End of Wireless Price Wars?

Are the brutal price wars that plagued the wireless arena for past three years coming to an end? A quick analysis of the current offerings shows that the hostilities have diminished if not completely ceased in the mobile market. First the fourth quarter the discounts and competition was not as severe as one though. Secondly, in the first quarter of 2005 we have a couple of mobile carriers actually raising prices, instead of the usual marketing madness. Cingular upped the ante and raised the entry point for its family plans to $69.99 from $59.99. T-Mobile, the biggest discounter of them all has ended its 1000-anytime minutes and unlimited weekend minutes promotion for $45.99. Mind you this very same package was going for $39.99 a year ago. Verizon Wireless has some discounted family plans but that’s about it.

There are couple of major trends at play. US wireless penetration is running at 61% and any future growth is going to come from adding more lines to older phones (family plans) or selling pre-paid phones. Secondly, Americans have become comfortable in yakking on their mobile phones all the time (well you can judge that by looking around you during commute hour – everyone is on the phone!) and its reflected in marginally higher ARPU (Average Revenue Per User) and declining churn rates. (Wireless Week has a good recap of all these stats.)

Why this certain wave of optimism in the industry? Consolidation: a year ago there were six carriers and now there are four carriers thanks to AT&T merging with Cingular, and Sprint gobbling up Nextel. So if all of you who are headed to CTIA next week, don’t be surprised if you see smiling wireless executives, willing to buy a round of spicy rum in New Orleans. The worst is over… for now!


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