AT&T Mobility's (NYSE:T) new "Mobile Share Value" plans, which are targeted at no-contract customers seeking an unsubsidized phone, will likely cut into AT&T's average revenue per user but could help the company win back market share, according to financial analysts.
Although AT&T denied the new plans were a response to competition, many analysts and market observers see the plans as a pushback against T-Mobile US (NYSE:TMUS), which has seen strong subscriber growth this year since it removed device subsidies from its plans.
Starting Dec. 8, AT&T customers can get a no-contract Mobile Share Value plan in several ways. They can do it by purchasing a new smartphone for no down payment with AT&T's "Next" handset upgrade program with monthly installment payments; by bringing their own smartphone; by buying a smartphone at the full retail price; or by switching to the new plan when they are no longer under contract.
Previously, AT&T's Mobile Share plans offered a sliding scale of monthly fees per smartphone attached to the plans, ranging from $30 to $50 depending on the data plan. Under the new Mobile Share Value plans, with a no-contract smartphone--either through Next or if the phone is paid for--the fee is $25 a month. That means a customer can get a 2 GB Mobile Share Value plan for $80 per month ($55 for the data plan and $25 for the smartphone fee), compared to $95 per month under the old plans.
Credit Suisse analysts Joseph Mastrogiovanni, Henrik Herbst and Michael Baresich wrote in a research note that the plans "effectively reduce the average monthly fee to add a smartphone by $10-$15/month with unsubsidized handsets. These plans will likely put pressure on postpaid ARPU, but the impact to EBITDA will be mitigated by the elimination of a subsidy."
New Street Research analyst Jonathan Chaplin wrote in a research note that T-Mobile "has been on a rampage for the last two and a half quarters, taking share from AT&T and Sprint (NYSE:S). We have been waiting for a competitive response from AT&T--here it is."
Chaplin said he viewed handset upgrade and installment pricing plans offered by AT&T and Verizon Wireless (NYSE:VZ) as effective price increases. "This move eliminates much of the increase. Furthermore, we think the trend of price increases that has fed ARPU growth for the group over the last three years will stall and potentially even reverse in coming quarters. Competitive intensity will escalate further as Sprint re-enters the fray later in 2014," he added.
Chaplin said the changes should help AT&T stem losses to T-Mobile, "however, it will come at the expense of ARPU and EBITDA."
Meanwhile, T-Mobile marketing executive Andrew Sherrard called AT&T's new plans confusing and expensive. Sherrard told CNET that the "'me-too' off-contract rate plan misses the mark."
AT&T also removed the sliding scale prices for devices for the company's existing Mobile Share customers. Previously the carrier charged between $30 and $50 per device, depending on the data plan; now the carrier is charging a flat $40 for all plans. That could mean an increase in price for some contract customers, depending on the size of their data bucket. For customers who choose larger data buckets, the prices will go down in most cases.
"After you do the complicated math, in multiple cases, these new plans are actually a price hike for customers," Sherrard said.
"Our new plans offer value, flexibility and choice, including a no-contract option," AT&T spokesman Mark Siegel told FierceWireless. "We think they'll help us retain current customers and attract new ones."
- see this CNET article
- see this separate CNET article
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