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Mobile & Wireless
T-Mobile USA unveils no-contract option
Verizon feels no need to respond with similar offer
by Sinead Carew, Reuters
NEW YORK (Reuters) - T-Mobile USA has started offering new service plans including the option of signing up for unlimited services without committing to a long-term service contract as it looks to regain ground lost to rivals.
The U.S. unit of Deutsche Telekom AG has been losing customers to smaller unlimited rivals Leap Wireless and MetroPCS Communications as well as to the larger Verizon Wireless and AT&T Inc .
While the company did not go as far as some analysts had expected, it did offer a $79.99 unlimited talk, text and Web surfing service to customers who do not want to sign up for a long-term contract, which typically lasts 2 years.
This is a 20 percent discount on its standard unlimited monthly fee but it comes with a catch as customers who opt for this service will have to pay more for their cellphones.
It will also offer a $50 per month unlimited service for non-contract customers that only includes voice calls.
Subscribers who opt for two-year contracts will still have to pay $99.99 a month for unlimited voice and data but they will get a better deal than non-contract customers on their cellphone price.
Some analysts had expected the No. 4 U.S. mobile service to announce a $50 per month unlimited voice and data service plan for all customers, sparking fears of a price war. However they saw the actual plans as a better option for T-Mobile USA and the market in general.
"In our opinion, the new plans are more benign than investors' initial fears and could relieve some pressure on wireless stocks," Piper Jaffray analyst Christopher Larsen said in a research note.
Top executives from Verizon Communications , owner of market leader Verizon Wireless with Vodafone Group Plc , told analysts on its quarterly earnings conference call on Monday that they did not believe they needed to respond to T-Mobile USA's offer with something similar.
Shares in Leap closed down 2.4 percent on Monday while shares in MetroPCS finished down 1.8 percent. Shares in Sprint Nextel , another low-priced rival, closed down 1.5 percent.
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