U.S. wireless carriers are talking about raising prices. But the impending arrival of a new iPhone could be reason to doubt their sincerity
Verizon Communications already raised prices last month, and Sprint and T-Mobile US have stated their willingness to consider the same. AT&T, which hasn’t changed its pricing in almost a year, could also be due for an increase. But price increases in a competitive industry are only sustainable if all players follow through with them. And if history is any guide, the release of a new iPhone could cause carriers to throw discipline out the window
T-Mobile’s aggressive growth strategy, launched two years ago, spurred a price war that pushed down average revenue per user across the industry. Things are just starting to level off. Verizon reported a 9.5% decline in average revenue per postpaid user in the second quarter—its slowest rate of decline since the second quarter of 2015. A similar improvement was evident at AT&T
But raising prices is a different matter, particularly ahead of the expected launch of Apple’s new iPhone this fall. Many wireless subscribers wait until then to buy a new phone. Many also switch carriers at the same time, creating an opportunity that T-Mobile, for one, hasn’t been able to pass up
Indeed, after Verizon raised prices July 6, T-Mobile Chief Executive John Legere wrote on Twitter : “I love the price hikes @verizon! It’s like you’re trying to get everyone to switch to @TMobile!! #keepitup”
That suggests T-Mobile may try to grab some of Verizon’s iPhone subscribers, further fueling the price war
For investors, carriers’ recent talk of pricing discipline may prove a false dawn
News Source
http://www.wsj.com/
Verizon Communications already raised prices last month, and Sprint and T-Mobile US have stated their willingness to consider the same. AT&T, which hasn’t changed its pricing in almost a year, could also be due for an increase. But price increases in a competitive industry are only sustainable if all players follow through with them. And if history is any guide, the release of a new iPhone could cause carriers to throw discipline out the window
T-Mobile’s aggressive growth strategy, launched two years ago, spurred a price war that pushed down average revenue per user across the industry. Things are just starting to level off. Verizon reported a 9.5% decline in average revenue per postpaid user in the second quarter—its slowest rate of decline since the second quarter of 2015. A similar improvement was evident at AT&T
But raising prices is a different matter, particularly ahead of the expected launch of Apple’s new iPhone this fall. Many wireless subscribers wait until then to buy a new phone. Many also switch carriers at the same time, creating an opportunity that T-Mobile, for one, hasn’t been able to pass up
Indeed, after Verizon raised prices July 6, T-Mobile Chief Executive John Legere wrote on Twitter : “I love the price hikes @verizon! It’s like you’re trying to get everyone to switch to @TMobile!! #keepitup”
That suggests T-Mobile may try to grab some of Verizon’s iPhone subscribers, further fueling the price war
For investors, carriers’ recent talk of pricing discipline may prove a false dawn
News Source
http://www.wsj.com/
