AT&T Inc. (T - Free Report) , the second-largest U.S. mobile service provider, plans to offer shared data plan – Mobile Share – for its wireless services in late August. The company’s move follows its biggest rival Verizon Communications Inc. (VZ - Free Report) , which released the shared data plan – Share Everything – last month.
The shared data strategy is considered the biggest innovation in wireless pricing over the past several years. As the cell phone markets are saturated and customers are hungrier for data rather than voice, the new strategy will maximize the carrier’s long-term revenue, though it could slightly put pressure on monthly average revenue per user growth in the short term.
There are various resemblances and differences between the plans of both companies:
Like Verizon, AT&T’s shared data plan will provide unlimited voice minutes and text, including video and picture messaging. It will bundle data services across multiple devices and allow sharing data on as many as 10 devices including smartphones, tablets, laptops and other compatible devices. The company will offer shared data plans to both new and existing customers.
Unlike Verizon, AT&T will not replace its existing individual and family plans. Instead, it will offer shared data plans in addition to the current plans.
Verizon charges $90 per month while AT&T will charge $85 per month for one smartphone and one GB data. Under AT&T’s plan, the price of the smartphone will decline with higher usages. On the other hand, smartphone price remains same even with the higher usage under Verizon’s plan. As a result, AT&T’s plan becomes cheaper when it comes to bigger data.
With the new wireless pricing plan, both AT&T and Verizon will enjoy a competitive edge over its major rivals. The plan will put the wireless business of Sprint Nextel Corp. (S - Free Report) and T-Mobile USA, a unit of Deutsche Telekom AG (DTEGY - Free Report) as well as prepaid wireless carriers such as MetroPCS Communications Inc. and Leap Wireless International Inc. more at risk. These offer unlimited pricing plans and do not have any intention to launch shared data pricing plans in the short term.
We are maintaining our long-term Neutral recommendation on AT&T. Currently, the stock retains the Zacks #3 (Hold) Rank for the short term (1–3 months).