AT&T Unveils New Pre-Paid Plan

AT&T (T) has introduced a new unlimited monthly calling plan for the prepaid wireless market. Starting today, customers subscribing to the company prepaid wireless services receive unlimited voice calls, instant messaging as well as text, picture and video messaging for just $60 a month. However, the plan does not cover iPhone users.

Apart from the U.S., the new unlimited plan covers Mexico, Canada and over 100 countries worldwide. Roaming within the U.S. is free of cost. This prepaid rate plan is about 50% lower than the company’s regular postpaid unlimited (voice and text) service plan.

AT&T offers its prepaid services under the "GoPhone" brand, which does not require the customer to sign long-term contracts and keep a minimum deposit. While the company remains a dominant player in the postpaid market (representing 86% of the company’s total net customer additions), it is struggling to retain customers in the prepaid segment due to more attractive service plans offered by its competition.

The U.S. prepaid unlimited market is characterized by intense price competition as the incumbent players battle to win new customers while retaining the existing accounts. The rationale behind AT&T’s latest move is to respond to the aggressive price plans of its major competitors in this segment.

Sprint Nextel (S) is currently enjoying meaningful traction for its $50 per month unlimited plan (voice, text, data), which was launched in early 2009 by the company’s Boost Mobile prepaid subsidiary. Smaller wireless carriers, such as Deutsche Telecom’s (DT) T-Mobile USA, MetroPCS (PCS) and Leap Wireless (LEAP) are also offering unlimited voice and data plans at cost-effective price points.

MetroPCS continues to be a leading player in the U.S. unlimited prepaid segment with cheap service plans that start as low as $30 per month. Moreover, America Movil’s (AMX) U.S. wireless subsidiary TracFone recently launched a $45 per month unlimited prepaid plan.

The $60 service plan represents a significant discount to AT&T’s current $90 ($3 a day) prepaid monthly unlimited plan, which is more expensive than the competition. While the company’s new unlimited plan is expected to boost opportunities in prepaid, its impact in this price-sensitive market is not expected to be huge given the presence of cheaper and more established competitive price plans. 

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