To help drive down costs and keep margins high, AT&T (NYSE:T) is focusing on smartphones that require lower subsidies yet are appealing to consumers. Speaking at the J.P. Morgan Global Technology, Media and Telecom Conference, AT&T Mobility President and CEO Ralph de la Vega told investors that AT&T studies smartphone subsidies every day in an attempt to minimize them. "We have to watch subsidies and make sure that we bring devices to market that customers love and will keep and have low subsidies."
De la Vega
De la Vega gave the Nokia (NYSE:NOK) Lumia 900 and the HTC One X as two examples of smartphones from AT&T that fit this category. "These are great devices that I think customers will like," de la Vega said.
Wireless carriers have been under increasing pressure from smartphone sales, which tend to drive up costs at a very fast rate. According to a Credit Suisse research report, smartphone subsidies have been the biggest source of pressure to mobile operators, with costs rising 34 percent from 2010 to 2011.
De la Vega also touted Microsoft's (NASDAQ:MSFT) Windows Phone platform. He said that sales of the Lumia 900, which uses the new OS, have exceeded expectations. He also believes Microsoft has a great opportunity with this OS, especially once it introduces Windows 8, because the company will be able to bring the same user experience to the PC, tablet and smartphone.
Though he declined to provide specifics, De la Vega said he believes AT&T can increase tablet sales by allowing customers to connect a tablet to the network using an existing data plan and share that plan across multiple devices. "That is what we are working on," he said. Yesterday, Verizon Communications (NYSE:VZ) CFO Fran Shammo told investors at the conference that Verizon Wireless too is working on shared data plans. He also said Verizon plans eliminate the $30 per month unlimited data plan that it still provides to 3G customers who were "grandfathered" into the plan because they were data customers prior to the company's switch to tiered data pricing last July.
Interestingly, de la Vega was asked about AT&T's plans to allow developers and content companies to pay for the mobile data that users generate when accessing their services. De la Vega said that the company already does this via its relationship with Amazon. "When you download a book to your Amazon Kindle, we provide the connectivity. The cost for downloading the book is something we wholesale to Amazon. That makes business sense," de la Vega noted. "We have done this for several years and there will be other cases like that."
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