Moody's: AT&T's new unlimited plans could hinder long-term data revenue growth

AT&T's (NYSE: T) new unlimited data service plan is likely to attract customers to both its wireless and DirecTV businesses, Moody's analysts said in a research note, but it may also hinder long-term growth of mobile data revenues.

The carrier this week announced the offering, which gives smartphone customers unlimited talk, text and data for $100 per month for the first line and $40 per month for the next two lines -- a fourth line costs nothing extra. The deal is available only to customers of AT&T DirecTV or AT&T U-Verse TV.

As Moody's notes, the offer clearly targets the 15 million DirecTV subscribers who are potentially AT&T customers, which has been a key focus of the carrier since its acquisition of the satellite TV provider last year. The offer is likely to prove compelling in an era where mobile video consumption is on the rise, it predicted.

"AT&T should gain marketing traction by offering a highly valued customer benefit that has largely been phased out as growing video consumption threatened to overwhelm network capacity," Moody's wrote. "We think that customers will be attracted to the unlimited plan offer and that it will drive modest subscriber growth at both AT&T wireless and DirecTV. We expect that incremental pay-TV and wireless subscribers will generate sufficient revenues and profit to more than offset the wireless discount's cost."

Moody's believes AT&T's unlimited plans are a direct response to T-Mobile's (NYSE:TMUS) Binge On service, which provides zero-rated data from specific providers and lightens traffic on the network by throttling network speeds for video.

However, Moody's said, a return to unlimited data plans could potentially trigger a price war. The firm added that data volume growth is one of the last remaining avenues for industry revenue growth, and that a return to unlimited plans could be a road block for that avenue.

"Competitors could respond and offer similar unlimited plans, potentially through partnerships with other pay-TV distributors (i.e. Dish Networks) and drive the market back to unlimited plans," Moody's observed. "We believe that absent new business models, data volume growth is one of the last remaining avenues for industry revenue growth and that video will be its main contributor. But, starting with T-Mobile's Binge On announcement, competitive forces have begun to erode this growth potential. AT&T's announcement today furthers this process and could derail future growth."

Related articles:
AT&T resurrects unlimited data offering at $100/month, but only for its DirecTV subscribers
The reality behind T-Mobile's Binge On strategy
Entner: The return of unlimited, this time with even more video
AT&T kills unlimited data pricing, supports iPhone tethering

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