Verizon, AT&T Cut Plan Prices - Analyst Blog

Verizon Wireless, a joint venture between Verizon Communications (VZ) and Vodafone (VOD), has reportedly slashed its unlimited wireless price plans by roughly 30%. Its archrival AT&T (T) followed suit by announcing similar price cuts. Existing customers of both operators can switch to the new plans at no additional cost. 

Starting January 18, 2010, Verizon’s newly announced nationwide unlimited voice plan for its contract customers will cost $69.99 a month, representing a drastic cut from $99.99 per month. The carrier is offering a new unlimited voice and text plan for $89.99 a month. Verizon’s nationwide unlimited family voice plan and unlimited family voice and text plan will be charged $119.99 (down from $199.99) per month and $149.99 (down from $229.99) per month, respectively. 

Moreover, Verizon’s prepaid monthly unlimited voice plan and prepaid unlimited voice and text plan will cost $74.99 a month and $94.99 a month, respectively, which is $5 more than the newly unveiled unlimited postpaid plan prices. However, these prepaid plans are much costlier than prominent unlimited prepaid players such as MetroPCS (PCS), Leap Wireless (LEAP), Sprint Nextel’s (S) Boost unit, Deutsche Telekom's (DT) T-Mobile USA and Amercia Movil’s (AMX) Tracfone whose calling plans cost as little as $50 a month. 

AT&T briskly responded to its rival’s new offerings when it announced its own set of competitive unlimited price plans. The carrier has introduced unlimited voice plan and unlimited voice and text plan for $69.99 and $89.99 a month, respectively. Unlimited family talk plan and family talk plus text plan will cost $119.99 and $149.99 per month, respectively, which are at par with Verizon’s offerings. Moreover, AT&T’s smartphone (including iPhone) customers will be charged $99.99 a month for unlimited voice and data, representing a $30 reduction. 

However, both the Tier-1 carriers require customers to buy data plans for accessing Internet on smartphones. All Verizon 3G multimedia handset (excludes high-end smartphones) users have to sign up for a $9.99 monthly data package that offers 25 megabytes usage per month. While Verizon has discontinued the $19.99 monthly data service plan for 3G multimedia phones, data package for 3G smartphones such as BlackBerry, Windows Mobile and Android devices remains at $29.99 per month. 

Likewise, AT&T has mandated that multimedia phone users have to spend at least $20 a month for text and/or web browsing plans. The rising popularity of 3G capable phones has boosted data usage, providing the carriers a significant opportunity to increase their share of data business. 

Given the high mobile penetration, leading US carriers are exploring new means to boost revenue and market share. The latest major move by the two national telecom heavyweights may escalate the price war in the intensely competitive unlimited wireless space. 

The hefty price discounts are likely to result in near-term drag on carrier voice revenues and impact revenues and margins of the high-end business. However, it will help improve subscriber retention (through increased customer adoption of low-priced plans) and drive revenue and EBITDA growth in the long run.
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