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T-Mobile Cuts Roaming Costs: Will Rivals Answer The Call?

James Dennin, Kapitall: T-Mobile is eliminating roaming costs to court international customers. Will anyone pick up?

Globe-trotting  T-Mobile (TMUS) customers are about to see their phone bills plunge. In an effort to court international and corporate customers who travel frequently, the wireless company is dropping roaming charges and allowing its customers to pay a low, flat rate for calls worldwide.

[Read more from Kapitall: Memory Prices on the Surge: Will These Semiconductor Stocks Surge]

Roaming costs – an industry standard – can add as much as 90% to a phone bill. According to the company, customers who amass roaming chargers at rival AT&T (T) would pay a whopping $1500 for a combination of data usage, texting, and phone calls abroad. 

Patrons of T-Mobile's plan would only pay about $6.40.

Inflationary rhetoric aside, that's a pretty hefty price drop. And while AT&T has a number of international plans to lower the cost significantly, nothing in the industry approaches T-Mobile's rate.
  • T-Mobile will also offer data service for free (although it'll be slower). 
  • And T-Mobile customers can purchase unlimited calls to about a hundred different countries for a flat rate of about $10 a month.

There is no doubt that these offerings will drastically reduce T-Mobile's revenue. But that's not necessarily a problem. The company is already owned by the much larger Deutsche Telekom AG (OTC), whose European operations could possibly provide a buffer against the losses T-Mobile could incur by charging so much less for calls placed across the pond. 

As the third largest wireless provider in the country, T-Mobile is all about market disruption. It cannot grow if it can't figure out ways to cut into Verizon's (VZ) dominant market share in the US, or AT&T's stronger presence overseas. And if the globe-trotting set doesn't sound like a very large demographic, offering cheap international service could be a way for T-Mobile to court lucrative corporate contracts, in addition to disrupting business for its competitors.

These moves have a tendency to percolate throughout the market. Shortly after T-Mobile introduced Jump, its program for unlimited smartphone upgrades, it wasn't long before competitors starting offering similar programs of their own.

So to my friends overseas: call me, maybe. Or should I say telephonez-moi?

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