United States Cellular Corporation USM has launched a new promotional plan that provides its subscribers with unlimited talk, unlimited text, tethering and 6GB of data for only $40 a month. Moreover, for customers willing to switch over to its network, U.S. Cellular will offer an additional $150 promotional card. Customers opting to trade in a smartphone with the carrier will get a further $150 as reward, which will take their share of the promotional offer to $300. The offer is well-timed as it comes in the mid of a situation where every other major wireless carrier is offering similar promotional offers, in a bid to poach rivals’ subscribers.
The Strategy
Although somewhat similar to other existing plans in the market, what differentiates U.S. Cellular’s offering is that the carrier has retained the traditional two-year contract. While its major rivals like Verizon Communications Inc. VZ”>VZ, Sprint Corp. S, T-Mobile US Inc. TMUS and AT&T Inc. T have recently skewed in favor of leasing their mobile devices, U.S. Cellular is still focused on subsidizing its device which compels a potential subscriber to accept the contract. While this may be an apparent turn-off for customers, U.S. Cellular aims to compensate for this by supplementing the deal with gift cards of up to $300. Additionally, in order to lure customers, the carrier also has a referral program that awards $50 service credits to both the new as well as the referring customer.
The Bottom Line
A saturating telecom market has led switching costs in the industry to decline in recent times, giving customers’ a wider choice to select between multiple wireless operators. While U.S Cellular’s offering is fairly lucrative, especially compared to that of the plans of other leading carriers that have significantly lower data allowances; forcing new subscribers into a two-year fixed contract may not bode well among potential customers, particularly when the industry is moving toward more flexible device leasing plans. However, with other equally attractive bonuses in place, it remains to be seen whether this Zacks Rank #1 (Strong Buy) company can provide a challenge to its bigger rivals in competing for a larger customer base.
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