Piper Jaffray analyst Christopher Larsen has cut his rating on Sprint Nextel, arguing that industry dynamics have shifted significantly over the lat two to three months.
The trends of most importance are the higher subsidies service providers are providing on handsets as well as lower prices for attractive pre-paid offers that are likely to put pressure on postpaid pricing, especially as more data intensive handsets become available at lower price points.
The other trend of note is that although the prepaid business has traditionally been viewed as a segment comprised of lower-income or credit-challenged customers, that is likely to change. Already we see more smart phones available for use on prepaid plans, a departure from past practices.
To be sure, mobile service providers will continue to use handsets as a differentiator, but wider availability of capable handsets used with pre-paid plans seems inevitable. At the same time, $45 and $50 prepaid plans that also feature unlimited usage are going to destabilize postpaid pricing.
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