Verizon Wireless is doubling the size of smartphone data plans to compete for customers and save on capital spending for older wireless technology, said Verizon Communications Inc. Chief Financial Officer Fran Shammo.
The largest U.S. wireless operator this week bumped up the amount of data it includes with smartphone plans – to 4 gigabits from 2 gigabits for $30 a month, for example. The offer is drawing customers to the company’s higher-speed Long-Term Evolution, or LTE, network and reducing the need for capital investments in third-generation, or 3G, technology.
“It’s beneficial from a financial standpoint,” said Shammo at an investor conference in New York today.
The move comes as Verizon Wireless is trying to stand out against AT&T Inc. and Sprint Nextel Corp. as the holiday- shopping season begins. Though all three now sell Apple Inc.’s iPhone 4S, AT&T is the only one offering the older iPhone 3GS, which is available for free. Sprint is the only carrier selling the iPhone 4S with unlimited data plans.
“The fourth quarter is the industry’s best quarter, so they are just trying to get some competitive edge for the holiday season,” says Chetan Sharma of Chetan Sharma Consulting in Issaquah, Washington.
Verizon’s double data plan is effectively a price cut, and the first the company has attempted since it dropped its unlimited data offer earlier this year. The new data offers are a limited time promotion and new users will keep the higher data allotments for the life of their contracts, Verizon said.
Verizon’s current offer makes its data plans, in some circumstances, less expensive than those from AT&T, the second- largest wireless carrier. AT&T’s 4-gigabit plan costs $45 a month, compared with Verizon’s $30. Verizon also offers 10 gigabits a month for $50, up from 5 gigabits, and 20 gigabits for $80, up from 10.
Sharma said he thinks Verizon’s LTE sales are going well. Not only is data being used as a competitive weapon, Sharma said Verizon is making the offer to “understand consumer behavior” so it can develop a pricing strategy.
It is looking primarily to see if higher caps draw different customer segments, lure customers from other carriers, reduce defections and “drive upgrades,” Sharma said.