(CSCO) Mobile Operators Revise Data Plans

The demand for smartphones is currently on the rise, leading to a growing requirement for wireless data services. Data usage has more than doubled over the last three years.

Cisco Systems Inc. (CSCO) estimated that mobile traffic would grow 26 folds and total mobile video traffic will expand to 197 million gigabytes (GB) over the next four years.

Given the surge in data traffic demand, mobile operators are revising their monthly data plans to attract more subscribers. Accordingly, the operators are switching to tiered-data pricing plans from the unlimited data plans.

As per market rumors, the largest U.S. mobile service provider Verizon Communications (VZ) will release its new monthly data plans next month. The company is expected to offer three tiered-data plans without any tethering beginning July 7.

Verizon would charge $30, $50 and $80 for 2 GB, 5 GB and 10 GB of data, respectively. Tethering for additional 2 GB of data will cost an extra $20 per month. The new plan is available for both 3G and 4G users.

The second-largest U.S. mobile operator AT&T Inc. (T) also offers monthly tiered data plans –– 200 MB for $15, 2 GB for $25 and 4GB, plus tethering for $45. The company recently introduced an unlimited prepaid plan for $50 per month.

A couple of days back, the third-largest U.S. wireless carrier Sprint Nextel Corp. (S)  announced that it will introduce a new data tier pricing for 10 GB as well as an unlimited WiMax data usage option for customers subscribing to data tiers of 3 GB and above concurrently with the launch of its first 4G tablet.

Sprint will charge $90 for the new 10 GB data plan. The new-tiered pricing plan will be an addition to Sprint’s current monthly data pans –– 1 GB of data for $20, 3 GB for $45 and 5 GB for $60.

Scanning through the monthly data plans, we see that AT&T offers the lowest price. The prepaid low-cost plan provides it with a competitive edge over Sprint’s Boost Mobile and Virgin Mobile brands as well as smaller carriers such as Leap Wireless International Inc.‘s (LEAP) Cricket and MetroPCS Communications Inc. (PCS).

We are maintaining our long-term Neutral recommendation on Verizon, AT&T and Sprint. The stocks retain the Zacks #3 (Hold) Rank for the short term.

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