T-Mobile aims to lure new customers by paying their termination fees, reports subscriber gains
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LAS VEGAS (AP) — T-Mobile US Inc., the country's fourth-largest wireless carrier, is aiming to lure subscribers from rivals by paying the fees required to break their service contracts.
Wednesday's announcement, at the International CES gadget show in Las Vegas, is the next step in T-Mobile's campaign to bolster its fortunes by shaking up conventions in the wireless industry. The strategy appears to be working: T-Mobile reported solid subscriber gains for the last three months of 2013. It started gaining subscribers last year after several years of losses to larger carriers AT&T Inc. and Verizon Wireless.
T-Mobile CEO John Legere said the company will pay early termination fees of up to $300 per line for people who switch from other companies.
"It's part of the overall industry scam," Legere said of early termination fees. "What we are going to do is force the industry to change."
T-Mobile eliminated early termination fees and service contracts last year. Instead, customers buy phones on installment plans and pay month to month for service. If they want to cancel service, they have to pay off the balance on their phones.
The initiative to pay switchers comes after AT&T Inc. said last week that it would pay $200 to people who switch — but only if they switch from T-Mobile. AT&T bills it as a limited-time offer.
The T-Mobile offer is indefinite.
"This one is here to stay," the CEO said. "This is becoming a fundamental part of our philosophy."
Legere and AT&T are in a bit of a feud: the flashy CEO went to an AT&T party in Las Vegas on Monday and was ejected by security. Legere said he and T-Mobile's chief financial officer had been given tickets by the manager of Macklemore, the rap artist who performed at the party. When Legere was encircled by huge security guards, CFO Braxton Carter hid in the bathroom, Legere said.
"Do you have any idea how much material you're going to give me if you do this?" Legere asked the security personnel. He was still thrown out, and as he guessed, the incident got a lot of attention. AT&T hasn't commented on it.
T-Mobile said it gained 1.6 million subscribers in the fourth quarter, helped by the elimination of service contracts and data fees when roaming abroad. Legere said the company is gaining at least two subscribers from AT&T and Sprint for each customer departing for those carriers. In relation to Verizon, it's gaining 1.3 customers for each one lost.