T-Mobile USA Testing $50 Calling Plan For Existing Customers

T-Mobile USA is offering existing customers in San Francisco a $50 flat-rate calling plan in another sign of an emerging price war for low-end wireless customers.

The No. 4 U.S. wireless carrier, a unit of Deutsche Telekom AG (DT), began offering the plan Wednesday to customers who have been with T-Mobile USA for 22 months or more. It's the first return salvo aimed at Sprint Nextel Corp.'s (S) Boost Unlimited, which last month unveiled its own $50 flat-rate plan.

T-Mobile USA won't comment on test market activities, according to spokeswoman Cara Walker.

But T-Mobile USA stores in San Francisco are actively pushing the plan, including calling up and alerting customers of the new $50 rate.

Customers won't have to extend their contract when they switch, although they'll have to honor the terms of the existing contract. The plan is for individuals and only includes unlimited calling.

Boost Mobile shook up the industry by offering a flat-rate $50 plan, which includes unlimited calling, text messages, Web surfing and walkie-talkie service. Boost's main targets are Leap Wireless International Inc. (LEAP) and MetroPCS Inc. (PCS), which offer similar unlimited plans but with regional restrictions. But Sprint also saw T-Mobile USA as vulnerable to cherry-picking.

In the fourth quarter, T-Mobile USA added 621,000 net new subscribers, down both sequentially and from a year ago. The turnover rate of 2.4% was also up from a year ago.

T-Mobile is being squeezed by the low end with Virgin Mobile USA Inc. (VM), Leap and Metro, while high-end players such as AT&T Inc. (T) and Verizon Wireless continue to nab the best customers. Verizon Wireless is jointly owned by Verizon Communications Inc. (VZ) and Vodafone Group Plc (VOD).

Sprint Chief Executive Dan Hesse, in an interview with Dow Jones Newswires Thursday, said he expected rival carriers to respond competitively, although he didn't think a price war would erupt.

But Sanford Bernstein & Co. LLC analyst Craig Moffett said any signs that Sprint was making progress with its cheaper plans could spark an aggressive response by competitors.

"As the market opportunity contracts, any real sign of a turnaround at Sprint would decisively undermine targets at Sprint's competitors," he said.

Sprint's battered shares are up 28% to $3.47. Deustsche Telekom shares are flat at $12.04.

-By Roger Cheng, Dow Jones Newswires; 201-938-2020; [e-mail]