AT&T Inc. (NYSE:T) customers will have to bear an increase in the monthly admin fee from $0.76 to $1.99. The hike comes at a time when the company is struggling with the pressure to increase its sources of revenue after coughing out $85.4 billion to acquire Time Warner. The increase will affect close to 85 percent of AT&T’s 64.5 million regular customers who use postpaid phone lines. However, according to BTIG Research analyst Walter Piecyk, the company is expecting to make close to $800 million a year from the hike.
Even though the increase is not applicable to customers with prepaid accounts, it is worth noting that AT&T has increased prices twice between April and June. The first was a 50 cents increase followed by a 73 cents increase.
But will AT&T’s higher fee open room for competition?
The wireless market has hundreds of other players who are also struggling to swim through the competition. Nonetheless, there are many questions as to what AT&T’s higher fee means to the market. It is obvious that wireless carriers will try to undo each other in an effort to retain and attract customers. Apparently, as AT & T hikes, T-Mobile stopped adding its fees. Instead, the company implemented an effective price cut of 5% to 10%.
However, it seems like AT&T is not interested in competition. In a statement supporting its move, AT&T spokesperson said, “This is a standard administrative fee across the wireless industry, which helps cover costs we incur for items like cell site maintenance and interconnection between carriers.”
The new fee could result in the termination of contracts by customers
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According to CNET’s Marguerite Reardon, the ‘admin fee’ by AT&T is not called for despite the fact that they will be used to cover additional operational costs. Also, they may not have been necessary given that AT&T has contracts with its customers. Thus, the company’s move may result in the termination of contracts by customers.
However, it is clear that contracts have no control over any increase in rates whether or not there are penalties involved. It remains to be seen how soon the customers would react to the hike.