Verizon cuts call fees expanding price war
UPDATE 4-Verizon cuts call fees, expanding price war
* New data fee $9.99/25 megabytes vs $19.99/75 megabytes
* Sees new charges upping revenue, EBITDA
* AT&T seen following with similar move
* Verizon Wireless CEO sees focus on smartphones (Adds Verizon Wireless CEO, analyst comments; updates shares)
NEW YORK, Jan 15 (Reuters) - Verizon Wireless, the biggest U.S. mobile service, is cutting its fees for voice calls by about 30 percent, in a move that could accelerate a price war in the ferociously competitive U.S. wireless market.
Its biggest rival, AT&T Inc (T.N), the No. 2 U.S mobile service, will likely have to follow suit with a similar cut to its services fees, analysts said.
Shares of Verizon Wireless parent Verizon Communications Inc (VZ.N) ended down 2.1 percent on Friday. Shares in Vodafone Group Plc (VOD.L), a minority Verizon Wireless owner, lost 1.5 percent in London.
Verizon Wireless said on Friday it is replacing a $99.99 voice plan with a $69.99 plan that includes unlimited phone calls and an $89.99 plan that also includes text messages.
However, Verizon said it was ending a data service plan for $19.99 a month for 75 megabytes of data downloads such as Web surfing. Instead it is adding a $30 unlimited service plan for cheaper multimedia phones and offering a $9.99 per month plan for 25 megabytes of downloads.
It will still require a $30 per month unlimited data service plan for smartphone users.
Verizon's Chief Financial Officer John Killian told analysts on a conference call that voice revenues would fall first but that all the changes would eventually help cut customer cancellations and increase revenue and earnings before interest, taxes, depreciation and amortization.
No specific target increased were announced.
Pacific Crest Securities analyst Steve Clement said AT&T would likely follow "in very short order" with an identical price cut and said operators such as Sprint Nextel (S.N) and Deutsche Telekom's (DTEGn.DE) T-Mobile USA already have cheaper service prices than Verizon.
He said that other than a change at AT&T, the Verizon move would not have a huge impact as only about a million customers use its $99.99 a month unlimited voice service today.
"Any time a market leader changes prices it causes concern but they're really cutting prices at the high end of voice. That's a small portion of the market," he said.
Clement said service fees at smaller competitors such as Leap Wireless International Inc (LEAP.O) and MetroPCS Communications Inc (PCS.N) are still much cheaper than Verizon's new offering.
Lowell McAdam, the CEO of Verizon Wireless, also told analysts on the call that the company would increase its focus on smartphones, like Motorola Inc's (MOT.N) Droid and Palm Inc's (PALM.O) Pre Plus, and already has plans to sell an additional 20 models this year.
However the executive said that the company would cut back the overall number of phone models it sells, from a current line-up of 80 phones to 50 models and noted that this number would come down even further over time.
Some investors took this news as a positive to smartphone makers like Palm, whose shares rose 5.6 percent on Friday, and bad news for makers of cheaper phones. LG Electronics (066570.KS) and Samsung Electronics (005930.KS) are big suppliers of cheaper phones for Verizon Wireless.
"It helps out the smartphone vendors. They'll clearly be pushing smartphones more." said Morgan Keegan analyst Tavis McCourt, "It hurts Samsung and LG."
The company's change in data fees come as Verizon and its rivals look for ways to ease pressure on their data networks. Rising popularity of Web-capable phones has vastly increased data use.
AT&T's mobile chief said late last year that he was looking for ways to ease data usage but did not elaborate. A spokesman for AT&T declined comment on whether it would follow Verizon.
AT&T currently offers a $99.99 unlimited voice plan and data services for $29.99 excluding text messages. Sprint said its service fees are still cheaper than Verizon Wireless.
(Reporting by Sinead Carew; editing by Gerald E. McCormick and Tim Dobbyn)
http://www.reuters.com/article/idCNN1514325020100115?rpc=44
|
