Wireless Wars: Verizon Fires Back
There’s an intergalactic battle going on for your auditory attention as telecom empires wage war in the celestial heavens. What’s their “force?” It’s flat pricing plans.
Last Tuesday, the valiant Verizon fired the first salvo: it launched a $99.99 plan for unlimited calls. Not to be outdone, marketcap leader AT&T, fired back five hours later with a similar $99.99 flat rate.
With fallen knight Sprint “Skywalker” set to enter the fray these Wireless Wars have Wall Street investors running scared from the stocks. Who will win the kill-or-be-killed battle for cellular supremacy?
Dennis Strigl, Verizon President & COO joins the panel for this conversation. Following is a summary of his main points.
Will the $99 plan launch a price war?
“This isn’t about launching a price war,” replies Strigl. “This is about recognizing an opportunity for Verizon . When you look at our average customer bill it’s about $51. Of our 65 million customers we have only 300,000 that are on price plans greater than $99 so we think this is an opportunity for us on the high end."
(In other words, Verizon sees this as an opportunity to charge more, almost double. In exchange for unlimited minutes Verizon believes high end buyers will welcome the certainty of a bill that's always $99 a month.)
“And yes we do have a handful of customers who are moving to the $99 plan that are (paying more), but we will keep them longer.”
What about Sprint cutting prices in a desperate attempt to steal away market share?
“What Sprint may go after is not our market,” Strigl replies. “Our market is the customer who wants the high quality network, good customers service and the dependability of a bill that they know will be about the same every month. So if Sprint goes after the low-end market, that’s not what we’re focused on.”
Tell us about momentum.
We continue to see robust growth overall (including) the wireless side, says Strigl. Wireless margins are 43-45%. And the guidance we’ve given in the past, we haven’t come off that guidance one bit as a result of this pricing change that we’ve made.”
Traders, what do you think?
Najarian, Finerman, and Adami all think Verizon could be a buy with a stop-out at the 52-week low.
Jeff Macke is a little more skeptical.
Find out what CNBC’s Dennis Kneale thinks the telecom giants in Wireless War Zone.
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Trader disclosure: On Feb.26, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders: Najarian Owns (BIIB), (NOK), (C), (CSCO), (MCD), (MS), (MSFT), (XLF), (XTO) Calls, (YHOO) and (YHOO) Calls; Macke Owns (INTC), (KSS), (MSFT), (ODP), (TSO), (WMT), (DIS), (YHOO); Finerman’s Firm Is Short (IYR), (IJR), (IWM), (MDY), (SPY), Finerman’s Firm Owns (DVA),(AAPL), Finerman’s Firm and Finerman Own (FLS), (HD), Finerman’s Firm Is Short (LEH) and Owns (LEH) Puts. Charles Schwab is a sponsor of Fast Money