Verizon, AT&T cut fees, expand price war

NEW YORK (Reuters) - The two largest U.S. wireless carriers, Verizon and AT&T, cut their rates on Friday, escalating a price war that began with smaller carriers.

Shares of AT&T and Verizon Wireless owners Verizon Communications Inc and Vodafone Group Plc ended lower, as did the broader market.

Verizon Wireless said on Friday that it was replacing a $99.99 voice plan with a $69.99 plan that includes unlimited phone calls and an $89.99 plan that also includes text messages, while it also required more customers to pay for data services.

AT&T said it would offer unlimited voice and data for $99.99, equating to a roughly $30 price reduction.

Verizon said it was ending a data service plan for $19.99 a month for 75 megabytes of data downloads such as Web surfing. Instead it is adding a $30 unlimited service plan for cheaper multimedia phones and offering a $9.99 per month plan for 25 megabytes of downloads.

The news comes a year after smaller carriers like Deutsche Telekom''s T-Mobile USA and Sprint Nextel unit Boost Mobile introduced lower-cost plans, sparking concerns of a price war.

Analysts at the time had said AT&T and Verizon may be able to sidestep a margin-denting price war because their customers are willing to pay a premium for the latest phones, faster data services and general reputation for more reliable networks.

Some experts still believe the impact is limited. Pacific Crest Securities analyst Steve Clement said only about a million customers use Verizon''s $99.99 a month unlimited voice service today.

"Any time a market leader changes prices it causes concern, but they''re really cutting prices at the high end of voice. That''s a small portion of the market," he said.

Clement also said service fees at smaller competitors such as Leap Wireless International Inc and MetroPCS Communications Inc are still much cheaper than Verizon''s new offering.

CUTTING CANCELLATIONS