Verizon Wireless and AT&T, the two largest US mobile operators, slashed their rates on Friday, reflecting the impact of an accelerating price war among US mobile operators.
The two companies are cutting the price of their monthly voice plans by about 30 per cent. Verizon Wireless said it will raise some of its data plan charges ahead of the roll-out of its 4G service later this year.
Verizon Wireless and AT&T are both responding to fierce price competition from their rivals including cut-price mobile operators who have introduced pre-paid unlimited calling plans costing as little at $50 a month.
Both companies are replacing monthly unlimited voice plans costing $100 with $70 plans and introducing two-line unlimited voice family plans for $120 a month. Text messaging and mobile internet access cost extra.
Smartphone owners including iPhone, BlackBerry and Android users will continue to pay $100 a month for voice, messaging and mobile internet service.
Verizon Wireless, a joint venture between Verizon Communications and Britain’s Vodafone, also announced changes in its mobile phone data plans that will increase costs for heavy data users and require all 3G multimedia phone users to sign up for a $10-per-month data plan.
Verizon Wireless described the changes as an attempt to simplify its pricing structure while boosting market share. Overall, the number of Verizon Wireless monthly plans will fall from 40 to 14, comprising six single-line and eight family-share plans.
Verizon also noted that the changes would enable it “to take advantage of the growing smartphone device portfolio and customer demand for smartphones,” whose owners tend to be heavy data users.
“When we see an opportunity to gain share and do it profitably, we are going to do it,” said Lowell McAdam, Verizon Wireless chief executive.
While voice revenues are expected to come down initially, Verizon Wireless executives said the ultimate effect of all the changes would be an increase in revenue and earnings before interest, taxes, depreciation and amortisation.
The moves, foreshadowed in comments made earlier this month by Ivan Seidenberg, Verizon’s chief executive, could put further pressure on rivals including AT&T.
It could slow the growth of smaller low cost competitors such as Leap Wireless, MetroPCS Communications and Sprint Nextel‘s Boost unit, which have been aggressively marketing pre-paid $50-a-month unlimited voice plans.
The US mobile phone market has become increasingly competitive in recent years with all the major carriers looking for ways to boost revenues and market share as mobile penetration nears saturation and ahead of the costly roll-out of next-generation 4G networks.
US mobile network operators, particularly AT&T, have also struggled in some densely populated urban markets to support the data requirements of the latest generation of ‘data-hogging’ smartphones including the Apple iPhone and Motorola Droid, generators of ‘capacity crunch.’
The Verizon Wireless data plan changes appear designed to clearly differentiate between light and heavy data users and is likely to lead to the further restructuring of data plans and tiered pricing based on data consumption.
“Verizon’s new pricing plan can be seen as a sensible first step,” said Craig Moffett of Bernstein Research in a note to investors. Verizon Wireless is planning to roll out a nationwide 4G network based on LTE (Long Term Evolution) technology later this year.