AT&T and U.S. Cellular Follow Verizon Wireless’ Unlimited Price Points – When Will It End?

Event Summary

January 15 and 18, 2010 -- AT&T and U.S. Cellular moved to match Verizon Wireless’ reduction for individual and family unlimited calling plans. The new AT&T and U.S. Cellular rates drop from $99.99/month (for individuals) to $69.99/month. Family plans move from a $199.99/month price point for two lines to $119.99/month. Additional unlimited lines (up to three) are available for $49.99/month.

Current Perspective

• Current Perspective: Slightly positive on both AT&T and U.S. Cellular matching the unlimited individual and family price points set forth by Verizon Wireless, because both carriers needed to close the price gap or risk being viewed as uncompetitive. The first quarter of any year still is a prime time for net additions and any perceived competitive weakness, especially when courting high-value customers, will ultimately hit the bottom line. Yet, while Verizon Wireless dropped $10 on its former 2,100-anytime minute plan (along with 100 anytime minutes), AT&T and U.S. Cellular did not follow suit, suggesting that the minimal price gap may be more effective in up-selling the customer to the family unlimited plan.

• Vendor Importance: High to AT&T, because the carrier is inextricably intertwined with its largest competitor, Verizon Wireless. Typically (not always), plan parity is AT&T’s postpaid rate plan strategy against Verizon Wireless. The move is of very high importance to U.S. Cellular, as the carrier has been hit hard by the competitive environment in the previous quarters with negative net additions. Therefore, aside from its free unlimited incoming messaging differentiators on its plans, it needs to stay in the game against national carriers.

• Market Impact: High on the wireless services segment, because any carrier that has above a $69.99 price point for individual unlimited calling and a $119.99 price point for family unlimited calling is uncompetitive. While Sprint does not offer pure unlimited talk plans, T-Mobile still undercut this postpaid “unlimited” ceiling with its Even More and Even More Plus plans. Smaller carriers such as Cincinnati Bell and Alltel are candidates to join the $69.99/$119.99 pricing party, as some still have the older, more expensive unlimited price points.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Actions - Vendor, Competitors

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