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AT&T Will Let Customers Buy Digital Music, Movies with Phones

(This story was updated to include other companies working with AT&T)

AT&T (T) is in the early stages of a plan to turn mobile phones into credit cards.

The carrier announced a deal today with mobile-payments companies Boku, Zong and BilltoMobile that lets subscribers buy music, movies, news stories, and other digital goods by typing in their phone number instead of using a bank card or PayPal account. Charges will show up on the customer's phone bill.

Mobile payments have been slow to take off in the U.S. because carriers have demanded as much as 40 percent of each purchase, leaving the seller unable to make a profit. Included in today's agreement is a reduction in the fee imposed by AT&T, though terms of the deal weren't disclosed.

Boku, a San Francisco-based startup, and Zong in Menlo Park have gotten the bulk of their earnings from virtual-goods sales on Facebook applications, where low production costs let developers make money even with the carrier fees. Boku Senior Vice-President Ron Hirson says that within a month, other types of digital items will be available for AT&T customers.

"Carriers are really starting to take mobile payments seriously," says Hirson. "We're taking huge steps toward making mobile payments a ubiquitous checkout option online, right next to credit cards."

Britain's Vodafone Group (VOD), the world's largest mobile-phone company, formed a similar agreement with Boku this month. For AT&T, the deal isn't its first venture in mobile payments. AT&T and Verizon Wireless planned to test a system at stores in Atlanta and three other cities that would let a consumer pay with the wave of a smartphone, three people with direct knowledge of the plan said in August. BilltoMobile, based in San Jose, is a unit of South Korea's Danal, and is also a part of AT&T's trial.

Levy is a reporter for Bloomberg News in San Francisco.

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