By Thomas Gryta
Major U.S. wireless carriers are following different strategies
in pricing Samsung Electronics Co. Ltd.'s (005930.SE, SSNHY) new
flagship smartphone, the Galaxy S 4, as they attempt to distinguish
their offerings in a market with little customer turnover.
The competition to grab customers--especially at smaller players
Sprint Nextel Corp. (S) and T-Mobile USA--is an example of why the
U.S. Department of Justice recently signaled against further
consolidation among the major carriers. In a filing Friday, the
Justice Department stressed that less wireless competition could
boost prices and reduce innovation.
Smaller wireless carriers are under pressure to get the
attention of customers by offering different service plans and
device pricing for popular products, especially as AT&T Inc.
(T) and Verizon Wireless continue to grow their dominance.
"On products where carriers don't have exclusivity, it is
difficult to differentiate the offering," said Gartner analyst
Hugues de la Vergne. Last week, T-Mobile--a unit of Deutsche
Telekom AG (DTEGY DTE.XE)--finally began selling Apple Inc.'s
(AAPL) iPhone, continuing the trend of all the major carriers
selling the most popular devices.
AT&T, the No. 2 carrier by contract customers, is selling
the 16-gigabyte version of the Galaxy S 4 at about $200 to
customers with a new two-year contract, unchanged from the previous
model and the same price as a base Apple iPhone. An AT&T
spokeswoman declined to comment further.
Verizon Wireless hasn't disclosed its pricing yet.
AT&T's unchanged strategy contrasts with Sprint's plans to
sell the Galaxy S 4 at about $250 under contract, with a $100
credit to customers switching from another carrier. Sprint's price
tag for the Galaxy S 4 is above the typical price point of about
$200 for the base model of high-end smartphones when they
launch.
T-Mobile, which doesn't require service contracts, is selling
the phone at about $150 with additional monthly payments of $20 for
two years. T-Mobile's upfront price for the Galaxy S 4 is about $50
higher than its price for the base model of Apple's iPhone 5.
It is unclear if Sprint and T-Mobile's higher prices are the
result of Samsung boosting the cost of the phone to the carriers,
or if the carriers are seeking to reduce the amount of subsidy they
pay on the device. Officials from Samsung weren't immediately
available for comment.
Regardless of the reason, both Sprint and T-Mobile have priced
the Galaxy S 4 as more costly than the iPhone, its prime
competition.
"All things being equal, that could drive people to the iPhone,"
said Ramon Llamas, an analyst with International Data Corp.
Elsewhere, smaller wireless carrier--U.S. Cellular Corp.
(USM)--set its Galaxy S 4 price at about $200 but includes a free
cover for the phone valued at about $60.
For Sprint, analysts noted that offering a discounted price only
to new customers could prompt current customers seeking the Galaxy
S 4 to look elsewhere for a better deal.
A Sprint spokesman stressed that the discount is a limited-time
offer that is similar to past promotions aimed at attracting
attention. He stressed that device cost is only one component of
wireless service, and existing customers will consider the total
cost of service.
Analysts also stressed that the price of the Galaxy S 4 is
likely to come down over time.
"The key price points in this market are $199.99 and free, and
products that have deviated from that in the past have had less
than ideal sales," Mr. de la Vergne said.
Write to Thomas Gryta at thomas.gryta@dowjones.com
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