Verizon Wireless, the biggest U.S. mobile service, is cutting its fees for voice calls by about 30 percent, in a move that accelerates a price war in the ferociously competitive U.S. wireless market.
Its biggest rival, AT&T Inc, the No. 2 U.S. mobile services, will likely have to follow suit with a similar cut to its services fees, analysts said.
Shares of Verizon Wireless parent Verizon Communications Inc were down 1.8 percent in noon trading on Friday. Shares in Vodafone Group Plc, a minority Verizon Wireless owner, closed down 1.5 percent in London.
Verizon Wireless said on Friday it is replacing a $99.99 voice plan with a $69.99 plan that includes unlimited phone calls and an $89.99 plan that also includes text messages.
However, Verizon upped its fee for data services such as Web surfing to $9.99 per month for 25 megabytes of downloads, from a $19.99 service plan for 75 megabytes of data downloads. It also set a requirement for a $30 per month unlimited data service plan for smartphone users.
Verizon's Chief Financial Officer John Killian told analysts on a conference call that voice revenues would fall first but that the ultimate effect of all the changes would be a rise in revenue and earnings before interest, taxes, depreciation and amortization.
No specific targets were offered.
Pacific Crest Securities analyst Steve Clement said AT&T would likely follow in very short order with an identical price cut and said operators such as Sprint Nextel and Deutsche Telekom's T-Mobile USA already have cheaper service prices than Verizon.
He said that other than a change at AT&T, the Verizon move would not have a huge impact as only about a million customers use its $99.99 a month unlimited voice service today.
Any time a market leader changes prices it causes concern but they're really cutting prices at the high end of voice. That's a small portion of the market, he said.
Clement said service fees at smaller competitors such as Leap Wireless International Inc and MetroPCS Communications Inc are still much cheaper than Verizon's new offering.
The increase in data fees comes as Verizon and its rivals look for ways to ease pressure on their data networks. Rising popularity of Web-capable phones has vastly increased data use.
AT&T's mobile chief said late last year that he was looking for ways to ease data usage. A spokesman for AT&T declined comment on whether or not his company would follow Verizon's move.
AT&T currently offers a $99.99 unlimited voice plan and data services for $29.99 excluding text messages.
Sprint said its service fees are still cheaper than Verizon Wireless.
(Reporting by Sinead Carew; editing by Gerald E. McCormick and Tim Dobbyn)