Billionaire Gives Tips for Switching IPhone Plans From AT&T

Billionaire Carlos Slim’s U.S. mobile carrier is giving users instructions for switching their AT&T Inc. (T) iPhones to his prepaid calling plans, showing them how to disable software aimed at preventing customers from defecting.

The site for Slim’s Straight Talk service, sold through Wal-Mart Stores Inc. (WMT), directs users of the Apple Inc. (AAPL) device who have trouble switching away from AT&T to a website that provides information. AT&T has a 9 percent stake in Straight Talk’s parent, America Movil SAB (AMXL), and has members on the board of Slim’s wireless carrier.

America Movil, the biggest U.S. prepaid wireless carrier, is using a Straight Talk unlimited $45 monthly smartphone plan to attract Verizon (VZ) Wireless and AT&T users. The iPhone instructions are part of Straight Talk’s aim to begin in the next 30 days offering small chip cards, known as SIM, that can be inserted into phones bought from stores, AT&T or T-Mobile USA (DTE), said Walter Piecyk, a BTIG Inc. analyst in New York.

“There is certainly a healthy inventory of used iPhones that consumers can buy at a low cost on EBay, but we believe Straight Talk’s new rate plan could also attract consumers using brand new iPhones,” Piecyk said in a research note today noting the switching directions.

Two-Year Contracts

AT&T sells the iPhone and other smartphones at a loss to get customers to sign up for contracts that typically run for two years. To try to prevent users from leaving during that period, AT&T “locks” the phones using software to ensure they only work on the carrier’s own network. Many other providers also use the same strategy.

An official of Mexico City-based America Movil who can’t be named under company policy declined to comment, as did Ashley Zandy, a spokeswoman for Dallas-based AT&T. Kristin Huguet, an Apple spokeswoman, didn’t return a phone message. Officials of Wal-Mart couldn’t immediately be reached.

America Movil doesn’t have its own network in the U.S. and rents capacity from U.S. carriers, including AT&T. That could limit the impact of America Movil’s SIM-card plan, since AT&T would simply charge America Movil for users that used to be its own clients, Piecyk said.

In its home country of Mexico, America Movil doesn’t provide users with a way to unlock their phones. Unlocking services can be found from sidewalk vendors in downtown Mexico City.

Pressure on Prepaid

Piecyk lowered his rating on regional prepaid carrier MetroPCS Communications Inc. (PCS) to “neutral” from “buy” today, citing the Straight Talk threat to pay-as-you-go providers.

“The ability to use the iPhone with Straight Talk could materially change the competitive dynamic in the U.S.,” Piecyk wrote in his research note. “The iPhone is the phone everyone wants, and now you can use it on a prepaid plan for only $45 a month for unlimited use,” he said later in an e-mail.

That plan compares to $90 a month at AT&T, the analyst said. Consumers may prefer to pay $600 for an unsubsidized iPhone then switch to Straight Talk to save money instead of signing a two-year contract with AT&T, he said.

Straight Talk’s own smartphone offerings include LG Electronics Inc. (066570) and Samsung Electronics Co. (005930) phones that use Google Inc.’s Android operating system. America Movil started the brand in 2009, selling exclusively through Wal-Mart.

The Mexican company’s U.S. unit, which also uses the TracFone, Net10 and Safelink brands, had 19.3 million clients at the end of September.

To contact the reporters on this story: Crayton Harrison in Mexico City at tharrison5@bloomberg.net; Scott Moritz in New York at smoritz6@bloomberg.net

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

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