Image source: T-Mobile US, June 3, 2022
T-Mobile US ( TMUS ) investors are generally satisfied but are now wondering why the company is not raising prices like Verizon Wireless ( VZ ) and AT&T Mobility ( T ) are. Over time, prices have been increasing year after year. Recently, with inflation, they have been skyrocketing, impacting most things we buy. Wireless is no exception. So, why is T-Mobile not raising rates? Is it a marketing strategy? Will that change? Does it run a tighter ship? Let’s take a closer look.
First, let’s discuss what causes rising prices.
There are many reasons, including that, when we increase minimum wages, the costs of delivering products also increases. If the costs of making and providing goods and services goes up, those increases are passed along to the marketplace. It has always been that way.
Higher wages and inflation cause prices to rise
Inflation is another wrinkle. This has been roaring over the past year. Inflation increases the cost of producing and providing goods and services. Therefore, it also has an upward pressure on pricing.
What is causing this current inflation wave? One obvious reason is the rising price of oil and gas. As the price of energy has increased, it costs more to deliver and produce everything. Period.
All of these reasons and more create an upward climb in cost pressure of providing products and services.
In fact, that’s all we all hear every day on the news. So, if that’s the case, it’s unfortunate, but also understandable that wireless services from Verizon Wireless and AT&T Mobility are increasing prices, right?
Why Verizon and AT&T are raising prices on wireless services
But wait. If Verizon and AT&T are raising their prices, why isn’t T-Mobile? Something is happening, but what?
Perhaps T-Mobile better manages its costs. Perhaps it’s a marketing move to make it look more attractive to the customer. Perhaps this is just a temporary delay. Who knows?
Whatever the reason, as we go further into uncertain economic times, customers are becoming more wary of overpaying for everything. They are looking for lower prices on the same products and services.
Perhaps, Verizon and AT&T see the writing on the wall. Perhaps they see the prices of so many other products and services going up and see this as a great moment to increase their prices without attracting much negative attention to the move.
No one really knows the thinking and the strategy behind why some wireless carriers are raising prices and others are not.
How will not raising prices affect T-Mobile investors?
This may or may not be a long-term issue. We will just have to wait and see. Over time, I have seen many changes in wireless. Some changes stick, while others don’t.
Will these price increases stick, or will Verizon and AT&T ultimately go back to traditional pricing?
Sure, we can’t blame Verizon and AT&T for wanting to increase prices in order to reward investors, but there is a delicate balance between keeping the customer happy and rewarding the investor.
Companies that only focus on the investor and not the customer typically win up front, but lose in the long-term.
Companies who focus on both the investor and the customer typically fare better in the long run.
Why T-Mobile is not raising prices like Verizon Wireless, AT&T Mobility
Herb Kelleher, co-founder and former CEO of Southwest Airlines ( LUV ), had the right attitude and strategy. He always said, first, take great care of your people. Then, they will take great care of your customers. Then ultimately, the investor will be happy. This is a winning strategy.
This deceptively simple strategy of keeping the customer happy first, and that leading to the investor being rewarded, is one of the most important things every CEO must learn if they want to be successful in the long-term.
So, for whatever the reason, T-Mobile is winning this marketing battle. It is standing out by standing its ground, not raising its prices and keeping its customers happy — which will ultimately reward its investors.
We will have to continue to watch this industry move over time. See whether this is strategy is short or long term.
In the meantime, however, T-Mobile looks like it is on the side of the customer. That will ultimately reward the investor… and there is nothing wrong with that strategy.
Jeff Kagan is an Equities News columnist. Kagan is a Wireless Analyst, Technology Analyst and Commentator who follows Telecom, Pay TV, Cloud, AI, IoT, TeleHealth, Healthcare, Automotive, Self-Driving cars and more. Email him at [email protected]. His web site is www.jeffKAGAN.com. Follow him on Twitter @jeffkagan and on LinkedIn at www.linkedin.com/in/jeff-kagan/.
Equities News Columnist: Jeff Kagan
Source: Equities News