Installment Plans Have Not Disrupted Mobile Carrier Revenues, but Manufacturer Leasing Might Do So

A shift from bundled “device plus service contract” to “installment plan phone purchase” apparently has not disrupted mobile service provider revenues.

That might not be the case if phone leasing becomes a major trend, and especially if consumers shift purchases of devices from carriers to the manufacturers.

“Ever since U.S. carriers began experimenting with installment plans and no-contract options designed to transition customers away from traditional two-year contracts with subsidized phones, there has been concern that high-end smartphone sales would suffer,” says Carolina Milanesi, chief of research at Kantar Worldpanel ComTech. That has not happened.

“Our most recent dataset dispels the fear that the new plans would negatively impact high-end device sales,” she says.

Looking at all installment or no-contract plans associated with iPhones, 55 percent were for an iPhone 6, and 22 percent were for an iPhone 6 Plus.

Those two devices account for 68 percent and nine percent of traditional contracts, respectively.

Samsung’s devices purchased on installment or without a contract include the Galaxy S6 with 36 percent of sales, and the Galaxy S6 Edge, accounting for 12 percent of sales.

Sales of those devices in conjunction with traditional contracts included the Galaxy S6 at 28 percent and Galaxy S6 Edge at five percent.

For the three months ending August 2015, 47 percent of the smartphones sold in the United States were linked to installment plans, said Kantar Worldpanel ComTech.

During this same period, smartphone purchases connected to traditional contracts, once the bulk of such transactions, represented only 20 percent of sales. Prepaid sales represented 33 percent.

In the three months ending August 2015, 51 percent of iOS sales were associated with installment or no-contract plans, 37 percent were on a traditional contract, and 12 percent were on prepaid plans.

For Android, 46 percent of sales were on installment plans or no-contract, 15 percent were on traditional contract, and 39 percent were prepaid.

Apple recently launched an upgrade plan in the U.S. market that allows buyers of the latest iPhone models the option to get a new phone every 12 months.

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We will have to see whether that “buy direct” program significantly dents carrier revenues by removing significant device sales.