Litigations and regulatory charges are not new to the telecom
industry and this time around it is
T-Mobile USA Inc.
) that has been accused by the Federal Trade Commission (FTC) on
grounds of unauthorised billing. On Tuesday this week, the U.S.
authorities lodged a complaint against T-Mobile USA for cramming,
which is a practice of imposing unauthorized charges on telephone
The news affected the stock price of T-Mobile USA
which traded low and ended at $33.41 on Tuesday closing.
Reportedly, T-Mobile USA was charging customers for text
messages services like horoscopes or celebrity gossip, which often
cost $9.99 a month upon subscription. According to FCC, T-Mobile
USA received 35% to 45% of the amount. However, what was
significant here was that T-Mobile customers did not sign up for
these paid services or authorise any such payment. However, they
were wrongly charged and shown as subscribed without any prior
In addition, FTC mentioned that T-Mobile USA misled customers by
billing the third party charges under use charges and premium
services, not disclosing the amount.
FTC remains concerned that such malpractices are still in play
despite T-Mobile USA along with other players like
Verizon Communications Inc.
) having already agreed to a pact that forbids them from charging
customers for third-party services unless instructed by the user
In this new litigation, the Federal Communications Commission
has also joined hands with FTC and is reportedly coordinating with
the latter in the whole investigation.
While T-Mobile USA, the fourth-largest U.S. mobile operator,
boasts cheaper and economical pricing policies, we believe an
indictment like this is likely to hamper its reputation going
forward. In defence, the company has shown significant concern
toward the issue and reportedly announced that it is fast resolving
the problems faced by the customers in question by helping them
process refunds. Meanwhile, the company has stated that it has
stopped billing customers for the text message services.
T-Mobile USA currently has a Zacks Rank #2 (Buy).
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