Upstart Launches Salvo in Long-Distance Price War : Telecom: IDT follows the lead of giant carriers, offering a flat rate that beats AT&T;’s recently announced plan.

NEW YORK —  IDT Corp., an upstart phone company dwarfed by the likes of AT&T; Corp. and MCI WorldCom Inc., jumped into a price war with the long-distance Goliaths on Wednesday by launching a flat rate that sharply undercuts AT&T;’s latest plan.

IDT took solid aim at the No. 1 long-distance carrier, staking its claim as the lowest-cost U.S. long-distance company by offering a flat rate of 5 cents a minute with a $3.95 monthly fee.

IDT’s move came just two days after AT&T; announced a 7-cents-a-minute rate with a $4.95 monthly fee as it battled rate-slashing rivals MCI WorldCom and Sprint Corp.

Analysts said the price cut by IDT, a Hackensack, N.J., carrier that mostly provides international service and prepaid calls, is part of a trend. Rates have slipped steadily since the 1984 breakup of AT&T;’s telephone monopoly. Companies have increasingly relied on revenue from Internet services, wireless and data transmission to offset pricing pressures in the long-distance market.

“Seven cents a minute is yesterday’s news,” Chief Executive Howard Jonas said. He added, “It is not our intention to escalate a pricing war. But it is our intention to make it clear to consumers that they can do better with us.”

IDT said it was setting a rate of 5 cents a minute for domestic long-distance phone service, with a $3.95 monthly fee. Like AT&T;’s offer, IDT’s program applies to all calls. The previous IDT rate had been 7.9 cents a minute with no monthly fee.

IDT also plans to offer rates as low as 3.5 cents a minute for customers who also subscribe to IDT’s dial-up Internet service.

IDT’s revenue for the most recent quarter was just 1.2% of AT&T;’s.

Riyad Said, a telecommunications analyst with Friedman, Billings, Ramsey in Arlington, Va., said the pricing plan will let IDT gain some customers without affecting AT&T;’s dominant market share.

“At some point, it will be hard for companies to keep lowering the price without wrapping some services around it,” he said.

Asked if AT&T; would respond to IDT’s cut, a spokesman said AT&T;’s 7-cent rate was a “compellingly simple offer that will be attractive to millions of customers.”

IDT shares fell 69 cents to close at $28.94 on Nasdaq. Shares of IDT’s 58%-owned unit Net2Phone Inc. fell $2.75 to close at $82.24, also on Nasdaq.

Net2Phone provides low-cost long-distance service by routing calls over the Internet. Its shares have risen more than fivefold since it first sold shares to the public July 29. IDT’s shares have gained 80% in the last year.

Investors remain optimistic about Net2Phone’s technology, which allows users worldwide to call the U.S. from their computers for 10 cents a minute. In addition, distribution agreements with America Online Inc., Sprint and Compaq Computer Corp., among others, are expected to fuel Net2Phone’s growth.

Market research firm International Data Corp. on Wednesday forecast that Internet protocol telephony--the technology Net2Phone uses--will soar to 2.7 billion minutes of use and $480 million in revenue by the end of this year.

It also said IP telephony minutes will reach 135 billion by 2004, with revenue rising to $19 billion and the business market surpassing the consumer market for these services.