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T-Mobile's Unlimited Plan Practically Costs the Same as Verizon's Now

By Adam Levy - Jul 10, 2017 at 11:43AM

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A price increase could be good for T-Mobile and everyone else in the wireless industry.

T-Mobile (TMUS -0.04%) just quietly increased the price of its One Plus plan by another $5 per month. T-Mobile first introduced One Plus, an add-on to its One unlimited data plan, after Verizon (VZ 0.53%) launched its unlimited plan, which includes HD video streaming and up to 10 GB of high-speed tethering. One Plus matches those capabilities and throws in unlimited in-flight Wi-Fi from Gogo.

With the price increase, T-Mobile charges $80 per month for a single line -- the same as Verizon's unlimited plan. In fact, T-Mobile's pricing is a bit higher than Verizon's for family plans of three or more lines (even when you account for the inclusion of taxes and fees in T-Mobile's price).

While the price increase isn't great for consumers, it's a sign that T-Mobile is starting take its foot off the pedal with its competitive pressure. Sprint (S) has been most aggressive with its pricing, but it doesn't have the network quality to compete with T-Mobile, Verizon, and AT&T (T 0.98%)

T-Mobile CEO John Legere standing in front of a sign that says "R.I.P. Data Plans"

Image source: T-Mobile.

Good for T-Mobile investors

T-Mobile has been the only major wireless carrier to be able to raise its average service revenue per subscriber in the last few years. Granted, it still sits below Verizon and AT&T, but it's also adding new subscribers, which supports strong revenue growth.

T-Mobile has given itself several hurdles to climb over in order to increase its revenue per subscriber. First, it gave customers the option to lock in their pricing indefinitely as long as they stick to their current plan. That means T-Mobile has to convince subscribers to switch to its unlimited plan in order to increase revenue from existing customers. Second, it switched to only offering unlimited data plans. The One Plus plan is its only means of increasing the bill on those unlimited customers.

T-Mobile's decision to increase the price on One Plus indicates it's confident the price increase won't negatively impact net additions too much. If it proves successful, it could lead to a price increase of its original unlimited plan, which would have a much bigger impact on ARPU.

Investors should look for commentary on management's pricing decision during the company's upcoming earnings call.

Good for telecom investors in general

If T-Mobile begins to bump its pricing higher across the board, it's particularly good for both AT&T and Verizon investors, and should have a modestly positive impact on Sprint.

For Sprint, its biggest competitive advantage is its pricing. Its service is priced well below the competitors, and T-Mobile increasing its prices just makes that advantage greater. That said, Sprint will only attract price-conscious consumers, so it may have difficulty increasing its prices in the future and keeping subscriber churn under control.

Both AT&T and Verizon, meanwhile, have suffered significant declines in service revenue as a result of T-Mobile's aggressive promotions. Price increases may be a sign that it's ready to take its foot off the pedal and start focusing more on cash flow instead of customer acquisition. That means AT&T and Verizon may experience fewer switchers and customer retention expenses, and gain a bit more freedom to play around with pricing on their own.

AT&T has been aggressive with its promotions, offering free HBO and a discount on its video services for subscribers to its $90-per-month Unlimited Plus plan. Verizon may offer similar incentives with the expected launch of a nationwide television streaming service later this year, but it might not have to if T-Mobile eases up on the pressure.

As the carrier stealing customers away and providing innovative offers, any reduction in competitive pressure from T-Mobile should be welcome news for investors in the other three major wireless companies. The price increase for T-Mobile's One Plus plan may be just the start, and that's good for everyone.

Well, everyone except for the consumers that missed out on saving $5 per month per line.

Adam Levy owns shares of Verizon Communications. The Motley Fool owns shares of and recommends Verizon Communications. The Motley Fool recommends T-Mobile US. The Motley Fool has a disclosure policy.

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Stocks Mentioned

T-Mobile US, Inc. Stock Quote
T-Mobile US, Inc.
$146.63 (-0.04%) $0.06
Verizon Communications Inc. Stock Quote
Verizon Communications Inc.
$45.80 (0.53%) $0.24
Sprint Corporation Stock Quote
Sprint Corporation
AT&T Inc. Stock Quote
AT&T Inc.
$18.57 (0.98%) $0.18

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