Why T-Mobile's New Tablet Offer May Hit AT&T Where It Hurts

 
 
By Michelle Maisto  |  Posted 2013-10-24
 
 
 

Hours before AT&T released its 2013 third-quarter results, T-Mobile CEO John Legere, who hasn't been shy about his plan to win over AT&T's customers (who hasn't been shy about anything, period), announced that T-Mobile was again shaking up the wireless industry, this time by encouraging people to use tablets the way they were meant to be used—with a cellular connection.

T-Mobile will soon begin selling Apple's new iPads and offering all the tablets in its portfolio with monthly payment plans and no money down. It will also accept any device for trade-in toward the cost of a T-Mobile tablet and—the kicker—is offering all tablet users, T-Mobile subscribers or not, 200MB per month of free data.

While T-Mobile is happy to sell tablet users additional data—it's offering daily passes for $5 and weekly passes for $10, among other deals—Legere called the 200MB "no small amount," explaining that it's enough to send 2,500 emails, 3,400 Tweets or post 540 times to Facebook.

Legere also said that, with tablet sales outpacing PCs, its silly that they're not connected all the time, like PCs, and so T-Mobile was eliminating the main reason tablet buyers tend to default to WiFi-only models: a fear of data overages.

The tablet strategy is likely to win T-Mobile some AT&T customers, surely part of its intention. But it wasn't until AT&T's earnings announcement hours later that it became clear that T-Mobile was hitting AT&T where it hurts most.

During its third quarter, AT&T added "nearly 1 million net subscribers," it said Oct. 23, but only 178,000 of these were actually postpaid smartphones—customers signing up for new two-year agreements. Shockingly, AT&T sold more than twice as many postpaid tablets—388,000, it announced.

"This is going to be a big hit for AT&T over the next few quarters, unless it comes out with a similar free tablet data offering," Eric Costa, an analyst with Technology Business Research, told eWEEK.

"T-Mobile is very aggressively targeting AT&T's growing tablet base with these new plans," Costa continued, "and I think it will be successful, at least in the short term, as AT&T is clearly relying heavily on tablets for growth."

Carolina Milanesi, a Gartner research vice president, said 200MB isn't much, given all that a tablet is capable of, but the deal "is certainly catchy for consumers, especially with the trade-in of a phone just before the holidays."

Overall, she added, "I think that T-Mobile's tactics will put pressure on the big guys to review their multi-device plans, as right now I think [tablets] are still too expensive for your average consumer and, given the low level of subsidy on the tablets, a hindering factor to uptake of cellular-enabled tablets."

Roger Kay, principal analyst with Endpoint Technologies, found the AT&T tablet figure to be odd, and wondered if it might be the result of a promotion, or weird quirk of the season. Still, he pointed out, tablets and smartphones are at different stages in their lifecycles, which means tablet growth is "quite high" right now.

"T-Mobile is the challenger in this case, and it's being aggressive," said Kay.

Calling Legere (kindly) "something of a wild man," Kay remarked, "I expect dramatic actions from Legere. He's going after a strong market and trying to deny some of that to AT&T." But, added, "I don't think they'll be that much of a force in hurting AT&T."

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