Sprint Nextel Corp
Starting January 30, Sprint, the No. 3 U.S. mobile service, will raise its price for smartphone users, who use about 10 times more data services than typical customers.
Sprint said it chose to raise its price so that it could keep its unlimited service offering, unlike bigger rival AT&T, which has put limits on data usage. Sprint's cheapest service will be $79.99 per month for smartphone use after the change.
While Sprint shares fell after the news, some analysts said its pricing was still competitive. Sprint already charged a $10 monthly premium for a few smartphones with fast wireless data connections. This extends the premium to all smartphones.
It might help ease concerns about data price wars because it could ease pressure on rivals to cut prices.
For example, Pacific Crest analyst Steve Clement said it will likely help No. 4 U.S. provider T-Mobile USA, a unit of Deutsche Telekom AG
When you've the most aggressive pricer go out and raise prices, that's good for everybody, Clement said. T-Mobile USA had been viewed as the value leader, but they have lost some of that ground to Sprint. This potentially opens the door for them a little bit.
The $79.99 fee would include 450 minutes of talking time, unlimited mobile-to-mobile talk and unlimited texts and usage of data services such as Web surfing unless the customer is roaming off Sprint's network.
In comparison, T-Mobile USA offers 500 minutes of talk time and unlimited texting and web-surfing for $79.99.
Similar services would cost about $110 at its biggest rival, Verizon Wireless, a venture of Verizon Communications
AT&T's most comparable offer would cost $85 a month, but limits data downloads to 2 gigabytes per month, while Sprint and Verizon Wireless still offer unlimited downloads.
Wells Fargo analyst Jennifer Fritzsche estimated that, even after the price rise, Sprint's service would still be about 33 percent cheaper than its bigger rivals.
This move is interesting in terms of timing as we believe Sprint may be more confident in its pricing power it has with its customers, Fritzsche said in a research note.
Sprint closed down 9 cents at $4.36 on the New York Stock Exchange.
(Reporting by Sinead Carew; editing by Derek Caney, Andre Grenon and Bernard Orr)