T-Mobile USA said it will begin offering unlimited data options without speed throttling to consumers beginning Sept. 5, signaling a new pricing war among the nation’s “non-big-two” carriers that could put pressure on margins for those involved.
T-Mobile USA announced that the new offerings will allow customers to add the unlimited data offering for $20 per month when selecting one of the carrier’s “Value” voice and messaging plans or $30 per month when selecting one of the “Classic” voice and messaging plans. That results in a Value plan with unlimited voice, messaging and data priced at $70 per month, while the Classic plan priced at $90 per month.
The new pricing undercuts the current “king” of unlimited data, Sprint Nextel, which has staked its recent marketing efforts around its unlimited data offering. Sprint Nextel’s plans begin at $80 per month for smartphones that includes unlimited messaging and data along with 450 anytime calling minutes, unlimited weekend calling, unlimited night calling beginning at 7 p.m. and unlimited calls to other mobile devices. Customers can pick up a totally unlimited plan from the carrier for $110 per month for smartphones.
Sprint Nextel does continue to have a slight upper hand in the competition in that it does currently offer Apple’s iPhone device, which remains absent from T-Mobile USA’s portfolio. However, many expect the carrier to gain access to the iconic device with the rollout of the next iteration expected next month.
Analysts noted that the move by T-Mobile USA could place some short-term pressure on Sprint Nextel, which has seen its stock price slowly rise over the past year.
“We believe this news could cause some concern in [Sprint Nextel] shares today,” noted Wells Fargo Securities senior analyst Jennifer Fritzsche, in a research report. “While [Sprint Nextel] has continued to gain share [versus] T-Mobile, our checks indicate T-Mobile has become a bit ‘less bad’ over the past few months as it has advertised its data speeds and network capabilities.”
Sprint Nextel’s stock (S) was trading down 1.5% in early Wednesday trading.
For T-Mobile USA, the move to unlimited data comes on the heels of the carrier moving a step closer to gaining valuable spectrum assets from Verizon Wireless as well as its plans to launch LTE services beginning next year thanks to a spectrum infusion from AT&T. Those deals should see the carrier move to bolster its network capacity and efficiency.
T-Mobile USA was not the only carrier this week to alter its data pricing. MetroPCS launched a new LTE plan that provides for unlimited voice, messaging and data for $55 per month. Sweetening that deal, the carrier also said customers can add up to three additional lines for $50 per month. The move followed a tough operational second quarter for the carrier, and reverses the implementation of capped data plans and speed throttling instituted earlier this year.
Leap Wireless, which also plays in the unlimited space, said during its second quarter conference call that in the coming weeks it would be rolling out its “first major service plan update in two years.”
While the move to unlimited data offerings could place greater pressure on network resources, carriers seem content that their moves towards more efficient, next-generation network technologies can handle the potential for greater strain. Macquarie Equities Research released a report earlier this year noting that the cost to deliver a bit of data over an LTE network was roughly 66% cheaper than delivering that same bit over a 3G-based network. The firm claims that in talking with carriers and vendors, the cost in capital expenditures and operating expenditures to deliver 1 GB of data over LTE is roughly $3.20, while delivering 1 GB over 3G is $9.39.
As for their larger rivals, Verizon Wireless and AT&T Mobility seem content with their data share plans and limited data buckets. Verizon Wireless has reportedly seen strong consumer acceptance to its data share plans that were rolled out in late June, while AT&T Mobility is set to launch its data share plans this week. AT&T Mobility’s plans have not been without some controversy as the carrier has said that iPhone customers looking to use Apple’s FaceTime video calling service will need to sign up for one of its data share plans in order to use the service over a cellular connection. Otherwise FaceTime users will be limited to the service while connected to a Wi-Fi connection.
Both Sprint Nextel and T-Mobile USA have seen their operating margins underperform in relation to their larger rivals, which analysts have attributed to greater marketing expenses and device subsidies relative to the size of their respective customer bases in relation to Verizon Wireless and AT&T Mobility. The support of unlimited data services could continue that pressure as Sprint Nextel and T-Mobile USA will need to find financial resources necessary to ensure that their networks can handle the potential for increased data usage.
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