Aggressive pricing competition among the U.S wireless carriers has intensified further. To remain in the league, AT&T, Inc. (T) has introduced a new data plan which will allow its Mobile Share Value customers to roll over their unused data limits to the next month. Both new and existing customers can enjoy this data plan effective Jan 25. Following the news, the company’s shares gained 1% in yesterday’s trading session.
Notably, AT&T boasts more than 50 million Mobile Share Value customers who will be able to enjoy this special privilege. According to the plan, the unused data which will roll over to the next month needs to be used within that month itself, before the billing cycle ends.
Last month, T-Mobile US, Inc. (TMUS) had introduced a data plan designed for the promotion of its “Uncarrier” brand. Named “Data Stash”, the plan will allow the company’s wireless subscribers to roll over the unused portion of their existing data limit to another year, even after the billing period is over.
Lately, the U.S. telecom industry has been witnessing intense price competition. On Dec 2, 2014, Sprint Corp. (S) came up with a similar data plan at a 50% concession for all AT&T and Verizon Communications Inc. (VZ) customers who choose to switch to Sprint. On Dec 4, T-Mobile introduced a pocket-friendly unlimited 4G LTE family plan offering unlimited talk-time, voice and text messages for $100 a month.
Aggressive pricing competition, these days, is compelling large telecom operators to invest in higher promotional activities. This has induced disappointing financial outlooks for both Verizon and AT&T. Meanwhile, T-Mobile has decided to abandon its 2G networks in 2015.
We believe such promotional strategies will help curtail churn rate while also driving revenues higher at AT&T. However, the increase in marketing expenses may hamper the company’s wireless service margin in the coming quarter.
Last month, AT&T’s chief financial officer had expressed his anticipation of considerably wider fourth-quarter 2014 churn rate compared to the year-ago period. However, the company expects to add customers in spite of this. AT&T also expects higher promotional expenses to hurt wireless service margins in the said quarter. Nevertheless, the company expects full-year 2014 wireless service margins to remain flat or show a slight upside in comparison to 2013.
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