Price Wars Only Help Proactive Enterprises

Sprint is escalating the wireless carriers’ price war with new drama by now offering DirecTV customers an entire year of free smartphone service! In effect, this is Sprint’s attempt to create a bundle of wireless and cable services for its customers even though Sprint – unlike Verizon and AT&T – is not part of a company that offers cable service. It is also Sprint’s response to AT&T’s current $500 bounty for DirecTV subscribers that switch to its wireless service.

The price wars started about a year ago when T-Mobile began paying consumers hundreds of dollars to switch to its service. Until AT&T’s latest DirecTV promotion, AT&T and Verizon had limited their counter moves to minor concessions such as offers of larger data plans for prices comparable to what they were charging before the promotion.

Most of the activities in these price wars have neglected two important areas. First, while prices have dropped for wireless services, smartphone subsidies have also been cut. In many cases, customers are paying the same or a little more each month to make up for the lost smartphone subsidy. For AT&T, 68% of its new smartphone subscriptions in the second quarter now have consumers paying for their smartphone in monthly increments with no two year commitment. Verizon’s program has reached 49% of its new activations.

Secondly, these moves have focused primarily on consumers. Enterprise customers may have been left out of the current promotions, but carriers are aggressively searching for new business. Large blocks of new enterprise business appeal to carrier reps that are paid for adding new customers. Telecom managers that have accurate inventory and records for when contracts are expiring, are well positioned to take advantage of lower prices for wireless services and negotiate for better deals. Those that are proactive and have telecom inventory organized are best positioned to take advantage of this new competitive environment.

Unfortunately, unless carriers sense that their business is at risk, they will not reduce prices for existing customers. Enterprises that have accurate information regarding their telecom spend for mobile services are well positioned to request competitive concessions. When incumbent mobile providers see that their business is at risk, enterprises may find it possible to obtain reduced prices for existing business.