What traditionally has been a holiday battle for market share among nationwide operators this year has turned into a struggle to compete against the Verizon Wireless juggernaut. The industry’s second-largest operator has been on a roll this year, adding several million more customers than its competitors. The carrier appears set to run the table during the always-important holiday shopping season.
The competition is attempting to put up a fight, but few expect their moves will alter the inevitable. The most likely casualty will be Cingular Wireless L.L.C., which saw its leadership position shrink by 1 million customers during the third quarter, and could see a similar hit during the final three months of the year.
RBC Capital Markets telecommunications analyst Jonathan Atkin claimed in a research note earlier this month that Cingular-along with Sprint Nextel Corp.-appeared to be losing market share to Verizon Wireless and T-Mobile USA Inc. through the first half of the fourth quarter.
Cingular does not appear troubled by that possibility as it has not made any significant pricing adjustments through the first two months of the fourth quarter, and instead is sticking with a pricing structure that mirrors Verizon Wireless’.
Sprint Nextel, on the other hand, has rolled out updated pricing models even after making significant changes in early September, following Sprint Corp.’s acquisition of Nextel Communications Inc.
In early November, Sprint Nextel changed the pricing strategy for its successful Fair & Flexible plans by adding several new tiers that now begin at $30 per month for 200 anytime calling minutes as well as a new high-end plan that includes unlimited calling for $200 per month. Sprint Nextel also unified the pricing of buying additional minutes at $5 for each 50-minute bucket.
The carrier now offers seven separate F&F plans in addition to five F&F family calling plans.
The changes were applauded for providing both a lower entry-level price point and for attempting to attract high-volume users with the unlimited offering, but analysts noted that the plethora of options has clouded the original gist of the F&F offering.
“The beauty of Sprint’s Fair & Flexible plan simplicity is gone,” noted William Ho, senior analyst of wireless services at Current Analysis. “Increasing the number of plans and matching larger rivals is in some ways a tactic admission that its previous pricing strategies were ineffective.”
T-Mobile USA also altered its pricing structure, rolling out its annual big-minute, low-cost holiday promotion. This year the carrier is offering 1,500 anytime calling minutes for $40 per month, which is 500 more minutes than the $40/1,000 minute plan the carrier offered last year. Customers can add unlimited night and weekend calling to the promotional plan for $10 per month.
Analysts noted that in addition to attracting traditional postpaid customers, the new offering could tempt prepaid customers who typically hesitate to sign contracts as well as people who subscribe to flat-rate local offerings from Leap Wireless International Inc. and MetroPCS Inc.
Leap and MetroPCS have said that their customers average around 1,500 calling minutes per month on their unlimited services, which don’t include the nationwide roaming offered by T-Mobile USA.
Carriers are also witnessing some benefits from their retail strategies.
RBC’s Atkin noted that Sprint Nextel was profiting from RadioShack Corp.’s decision to replace long-time partner Verizon Wireless with Cingular at the end of the year. Atkin cautioned that Sprint Nextel’s benefit was limited, and that the carrier might be forced to take additional revenue-pressuring steps to ensure robust growth during the quarter.
“Sprint’s apparent share gain at RadioShack is not in our view sufficient to ensure strong subscriber growth,” Atkin said. “We believe it has loosened CDMA credit/deposit requirements to offset slower iDEN postpaid growth, and may have to take additional steps during the holidays that could pressure its expense, churn or [average revenue per user] metrics in [Q4] or 2006.”
Meanwhile, several service providers inked new distribution deals in advance of the holiday shopping season. Verizon Wireless announced a pact last week to operate kiosks in more than 100 BJ’s Wholesale Club Inc. locations. The operator will sell phones and services through the kiosks, and subscribers can check their accounts and pay bills at the locations.
BJ’s operates warehouse clubs and gas stations in 16 northeast states.
Virgin Mobile USA L.L.C. said it is expanding on its relationship with 7-Eleven Inc. The prepaid services provider will distribute its offerings through 5,300 of the convenience store’s outlets nationwide, up from a previous 700 locations.
Also, Skype Technologies SA notched an agreement to sell its Internet voice telephone kits in 3,500 RadioShack stores nationwide. The $100 kits, manufactured by Motorola Inc., include a headset and adapter that allow users to make calls from up to 30 feet away from a Bluetooth-enabled computer.
Skype, which boasts 66 million users, hopes to raise its profile among U.S. consumers with the brick-and-mortar strategy.
In addition to tapping one of the nation’s largest electronics stores, Skype has picked a deft partner in the world of wireless retail, according to a study released by The NPD Group. The survey of 2,100 consumers found that while 68 percent of all purchases were made at carrier-owned outlets, big-box retailers delivered a better shopping experience.
RadioShack and Wal-Mart Stores Inc. provided the best experience, according to respondents, while T-Mobile USA and Sprint Nextel ranked lowest among retailers. Only 24 percent of all respondents described their experience as good or excellent.
