(PCS) MetroPCS Communications Raises Rates and Limits Data

MetroPCS Communications Inc. (PCS) – one of the lowest cost wireless service providers in the U.S. – has announced price raises for its unlimited plan. Subscribers will now have to pay $70.00 per month instead of $60.00 for its unlimited 4G LTE data plan.

Further, the carrier has also announced bandwidth throttling to three of its 4G LTE plans and slowed down speed to the 3G level after the usage of 250MB, 2.5GB or 5GB depending upon the plan in order to manage network traffic and reduce bandwidth congestion.

Given the massive demand for wireless data services, MetroPCS is practicing bandwidth throttling like many other carriers. In February, AT&T Inc. (T) came up with similar policies as it was falling short of bandwidth. For an unlimited plan, the company axed approximately 99% of the data speed in an attempt to limit the unlimited services.

The issues now surfacing over bandwidth shortage raises doubts over the efficacy of the present wireless market in the booming wireless data space.  Over the last year, wireless carriers like AT&T, Verizon Communications (VZ) and Sprint Nextel (S) registered an upsurge in their data service revenues.

The companies are in the fray to obtain spectrum licenses and lure customers with 3G and 4G services across their markets.  Most of the investments made are directed toward technological upgrade and entry into new markets as compared to capacity in the existing markets leading to poor standards of services.

Going back to MetroPCS, the company is working on a number of strategies to tap opportunities in the wireless data market. MetroPCS is focused on expanding its footprint in the 4G LTE market. The company has already deployed high-speed 4G LTE services in most of its major markets and further expects full coverage by the end of 2012 supported by the expected launch of “4G LTE for All” program in the second half of the year.

However, these plans only indicate technological advancement by the company and may not resolve its current network capacity shortfall. How far these issues can eventually impact the financial results of MetroPCS is yet to be measured but if these problems continue to persist we believe the company may lose customers and thereby increase its churn rates.

The company is already competing with the aggressive pricing plans of Verizon and Sprint. Moreover, smaller wireless carriers, such as Deutsche Telekom’s T-Mobile and Leap Wireless (LEAP) are also offering cost effective unlimited voice and data plans.

We maintain our long-term Neutral recommendation on MetroPCS, supported by a Zacks #3 Rank (Hold).

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