Leap, MetroPCS Shares Down On New Pre-Paid Plan From AT&T
October 09 2009 - 2:44PM
Dow Jones News
Shares of Leap Wireless International Inc. (LEAP) and MetroPCS
Communications Inc. (PCS) fell after AT&T Inc. (T) unveiled a
new, less expensive pre-paid plan, reigniting concerns over pricing
power at the low end of the wireless business.
Earlier Friday, AT&T launched an unlimited plan for calls
and text messages for $60 a month under its GoPhone pre-paid
service. While not as low as the plans offered by Leap or MetroPCS,
such an aggressive move by the telecommunications giant was seen as
a threat to the smaller pre-paid players best known for their
unlimited plans.
Leap fell nearly 7% to $16.08, while MetroPCS fell 4.5% to
$8.
"While not directly competitive on price, this offer provides a
stake in the ground for AT&T, and could ultimately result in
even greater price competition across the segment," said William
Power, an analyst at Robert W. Baird & Co.
While Leap and MetroPCS continue to show impressive growth, they
have been hampered by a flood of entrants in the area. With less
growth at the high end, which is dominated by AT&T and Verizon
Wireless, players are scrambling to get at customers on the low
end. The industry continues to benefit from customers looking to
avoid long-term contracts and pay less each month.
Most notably, Sprint Nextel Corp. (S) has pushed its Boost
Mobile product to great success. America Movil S.A.B. de C.V. (AMX)
unit Tracfone is also seen expanding its Straight Talk service,
which undercuts most of the competition. The service is powered by
Verizon Wireless, which is jointly owned by Verizon Communications
Inc. (VZ) and Vodafone Group Plc (VOD).
The pricing pressure, which has caused prices to drop rapidly
over the past year, is expected to continue, industry observers
say. MetroPCS and Leap's most popular plans hover between the $40
and $50 level, but they have seen more features and price cuts and
both get aggressive with expansion.
"The holidays usually bring new prices in wireless," said Philip
Cusick, an analyst at Macquarie Securities, noting that it has
already been a "crazy year."
A Leap spokesman declined to comment on AT&T's plans.
MetroPCS wasn't immediately available for comment.
-By Roger Cheng, Dow Jones Newswires; 212-416-2153;
roger.cheng@dowjones.com