T-Mobile hangs up its 'deceptive' ad campaign
The wireless carrier must now rethink its strategy after Washington state's attorney general put the kibosh on its marketing approach.
By Jonathan Berr 1 hour ago
T-Mobile, the fourth-largest wireless provider, thought it had come up with a winning strategy to retake customers from AT&T (T -0.91%) and Verizon Wireless (VZ) by marketing itself as the hassle-free "un-carrier." Too bad Washington state Attorney General Bob Ferguson found the ads to be "deceptive," and now the company has agreed to a court order to change its tune.Under T-Mobile's "no-contract" plan, customers were required to buy their own phone, though they could pay off their balance over a two-year period. The company didn't properly disclose to customers that they were required to carry a wireless service for the entire period or pay the full balance owed on the phone if they canceled their order earlier. Customers who purchased T-Mobile service and equipment between March 26 and April 25 are eligible for refunds. For its part, T-Mobile denies wrongdoing.
The question for the Deutsche Telekom wireless unit is what to do now to gain an edge in the fiercely competitive wireless market.
Last year, AT&T's plan to acquire T-Mobile was quashed by the U.S. Department of Justice on antitrust grounds. T-Mobile is now in the process of acquiring No. 5 player MetroPCS (PCS -1.00%), and it began carrying the Apple(AAPL +1.19%) iPhone April 12, so things are starting to look a bit better.
As TechCrunch recently noted, T-Mobile is losing fewer customers, particularly the lucrative postpaid customers. Nonetheless, it's still losing them, bleeding 199,000 in the most recent quarter. The carrier is also picking up more prepaid customers, gaining 1.7 million over the past seven quarters.
Its rivals, however, did better.
AT&T added 296,000 wireless customers in the second quarter. The company's wireless margins were its best ever, and its churn rate -- a measure of how many customers quit -- hit a record low.
Verizon, which may be buying out Vodofone's (VOD +0.33%) stake in Verizon Wireless, added 677,000 retail postpaid net connections. The company's customer additions on this basis increased sequentially in every quarter last year, and it expects to repeat that trend this year.
Sprint (S +0.42%), the third-largest carrier, is the subject of a takeover war between Japan's Softbank and John Malone's Dish Network (DISH -0.30%). It continues to struggle as well, losing about 560,000 subscribers in the latest quarter, worse than analysts expected.
Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.
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