Will Flat Rates Take Over The U.S. Wireless Industry?
Verizon Wireless' CFO tells investors that unlimited-calling and upgrades are "game-changing voice and data plans."
Saying that its new flat-rate unlimited-calling plan is attracting subscribers from other carriers as well as upgrades within its own subscriber ranks, Verizon Wireless Monday predicted revenue growth in the double digits for the foreseeable future.
Speaking by webcast at a Bear Stearns Media Conference in Palm Beach, Fla., Doreen Toben, chief financial officer of Verizon Wireless parent company Verizon Communications, said margins will hit 43% to 45% and that the U.S. No. 2 wireless provider will continue to capitalize on new price structures in the industry as well as the trend toward open networks.
"We're very upbeat about the prospects for wireless growth for 2008 and beyond," Toben said. Verizon Wireless is a venture of Verizon and Vodafone Group.
Touting its "game-changing voice and data plans," Verizon unveiled its $99.99 subscription rate for unlimited calling on Feb. 19. The plan allows unlimited calls to any U.S. number including landlines for $100 a month.
Verizon's competitors responded swiftly. No. 1 U.S. carrier AT&T matched the offer the same day, while struggling Sprint Nextel produced an $89.99 flat-rate plan within days. T-Mobile USA has introduced a $100 a month unlimited plan that also includes unlimited messaging. Toben indicated that investor fears of a price war among the U.S. carriers -- which have been able to keep prices and margins up by charging by the minute -- are unfounded.
"It doesn't take that many more of the $79.99 folks to go up to $99.99 to offset" the reduced fees for high-volume callers, she said.
Verizon has also revamped its subscription tiers for high-speed data access to mobile devices. Two new data plans, one that offers 50MB of data traffic per month and one that offers 5GB, debuted at the start of this month. The 50MB plan costs $40 a month and the 5GB plan $60.
So far Wall Street has not been impressed. Wireless carrier stocks have fallen with the broader stock market in recent days, with shares of Verizon Wireless' parent company dropping from the $45 range at the end of 2007 to around $35 on Monday, a 22% slide.
While cutting its rates for unlimited calling, Verizon is also trying to stay abreast of the movement toward open networks and open devices that could transform the U.S. wireless market in the next couple of years. Following up on Apple's release last week of the software development kit for the popular iPhone, which runs exclusively on AT&T's EDGE network, Verizon plans next week to release Version 1.0 of the specifications for new wireless devices running on its "Any Device, Any App" plan, which is a data-only service.
Verizon said in late 2007 it planned to open up its data network to devices and applications from any vendor. The company is also thought to be a contender in the FCC auction of valuable spectrum in the 700MHz range, which carries requirements for open networks built on the airwaves.
The new technical specs "will provide the roadmap for wireless device visionaries and tinkerers, as well as existing device makers, to create consumer products not offered directly by the company," said Anthony Lewis, vice president of Verizon's open development initiative, in a statement.
Verizon shares were down 1.7% in morning trading on Monday.
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