Wireless Battle Heats Up as Dow Drops

AT&T is lowering prices in response to T-Mobile, which is one reason it's lagging the Dow today.

Mar 10, 2014 at 3:30PM
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The Dow Jones Industrial Average (DJINDICES:^DJI) started the week on a down note today -- falling 55 points in late trading -- after Chinese exports were reported to have fallen 18.1% from a year ago for an overall trade deficit.  

It should be noted that the Lunar New Year holiday fell mostly in February, which will impact production over the first two weeks of the month. So while the decline in exports seems sharp, when adjusted for the holiday it may not be as bad as it first appears.

Wireless battle continues
Dow wireless companies AT&T (NYSE:T) and Verizon (NYSE:VZ) are respectively down 0.25% and 0.5% today after the battle for customers intensified. AT&T announced over the weekend it is cutting the cost of its 2 GB Mobile Share Value data plan by $15, to $65 per month.

Before you get too excited, this is only for consumers who aren't under contract, meaning you must have a phone that's past its two-year contract or pay full price for the phone. The savings would be $360 over two years, which is about the same as the subsidy AT&T and Verizon give for high-end smartphones.

AT&T is trying to fight off a massive effort by T-Mobile (NASDAQ:TMUS) to steal customers by offering lower prices and no contracts. T-Mobile  just increased the 4G LTE data customers get in the base $50 plan from 500 MB to 1 GB and will even pay for new users to sever contracts with rivals.  

Thus far, the price battle has been between T-Mobile and AT&T, and like the $15 reduction in monthly costs, many of the new offers simply shift when customers are spending money.

Verizon Wireless has largely stayed out of the fray because it commands higher rates thanks to a larger 4G LTE network. But if AT&T and T-Mobile both begin to push lower prices without contracts Verizon may have to shift its strategy from pushing contracts.

For investors, the reaction today is negative, but it will take time to see how successful T-Mobile is in shaking up the wireless industry. AT&T and Verizon have huge infrastructure advantages that won't be easy to overcome. I wouldn't bet against these giants, even if T-Mobile is rattling the cages of the wireless industry right now.

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Travis Hoium manages an account that owns shares of AT&T; and Verizon Communications. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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