AT&T Fights To Keep Customers

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There's no love lost between AT&T and T-Mobile, the nation's first- and fourth-largest wireless network operators, respectively. T-Mobile CEO John Legere has been taking potshots at the larger carrier for more than a year, taunting its leaders and even going so far as to issue fake press releases. At stake? Your money. With the US wireless market nearly saturated, the only way for carriers to win new business is to steal it from competitors.

T-Mobile has been aggressively courting AT&T's customers with financial enticements, and now AT&T has responded in kind. On Wednesday, AT&T kicked off a promotion that will give customers $100 for activating a new line of service. The credit can be applied to any line, be it a smartphone, regular phone, tablet, hotspot, or wireless home phone. The promotion, which runs through March 31, applies to both new and existing customers, no matter which carrier they come from.

Earlier this month, AT&T targeted T-Mobile's customers more directly, offering T-Mobile customers up to $450 in account credit to switch to AT&T. AT&T will also pay up to $250 for device trade-ins (depending on the condition of the device) and another $200 credit for porting their numbers from T-Mobile. In order to earn the $200 credit, however, T-Mobile customers must activate an AT&T Next plan (the carrier's most expensive), buy a device at full price (often costly), or activate a device they already own. This offer is available only for a limited time.

[Samsung and Apple led the pack of smartphone shipments last year -- and that's billion with a b. Read 1 Billion Smartphones Shipped In 2013.]

T-Mobile responded less than a week later with its "Get Out of Jail Free Card" promotion, in which T-Mobile will pay the early termination fees for customers who switch from AT&T, Sprint, or Verizon Wireless. T-Mobile said it will cover up to $350 for the early termination fees (ETFs) plus another $300 for device trade-ins, putting the company on the hook for as much as $650 to win over some customers. (T-Mobile insists the economics behind the plan are sound.) ETFs decrease over time, so T-Mobile's actual ETF payout for those who switch will likely be much lower than $350.

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All three of these promotions underscore just how desperate the carriers are to win new customers. Though the ETF payout has been previously offered by carriers on occasion, the tactic has often been frowned upon, as it in effect amounts to a bounty to score subscribers. Any reservations the carriers may have had about paying for new customers has now been tossed out the window.

The metric used to describe loss of customers is called "churn." The lower the churn, the fewer customers are leaving and heading somewhere else. AT&T reported churn of just 1.1% for post-paid accounts during the fourth quarter of 2013 -- a record low for AT&T. Conversely, T-Mobile's churn came in at 1.7%. The percentages can be a bit deceiving, however. AT&T has more than twice as many customers as T-Mobile, so that 1.1% reflects a greater number of actual customers leaving. Meanwhile, Verizon reported fourth-quarter post-paid churn of just 0.96%. (Sprint isn't due to announce fourth-quarter results until February 11.)

Potential customers need to think about more than the dollars and cents when weighing whether or not to jump carriers. Sure, that upfront account credit looks appealing, but how do the service plans add up? What about coverage at home and work? And don't forget about device selection and other associated costs.

In the war for customers, consumers may very well come out on top. How the carriers will fare isn't quite so clear.

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