Samsung Tablet Prices Cut Again in Rising Challenge to IPad

Sprint Nextel Corp. (S) and Verizon Wireless cut the price of the Galaxy Tab tablet computer for the second time this year, signaling more competition for Apple Inc. (AAPL)’s iPad.

The Tab, made by Samsung Electronics Co., now costs $199.99 with a two-year wireless-service contract, according to the carriers’ websites. In January, Sprint cut the price to $299.99, while Verizon reduced the price to $499.99.

Carriers are lowering the prices for tablets that connect to the Web using mobile-phone networks to earn data revenue and compete against Wi-Fi tablets which are available without monthly contracts. The cheapest iPad 2, which has Wi-Fi only, is priced at $499.

“If you’re a tablet vendor, you have to incentivize the carrier to make shelf space for it, and the carrier wants to sell two-year contracts,” said Tavis McCourt, an analyst at Morgan Keegan & Co. in Nashville, Tennessee.

Sprint, the third-largest U.S. wireless carrier, reduced its price for the Galaxy Tab at the beginning of this month, said Mark Elliott, a spokesman. Verizon Wireless, the biggest mobile carrier, cut its prices last month, said Brenda Raney, a spokeswoman for the Basking Ridge, New Jersey-based company.

Dallas-based AT&T Inc. (T), the No. 2 carrier, has held the price for the Tab at $549.99 after slashing it by $100 earlier this year.

Wi-Fi Ultimately Cheaper

While tablets that can connect to mobile-phone networks give the users Internet access in a wider area than Wi-Fi-only tablets, they also require a data-service contract, making them more expensive ultimately, McCourt said. Still, the lower initial price and carrier promotion will help boost demand for the devices, he said.

Wi-Fi tablets connect to the Web using so-called hotspots available in libraries, bars, hotels and users’ homes.

“As tablets go from being early adopter to mass-market, and the total two-year cost to the consumer becomes more and more important, the Wi-Fi versions are far more cost effective,” McCourt said.

The iPad 2, which has a larger screen than the Galaxy Tab, is also available as a version that can connect to mobile-phone networks. That version starts at $629.

Sprint, based in Overland Park, Kansas, rose 9 cents, or 2 percent, to $4.64 at 4 p.m. in New York Stock Exchange composite trading. Verizon Communications Inc. (VZ), which co-owns the wireless company with Vodafone Group Plc (VOD), fell 4 cents to $37.85. Samsung fell 2.3 percent to 923,000 won at close of trading in Seoul.

To contact the reporter on this story: Amy Thomson in New York at athomson6@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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