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Cellphone firms offer flat-rate call plans

Moves by Verizon, AT&T, T-Mobile put pressure on Sprint

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Bloomberg News / February 20, 2008

DALLAS - AT&T Inc., Verizon Wireless, and T-Mobile USA Inc., three of the top four US mobile phone carriers, revealed flat-rate subscriptions for unlimited wireless calls, intensifying pressure on Sprint Nextel Corp.

Verizon Wireless parent Verizon Communications Inc. fell the most in almost six years in New York trading after the mobile carrier disclosed a plan to give users unlimited calling time for $99.99 a month. AT&T unveiled an identical service, and T-Mobile offered unlimited text messages and calls for the same price.

The flat-rate plans may force Sprint, which lost 1.2 million customers with wireless contracts in 2007, to offer a similar subscription at a lower price, perhaps $70 to $80 a month, said analyst Christopher King of Stifel Nicolaus & Co. in Baltimore. Verizon, which trails AT&T in total wireless customers, added 1.6 million contract subscribers last quarter.

"This very well could be the beginning of a significant price war," said King, who advises holding on to shares of Sprint, AT&T, and Verizon Communications. "Once you have an all- you-can-eat plan out there, voice minutes become a commodity."

Verizon Communications, which co-owns Basking Ridge, N.J.-based Verizon Wireless with Vodafone Group PLC, plunged $2.49, or 6.6 percent, to $35.34, the biggest drop since July 2002.

AT&T fell $1.99, or 5.3 percent, to $35.89 after saying its plan would begin Feb. 22. Sprint, the third-biggest US wireless carrier, lost 34 cents to $9.23. T-Mobile parent Deutsche Telekom AG also fell in Frankfurt.

"Sprint has no choice" but to offer a cheaper flat-rate plan, said Credit Suisse analyst Christopher Larsen. "You can't come out and offer the same plan as Verizon. What's disruptive about that?" The New York analyst expects shares of all three US-based carriers to outperform the broader market.

AT&T, which added 1.2 million contract customers last quarter, disclosed its flat-rate subscription in a statement about five hours after Verizon officially began its plan. The $99.99-a-month rate applies to all handsets AT&T supports, including Apple Inc.'s iPhone.

"We are prepared to respond very quickly to meet customer needs and changes in the competitive environment," AT&T spokesman Mark Siegel said.

Customers of San Antonio-based AT&T spent an average of $50.28 a month on wireless service last quarter, while Verizon's spent $51. Sprint plans to reveal full results for last quarter on Feb. 28.

T-Mobile's $99.99-a-month unlimited plan, which begins tomorrow, will cover all types of mobile messages, including pictures, in addition to voice calls, company spokesman Peter Dobrow said yesterday. Equivalent plans from AT&T and Verizon Wireless would cost about $120 a month.

Sprint, based in Overland Park, Kan., has tested a flat-rate plan in four US cities, selling calls, text messaging, and Internet access for $119.99 a month. Verizon matched that price yesterday for the same services and began selling a plan that includes mobile video and driving directions for $139.99.

Sprint is still evaluating the results of the trial, spokeswoman Emmy Anderson said.

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