Verizon Wireless-AT&T 'Price War' May Boost Revenues

Don't be fooled by the latest round of price cuts by Verizon Wireless and AT&T.

The two biggest U.S. mobile-phone companies said on Jan. 15 they'll cut monthly prices on unlimited voice calling packages by $30. While the decreases make voice calling cheaper, they and other price moves announced the same day are designed to get subscribers to opt for data plans that typically carry higher price tags and fatter margins for mobile-phone service providers. So the net effect may be increased revenue, analysts say. "We could see a move upwards rather than downwards," says Jennifer Fritzsche, an analyst at Wells Fargo Securities in Chicago, who recommends buying shares of AT&T and Verizon Communications. "Any kind of voice pricing is very much a commodity," Fritzsche tells Bloomberg News. "Data is the future." Verizon Wireless, for example, may sacrifice $540 million in voice revenue while generating an additional $630 million in data plan sales, according to Credit Suisse analyst Jonathan Chaplin. That suggests a net gain of $90 million. Only about 2% of wireless subscribers will see lower bills as a result of the price changes, according to estimates by JPMorgan. Effective Jan. 18, Verizon Wireless and AT&T will charge about $70 apiece for unlimited voice calls.