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AT&T, Verizon push free iPhones for long-term customers

Wireless contracts are making a comeback.

Mobile phone operators in the US Offers the best value discount in years. by giving customers a brand-new device at no cost or making small monthly payments over the course of several months. Discounts from AT&T. Inc.,

Du 0.14%

Verizon Communications Inc.

VZ 0.56%

and T-Mobile US Inc.

TMUS 1.54%

Requires clients to make long-term commitments to give the provider the stability they need to reassure investors. When they increase spending on 5G network upgrades

AT&T kicked off the trend in October by offering high-end smartphones like the iPhone 1

2 free with eligible trade-in devices. The discount is later reduced to $700, which covers the entire price of the iPhone 12 Mini and most standard iPhone 12s. including other devices

Verizon followed suit on Tuesday, offering a $700 trade-in credit for a new iPhone and $800 for a high-end Android phone. The two companies’ most generous offerings require customers to stick with their unlimited data plans. specified period

“It’s basically a contract,” said Jeff Moore, head of telecommunications research firm Wave7 Research. instead of supporting the switchers.”

The free phone strategy is a throwback to the wireless market a decade ago. When US carriers subsidize the price of most new smartphones in exchange for a guaranteed monthly payment of members.

The status quo changed around 2013, and carriers began hawking contract-free wireless plans to customers who bought their own devices.

Members can also pay the cost of their new smartphone through monthly installments added to their bill.

AT&T and Verizon are making most or all purchases in exchange for reliable earnings. Verizon’s free phone offer requires a two-year term. AT&T on Friday extended its 30-month paid plan to cover three years. Both companies offer deals to existing customers. It’s not just new customers or people who add new phone lines.

T-Mobile is offering trade-in credit worth up to $1,000 for a new smartphone that pays off over two years. This offer covers a wide range of mobile data plans. But this applies only to customers who have activated a new phone line.

Each carrier covers the cost of the smartphone through a monthly bill credit equal to their regular device installment. More expensive devices, like the iPhone 12 Pro Max—sticker price. $1,100—Provides low monthly installments. Verizon’s $700 to $800 offer also offers new customers a $300 gift card. The discount requires continuous wireless service for at least two years. Otherwise, the customer will have to pay for the purchase of the smartphone.

Wall Street analysts said the deals for existing AT&T and Verizon customers affected a wider range of eligible users than previous promotions. Paying to get new and existing customers a new smartphone already costs AT&T as much as $2 billion a quarter, according to estimates from industry researchers. MoffettNathanson LLC

Verizon’s free phone offer requires a two-year period.


David Paul Morris/Bloomberg News

The handout gave AT&T the sharp subscriber growth that investors often reward. The Dallas company added nearly 1.4 million monthly phone connections to its base in the six months ending in March.

David Christopher, AT&T’s executive vice president of wireless, said device credit is more like interest-free financing than a long-term contract for wireless service. He said carriers began offering subsidies as sticker prices on top smartphones have risen from $600 a few years ago to $1,000 or more today. And buyers need more ways to buy.

“Our customer base is valuable. And the customers who voted for AT&T had low turbulence,” he said. “It resonated in the market. We love this recipe.”

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Industry executives also said the generous phone deal revealed stiffer competition in the wireless market, which has shrunk to three national carriers since its acquisition of rival Sprint Corp. T-Mobile in 2020 Inc.

Ingredients were obtained for the fourth national system through the Department of Justice brokered settlements. But the system’s first cell tower won’t be available until later this year.

The merger hasn’t resulted in a sharp rise in service fees. Although the monthly rate is not reduced either. MoffettNathanson Estimated average revenue per user on monthly plans The provider’s value for reliable monthly payments has been around $47 over the past three years.

Internet cable provider Comcast Corp.

and communication charter Inc.

It’s upping the fight with its own low-cost wireless plans. These deals are only available in the footsteps of cable providers. They have a mobile service agreement with the help of Verizon’s network.

“We see a very competitive and healthy market,” T-Mobile Chief Executive Mike Sievert said last month. “When more and more people started entering the switching pool, You will have more jumpers. And with more people, T-Mobile tends to do well.”

Fast 5G speeds are here. But it’s not all that useful on the new 5G smartphone. Joanna Stern from WSJ put together a motorhome to see if connectivity can power all of her connected devices. And she explains the confusing world of 5G along the way (Aug 2020). Illustration: Sharon Shi.

Meanwhile, Verizon trusts its customers with cheaper wireless service to upgrade to its most expensive unlimited data plan. This includes high-speed 5G access and subscriptions to media services such as Disney+. The carrier says about a fifth of its monthly wireless accounts subscribe to these premium unlimited plans by the end of 2020. Management shares hopes to increase to about 50% by the end of 2023.

AT&T’s offer applies to multiple wireless plans. But company executives have touted the ability to resell customers to premium services that come with other perks like HBO Max. Discovery competitors Inc.

The provider did not detail plans for HBO Max after the deal closed. But it has said the Hollywood business will remain part of AT&T through mid-2022.

The three national carriers are working to strengthen their customer base. As they ramped up spending on 5G infrastructure, US companies bid about $81 billion earlier this year to obtain new federal spectrum licenses. which supports high speed connection As a result, the overall debt of this sector has increased. Executives say these down payments will benefit as customers begin to notice 5G’s faster internet speeds in the next few years.

Until then, AT&T and Verizon have been able to fight in the market with discounts to avoid subscriber bleeding.

“It’s a dead end,” said Craig Moffett, an analyst with MoffettNathanson said: “History says it is easier to start a price war like this than to end it.”

write to Drew FitzGerald at andrew.fitzgerald@wsj.com

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