By Scott Moritz | Bloomberg
AT&T is raising prices for older mobile service plans in an effort to squeeze more revenue from customers and blunt the effects of accelerating inflation.
The price increases mark a high-profile reversal for an industry that has primarily competed for new customers with discounts, free phones and low-cost family plans – even after moving to a three-player market with the purchase of Sprint Corp. by T-Mobile US Inc. in 2020.
AT&T’s increases are the first for such plans in three years. The Dallas-based carrier is increasing monthly charges on those older plans up to $6 per month for single-line customers and up to $12 per month for families, a spokesperson confirmed Tuesday. Employees at several stores were notified of the changes this week and are offering new plans or telling customers to call the company’s consumer service line for help choosing new deals.
AT&T shares rose 2.9% to $19.68 on the news. Verizon Communications Inc. added 2.1% and T-Mobile pared its loss for the day.
Subscribers will have the option to avoid the price hike by upgrading to new unlimited plans, the carrier said.
“We encourage our customers to explore our new plans which offer many additional features, more flexibility for each line of their account and, in many cases, a lower monthly cost,” the carrier said in an email response on Tuesday. to the questions.
AT&T warned investors of inflationary pressures. On an earnings call last month, CEO John Stankey said the pay hike could add about $1 billion to the company’s overhead costs this year and raised the prospect of a price hike.
“To run this business and not sit here and assess where we have options to price change and be successful, I wouldn’t be doing my job properly,” Stankey said.
In the wake of the Covid-19 pandemic, wireless carriers have seen record wireless churn rates. While locked at home, customers stayed with their carriers and largely continue to do so today.
The price hike will test whether mobile service providers can join other industries like food and energy in passing on higher costs. Unlike cable TV bills which steadily increase, the wireless industry generally does not raise prices for current customers, but uses promotions to move people to more expensive plans.
AT&T’s move could ruffle some feathers, according to a mobile intentions survey from Recon Analytics. The rate of customer no-shows, which stood at about 1% per month at AT&T, could reach as high as 1.25%, according to the survey. And Verizon would be the biggest beneficiary of this change, according to survey responses.
For years, carriers have competed and won new customers by matching each other’s offerings, whether with unlimited data caps, free streaming from Netflix or HBO Max, or multi-line family plans. . AT&T’s move upends that status quo, according to LightShed Partners analyst Walt Piecyk, who said all carriers are under pressure to generate a return on recent multi-billion dollar investments.
“5G and free streaming services have not been enough to drive the migration to higher plans that are needed to drive revenue growth in the wireless industry,” Piecyk said.
Like food and fuel, mobile phone connections have become an essential service.
“Service providers have almost carte blanche to raise prices, provided their major rivals do the same, because communications services are a must, not a luxury,” said GlobalData analyst Tammy Parker.