AT&T Goes After T-Mobile With Attack Ads

Rivalry Between Telecoms Once Poised to Merge is Escalating

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AT&T took aim at T-Mobile USA's network performance in newspapers ads yesterday, escalating a rivalry between two companies that were once poised to merge.

Responding to unspecified claims by T-Mobile, AT&T ran a full-page counterattack in the New York Times, the Wall Street Journal and USA Today. The ads say T-Mobile drops twice as many calls and its network speeds are only half as fast as AT&T's.

Tension between the companies began to flare at the Consumer Electronics Show in Las Vegas in January, when T-Mobile Chief Executive Officer John Legere called AT&T's network "crap." Legere, who took over in September, has branded his company the "un-carrier" and vowed to shake up the industry. After seeing the new AT&T ad, T-Mobile said it was surprised and pleased by the attention being paid to a smaller competitor.

"Wow. Looks like we struck a chord," T-Mobile's chief marketing officer, Mike Sievert, said in an e-mail. "AT&T doth protest too much. Glad they're spending their money to print our name."

AT&T's ad budget is far larger than T-Mobile's with the former ranking as the fifth largest advertiser in the country per Ad Age's Datacenter rankings with $2.36 billion in spending, whereas T-Mobile doesn't even rank in the top 100.

In criticizing T-Mobile, AT&T is going after the industry's underdog by market share too. While Verizon Wireless and AT&T dominate the U.S. wireless market, T-Mobile is a distant No. 4. The Bellevue, Washington-based carrier, owned by German phone company Deutsche Telekom AG, lost 2.1 million subscribers last year, including 515,000 in the fourth quarter.

T-Mobile's recent ads have touted the speed and geographic reach of its new fourth-generation network.

"T-Mobile's advertising is a combination of misguided and just plain wrong," said Mark Siegel, a spokesman for Dallas- based AT&T. The newspaper ad was "just a friendly reminder of the fact that independent third-party testing says AT&T's network delivers faster speeds and fewer dropped calls than them."

The sharp response underscores a sensitivity to network quality issues that dates back about five years, when AT&T first rolled out Apple Inc.'s iPhone. While the device surged in popularity, so did complaints about AT&T's overburdened service.

AT&T's 4G network -- a speedier system using a technology called long-term evolution, or LTE -- has helped the carrier improve its reputation. Consumer Reports, which gives AT&T "middling to low marks" overall, cited the LTE network as a user favorite in its latest report.

AT&T had planned to shore up its network by acquiring T- Mobile in a $39 billion deal. The merger proposal was scuttled in 2011 after regulators raised concerns about diminishing competition in the industry. Since then, AT&T has been trying to piece together more network capacity through smaller deals.

T-Mobile, meanwhile, announced plans in October to merge with MetroPCS Communications Inc. (PCS), a smaller carrier that focuses on prepaid customers.

--Bloomberg News, with additional reporting from Ad Age

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