With the proliferation of smartphones in the United States, consumers are already becoming accustomed to a world in which their phone plays a much greater role in their spending habits. A new initiative from AT&T (NYSE: T) announced this morning aims to bring the relationship between mobile phone and the user’s purchase methods. The telecom giant has partnered with mobile-payment companies Boku, BilltoMobile and Zong to let AT&T subscribers use their mobile phone number to purchase downloadable music, films, news items, in-app goods, and other digitally distributed items rather than a credit card number or Web-based payment option like eBay‘s (NASDAQ: EBAY) Paypal service. Any charges made using the new service will appear on the user’s phone bill at the end of the month.
Mobile payments have yet to take off outside of the in-app and in-game purchase markets in mobile social network tools. Most phone carriers take a significant percentage of each transaction, as much as 40% in some cases, making it difficult for businesses supporting the payment method to turn a profit. The low cost of content purchased in applications and social games on services like Facebook have lent themselves to those companies using Boku and Zong’s services, but full app and digital content purchases generally cost too much for mobile payments to prove affective. According to Bloomberg, AT&T has not revealed what percentage of each transaction they are taking, but it can be assumed that they are offering a more competitive rate than has been traditionally seen with mobile payments.
AT&T is enjoying significant growth thanks to their mobile business. The company grew significantly in their third quarter, adding 2.6 million new mobile subscriber thanks in large part to the popularity of Apple Inc.‘s (NASDAQ: AAPL) iPhone 4. Analysts are predicting that AT&T will control 33% of the mobile phone market by the end of 2010, giving them a solid foothold right as they are expected to lose their exclusive support of Apple’s iPhone.
With AT&T supporting more and more Internet connected devices like Apple’s iPad and a range of new phones running Microsoft‘s (NASDAQ: MSFT) Windows Phone 7 operating system, the company is proving it has a clear understanding of the evolving mobile market and a strategy to evolve with it. The new mobile payment agreement with BilltoMobile, Boku and Zong is confirmation for investors that the company is making the right moves. AT&T shares are high right now, trading at $28.50, just below the 52-week high of $29.43. With continued growth on the horizon, though, it’s a good time to buy.
As of this writing, Anthony Agnello did not own a position in any of the stocks named here.
