T-Mobile US Inc. (TMUS - Free Report) , with its diverse postpaid wireless plans, has emerged as a major contender in a saturated and intensely competitive market.
This national provider of mobile communications services is making its unlimited postpaid wireless service, T-Mobile ONE, more attractive with the inclusion of services from online video streaming service provider, Netflix Inc. (NFLX - Free Report) . Currently, both T-Mobile US and Netflix carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Effective Sep 12, customers with at least two lines on T-Mobile US' One family plan will be able to activate a standard Netflix subscription with no extra charges along with unlimited data for just $40 per line for a family of four (inclusive of all taxes and fees). The offer is open to both existing and new customers. Subscribers who already have a Netflix account can avail this offer as well.
For customers that already have Netflix accounts, T-Mobile US has promised to cover the cost of subscription — a deal that’s worth $120 every year. The promotion is part of what the company calls its “Un-carrier” strategy, which is an effort to challenge mobile carrier conventions.
“The future of mobile entertainment is not about bolting a satellite dish to the side of your house or resuscitating faded 90s dotcoms. The future is mobile, over-the-top and unlimited,” said John Legere, president and CEO of T-Mobile US.
The latest offering is one of the several low-priced service plans and promotional moves which T-Mobile US has undertaken to lure more subscribers from competitors like AT&T Inc. (T - Free Report) and Verizon Communications Inc. (VZ - Free Report) . Although the company has increased its top line by adding customers, but the costs incurred to bear marketing campaigns and advertisements are likely to affect margins.
Similar Moves by Other Carriers
In April 2017, U.S. telecom behemoth, AT&T unveiled its plans about bundling a subscription of HBO with its Unlimited Plus wireless service at no extra cost. Prior to this, AT&T had also chalked other promotional offers, giving free access to HBO for a year on it’s over the top (OTT) online streaming service, DirecTV Now.
We are well aware of the ongoing massive consolidation between wireless companies and cable TV operators (to strengthen their base). The latest initiative by T-Mobile US marks the beginning of such consolidation between wireless operators and online video streaming service providers.
Again, we know that the cable TV operators have been losing customers to wireless telecom operators and online streaming service providers. This is because of the extensive network of fiber-based video services from telecom operators and the cheap source of TV programming from the online video streaming providers such as Netflix, Hulu.com, YouTube etc. Per a FierceCable report, traditional pay-TV services, including cable and satellite, lost 976,000 customers in the recently reported second-quarter 2017, due to cord cutting.
In order to cope up with the loss and remain competitive in the market, cable companies like Comcast and Charter are jointly venturing into U.S. wireless services business, competing head to head with market incumbents like AT&T and Verizon Communications. Comcast recently completed the nationwide rollout of its wireless services under the Xfinity Mobile brand, while Charter plans to offer wireless service in 2018.
Amid such mixed consolidation issues between wireless, cable TV operators and online video streaming service providers, we await to see what the future unfolds and how does each of the operators individually benefit from their respective business moves.
The company's price performance has been impressive. Over the past six months, shares of T-Mobile US have inched up 3.8% as compared with the industry’s decline of 7.1%.
However, when compared with the market at large, the stock’s performance looks miserable, as the S&P 500 index has rallied 4.2%, over the same time span.
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