Analysts: Verizon's 'More Everything' plans show No. 1 carrier isn't immune to price war

Verizon Wireless (NYSE:VZ) updated its shared data plans, changing the name of the plans from "Share Everything" to "More Everything" and increasing the data allotments for some plans. The carrier is also giving a discount to customers who use its "Edge" handset upgrade program. Both changes are Verizon's latest response to an escalating price war among the Tier 1 carriers, sparked primarily by T-Mobile US (NYSE:TMUS).

Details of Verizon's More Everything plans leaked online yesterday but confirmed early today by the company, which is the nation's largest wireless carrier by subscribers.

As with Verizon's initial Share Everything plans, all of the new More Everything plans have unlimited voice and texting. Under the new More Everything plans, Verizon will essentially double the data allowance for many plans without increasing the price. For example, Verizon's $40 per month/500 MB plan will increase to 1 GB of data, while the $50/1 GB plan will increase to 2 GB, and the $60/2 GB plan will jump to 3 GB of data. The increase in data will happen automatically for existing Share Everything customers, which the company said make up about 46 percent of its total customer base. Line access charges per month will remain the same: $40 for smartphones, $30 for feature phones and $10 for tablets.

However, customers who use Verizon's Edge handset upgrade program will see a slight reduction in their line access charge. Those who have plans with 250 MB up to 8 GB of data will get $10 off the cost of their shared bucket of data. For those Edge customers with 10 GB or more, they will get a $20 per month discount. Verizon's Edge program lets customers pay for their device in monthly installments and upgrade early if they have paid off half the cost of the device.

Verizon outlined its changes relative to its existing plans.

Unlike plans from other carriers, Verizon still does not give customers a discount on service pricing if they buy their phone outright or bring their own phone. Other carriers have argued that, if a carrier is no longer subsidizing a device, customers should see a price cut in their service pricing.

In a call with reporters, Verizon Wireless CMO Ken Dixon said that he thinks the formula Verizon Wireless is using with its Share Everything plans, and now More Everything plans, has been successful and that customers are happy with it. "When you have something that works and benefits the customers, you look at how to make it better. That's More Everything."

When asked why the company is not following the model of other operators that give customers a break on service pricing if they purchase their phone outright, Dixon said that he believes Verizon is the carrier that is "giving customers a choice."

More Everything plans also offer unlimited international messaging and each More Everything line can use up to 25 GB (or up to 250 GB on a 10-line account) of cloud storage from Verizon. Verizon also offers parental controls and international long distance, both of which are free for the first three months and then available for $5 per month thereafter.

Finally, Verizon is now touting the deployment of its AWS spectrum, noting that the spectrum will double--and in some markets triple--the carrier's available network capacity. Verizon is planning to augment its LTE network in 50 different cities with AWS spectrum in the first half of 2014. Dixon said that the company currently has 16 devices and tablets that can use the AWS spectrum but declined to say which markets currently are using the AWS spectrum. He added that all new devices going forward will have AWS capability and that the company will be talking about its AWS coverage more in the coming weeks.

Mark Lowenstein, managing director of Mobile Ecosystem, said that these price reductions are significant for Verizon, which has tried to maintain its "premium price for a premium network mantra for a long time." Lowenstein said that given the competitive scenario the company had to start responding. However, he noted that the timing of Verizon's actions are key because it has made significant progress deploying LTE in its AWS spectrum, which means the company can "open up the data spigot without sacrificing margins."

"Verizon cut prices today, demonstrating that no one is immune to a price war," Credit Suisse analysts wrote in a note to investors this morning. "We believe the move could signal that the company is seeing pressure from other carrier initiatives.  In our opinion, T-Mobile's ETF reimbursement plans have had solid traction so far in 1Q14, likely putting pressure on all the other carriers.  Additionally, the strength of AT&T's network coupled with the recent introduction of lower prices for 10GB+ plans could be adding to the pressure on Verizon."

The Credit Suisse analysts also noted that Verizon's actions could cause a subset of Verizon's customer base to migrate to lower priced buckets, thus potentially lowering Verizon's revenues. However, that action could be offset by more customers joining the carrier, more customers moving to more expensive data tiers, and reduced churn.

T-Mobile incited the current price war last year with its move to eliminate device subsidies and thus lower the prices of its service plans. This year T-Mobile announced it will pay off customers' early termination fees if they switch to T-Mobile and trade in their devices.

In response, AT&T in December launched its Mobile Share Value plans, which lowered prices for customers who join the carrier's Next handset upgrade program as well as those who bring their own phone, who buy a phone at full price, or who are no longer under contract. AT&T also cut prices on its higher-end Mobile Share shared data plans.

For its part, Sprint (NYSE:S) last month introduced cheaper "Framily" plans and recently lowered pricing on its Boost Mobile prepaid service as part of a promotion. Under Framily, Sprint customers pay $55 per month per line for unlimited talk, text and 1 GB of data. For each new Sprint customer joining a Framily group, the cost per person will drop $5 a month up to a maximum monthly discount of $30 per line. A group of at least seven people will get unlimited talk, text and 1GB of data for $25 per month per line, excluding taxes and surcharges. In addition, Framily members can each pay $20 per month per line to buy unlimited data plus get a new phone every year, or they can add 1 GB or 3 GB per month to their plan.

For more:
- see this Verizon post
- see this Verizon web page
- see this WSJ article (sub. req.)
- see this CNET article
- see this The Verge article

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Sue Marek contributed to this report.