How often do you use your cell phone to make phone calls these days? Well if you’re like most people, not very often. In fact, monthly call time by cell phone users has fallen by roughly twenty percent in the last five years. Providers are beginning to adjust their business models to this new normal, and this movement could prove costly to consumers.
As of June 28, Verizon (VZ) users will be forced to purchase plans that, while including unlimited voice and text, will come with data packages that are nearly twice the current rate. These are being marketed as “share everything” plans, which would allow users with multiple devices, for example in a family setting, to share a set amount of data.
However, users with only one device will likely have to pay much more than they have previously for the same service. If you are interested in getting into the Smartphone universe with Verizon, now is the time as those who purchase their devices before the end of the month will have their unlimited data plans grandfathered in.
Other mobile providers are counteracting this strategy by providing, for the first time, the uber-popular iPhone without a standard contract. Virgin Mobile (VMED) and Cricket are two companies leading the way with this strategy, offering monthly rates starting at $30 and $55, respectively. However, their offers, as you could expect, are too good to be true. Instead of purchasing the phone up front at a discounted rate, customers will have to pay upwards of four times the subsidized price offered by Verizon and AT&T (T).
Business Section: Investment Ideas
How will the markets, and consumers, react to this move? While some analysts are already hailing the strategy as “brilliant” and “[redefining] the economics of mobility”, the possibility looms that customers will turn to other carriers like AT&T who are yet to introduced such cost prohibitive pricing plans. Here is a list of major wireless providers who will likely be affected by the move.
1. Verizon Communications Inc. (VZ, Earnings, Analysts, Financials): Provides communication services. Market cap at $124.29B, most recent closing price at $43.75.
2. Virgin Media, Inc. (VMED, Earnings, Analysts, Financials): Provides of entertainment and communications services in the United Kingdom. Market cap at $6.16B, most recent closing price at $22.19.
3. AT&T, Inc. (T, Earnings, Analysts, Financials): Provides telecommunication services to consumers, businesses, and other service providers worldwide. Market cap at $209.25B, most recent closing price at $35.69.
4. Sprint Nextel Corp. (S, Earnings, Analysts, Financials): Offers wireless and wireline communications products. Market cap at $9.3B, most recent closing price at $3.10.
(Written by Dan Connelly)
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