Log in
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Dynamic quotes 


SummaryMost relevantAll NewsAnalyst Reco.Other languagesPress ReleasesOfficial PublicationsSector news

AT&T, Verizon Push Free iPhones for Long-Term Customers

06/05/2021 | 03:44am EDT

By Drew FitzGerald

The wireless contract is staging a comeback.

U.S. cellphone carriers are offering their most generous discounts in years, handing some customers brand-new devices for no money down or small monthly payments stretched over many months. The discounts from AT&T Inc., Verizon Communications Inc. and T-Mobile US Inc. require customers to make long-term commitments that give carriers the stability they need to reassure investors as they increase spending on 5G network upgrades.

AT&T kicked off the trend in October by offering high-end smartphones such as the iPhone 12 free with an eligible trade-in device. Its discount later dropped to $700, which covers the entire price of an iPhone 12 Mini and most of a standard iPhone 12, among other gadgets.

Verizon followed suit on Tuesday, dangling trade-in credits of $700 toward new iPhones and $800 toward high-end Android phones. Both companies' most generous offers require that customers stick with an unlimited data plan for a set time.

"It's essentially a contract," said Jeff Moore, the head of telecom research firm Wave7 Research. "We're seeing carriers locking in the customer base that they have as opposed to encouraging switchers."

The free-phone strategy is a throwback to the wireless market a decade ago, when U.S. carriers subsidized the price of most new smartphones in exchange for subscribers' guaranteed monthly payments.

The status quo shifted around 2013, and carriers began hawking no-contract wireless plans to customers who bought their own devices.

Subscribers could also pay off the cost of a new smartphone through monthly installments added to their bills.

AT&T and Verizon are now footing most or all of those purchases in exchange for reliable revenue. Verizon's free-phone offer requires a two-year commitment. AT&T on Friday stretched its 30-month payoff plan to cover three years. Both companies are offering the deals to existing customers, not just new ones or those adding a new phone line.

T-Mobile is offering trade-in credits worth up to $1,000 toward new smartphones paid off over two years. Its offer covers a wider range of mobile data plans but only applies to customers activating a new phone line.

Each carrier covers the cost of the smartphone through monthly bill credits equal to what their regular equipment installment payments would be. More expensive devices such as the iPhone 12 Pro Max -- sticker price $1,100 -- yield low monthly installment payments. Verizon's $700 to $800 offer also throws in a $300 gift card for new customers. The discounts require continuous wireless service for at least two years; otherwise, customers must pay off the balance of the smartphone purchase.

Wall Street analysts say the offers to existing AT&T and Verizon customers affect a much wider range of eligible users than previous promotions did. Paying to equip new and existing customers with new smartphones has already cost AT&T as much as $2 billion per quarter, according to estimates from industry researcher MoffettNathanson LLC.

The handouts have yielded AT&T the sharp subscriber growth that investors tend to reward. The Dallas company added nearly 1.4 million postpaid phone connections to its base over the six months that ended in March.

David Christopher, executive vice president of AT&T's wireless division, said the device credits are more like interest-free financing than a long-term contract for wireless service. He said the carrier started offering subsidized financing because the sticker price on top smartphones has risen from $600 a few years ago to $1,000 or more today, and buyers wanted more ways to cover the purchase.

"Our customer base is very valuable, and low churn is represented by customers voting to stay with AT&T," he said. "It resonated in the marketplace. We like the formula."

Industry executives also say the generous phone deals reveal fiercer competition in the wireless market, which has shrunk to three national carriers since T-Mobile's takeover of rival Sprint Corp. in 2020. Satellite operator Dish Network Inc. gained the ingredients for a fourth national system through a Justice Department-brokered settlement, but its first cell towers won't go live until later this year.

The consolidation hasn't yet led to sharply higher service charges, though monthly rates haven't fallen either. MoffettNathanson estimates the average revenue per user on a postpaid plan, which carriers value for its reliable monthly payments, has hovered around roughly $47 over the past three years.

Cable-internet providers Comcast Corp. and Charter Communications Inc. are adding to the fray with their own low-price wireless plans. Those deals are only available in the cable providers' footprints, where they have arrangements to provide cellular service with help from Verizon's network.

"We see a competitive, healthy market out there," T-Mobile Chief Executive Mike Sievert said last month. "When more people start to enter the switching pool, you have more people that are jump balls. And when more people are jump balls, T-Mobile tends to do well."

