T-Mobile USA Tests unlimited $50 Calling Plan

T-Mobile USA Tests unlimited $50 Calling Plan
By Roger Cheng

T-Mobile USA is offering existing customers in San Francisco a unlimited $50 flat-rate calling plan in the latest illustration of tightening prices in the industry.

The No. 4 U.S. wireless carrier, a unit of Deutsche Telekom AG (DT), began offering the plan Wednesday to customers who have been with T-Mobile USA for 22 months or more. It's the first return salvo aimed at Sprint Nextel Corp.'s (S) Boost Unlimited, which last month unveiled its own $50 flat-rate plan. The two may ultimately drive down prices for carriers seeking low-end users.

"That's one heck of a competitive price," said Roger Entner, head of telecom research at Nielsen Co. "At least with the weaker ones, that might be what they have to do."

Still, because of the restriction on the offering, the plan isn't expected to undermine the $100 price point which has become the standard for unlimited plans among the major carriers.

"Basically, this is a retention tool," Entner said. "No one's going to pick a carrier for something they can get in 22 months."

T-Mobile USA won't comment on test market activities, according to spokeswoman Cara Walker.

But T-Mobile USA stores in San Francisco are actively pushing the plan, including calling up and alerting customers.
Customers won't have to extend their contract when they switch, although they'll have to honor the terms of the existing contract. The plan is for individuals and only includes unlimited calling.

Boost Mobile shook up the industry by offering a flat-rate $50 plan, which includes unlimited calling, text messages, Web surfing and walkie-talkie service. Boost's main targets are Leap Wireless International Inc. (LEAP) and
MetroPCS Inc. (PCS), which offer similar unlimited plans but with regional restrictions. Sprint also saw T-Mobile USA as vulnerable to cherry-picking.

In the fourth quarter, T-Mobile USA added 621,000 net new subscribers, down both sequentially and from a year ago. The turnover rate of 2.4% was also up from a year ago.

T-Mobile is being squeezed by the low end with Virgin Mobile USA Inc. (VM), Leap and Metro, while high-end players such as AT&T Inc. (T) and Verizon Wireless continue to nab the best customers. Verizon Wireless is jointly owned by Verizon Communications Inc. (VZ) and Vodafone Group Plc (VOD).

Sprint Chief Executive Dan Hesse, in an interview with Dow Jones Newswires Thursday, said he expected rival carriers to respond competitively, although he didn't think a price war would erupt.

But Sanford Bernstein & Co. LLC analyst Craig Moffett said any signs that Sprint was making progress with its cheaper plans could spark an aggressive response by competitors.

"As the market opportunity contracts, any real sign of a turnaround at Sprint would decisively undermine targets at Sprint's competitors," he said.

Sprint's battered shares are up 28% to $3.47. Deustsche Telekom shares are flat at $12.04.