U.S. mobile service providers are playing follow-the-leader with their wireless plans, and analysts now believe Sprint Nextel ( S - Get Report) could ignite an all-out price war that may mean pain for the telecom sector. Earlier this month, Sprint unveiled its Unlimited Access Pack, providing users with unlimited voice, messaging and data for $119.99 a month. The deal is currently available in only four major markets: San Francisco, Philadelphia, Tampa and Minneapolis-St. Paul. Facing increased pressure to
develop their own packages, Verizon ( VZ - Get Report), AT&T ( T - Get Report) and Deutsche Telekom's ( DT) T-Mobile have followed suit, launching unlimited service plans this week for a flat rate of $99.99 a month. With prices falling, analysts say that Sprint will be forced to drop its unlimited wireless plan below its competitors. Worries about a price war have lopped 11% off of AT&T shares and 10% off Verizon shares in the last two days. Sprint is down 8% over the previous two sessions. In a research note, UBS analyst John Hodulik said he expects Sprint to launch a new unlimited voice plan in the next few weeks nearer to the $60-to-$80-a-month range. "We believe there is still further downside risk in the stocks if Sprint opts for a plan in the low end of the range," said Hodulik, adding that he has decreased his earnings estimates to reflect slowing growth in wireless at both Verizon and AT&T. William Power, analyst with Robert W. Baird, said in a note that a new wave of price competitiveness would be negative for the entire telecom industry. "Our bigger concern rests with Sprint's plans and the potential for future additional competitive responses," said Power. "We expect pricing concerns to be a meaningful overhang for the entire sector in the near to medium term, particularly when combined with slowing postpaid subscriber growth and economic-related uncertainties." The developing price war between the carriers prompted Credit Suisse analyst Christopher Larsen to cut his rating for the whole group to market weight from overweight, saying that the "trends that have driven the sector over the last couple years could weaken in 2008. "We think the primary drivers of this pressure could be a potential wireless price war, sparked by the introduction of flat-rate plans, and macroeconomic weakness," added Larsen. He also downgraded both AT&T and Verizon to neutral from outperform. Among other telecom names, Leap Wireless ( LEAP), Vodafone ( VOD) and Telefonica ( TEF - Get Report) were losing ground. Deutsche Telekom was down 2.1% Wednesday.