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Oct 15, 2009
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Wal-Mart takes inexpensive mobile plans nationwide

Oct 15, 2009

By Nicole Maestri and John Tilak

SAN FRANCISCO/BANGALORE (Reuters) - Wal-Mart Stores Inc (WMT.N) is expanding an offering of cut-price mobile services nationwide, putting further pressure on rivals such as Leap Wireless International Inc (LEAP.O) and MetroPCS (PCS.N).

Shares of Leap and MetroPCS both fell after Wal-Mart announced on Wednesday 14 October the expansion to more than 3,200 stores from 234 of the service, developed with TracFone Wireless Inc, the U.S. unit of Mexican cell-phone giant America Movil (AMXL.MX) (AMX.N), owned by billionaire Carlos Slim.

The offering includes a $30 prepaid plan for 1,000 minutes as well as a $45 per month plan for unlimited calling. The service runs on the network of Verizon Wireless, a venture of Verizon Communications (VZ.N) and Vodafone Group Plc (VOD.L).

While many investors had expected that the trial would expand across the country, the announcement underlined the increasing competition for Leap, MetroPCS and others.

"This clearly represents increased competition for the entire wireless sector and in particular for the unlimited pay-in-advance segment, of which leap and MetroPCS are really likely to be negatively impacted the most," said Soleil/Nelson Alpha Research analyst Michael Nelson.

Wal-Mart said it will be offering the plans nationwide on October 18 after a pilot program in 234 stores this summer. It said that customer response to the program was "overwhelming."

Nelson said that the trial offering had already hurt Leap and MetroPCS in the second quarter and likely in their upcoming third-quarter reports.

"Now with the nationwide expansion of the service through an extremely powerful distribution channel of Wal-Mart, it certainly raises the risk profile of the unlimited pay-in-advance segment," Nelson said.

Wal-Mart said the Straight Talk no-contract wireless offerings are an exclusive service.

The new plans will likely also put pressure on rivals such as Sprint Nextel (S.N) unit Boost as it offers an unlimited calling plan for around $50 a month.

Leap shares were down 23 cents or more than 1 percent at $15.17 at midday on the Nasdaq. MetroPCS shares were down 18 cents or 2.4 percent at $7.36 on the New York Stock Exchange.

(Reporting by Nicole Maestri in San Francisco and Sinead Carew in New York, editing by Maureen Bavdek and Matthew Lewis)

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