UPDATE: Wal-Mart Expands Cheap No-Contract Wireless Offering
October 14 2009 - 11:27AM
Dow Jones News
Wal-Mart Stores Inc. (WMT) said Wednesday that it would expand
nationally Tracfone Wireless Inc.'s ultra-cheap Straight Talk
cellphone service, in another illustration of the ratcheting down
of pricing at the low end of the wireless industry.
Straight Talk, which offers a monthly plan for as low as $30 a
month, and an unlimited access plan - including text messages and
mobile Web access - for $45 a month, was until recently offered as
a limited trial service by Tracfone, which is a unit of America
Movil S.A.B. de C.V. (AMX). The service is seen as a potent
competitor in the hot prepaid segment, particularly because it runs
on the Verizon Wireless network. With a national stage, Straight
Talk is able to apply pressure on all of the prepaid wireless
providers.
Straight Talk will be available nationally starting Sunday.
"It's just one other salvo in the ongoing pricing battle," said
Roger Entner, an analyst at Nielsen Co.
The service is seen as a threat to prepaid providers MetroPCS
Communications Inc. (PCS) and Leap Wireless International Inc.
(LEAP), best known for their unlimited prepaid plans. The two
companies are experiencing pressure from Sprint Nextel Corp.'s (S)
Boost Mobile, which also vulnerable to the Straight Talk plan.
Spokesmen for each provider weren't immediately available for
comment.
MetroPCS shares recently fell 4.2% to $7.22, while Leap fell
4.9% to $14.65.
Lesser known is the effect on larger carriers. Sprint and
Deutsche Telekom AG's (DT) T-Mobile USA have already suffered from
customers migrating to cheaper plans, but there hasn't been as much
of an effect on the top two players, Verizon Wireless and AT&T
Inc. (T). Verizon Wireless, owned by Verizon Communications Inc.
(VZ) and Vodafone Group Plc (VOD), has maintained its premium
pricing thanks to positive perceptions of its network, while
AT&T has the Apple Inc. (AAPL) iPhone.
But in the case of Straight Talk, Verizon Wireless provides the
underlying network, prompting some concern over its core service.
AT&T also has a deal with Tracfone, but doesn't lend its name
to the service. The Verizon Wireless name is currently found on
Straight Talk products.
"It certainly cannibalizes Verizon Wireless's own business,"
Entner said. "But Verizon really wants to take a bite out of
AT&T's Tracfone business, and they put their name in to up the
ante."
Verizon Wireless wasn't immediately available for comment.
Industry observers are already speculating on a response.
T-Mobile USA is seen as the next to cut its price with a possible
$50 unlimited wireless plan, although the carrier has declined to
comment on its plans.
Wal-Mart's move further into wireless is the latest example of
the world's largest retailer bringing its size and scale to a
business beyond the traditional department store. For example,
Wal-Mart has increased its presence in health care for years, most
notably by launching a program pricing one-month supplies of
certain generic drugs at $4, an action that prompted other
drug-store chains to offer similar plans.
Wal-Mart is one of several large chain stores shifting its focus
to take advantage of the still growing wireless business. Over the
past few months, Best Buy Co. Inc. (BBY) and RadioShack Corp. (RSH)
have made a more concerted effort to emphasize the breadth of their
wireless options. Best Buy, for example, recently began offering
Leap's service in its mobile stores.
While the $45 plan offers unlimited access to everything, the
$30 plan includes 1,000 minutes, 1,000 text messages and 30
megabytes of mobile Web access.
Handsets for the plans, from manufacturers including LG Corp.
(003550.SE) and Samsung Electronics Co. (SSNHY, 005930.SE), are
available at Wal-Mart stores and start at about $40.
The retailer's cellphone pilot program that began last summer in
234 stores was successful, said Wal-Mart, and the company has
worked quickly to make the plans available before the holidays.
-By Roger Cheng, Dow Jones Newswires; 212-416-2153;
roger.cheng@dowjones.com
(Nathan Becker contributed to this article.)