Sprint Nextel Corp
Starting January 30, Sprint will increase its price for smartphone users, which use roughly 10 times more data services than typical customers, instead of limiting data usage such as its bigger rival AT&T has done. After the change, Sprint's cheapest monthly service will be $79.99 for smartphone customers.
While Sprint shares fell after the news, some analysts noted its pricing was still competitive. Sprint already charged a $10/month 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 the valued 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 talk 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.
Similar services would cost about $110 at its biggest rival, Verizon Wireless, a venture of Verizon Communications Inc
AT&T's most comparable offer would cost $85 a month, but limits data downloads to 2 megabytes 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 shares were down 3 cents at $4.42 in afternoon trading on the New York Stock Exchange.
(Reporting by Sinead Carew; editing by Derek Caney and Andre Grenon)