T-Mobile Takes a Shot at AT&T With Free DIRECTV NOW Offer

By Daniel B. Kline Markets Fool.com

T-Mobile (NASDAQ: TMUS) forced its way into becoming a major player in the wireless industry by relentlessly attacking the big dogs in its space,AT&T (NYSE: T) and Verizon (NYSE: VZ). The company has used the same strategy Howard Stern did back in his terrestrial radio days. When the outspoken talk show host entered a new market in syndication he immediately started talking about whatever show topped the local ratings. By steadily mocking his competition, Stern pushed his own brand while making his rivals seem uncool.

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It's a strategy that works if you actually have a superior product. T-Mobile can argue that it does, or at least that it costs less, offers more perks, and has a put-people-first policy that compares favorably to what its CEO John Legere might argue are AT&T's and Verizon's put-profits-first policies.

Legere loves to tweak his rivals by mocking their every move and pointing out when they do something that's not consumer-friendly. Now the CEO has targeted AT&T's efforts to use its new DIRECTV NOW product to keep and gain new wireless customers by letting subscribers stream the service without any data counting against their caps.

That's a smart way to entice people to pay for wireless service and DIRECTV NOW, but T-Mobile has decided to up the ante. The Un-carrier is trying to beat AT&T at its own game by offering any of its customers who switch to T-Mobile a free year of DIRECTV NOW.

Legere has been very aggressive when it comes to going after rivals. Image source: T-Mobile.

What is T-Mobile doing?

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AT&T offers unlimited dataonly to customers who bundle the DIRECTV satellite service and wireless along with a small number of users on grandfathered plans. That makes not counting DIRECTV NOW, a cable-like streaming service, against its data caps valuable to its customers.

T-Mobile does not have data caps on any of its new plans (though it does slow down data delivery speeds during congested times for the top 3% of data users). Because of that, T-Mobile customers who subscribe to DIRECTV NOW don't need the data to not count against their cap, so the company has upped AT&T's offer by giving anyone who switches from the company to T-Mobile a free year of the streaming service. You have to activate two lines and bring your number to T-Mobile. Legere's company will do that by offering the new subscribers a $35 monthly credit to cover the cost of the streaming service.

"Both DIRECTV NOW and the DIRECTV apps stream free on T-Mobile with a faster, more advanced network that covers nearly every American," said Legere in a press release. "AT&T is so distracted by their new businesses and DIRECTV that they continue to ignore their 110 million wireless customers. Luckily, the Un-carrier's here to show them how to actually take care of customers!"

Will this work?

T-Mobile has shown that going after AT&T and Verizon works. The company added 2 million customers in Q3, which makes 14 straight quarters of adding at least 1 million. The Un-carrier also said in its third-quarter earnings release that its 13.2% growth in service revenues made it the industry leader for the 10th consecutive quarter while its 17.8% gain in total revenue made it the industry leader in growth for the 13th time in the past 14 quarters

Clearly the company's strategy has worked and in this case it's offering a better deal than AT&T. T-Mobile already has lower prices, unlimited rather than capped data, and a comparable network. Throwing in a year of DIRECTV NOW should give AT&T customers even more reason to switch.

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Daniel Kline has no position in any stocks mentioned. He has never seen Frozen. The Motley Fool recommends T-Mobile US and Verizon Communications. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.