Verizon, meanwhile, is counting on customers with cheaper wireless service to upgrade to its most expensive unlimited-data plans, which include high-speed 5G access and subscriptions to media services such as Disney+. The carrier said about a fifth of its postpaid wireless accounts subscribed to these premium unlimited plans at the end of 2020, a share executives hope to boost to about 50% by the end of 2023.

AT&T's offers apply to several wireless plans, but its executives have touted their ability to upsell customers to premium-tier service bundled with other perks such as HBO Max. The telecom giant recently unveiled plans to spin off HBO owner WarnerMedia into a new company combined with rival Discovery Inc. The carrier hasn't detailed its plans for HBO Max after the deal closes but has said the Hollywood business will remain part of AT&T through mid-2022.

All three national carriers are working to shore up their customer bases as they increase spending on 5G infrastructure. U.S. companies bid about $81 billion earlier this year to secure new federal spectrum licenses that support the high-speed connections, adding to the sector's overall debt. Executives have said those down payments will yield benefits once their customers start to notice 5G's faster internet speeds in the coming years.

Until then, AT&T and Verizon could keep battling it out in the market with discounts to avoid bleeding subscribers.

"It's a stalemate," said Craig Moffett, a MoffettNathanson analyst. "History says it's a lot easier to start these kinds of price wars than it is to end them."

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

(END) Dow Jones Newswires

06-05-21 0544ET

Stocks mentioned in the article
ChangeLast1st jan.
APPLE INC. 1.26% 147.36 Delayed Quote.9.67%
AT&T INC. 0.28% 28.19 Delayed Quote.-2.26%
CHARTER COMMUNICATIONS, INC. 2.69% 770.02 Delayed Quote.13.35%
COMCAST CORPORATION -0.41% 58.23 Delayed Quote.11.58%
DISCOVERY, INC. -4.19% 27.87 Delayed Quote.-3.32%
DISH NETWORK CORPORATION 0.74% 42 Delayed Quote.28.91%
DJ INDUSTRIAL 0.80% 35116.4 Delayed Quote.14.14%
S&P 500 0.82% 4423.15 Delayed Quote.17.02%
T-MOBILE US -0.28% 144.5 Delayed Quote.7.46%
VERIZON COMMUNICATIONS -0.05% 55.73 Delayed Quote.-5.06%
All news about AT&T INC.
12:13pAT&T : TitleAT&T to Webcast Pascal Desroches Keynote at Oppenheimer Conference o..
11:53aAT&T : to Webcast Pascal Desroches Keynote at Oppenheimer Conference on August 1..
11:04aAT&T : and TPG Close DIRECTV Transaction
10:06aAT&T : Delta Air Lines Pilots Upgrading to AT&T 5G and iPad Pro
09:43aCHANGE : The One Constant in Healthcare Transformation
06:18aAT&T : DIRECTV to Own and Operate Former AT&T Video Operations
06:18aAT&T : & TPG Close DIRECTV Transaction (Form 8-K)
08/02AT&T INC. : Other Events, Entry into a Material Definitive Agreement, Financial ..
08/02AT&T : & TPG Close DIRECTV Transaction
08/02AT&T Inc. and TPG Capital Closes Their Transaction Establishing A New Company..
More news
Financials (USD)
Sales 2021 174 B - -
Net income 2021 18 273 M - -
Net Debt 2021 161 B - -
P/E ratio 2021 11,1x
Yield 2021 7,42%
Capitalization 201 B 201 B -
EV / Sales 2021 2,08x
EV / Sales 2022 1,99x
Nbr of Employees 226 840
Free-Float 93,6%
Chart AT&T INC.
Duration : Period :
AT&T Inc. Technical Analysis Chart | MarketScreener
Full-screen chart
Technical analysis trends AT&T INC.
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus HOLD
Number of Analysts 29
Last Close Price 28,11 $
Average target price 31,67 $
Spread / Average Target 12,6%
EPS Revisions
Managers and Directors
John T. Stankey President, CEO, COO & Director
Pascal Desroches Chief Financial Officer & Senior Executive VP
William E. Kennard Independent Chairman
David S. Huntley Chief Compliance Officer & Senior Executive VP
Matthew K. Rose Lead Independent Director
Sector and Competitors
1st jan.Capi. (M$)
AT&T INC.-2.26%200 701
T-MOBILE US7.46%180 836
SOFTBANK GROUP CORP.-14.23%109 191
AMÉRICA MÓVIL, S.A.B. DE C.V.15.04%55 357