The price increases mark a high-profile reversal for an industry that has mostly competed for new customers with discounts, free phones and low-priced family plans—even after shrinking to a three-player market with the purchase of Sprint Corp. by T-Mobile US Inc. in 2020. 

The price increases are the first for such plans in three years. Dallas-based AT&T is raising the monthly fees on previous plans by up to $6 a month for single-line customers and up to $12 a month for families, an AT&T spokesman confirmed Tuesday. Staffers in multiple stores were informed of the changes this week and are offering new plans or telling customers to call the company’s consumer service line for help on choosing new offers.

Shares of AT&T rose as much as 2.9% to $19.68 on the news. Verizon Communications Inc. added 2.1% and T-Mobile narrowed its loss for the day.

Subscribers will have the option to avoid the price hike by switching to new unlimited plans, the carrier said.

“We are encouraging our customers to explore our newer plans which offer many additional features, more flexibility for each line on their account and, in many cases, a lower monthly cost,” the carrier said Tuesday in an emailed response to questions.

AT&T has been warning investors of inflationary pressures. On an earnings call last month, Chief Executive Officer John Stankey said rising wages could add about $1 billion to the company’s overhead this year.

Test for carriers

The price hike will test whether carriers can join other industries like food and energy in passing on higher costs. The plan could backfire if disgruntled AT&T customers defect to Verizon and T-Mobile. Unlike cable-TV bills that increase routinely, the wireless industry typically doesn’t raises prices on current customers but uses promotions to move people to higher-priced plans. 

The pandemic led to record low wireless churn rates: While locked at home, customers stuck with their carriers and largely continue to do so today. The low defection rate may be a factor in AT&T’s decision.  

“Running this business and not sitting here and evaluating where we have options to move on pricing and be successful, I wouldn’t be doing my job properly,” Stankey said on the call.

A price increase might ruffle some feathers, according to a Recon Analytics mobile intender survey. The rate of customer defections, which ran at about 1% a month at AT&T, could rise to as much as 1.25%, according to the survey. And Verizon would be the biggest beneficiary of the shift, according to the survey responses. 

Like food and fuel, mobile phone connections have become an essential service. 

“Service providers have almost carte blanche to raise prices, provided their chief rivals do as well because communications services are a must-have, not a luxury,” said Tammy Parker, an analyst with GlobalData.