Sprint Nextel Could Profit from AT&T Policy Change
AT&T (NYSE: T) announced that it will begin to reduce mobile phone download speeds for any of its unlimited data plan users who reach specific data thresholds.
AT&T said that the changes to its unlimited data plans were necessitated because of skyrocketing mobile phone broadband usage and a "limited availability of wireless spectrum", which may have been a swipe at regulators who opposed the company's attempt to purchase T-Mobile USA.
Under the new plan, customers with unlimited download plans will have their download speed reduced once their monthly download traffic reaches 3GB. Customers who have 4G LTE smart phones will have their download speeds reduced once they hit 5GB of monthly traffic.
The first time that the amount of data that a customer downloads traffic approaches the threshold, the customer will receive a text message warning that the customer's download speed will soon be reduced. After passing the download threshold, the customer's download speed will be reduced for the rest of that billing cycle.
After the the first time this happens, the customer will no longer receive warnings when approaching the data thresholds.
Customers will still be able to download an unlimited amount of data but the downloads will become slower when heavy data users pass the designated threshold.
AT&T said that most customers won't be affected by the policy change and should never get the warning text because 95 percent of the company's customers never reach the limits of the "unlimited" data plans.
AT&T says that its current unlimited plan customers have a few different options to deal with the policy change. The company said that if customers are concerned that they might reach the download threshold, they should use Wi-Fi connections whenever possible because Wi-Fi connections do not count towards the customers' download thresholds.
Customers who aren't heavy data users don't have to do anything because AT&T claims that 95 percent of its users never reach the threshold, so they won't be affected by the policy change.
The option that AT&T would probably prefer its customers to choose is to switch to one of the company's tiered plans. Under these plans, customer download speeds are never reduced but the customers are charged for exceeding their monthly allowance.
Although AT&T is hoping that its customers sign up for the more expensive tiered plans, Sprint Nextel (NYSE: S) could be the real beneficiary of the AT&T policy change because Sprint still offers an unlimited data plan for $79.99 per month.
(c) 2013 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.