Apple, other smartphone makers may be at risk from new AT&T upgrade plan
Smartphone makers that depend on handset subsidies from wireless carriers saw their shares slip on Tuesday after AT&T T +0.66% announced a new plan that will allow customers to upgrade their devices more frequently — provided that they pick up more of the cost themselves.
BloombergThe iPhone 5.
Shares of Nokia NOK -2.88% and BlackBerry BBRY -1.60% were down more than 1% in morning trades, while Seoul-listed Samsung Electronics KR:005930 fell more than 1% during that session. Apple AAPL +0.28% shares were flat.
AT&T, by contrast, edged up 0.7% to $35.79. Overnight, the company announced its AT&T Next plan, which would allow subscribers to get a new smartphone or tablet every year with no down payment or upgrade fee. The consumer would pay a monthly fee on top of the service plan, and could trade up to a newer device after 12 months or keep going to pay off the existing device for a total of 20 months.
Monthly fees vary, depending on the device, and AT&T said no financing charge would be levied. Monthly fees would range from $15 to $50. The company said Samsung’s latest Galaxy S4 smartphone would run $32 per month. No cost estimate was given for Apple’s iPhone 5, though the iPhone has an average selling price above $600 — making it among the most expensive smartphones on the market.
Handset subsidies are a major contributor of earnings for smartphone companies. For instance, the $200 paid by consumers for top-line devices like the iPhone 5 and Galaxy S4 barely cover the estimated build prices on those phones. But carriers like AT&T, Verizon VZ +0.67% and T-Mobile TMUS -2.68% are under pressure from their own shareholders to bring these subsidies down, given that new smartphone launches are typically money-losing events for the carriers until they get into the later portions of a subscriber’s two-year contract.
Given that the market for high-end smartphones has been slowing , as the devices reach greater levels of parity, wireless carriers are now becomin
This is good news for phone makers as the upgrade cycle can be reduced to 12 months. Lakers must be really short this stock as everthing he has posted lately has a negative tone. The headline to this ad is very decieving.
Given that the market for high-end smartphones has been slowing , as the devices reach greater levels of parity, wireless carriers are now becoming more concerned with keeping down the churn (meaning, keeping their customers from fleeing to their rivals). T-Mobile launched a no-subsidy plan for the iPhone earlier this year. Verizon may be quizzed about the trend on its up-coming earnings call on Thursday morning.