AT&T and T-Mobile Return Fire: Sprint Takes Aim

MobileCrunch reported yesterday that Verizon’s new unlimited calling plan could start a price war in the U.S. mobile market. Hours after the announcement by Verizon Wireless, both AT&T and T-Mobile returned fire with unlimited calling plans of their own. Consumers should be happy but stock holders of the telecommunications companies may become a little gun shy.

Verizon’s $99.99 a month unlimited calling plan (which covers all of the United States not just selected areas) was only five hours old when AT&T announced its own unlimited plan. Three hours after AT&T’s announcement, T-Mobile joined the conflict, saying it would introduce a $99.99 plan today. Unlike the Verizon and AT&T plans, T-Mobile’s includes unlimited text and picture messaging, which costs $14.99 per month when added to other T-Mobile plans.

“This is a highly competitive market and we’re committed to moving fast to meet customer needs,” said Ralph de la Vega, chief executive of AT&T Mobility.

The number three provider in the United States, Sprint Nextel, currently has an unlimited calling plan of $119.99 a month, but it is limited to residents of Philadelphia, Minneapolis, Tampa and parts of Northern California and Western Nevada. Analysts expect Sprint to announce its own unlimited plan that covers the entire nation.

It is speculated that Sprint’s flat-rate calling plan could undercut the competition by as much as 40%, a move that would intensify the mobile war. Recently, Sprint has seen a defection of customers that has hurt the bottom line. Selling unlimited plans for as little as $60 could bring new recruits back to Sprint.

“Our bigger concern rests with Sprint’s plans and the potential for future additional competitive responses,” Robert W. Baird analyst Will Power wrote in a research note.

Share prices for all the combatants have been on the decline since Verizon fired the first salvo in the mobile pricing war. If Sprint tries to undercut the competition with $80 or $60 plans, the competition will be forced to respond with either lower prices or more services with their pricing packages. This will cut into profits, at least for awhile.

“Our bigger concern rests with Sprint’s plans and the potential for future additional competitive responses,” Robert W. Baird analyst Will Power wrote in a research note.