AT&T, Verizon price cuts may have small impact on revenue

The price cuts AT&T Mobility and Verizon Wireless made to their unlimited plans likely will not have much of a negative impact on their revenue, as market dynamics and the benefits accrued from the simplified pricing structure will offset most revenue losses. Meanwhile, with quarterly earnings announcements approaching, attention turned to pressure on margins at the nation's two largest telcos.

Verizon's decision to couple its price cuts with a $9.99 per month data plan for some of its devices will help offset revenue. Additionally, only around one million of Verizon's 90 million subscribers are on an unlimited calling plan currently, according to Verizon CEO Lowell McAdam. And at AT&T, many customers are on family plans and would not really benefit from making the switch to the new plans. By simplifying their offerings, the two carriers also are likely to cut down on customer confusion, reducing customer service costs.

Verizon and AT&T late last week each reduced the price of their postpaid unlimited monthly calling plans by around $30, to $69.99 per month for individuals.

Both carriers have seen their subscriber bases continue to grow over the past several quarters at the expense of smaller Tier 1 rivals Sprint Nextel and T-Mobile USA, even without the price cuts. That growth will be in focus next week when AT&T and Verizon report their fourth quarter earnings.

Verizon is expected to add around 1.6 million new wireless customers, while its landline division is expected to lose hundreds of thousands of subscribers. The company also increased its marketing in the quarter for the Motorola Droid and for an extensive advertising campaign against AT&T, which could help drive down margins; analysts expect Verizon's operating margin to be around 39 percent. At AT&T, the company is expected to lose around a million landline customers and gain roughly 2 million wireless subscribers. The company's margins have bee rising slightly, and its wireless margin is expected to be around 36 percent.

For more:
- see this Dow Jones Newswires article (sub. req.)
- see this Dow Jones Newswires article (sub. req.)

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