AT&T Charging 5 Cents a Minute for Weekend Calls (Update2)
Bloomberg News
September 24, 1998, 4:33 p.m. ET
AT&T Charging 5 Cents a Minute for Weekend Calls (Update2)
(Updates with closing share activity.)
New York, Sept. 24 (Bloomberg) -- AT&T Corp., the largest
U.S. phone company, is offering residential customers long-
distance calls within the U.S. for 5 cents a minute on weekends,
in a bid to add more customers and stem defections.
The discount rate is available for six months to customers
who sign up for AT&T's One Rate Plus plan, which charges 10 cents
a minute on other days plus a $4.95 monthly fee. The new plan
comes a year after rival MCI WorldCom Inc. began charging
consumers 5 cents a minute for long-distance calls on Sundays.
AT&T is aiming to sign up consumers who spend more time on
the phone and more money each month on phone services, as Chief
Executive C. Michael Armstrong pushes to boost revenue growth.
The plan also seeks to reclaim market share from MCI, the No. 2
long-distance company, which has used 5 Cent Sundays to rebuild
its consumer business.
''This is definitely a competitive response to MCI's 5 Cent
Sundays,'' said Blake Bath, an analyst at Lehman Brothers Inc.,
who rates MCI WorldCom ''buy'' and AT&T ''outperform.'' ''It's
been a great customer acquisition tool for MCI.''
One analyst said he doesn't expect AT&T's plan to be as
successful.
''It will never do for AT&T what it did for MCI,'' said
Brian Adamik, a market researcher for the Yankee Group. ''AT&T at
best can hope to bleed less as opposed to grow share.''
Shares of New York-based AT&T fell 1/4 to 59 1/4. Jackson,
Mississippi-based MCI WorldCom fell 2 to 48 3/4.
Heavy Callers
AT&T expects to gain customers who will spend enough on
other days to compensate for the $4.95-a-month charge.
''A light user would never get enough out of this,'' said
Mark Siegel, a company spokesman. ''This is targeted to heavy
callers.''
AT&T also is charging customers who sign up for the plan
higher calling-card rates.
Regular One Rate Plus customers who pay 10 cents a minute
every day are charged 30 cents a minute plus a 30-cent surcharge
for calling-card calls. Customers who sign up for the One Rate
Plus 5 Cent Weekends plan will be charged 40 cents a minute plus
a 65-cent surcharge when they use their calling cards.
''They're trying to make the move as revenue neutral as
possible,'' Adamik said.
One distinction between the AT&T and MCI WorldCom plans is
MCI WorldCom automatically charges consumers 5 cents a minute on
Sundays. AT&T customers who want the discounts have to call and
sign up.
Further, MCI's plan isn't temporary. After six months, AT&T
customers will be charged 10 cents a minute on Saturdays and 5
cents on Sundays.
''5 Cent Sundays has been a very popular product with new
and existing customers,' said Brad Burns, a spokesman at MCI
WorldCom. ''It builds customer loyalty.''
MCI has no plans to expand its program to other days, Burns
said.
MCI, which was bought by WorldCom earlier this month,
introduced the discount plan in September 1997. MCI WorldCom has
about 20 percent of the $70 billion-a-year U.S. long-distance
phone market.
AT&T has been advertising the new plan, which is available
nationwide, for the past few weeks, Siegel said.
--Andrew Brooks in the Princeton newsroom and Colleen McElroy in
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