T-Mobile Can't Cut Prices Because That Would Prove They Are Competing With AT&T

Last spring when the first Senate hearings were held regarding AT&T’s pending purchase of T-Mobile USA, the folks at the Death Star repeatedly stated that they weren’t trying to eliminate competition because they don’t view the much smaller T-Mobile as competition. Unfortunately for T-Mobile, having to keep up that charade while AT&T fights the Justice Dept.’s attempt to block the deal could result in the loss of millions of customers.

The problem, reports Bloomberg, is that T-Mobile can’t cut their prices to gain new customers because any price slashing would lend credence to the DOJ’s allegation that T-Mobile’s continued existence helps keep the market competitive.

“Cutting prices at this point would be very difficult because the DOJ has said their strategic importance stems from their role as a price cutter,” says one industry analyst.

Another analyst pointed to customer uncertainty over the deal as a factor that is hurting T-Mobile’s immediate outlook.

“T-Mobile is already in a difficult spot from a consumer perspective,” said the analyst. “People will ask themselves, ‘Am I really going to sign a two-year contract with a company that may be on life support if the deal doesn’t go through?’”

In all, Bloomberg surveyed six analysts to get their predictions on what will happen while the AT&T deal is still looming over everyone’s heads. And between the lack of price cuts and general customer uncertainty, they foresee a tripling in the amount of contract customers T-Mobile loses each month, from 390,000 to 1.2 million. Even the most conservative estimate was still just under 1 million customers lost each month.

As we reported earlier this week, T-Mobile has teamed up with Walmart to offer no-contract 4G service for only $30/month. But while the analysts agree that this will result in an increase of pre-paid customers, they don’t think it will be enough to offset the contract customer losses.

T-Mobile Client Losses May Triple on AT&T Deal [Bloomberg]