Sprint "iPhone for Life" Moves to Device Rental
One effect of the Apple iPhone 6 launch is that the leading U.S. mobile service providers are moving swiftly to use the launch as a chance to protect existing customer bases and attract new customers.
Perhaps the most unusual is Sprint’s iPhone for Life promotion, where customers rent rather than buy their devices. The program allows users to get a new model iPhone every two years.
Users pay $20 a month for the device rental, and $50 a month for unlimited domestic talking, messaging and Internet access.
Basically, the rental plan creates a new “lowest cost offer” from Sprint. At $70 a month, the rental plan is $10 a month less costly than the no-contract plan that features $30 a month for installment payments on the device.
The two-year contract price represents monthly payments of $85 a month.
Sprint also is offering to pay as much as $350 per line when a customer switches to Sprint from T-Mobile US, AT&T Mobility, Verizon Wireless or “any competitor.” To get the credit, customers must sign up for the installment plan for any new devices, and buy an unlimited usage plan or a “Family Share Pack” including at least 20 Gbytes of mobile Internet usage.
Verizon Wireless is giving customers a free 16 gigabyte iPhone 6 if they traded in an eligible working, older iPhone model and signed a two-year contract. As is typical for any such offer, the key is the two-year contract, meant to deter churn over the length of the contract.
Sprint also has a promotion allowing consumers to trade in as many as three phones per account, promising to pay up to $300 for each trade-in device and matching any offer for a trade-in made by T-Mobile US, AT&T Mobility or Verizon Wireless.
T-Mobile US likewise offers to match trade-in offers from the other three leading national providers, and top it by paying $50 more.
AT&T Mobility is offering a $100 credit toward the purchase of any iPhone model for customers who activate a new line.
Historically, ability to offer the latest iPhone has been a competitive advantage, the best examples being the exclusive AT&T enjoyed at the time of the U.S. iPhone launch, as well as the similar exclusive SoftBank enjoyed in Japan, a period when SoftBank saw its fastest growth of market share.
Conversely, T-Mobile US began to add customers rapidly after it gained the right to sell the iPhone. To be sure, other initiatives also have been launched by T-Mobile, so it is hard to isolate the impact of any particular component.
But it is safe to say all the leading mobile providers see the iPhone 6 launch as a time when customers can be lost or won, very quickly.
As expected, wide adoption of “no-contract” and device installment plans might play a role in increasing potential churn.
Though Verizon Wireless continues to have a high percentage of accounts on contract plans, AT&T already has 44 percent of its U.S. postpaid accounts on “no contract” plans. AT&T further expects 66 percent of its accounts to be on such plans by the end of 2014.
By definition, it is easier for a customer to switch when on a no-contract plan.
Hence the concern by the leading four mobile service providers about getting as many iPhone 6 upgrades as possible.
The promotional activity around the Apple iPhone 6 comes amid a price war that still shows no signs of abating.
Longer term, there also is the issue of when T-Mobile US will be purchased by another firm, and which firm will do it. It seems virtually certain now that the buyer could not be any of the other three leading U.S. mobile firms. Both AT&T and Sprint have tried, and both have been rebuffed.
That means the U.S. mobile market will continue to feature four leading firms. The only issue now is the identify of the firms in the group of four.
Dish Network has to do something relatively soon, or lose the equity value embedded in its right to deploy Long Term Evolution fourth generation mobile networks.
Comcast does not have immediate pressure, but is another likely candidate to change U.S. mobile market structure, eventually.