Unlimited plans from T-Mobile and Sprint are compelling, but analysts say network concerns remain

On its website, Sprint boasts that its unlimited plan costs less than similar offerings from its rivals.

The unlimited data plans introduced Thursday by T-Mobile and Sprint are likely to help both carriers in their battles with Verizon and AT&T, analysts said. Whether their networks are up to the task of delivering significantly more data has yet to be determined, though.

T-Mobile held a media call to unveil its new plans, which offer unlimited everything on a single line for $70 a month when customers pay automatically. A second line is $50, and additional lines are $20 each.

Sprint, meanwhile, introduced an unlimited everything plan for $60 a month, with a second line available for $40 more.

The moves are almost sure to help the carriers build on some impressive recent momentum. T-Mobile posted 1.9 million net new customer additions during the second quarter of 2016, marking its 13th consecutive quarter with more than 1 million new users. And while Sprint continues to struggle financially, the nation’s fourth-largest operator reported 173,000 net postpaid phone additions in the second quarter, marking its third consecutive positive quarter.

“We believe the freedom of unlimited data will resonate with wireless customers,” Jennifer Fritzsche of Wells Fargo Securities wrote in a note to clients. “Based on recent porting data, both T-Mobile and Sprint continue to see share gains at the hands of the two large incumbents. Recall in our early June visit to Sprint headquarters we thought some new plan was coming – T-Mobile seemed to get the same memo and moved ahead of it.”

The two plans offer a marked contrast to new offerings from both Verizon and AT&T; both carriers recently introduced new tiered data pricing structures that are generally more expensive than previous plans but include more data.

Both Sprint and T-Mobile's new plans include constraints aimed to lighten the network loads. T-Mobile limits video quality to 480p, and users who exceed 26 GB of data during a billing cycle may be throttled during times of network congestion. Sprint’s unlimited plan also limits video to 480p; it also limits music to 500 Kbps and gaming to 2 Mbps. And neither plan includes unlimited tethering at the advertised prices (Sprint's plan includes 5 GB of tethering, T-Mobile sells 5 GB for $15).

“Now the question becomes which network can best handle this usage and how this could impact the take rate of AT&T’s OTT plans coming in Q4,” Fritzsche continued. “We note Sprint continues to carry more tonnage (per) sub than the two largest carriers and is using well less than 50 percent of its total spectrum assets.”

But while Sprint has plenty of airwaves it can put to use, questions remain about how committed the carrier is to maintaining its network. Sprint spent $376 in capex on its network in the second quarter, Fritzsche noted earlier this week, down dramatically from the $1.6 billion it spent during the same period a year ago. And in May Sprint lowered its capex guidance for the rest of the year to $3 billion, far shy of analysts’ estimates in the range of $4.5 billion.

T-Mobile executives say they’re confident the operator's network can handle the expected increase in traffic, citing the success of the carrier’s Binge On offering. Binge On enables users to view zero-rated video content in 480p, which has spurred uptake of video but doesn’t appear to have significantly affected the network. Indeed, T-Mobile executives have said Binge On resulted in a 10 percent reduction in network usage due to the slimmed down video stream.

“Despite plans that will encourage higher usage, (T-Mobile’s) management is comfortable that the network can handle the added load,” Jefferies analysts wrote. “We believe Binge On is the key driver, with the lower video quality providing better than expected load benefits…. T-Mobile will continue to add coverage (low-band) and capacity (mid-band) as it continues to add subscribers at a healthy pace.”

Indeed, some analysts believe T-Mobile and Sprint are leveraging their network capacity against their rivals. “AT&T and Verizon have network issues from a capacity perspective that Sprint and T-Mobile don’t,” New Street Research analyst Vivek Stalam told the Wall Street Journal, explaining that it would be difficult for AT&T and Verizon to offer unlimited data to their full customer base.

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