AT&T Inc. (NYSE: T), the second-largest U.S. wireless-service provider, unveiled a $99 smartphone with a $65 a month pay-as-you-go plan, stepping up competition with prepaid carriers such as MetroPCS Communications Inc.

AT&T will start offering the plan on Oct. 7 under its GoPhone brand, according to a statement. The service, designed for smartphone users, is $10 less than previous pay-as-you-go offers with similar features. It includes unlimited talk and texting, along with 1 gigabyte of data per month, with no contract required.

Carriers are increasingly targeting the prepaid market as the saturated U.S. wireless industry makes it harder to add more contract customers. Prepaid plans appeal to young people, bargain hunters and consumers with poor credit.

Even with the price cut, AT&T’s new offering will be costlier than rival services. T-Mobile USA Inc. has a $60-a- month plan that offers 2 gigabytes of data. MetroPCS and Sprint Nextel Corp.’s Virgin Mobile unit, meanwhile, both sell $55 unlimited programs for smartphones.

AT&T’s plan works with a $99 Huawei Technologies Co. smartphone that runs on Google Inc.’s Android operating system.

Shares of Dallas-based AT&T rose less than 1 percent to close at $37.75 in New York. The stock has climbed 25 percent this year.