The price war among cellular service providers in the United States has heated up again. Pressured, perhaps, by the incredibly low pricing offered by T-Mobile US Inc. (NASDAQ: TMUS), which is trying to dig out of its place as the number four company in the sector, AT&T has launched what it calls its “best ever value plan for families.” It will take some time to find out if AT&T Inc. (NYSE: T) can make money on this kind of program, or if it has decided to opt for market share over profit.
The new plan includes 10GB of data, and unlimited talk and texting for four lines at a price of $160 a month. The program does not require a contract. The deal allows up to 10 lines of service, and as few as one. For those who are already AT&T customers:
- All existing customers, including those on a 2-year agreements before Feb. 2, 2014, are able to move to these plans.
- If you are already on a 10GB or higher Mobile Share Value plan as of Feb. 2, 2014 — you don’t need to do anything. You’re automatically in.
It will probably be only a matter of days before Sprint Corp. (NYSE: S) and Verizon Communications Inc. (NYSE: VZ) decide to match or better the deal. Otherwise, they risk the loss of customers.
Only a few years ago, carriers were convinced that as the number of cellular subscribers reached nearly 300 million, the way around market saturation was to increase fees for data, voice, and text messages. The competition among the four carriers is now based on two things: discounts, and the strength and breadth of superfast 4G networks.
Sprint can be expected to respond to AT&T’s price change. It has perennially lost money in its number three spot. Japan’s Softbank, the new owner of Sprint, has said it will do whatever is necessary to improve the company’s profits, which has to include taking market share from AT&T and Verizon.
The price war for cellular service has escalated. Profits are likely to be the victims of this carnage.
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