By Liana B. Baker and Sinead Carew
LAS VEGAS/NEW YORK, Jan 8 (Reuters) - T-Mobile US on Wednesday reported a fourth-quarter boost in customer growthand offered to pay customers to switch from rival services,escalating already intense competition in the U.S. wirelessmarket.
The No. 4 U.S. mobile operator, promised payments of up to$350 per line to cover early termination fees for consumers whobreak their contract with bigger rivals and switch to T-Mobile.
The offer came just days after AT&T Inc promised a$200 credit to T-Mobile customers who switch. While AT&T alsooffered up to $250 for switching customers who trade in theirphone, T-Mobile said it would pay up to $300 for trade-ins.
The companies have been targeting each other because theyuse the same network technology, making it easy for consumers tobring their phones when they switch, but some on Wall Street areconcerned they will cause an industry-wide price war.
The latest offer from T-Mobile also targets customers withVerizon Wireless and Sprint Corp, which isreportedly interested in buying T-Mobile.
T-Mobile said it hoped the cash offer would lead wholefamilies as well as individuals to switch to its service,because contract termination fees are one of the biggeststumbling blocks against families switching service.
John Legere, the outspoken chief executive officer ofT-Mobile, said he hoped the offer would end the "industry scam"of family plans, which tie entire families into long-termcontracts.
Legere joked that AT&T's recent offer would actually play toT-Mobile's advantage because it would allow AT&T customers totry a different service with less financial risk than before.
"If it doesn't work they'll pay you to come back," Legeresaid in announcing the offer at the Consumer Electronics Show inLas Vegas.
And because termination fees are reduced the further acustomer is into a two-year contract when they want to switch,Chief Financial Officer Braxton Carter estimated that T-Mobilewill end up paying less than $200 on average for switchers.
He told Reuters that while the offer may put short-termpressure on margins because it involves upfront payments, itwould help the company in the long term.
"Overall this puts us in a better position to achieve andmaybe exceed our guidance," Carter said, referring to thecompany's three-to-five year financial targets.
Carter reiterated T-Mobile's long-term target for revenuegrowth in a range of 3 percent to 5 percent and a growth rate of7 percent to 10 percent for earnings before interest, tax,depreciation and amortization.
T-Mobile, which is 67 percent owned by Deutsche Telekom, managed to turn the corner on four years ofcustomers losses in 2013 by criticizing its rivals and promotingits service plans as being more flexible and consumer friendly.
It said it added 1.645 million net customers in the fourthquarter, up from 1.023 million in the quarter before, markingits third quarter of customer growth for 2013.
The fourth-quarter additions included 869,000 valuablepost-paid customers, which was up 13 percent from the thirdquarter, according to the company.
It said customer defections, known in the industry as churn,stayed at third-quarter levels of 1.7 percent and compared with2.5 percent in the fourth quarter of 2012.
Some analysts have argued that T-Mobile is reducing itschance at being bought by Sprint because anti-trust regulatorswould be unlikely to approve a deal that eliminates theindustry's most aggressive competitor.
But Carter dismissed the concern.
"We're running this business for the long term. We're notrunning it for a strategic transaction," he said. But theexecutive said that he believes consolidation in the industry is"inevitable" and that "it's not a question of if but when."
Vodafone (VOD)
