Verizon Offers Monthly Plan With No Termination Fees (Update2)
By Lauren Berry
Sept. 22 (Bloomberg) -- Verizon Wireless, the second- largest U.S. mobile-phone company, will offer month-to-month contracts that don't have cancellation fees, a bid to attract customers wary of long-term commitments.
Monthly subscribers will pay the same rates as those with long-term contracts, though they won't get discounts on new handsets, Verizon Wireless spokeswoman Brenda Raney said today.
Verizon and larger rival AT&T Inc. faced criticism from lawmakers and consumers who said fees for canceling contracts early are too high. The new plan may not appeal to many customers because they will need to pay significantly more for phones, said Soleil Securities analyst Todd Rethemeier.
``I don't think there's going to be huge demand for it when people realize how much they are going to have to pay for a phone, when they're used to paying next to nothing,'' said Rethemeier, who recommends buying Verizon stock and doesn't own any. ``It sounds great until you look at the details.''
Existing customers can switch to monthly plans after completing their current contracts. New subscribers can purchase a full-price phone or use their existing handset if it works on Verizon's network, Basking Ridge, New Jersey-based Verizon Wireless said today in a statement.
A new LG Electronics Inc. Chocolate phone from Verizon, for example, is free with a two-year contract, according to Verizon's Web site. The month-to-month version is $299.99.
``This option is for a customer who wants to change phones frequently,'' Raney said. ``Some people just have to have that latest phone.''
Verizon, which made about half of its $24.1 billion in revenue last quarter from wireless service, agreed in July to resolve a consumer lawsuit over early cancellation fees by paying a $21 million settlement. The agreement covered contracts that had a flat-rate cancellation fee and were issued before Verizon Wireless introduced a declining-fee structure in 2006.
Verizon's termination fees start at $175 and decline $5 for every month a user stays with the contract after 30 days. Customers can cancel for free in the first 30 days, Raney said.
AT&T offers a month-to-month plan without cancellation fees for customers who pay the full price for its phones, except Apple Inc.'s iPhone, spokesman Mark Siegel said.
Verizon Communications Inc., which co-owns Verizon Wireless with Vodafone Group Plc, fell $1.27 to $32.03 at 4 p.m. in New York Stock Exchange composite trading. The shares have declined 26 percent this year.