Don't Expect Your Carrier to Help Pay for Your $1,000 iPhone -- 2nd Update
September 14 2017 - 4:25PM
Dow Jones News
By Drew FitzGerald and Ryan Knutson
Discounts on Apple Inc.'s newest iPhone models haven't kept up
with their climbing prices.
Wireless carriers are offering less generous deals on new
iPhones than in years past as executives bristle at the handsets'
cost. Apple on Tuesday unveiled two iPhone 8 models starting at
$699 alongside a premium device, the iPhone X, for $999. That is up
from a base price of $649 last year for the iPhone 7.
The rising cost is prompting wireless companies to look for
other ways to lure customers to their service. Buying a new handset
is often the easiest way for the carriers to steal subscribers from
rivals, but the cost of the devices, which customers usually pay
back over time at zero interest, cuts into their profitability.
"I think we should invite the manufacturers to share a little of
the cash flow burden," Sprint Corp. Chief Executive Marcelo Claure
said at an investor conference in New York Thursday. "We're not too
excited with the prices going up and also having to finance
that."
Mr. Claure said Sprint isn't planning to let customers have a
$999 iPhone X without at least making a down payment or paying
interest, though it hasn't made a final decision about how it will
be sold.
"The model is not sustainable where we are buying devices at
high prices and then were just basically providing interest-free
financing to customers," he said.
Apple didn't immediately respond to a request for comment.
Last year, shortly after Apple unveiled the iPhone 7, the four
major U.S. carriers were quick to offer free iPhone 7s to customers
who traded in the previous model. This time, executives say they
don't want the newest iPhones to spark another promotional
brawl.
"I'm encouraged, frankly, by the discipline there appears to be
around promotions for the iPhone," Verizon CEO Lowell McAdam said
Thursday, adding that the discipline will help the company boost
revenue following price cuts and its return to unlimited data plans
earlier this year.
Mr. Claure, who echoed Mr. McAdam's pleasure with the soft
promotions, said Sprint would respond aggressively to any rival
offers, but doesn't want to take the first swing. "In the case that
somebody becomes aggressive, we are going to be the one with the
most enticing offer," he said. "But so far things seem to be very
responsible, which is good."
Jefferies analyst Mike McCormack said most companies' promotions
focused on trade-in offers for old devices, "a much more measured
approach than the free-iPhone deals we saw last year."
AT&T Inc. said it would broaden an existing buy-one-get-one
offer to include a $699 credit for iPhone buyers adding a second
phone line. But the deal only applies to the iPhone 8 and iPhone 8
Plus, not the iPhone X, and subscribers also need DirecTV or
U-verse to qualify.
Verizon and T-Mobile US Inc. are both offering trade-in
customers up to $300 off the newest models instead of the $650
credits on tap last year, which covered the cost of a basic iPhone
7. The major carriers also let customers finance the latest devices
over 24 months, in some cases upgrade again next year. Apple has an
installment program, which costs $50 a month, that includes its
AppleCare insurance and free upgrades each year.
Mike Sievert, T-Mobile's chief operating officer, said last
year's deep discounts weren't as effective as the company had
hoped. "Within a few days, everybody had copied it," he said on
Thursday. "What exactly does this accomplish?"
T-Mobile's network could be another reason for caution. Apple's
new devices aren't compatible with a sliver of airwave licenses
T-Mobile bought for $8 billion earlier this year. Samsung
Electronic Co.'s latest device also doesn't support the frequency,
which the company is counting on to give it an edge over
competitors.
People keep their phones for about 2 1/2 years, so T-Mobile has
an incentive to make its customers upgrade later, when more devices
work with its full network. Mr. Sievert suggested as much Thursday,
noting this year's iPhone was never part of its plans when it
plotted the network expansion.
A T-Mobile spokeswoman said the company doesn't want its
customers to hesitate to buy a new phone if they are ready to
upgrade.
For now, T-Mobile's most generous offer applies to customers who
stick it out until 2018. Members of its upgrade program can trade
in today's new iPhone for the next-generation version, expected a
year from now, and have the carrier pay off the remaining balance
on their old device.
--Tripp Mickle contributed to this article.
Write to Drew FitzGerald at andrew.fitzgerald@wsj.com and Ryan
Knutson at ryan.knutson@wsj.com
(END) Dow Jones Newswires
September 14, 2017 16:10 ET (20:10 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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