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T-Mobile sweetens plan with free Netflix ahead of new iPhone

Bloomberg logoBloomberg 9/6/2017 Scott Moritz

Video by GoBankingRates

T-Mobile US will start including a Netflix Inc. subscription for customers who have at least two lines on an unlimited data plan, adding to evidence that a new front is opening up in the wireless wars, with video services being thrown in as bait for new subscribers.

New and current customers will get the standard Netflix video-streaming service, which costs about $10 a month, for no extra charge. T-Mobile is offering two unlimited plans for $100 a month, including taxes and fees. Chief Executive Officer John Legere announced the Netflix deal, an exclusive in the U.S., in a video Wednesday.

The move underscores the lengths wireless carriers are willing to go to attract new customers, with giveaways and price promotions starting to heat up ahead of the new iPhone arrival in the coming weeks. AT&T Inc. charges $145 a month for two lines on an unlimited HD plan that includes an HBO subscription. And Sprint Corp. granted six free months of Tidal, rapper Jay-Z’s music service, in which the company agreed to acquire a 33 percent stake in January.

“Unlimited calling, text and data are the table stakes in wireless -- now you have to differentiate on content,” said Roger Entner, an analyst with Recon Analytics LLC.

T-Mobile didn’t disclose terms of its Netflix deal, but Chief Operating Officer Mike Sievert said Netflix is providing the wireless carrier with a small discount off its $10 subscriber rate. The cost of the Netflix offer won’t affect T-Mobile’s earnings forecasts, said Chief Financial Officer Braxton Carter.

Still, the expenses will add up, showing “T-Mobile’s prioritizing growth over profitability,” Entner said. The promotion could cost T-Mobile about $125 million a quarter, said Walt Piecyk, an analyst at BTIG LLC.

Netflix shares rose 1.8 percent to $177.67 at 1:45 p.m. in New York Wednesday. T-Mobile was up less than 1 percent.

The giveaway reflects the industry’s preference to add more features to subscriptions rather than slash prices. That resolve could be tested when carriers start selling the latest iPhone, which is expected to be introduced Sept. 12 -- the same day T-Mobile’s Netflix offer goes into effect. The last time a new Apple Inc. phone was released, it spurred freebie phones from the four biggest wireless carriers that caused out-of-pocket expenses to swell.

Netflix, meanwhile, has been reaching more deals as it boosts its global expansion drive. European wireless carriers including Vodafone Group Plc and SFR Group SA have included Netflix in subscription packages for a limited time.

“With T-Mobile now paying the monthly bill, the risk of seasonal churn and hence higher revenue growth for Netflix is clear,” Piecyk said Wednesday in a note. “The marketing dollars that T-Mobile will spend promoting this offer will also be a clear benefit to cementing Netflix as one necessary source of content in the future of consumer consumption.”

T-Mobile’s unlimited-data plans start at $100 for two lines for DVD-quality video. For an additional $5 per line, customers can get high-definition video. Last month, Verizon Communications Inc. replaced its $80 unlimited plan with one starting at $75 for standard-quality video and the higher-tier priced at $85 for HD. Sprint’s unlimited plan starts at $50 for a single line.

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