Can AT&T’s New Plans Boost Its ARPU?

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AT&T (NYSE:T), the second largest U.S. wireless carrier, introduced a new set of wireless plans that aim to incentivize higher data consumption, while potentially boosting ARPU. While AT&T’s lower-tiered plans will become more expensive, offering higher data caps, its high-end plans (15 GB+ per month) will see pricing come down notably (see the table below). The new plans will also eliminate data overage charges by reducing speeds to 128 kbps after customers consume their allotted high-speed data limits. Current subscribers can continue to keep their existing plans. The move, which marks AT&T’s first rate revision in over a year, brings the carrier’s plans roughly in line with Verizon, which made similar changes to its plans last month.

Trefis has a $48 price estimate for AT&T, which is about 15% ahead of the current market price.

See our complete analysis for AT&T here

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AT&T Doesn’t Want To Play The Pricing Game At the Low End 

It’s evident that AT&T does not want to get caught up in the postpaid pricing war that its smaller rivals Sprint and T-Mobile are engaged in, as the carrier has effectively increased the base price for the most frugal users with its new plans. The lowest tier data plan will see prices rise from $20/month to $30/month, with the data cap rising from 300 MB to 1 GB. AT&T’s focus on higher-value users has been evident in recent quarters, as the carrier has been letting go of many of its lower-value feature phone customers (180k postpaid net losses in Q2).

Driving Data Consumption Growth

With the U.S. wireless market saturating, revenue growth coming from new subscriber additions is slowing. Moreover smartphone penetration is also slowing down, implying that the incremental revenue from users adding data services to their plans will diminish. Like most other carriers, AT&T is counting on boosting ARPU by driving data usage growth. The new plans aim to do exactly this, enticing customers to upgrade to higher data tiers by significantly cutting pricing. For instance, the carrier’s top-end 30 GB data plans will see a 40% price cut, while its most popular 15 GB plan will be replaced by a 16 GB offering that costs $10 less. AT&T is likely wagering that the revenue loss from its current base of high-end users will be more than offset by subscribers on lower-end plans upgrading to plans with larger data buckets.

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