Mobile Price War: AT&T Offers $500 to DirecTV Customers

AT&T (NYSE:T) is offering as much as $500 to DirecTV and U-verse customers who switch their wireless service to AT&T, marking the latest move in the fight for mobile users.

Current subscribers of DirecTV or U-verse, AT&T’s wireline TV service, will receive a $300 bill credit for each mobile line they switch over, as long as they buy a smartphone through AT&T Next, a monthly payment alternative to two-year contracts.

Another $200 is available to customers who trade in an eligible smartphone. Those customers will receive trade-in credit or a promotion card.

The nation’s No. 2 mobile carrier, which completed its acquisition of DirecTV last month, said Monday the limited-time promotion can be coupled with an existing $10-per-month discount for customers who combine TV and wireless services on a single monthly AT&T bill.

The deal was announced on the heels of Verizon’s (NYSE:VZ) decision to scrap phone subsidies and two-year contracts amid a tense competition for mobile subscribers.

On Friday, Verizon announced changes to its smartphone plans for new subscribers. The top U.S. carrier will eliminate service contracts, which carry early termination fees. In exchange, customers who purchase a smartphone must pay the full price under a monthly payment plan.

Verizon said the new structure allows customers to upgrade their smartphones and seek trade-in credit as soon as they pay off their old device.

T-Mobile (NYSE:TMUS) and other carriers have been shifting away from traditional two-year contracts, hoping that added flexibility and cheaper rates will attract consumers. Smartphones are discounted, sometimes by a large margin, when customers commit to the service for two years.

For example, an Apple (NASDAQ:AAPL) iPhone 6 with 16 gigabytes of storage, which has a regular price of $649.99, costs as little as $21.67 a month for 30 months through AT&T Next, according to the carrier’s website. The same phone is available for a one-time cost of $199.99 under a two-year contract. As an incentive, the monthly payment plan includes smaller service fees.

T-Mobile has used no-contract plans to great effect. The fourth-largest mobile provider is catching up to No. 3 Sprint (NYSE:S) as T-Mobile’s subscriber numbers continue to grow. T-Mobile was the first major carrier to drop two-year contracts about two years ago.

The competition from T-Mobile has helped fuel a price war among the larger rivals. Wireless growth has been hard to come by, with AT&T recently reporting a decline in the number of postpaid wireless subscribers it added in the second quarter.

Looking to attract DirecTV viewers to its mobile plans, AT&T said last week it will start offering quad-play bundles that include its wireless, home phone and Internet service with DirecTV satellite television.

The “All in One Plan” includes high-definition and DVR service for four TVs and unlimited talk and text for four smartphone lines with 10 gigabytes of shared data. The Dallas-based company is offering the plan for a promotional price of $200 a month for 12 months.