UPDATE: T-Mobile USA Tests $50 Calling Plan
February 19 2009 - 3:15PM
Dow Jones News
T-Mobile USA is offering existing customers in San Francisco a
$50 flat-rate calling plan in the latest illustration of tightening
prices in the industry.
The No. 4 U.S. wireless carrier, a unit of Deutsche Telekom AG
(DT), began offering the plan Wednesday to customers who have been
with T-Mobile USA for 22 months or more. It's the first return
salvo aimed at Sprint Nextel Corp.'s (S) Boost Unlimited, which
last month unveiled its own $50 flat-rate plan. The two may
ultimately drive down prices for carriers seeking low-end
users.
"That's one heck of a competitive price," said Roger Entner,
head of telecom research at Nielsen Co. "At least with the weaker
ones, that might be what they have to do."
Still, because of the restriction on the offering, the plan
isn't expected to undermine the $100 price point which has become
the standard for unlimited plans among the major carriers.
"Basically, this is a retention tool," Entner said. "No one's
going to pick a carrier for something they can get in 22
months."
T-Mobile USA won't comment on test market activities, according
to spokeswoman Cara Walker.
But T-Mobile USA stores in San Francisco are actively pushing
the plan, including calling up and alerting customers.
Customers won't have to extend their contract when they switch,
although they'll have to honor the terms of the existing contract.
The plan is for individuals and only includes unlimited
calling.
Boost Mobile shook up the industry by offering a flat-rate $50
plan, which includes unlimited calling, text messages, Web surfing
and walkie-talkie service. Boost's main targets are Leap Wireless
International Inc. (LEAP) and MetroPCS Inc. (PCS), which offer
similar unlimited plans but with regional restrictions. Sprint also
saw T-Mobile USA as vulnerable to cherry-picking.
In the fourth quarter, T-Mobile USA added 621,000 net new
subscribers, down both sequentially and from a year ago. The
turnover rate of 2.4% was also up from a year ago.
T-Mobile is being squeezed by the low end with Virgin Mobile USA
Inc. (VM), Leap and Metro, while high-end players such as AT&T
Inc. (T) and Verizon Wireless continue to nab the best customers.
Verizon Wireless is jointly owned by Verizon Communications Inc.
(VZ) and Vodafone Group Plc (VOD).
Sprint Chief Executive Dan Hesse, in an interview with Dow Jones
Newswires Thursday, said he expected rival carriers to respond
competitively, although he didn't think a price war would
erupt.
But Sanford Bernstein & Co. LLC analyst Craig Moffett said
any signs that Sprint was making progress with its cheaper plans
could spark an aggressive response by competitors.
"As the market opportunity contracts, any real sign of a
turnaround at Sprint would decisively undermine targets at Sprint's
competitors," he said.
Sprint's battered shares are up 28% to $3.47. Deustsche Telekom
shares are flat at $12.04.
-By Roger Cheng, Dow Jones Newswires; 201-938-2020;
roger.cheng@dowjones.com