T-Mobile Gets Squeezed, Saved by AT&T

T-Mobile lost nearly 100,000 customers in the first quarter, as the company finds itself crunched between higher-end competitors like AT&T and Verizon, and lower-end carriers like Cricket and MetroPCS.

The Bellevue, Wash.-based carrier’s profits also fell by $200 million from the year before, compounding the bad news. But, on a bright note, its 4G network is taking off and currently covers more than 200 million people around the U.S.

Although plans are in the works for a $39 billion merger with AT&T, T-Mobile said it will compete until the deal is done, despite lacking the popular, high-end products, like the iPhone, which larger carriers offer.

The pending merger is casting a shadow on T-Mobile’s financial picture. Declining profits may reflect fleeing subscribers who aren’t keen on becoming AT&T customers.

T-Mobile customers widely anticipate a rocky transition as everyone squeezes onto the same spectrum, a fear possibly fueling some defections. AT&T’s higher prices may also deter possible customers.

Besides high-end competitors, T-Mobile is facing difficulties from lower-end carriers. In January, T-Mobile began a strategy to compete with rivals like Cricket by marketing a number of Android phones under $100. But, given its first-quarter numbers, this strategy didn’t work as well as planned. In comparison, prepaid options from MetroPCS even doubled T-Mobile’s earnings last quarter.

With the economy still in the tank, many customers may choose prepaid options instead of pricier options from AT&T and Verizon. But even though T-Mobile kicked off its prepaid campaign last winter, its offerings don’t come close to rival Cricket’s $35 a month plan.

Squeezed from above and below, T-Mobile may be better off being acquired by AT&T.

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