More than half of MetroPCS Communications Inc.s new users came from bigger nationwide phone companies in the fourth quarter, Chief Financial Officer Braxton Carter said in an interview. The company had its best quarter to date as more consumers avoided renewing their contracts, he said.

Verizon spokesman Jim Gerace and AT&T spokesman Mark Siegel declined to comment on cell-phone defections.

By offering unlimited voice and data service at less than half of what many monthly agreements cost, MetroPCS and Leap Wireless International Inc. have typically picked up cell-phone users who couldnt afford or qualify for contracts at their larger rivals. That may put pressure on Verizon and AT&T to revamp their own contract-free calling plans to lure back subscribers.

“The national carriers are not going to let Leap and Metro get too successful,” said Sergey Dluzhevskiy, a Rye, New York- based analyst at Gabelli & Co. His firm owns shares of MetroPCS, Leap Wireless, Sprint Nextel Corp., AT&T and Verizon. “You can be profitable with prepaid.”

Verizon said today that it added 1.4 million mobile subscribers last quarter, excluding acquisitions and divestitures. That missed the 1.5 million estimate of Wachovia Securities Inc. analyst Jennifer Fritzsche. AT&T will release results tomorrow.

Fixed Monthly Rate

Leap Wireless rose 88 cents, or 3.5 percent, to $25.77 in Nasdaq Stock Market trading at 9:32 a.m. New York time. MetroPCS fell 6 cents to $13.23. AT&T fell 58 cents, or 2.2 percent, to $26.25 in New York Stock Exchange composite trading. Verizon dropped $1.37, or 4.4 percent, to $29.62 and Overland Park, Kansas-based Sprint was unchanged at $2.49.

MetroPCS and Leaps pay-as-you-go customers agree to a set monthly rate for an unlimited bucket of minutes. Prepaid plans let customers pay for a block of minutes and refill their phones when their time runs out. Both plans combined may gain about a percentage point in market share a year, accounting for 22 percent of mobile customers by 2012, according to Yankee Group analyst Christopher Collins.

Sprints plan for unlimited voice and data costs $99.99 a month for contract customers. New York-based Verizon and Dallas- based AT&T charge $99.99 a month for unlimited voice.

AT&T may have added fewer subscribers in the quarter than J.P. Morgan Securities Inc. initially forecast. New York-based analyst Mike McCormack revised his figures down 11 percent to predict the addition of 1.35 million new customers to its base of 74.9 million.

Combined Networks

The carriers can offer cheaper service by operating smaller, regional networks and not subsidizing cell phones. Leap and MetroPCS have combined their networks as part of a roaming agreement that increased each companys reach and will roll out service in New York, Boston and Washington this year.

In response, Sprint, the No. 3 wireless carrier, released its own $50 unlimited pay-as-you-go plan under its Boost brand that offers broader service than Leaps and MetroPCSs regional networks.

Boost, which runs on Sprints iDen push-to-talk network, includes unlimited calls, text messages and access to news and weather updates, comparable to plans at MetroPCS and Leap priced from $45 to $50 a month. This may ultimately force the two companies to cut prices, McCormack said.

Price War

“Theres the potential for a price war, which means that really nobody wins in the end,” he said. “Its a customer base that turns over very rapidly, which allows for newcomers or existing entrants to aggressively market to those customers.”

Leap Chief Operating Officer Al Moschner said the company doesnt plan to change its rates unless Sprint cuts Boosts first. MetroPCS wasnt hurt by a trial Boost Unlimited plan that Sprint offered in its territory and doesnt plan to address Boost in ads, MetroPCSs Carter said.

Contests for customers may ultimately force companies like AT&T and Verizon to sell high-end smart phones for less than $100 and unlimited calling plans for under $50 a month as soon as a year from now, Yankee Groups Collins said.

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