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Get Ready for Higher Cellphone Bills in 2018

The Wall Street Journal logo The Wall Street Journal 2/8/2018 Drew FitzGerald

Cheap wireless plans might be harder to find this year.

The two most aggressive U.S. wireless carriers, Sprint Corp. and T-Mobile US Inc., are signaling they will scale back discounting this year after a failed attempt to combine their businesses.

Sprint, the No. 4 carrier by subscribers, last week said it would only chase new customers it considers profitable. No. 3 T-Mobile said Thursday it will also be more selective with the deals it offers as it focuses on boosting cash flow while still growing its customer base.

“We think our shareholders are looking for both. They don’t want a trade-off.” T-Mobile Chief Operating Officer Mike Sievert said in an interview. ”In any given quarter, we could choose to grow more than we grow.”

T-Mobile’s more cautious stance showed in its outlook for the year. The company said it plans to add 2 million to 3 million postpaid customers in 2018, a step back from the 3.6 million it gained last year.

The forecast “takes into account our desire to balance growth and profitability,” Chief Financial Officer Braxton Carter said in a conference call with analysts, adding that T-Mobile’s push into rural areas would provide enough new sign-ups to “afford us the opportunity to be less promotional in existing markets.”

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The moves come after both companies in November abandoned plans to merge after months of talks. The aborted consolidation attempt meant the U.S. will continue to have four nationwide wireless carriers vying for customers’ wallets, at least for the foreseeable future.

The market leaders, Verizon Communications Inc. and AT&T Inc., have responded to smaller rivals’ promotions by offering unlimited data plans, which muted a key marketing message for T-Mobile. AT&T has also hawked bundles of its wireless plans with TV services it owns.

There were signs earlier last year that the wireless industry might dial back its aggressive pursuit of new customers. Carriers decided to avoid offering free iPhones to customers trading in old models after maker Apple Inc. released even more expensive devices. Sprint Chief Executive Marcelo Claure said at the time he would prefer that manufacturers pick up more of the tab for customers’ hardware.

The plateauing prices come a year after promotions became so aggressive the Federal Reserve said falling wireless prices may have contributed to low inflation.  

Mr. Claure recently said the company won’t act as aggressively when customers’ promotional offers expire because the service’s quality is improving.

“We’re going to have a lot of room to increase our price of unlimited to get to similar prices, as Verizon and AT&T in the future,” the Sprint CEO said last week in a call with analysts. “You get that by having an amazing network.”

This wouldn’t be the first time wireless companies have promised investors they would be more judicious with promotions, only to fold when competition heats up.

AT&T last year offered a buy-one-get-one free iPhone promotion that added to costs but helped fuel a stronger-than-expected gain of 329,000 postpaid phone customers. Wireless companies tend to prefer those subscribers who pay after using monthly service, rather than ahead of time, because they tend to stay customers for longer.

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