File under voice just cant seem to retain its value: The wireless fare wars have begun. T-Mobile USA announced Wednesday that it will begin offering a flat-rate, all-inclusive voice plan for under $100, following identical announcements by Verizon Wireless and AT&T Inc. the day before. All eyes are on Sprint Nextel Corp. to follow suit.
Wall Street is not happy, with investors dumping telco shares and analysts revising price targets downward in morning trading. Thats likely because as happened in long-distance, the C-word is being thrown around now that the majors are slashing pricing: Commoditization. While voice remains bread and butter to the bottom lines of all carriers, a bigger concern than eating into existing profits seems to be gaining market share as the U.S. landscape approaches saturation. Caught in a fiercely competitive market amid a weakening economy, AT&T and Verizon have tried wooing customers with everything from network quality (Verizons winning ad campaign) to devices (AT&Ts iPhone) but they may be coming to the realization that the way to consumers hearts amid recession fears is through their pocketbooks.
Sprints move now could be a linchpin in the wireless landscape, according to Bear Sterns analyst Phil Cusick, who writes Sprint could go as low as $60 per month should it choose to do so. If the struggling carrier slashes pricing even below the around $100 mark, it could trigger a more aggressive wave of price-cutting that some analysts are calling a race to zero.
However, Sprint spokeswoman Emmy Anderson says the carrier is doing just fine as it is. It has, for instance, been market-testing an all-you-can-eat bundle, the Sprint Unlimited Access Pack with voice, texting, Web and e-mail, for $119.99 in four markets. Sprint offers great value in the market today with our current rate plan offerings, with differentiators such as unlimited text messaging starting at $10 and unlimited nights and weekends starting at 7 p.m. instead of 9 p.m., she notes. We are continuously evaluating our market offerings but are not disclosing any future plans at this point.
Verizon and AT&T, within mere hours of each other Tuesday, both announced unlimited calling plans for under $100. Verizon announced that its flat-rate, $99.99 plan will include unlimited calling, including all roaming and long-distance charges. It can be combined with any data plan.
About five hours later on Tuesday, AT&T announced an almost identical pricing structure for all devices. Existing customers can choose unlimited calling without extending their contract, while new customers have the option of a month-to-month, 12 or 24 month contract.
Analysts predicted that others will have to match the offers. With voice losing its value, data comes to the fore as a revenue-generating focus. If the voice plans are cheaper, will subscribers be more willing to sign on for data plans in 3G markets? And in second-tier markets, where will the differential ARPU come from? Time will tell whether carriers will find the fare war a losing gambit.