Next Tuesday was already going to be a pivotal day for wireless carriers, with Apple Inc.'s (AAPL) announcement of its 10th anniversary iPhone likely to spark a round of aggressive promotions that would set the tone through the holiday sales cycle.
But T-Mobile's (TMUS) new offer starting next week of free subscriptions to Netflix (NFLX) , which cost $9.99 per month, to customers of its family plan with at least two phones makes Tuesday an even bigger day. The deal opens another front in the battle for subscribers.
AT&T Inc. (T) in particular might feel compelled to respond, Roger Entner of Recon Analytics LLC suggested.
"This is T-Mobile's preemptive strike at AT&T," Entner said, noting that the Dallas telecom is trying to close its purchase of Time Warner Inc. (TWX) .
AT&T has made video streaming part of its hallmark. The carrier bundles its DirecTV Now video streaming package with its mobile service, cutting the price from $35 to $10 per month for its wireless subscribers.
"With this this move it basically almost [requires AT&T] to do something similar" to T-Mobile's offer, Entner said. Considering [the] subsidies it already offers, Entner suggested that AT&T could make DirecTV to Go free. "To go from $10 to zero is not that far," he said.
Since all four of the national wireless carriers now offer unlimited data plans, video has become a way for the telecoms to differentiate their services.
T-Mobile's deal is a sign that telecoms do not necessarily need to own content to use it as a promotional tool. The telecom will likely recoup the cost of subsidizing the Netflix accounts by reducing costumer defections and adding new subscribers, Simon Flannery of Morgan Stanley suggested in a note.
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CEO John Legere mocked Verizon's (VZ) acquisitions of AOL and Yahoo! in a press release announcing the Netflix deal, noting that "resuscitating faded 90s dotcoms" is not a plan for the future of wireless.
Verizon's Oath portfolio of digital brands includes Yahoo!, AOL, HuffPost, Tumblr, BUILD Studios, Yahoo Mail and other brands. The telecom's go90 wireless app has original programming, but nothing on the scale that AT&T is building with the acquisitions of DirecTV and Time Warner.
For its part, Sprint purchased a 33% stake in Jay Z's Tidal music streaming service earlier this year. The carrier provided subscribers early access to Jay Z's 4:44 album, and is giving out free tickets to to the 4:44 tour. The No. 4 carrier has largely focused on price cuts rather than video, however.
Meanwhile, T-Mobile is likely not done with promotions to lure customers from its rivals. "The iPhone launches are always big switching events," Legere said. "I wouldn't be surprised if there is a really aggressive promotion from T-Mobile on top of [the Netflix offer]."
Last year's iPhone subsidies ran $300 to $400 per device, MoffettNathanson LLC analyst Craig Moffett wrote in a report. With the new iPhone carrying a price of $1,000 or more, Comcast Corp. (CMCSA) entering the wireless business through a wholesale agreement with Verizon and other factors, Moffett suggested the subsidies could be even higher this year.
T-Mobile is on the offensive heading into Tuesday's big Apple event. The Netflix deal may shows that Legere feels the heat from AT&T, Verizon and Sprint more than he lets on. The telecom has led the industry in revenue growth for 16 of the past 17 quarters and reported the most net postpaid subscriber additions for six consecutive quarters. Legere does not want to lose that momentum.
"People don't just give away $10," Entner said. "You don't do this unless you really feel someone is breathing down your neck."