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Verizon’s Price Cuts Could Indicate They Are Getting Ready To Take On T-Mobile And Sprint

February 6, 2015 - Written By Kristijan Lucic

If Verizon’s latest moves are any indications, the carrier is getting ready to battle it out with Sprint and T-Mobile. Verizon Wireless decided to cut prices on most of company’s ‘More Everything’ shared data plans by $10, and according to analysts, that basically means that Verizon is looking to compete directly with T-Mobile and Sprint. According to the report, Verizon is not that concerned about AT&T though. This is not the only change Verizon did recently though, the price of their shared plan is now $100, instead of $80 it was before, which brings it on even grounds with AT&T. Verizon did, however, cut prices of some other plans, like the one with data allowances between 500MB and 6GB, which is $10 cheaper now. Same thing can be said for their 8GB plan, which is now $5 cheaper.

“We believe that today’s plan change signals a shift in strategy, from targeting AT&T on 1 GB and higher plans, to competing more aggressively with Sprint and T-Mobile on single line and lower-end 2-line family plans,” said Jefferies analyst Mike McCormack. Scott Goldman and Tudo Mustata, on the other hand, said the following: “While the plan changes could pressure [average revenue per account] trends, we also believe investors could be concerned with the company’s increased willingness to compete head-to-head with the two value carriers.”

The Verizon’s 3GB plan is still more expensive than most Sprint and T-Mobile offerings, on the other hand. When combining two-line family plans, Verizon comes to even ground with Sprint and T-Mobile though. The analysts don’t think that the Verizon’s pricing changes will force a response from AT&T though, they said the following: “AT&T also has flexibility in offering lower monthly price points by offering different tenure equipment installment plans.”

According to a BTIG analyst, Walter Piecyk, the most interesting change in Verizon was the price cut to the monthly smartphone line charge for customers using Verizon Edge. “While the price cut on the monthly line fee could simply be a way to target customers from AT&T or Sprint, we think it might also be a test to try and move a greater mix of customers to Edge phone payment plans. Verizon customers can only benefit from this lower monthly service rate if they move over to the Edge phone payment plan,” he wrote in a blog post.

Verizon said that around 25% of all of their phone activations were completed through the Edge program, as far as Q4 2014 goes that is, this shows growth of 12% compared to the third quarter. “It’s hard to know what impact this promotion will have on Verizon’s Edge phone payment program but it could be an early [indication] that they will be more willing to embrace this EBITDA-friendly strategy in 2015 as they face persistent competitive pressures,” added Piecyk.