according to a new report from the analysts, AT&T is the operator that is most clearly stepping up to that challenge. "AT&T, which was already offering the richest offers in the weeks leading up to the iPhone 13 release, continues to be the most aggressive in terms of overall promotionality."
Promotions for all unlimited customers, not just the 'premium' ones
Specifically, the analysts point out that there's one important difference between the promotional offerings from AT&T and those from Verizon and T-Mobile. "Verizon and T-Mobile's best offers on the iPhone 13 series are exclusively available to premium unlimited customers, who are, in effect, paying more for service in order to offset the cost of a free or almost-free device," they wrote. "AT&T, by contrast, is offering its most lucrative promotions to all unlimited customers, including those on the lowest-ARPU unlimited tiers."
Meaning, Verizon and T-Mobile customers must also sign up for the operators' most expensive unlimited plans in order to get iPhone 13 discounts. That caveat certainly dovetails with the two operators' overall financial goals. But AT&T is offering its discounts to all unlimited customers, including those who select its cheapest plans.
In comments at a recent investor event, AT&T CEO John Stankey argued that AT&T's promotions aren't necessarily groundbreaking. "We're not doing anything that's really out of the norm with the balance of the rest of the industry. But we are coming up from levels that may have been below the norm," he explained, according to a Seeking Alpha transcript. "I feel very comfortable with the overall equation right now. And I frankly believe we still have a few more cycles to fine tune it even a little bit further."
Bulking up on software and spectrum
But Stankey hinted that AT&T isn't content to sit back and compete on price alone. "We've now started doing some things quietly behind the scenes. We have another muscle to build here, which is how do we begin to work on software to differentiate our products and services in a way that makes our product better than what our competitors can do," he said, without providing details.
It's also worth noting that AT&T is widely expected to dominate the FCC's upcoming midband spectrum auction of licenses in the 3.45-3.55GHz band (dubbed the Andromeda band by the Light Reading editorial team). Indeed, the company recently asked the agency for permission to begin testing equipment from Nokia and Ericsson in the band across roughly a dozen major US cities.
If AT&T acquires the maximum amount of spectrum it can in the Andromeda auction – 40MHz of licenses around the country – the operator could use those winnings to directly challenge T-Mobile's lead in the buildout of midband 5G. That could well give the operator more leverage against its competitors.
A new angle on old Ma Bell
Moreover, AT&T could take another page from T-Mobile's original "uncarrier" playbook: A re-energized brand.
"I think we need to do some work to reposition and update it," AT&T's Stankey said of the AT&T brand. "The management team has been doing an awful lot of work over the last several months in this area."
Stankey noted AT&T recently hired Kellyn Smith Kenny – previously the CMO of Hilton – into the newly created position of chief marketing and growth officer. He said she's leading a program within the company to redefine AT&T's brand.
"We're not quite finished with the work yet. We're very close to the goal line in terms of being ready to talk to you about that, characterize it out to our customer base, put in place the mechanics that need to support that. And it will be a multi-year effort for us to ensure that we operate the business consistent with that framework that we put in place," he explained. "That will give us the AT&T for the next 10 years that we can all rally around that I think will be relevant and take great momentum and make it even better."
Finally, it's worth noting that AT&T's efforts come as T-Mobile continues to withdraw from the novel, aggressive promotional and pricing strategies that were a hallmark of former T-Mobile CEO John Legere, who shepherded the operator's "uncarrier" branding.
Subsidies, back from the dead
One of Legere's first "uncarrier" strategies was to move away from phone subsidies. Such subsidies were commonplace in the early days of the smartphone industry, and allowed operators to sell phones for just a few hundred dollars while recouping the full cost of the gadgets by locking customers into two- or three-year service contracts. However, after that contract ended, monthly service costs did not change.
T-Mobile's introduction of equipment installment plans (EIP) in 2012 changed that dynamic by separating the cost of a phone from the cost of monthly service. In subsequent years, all of T-Mobile's rivals shifted to EIP pricing models.
But, according to the analysts at MoffettNathanson, the new pricing plans from T-Mobile and others are essentially bringing subsidies back into the industry.
"The bigger picture here is one of a return to the old subsidy model," they argued. "That is particularly true at Verizon and T-Mobile, where the nature of the new [iPhone 13] offers is to trade upfront handset value (subsidies) for higher monthly ARPU (premium unlimited plans)," they wrote.
However, they noted that AT&T is not necessarily traveling along that same path.
"Just as in the old days, when there was a notional $20 of padding in ARPU [average revenues per user] to account for the cost of the device, Verizon and T-Mobile are requiring a premium unlimited subscription that, in most cases, is $10 or $20 more than an introductory unlimited plan. AT&T is not," they wrote.
Of course, it's unclear whether AT&T will fully break from the pack and chase the kind of disruptive strategies that T-Mobile did in its early days under the "uncarrier" brand. Indeed, there are far more similarities between the pricing and promotional strategies of AT&T, Verizon and T-Mobile than there are differences.
But AT&T's approach to iPhone promotions, its plans to update its brand, its hopes for "software to differentiate our products and services," and its interest in the upcoming Andromeda auction could all collectively pave the way for the operator to pick up the maverick "uncarrier" mantel that T-Mobile may be stepping away from.
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