Carriers push promotions for pricey Samsung S20 5G series

Samsung Galaxy S20 series
Carrier promotions for Samsung's Galaxy S20 series are roughly twice as strong year over year compared to the S10, according to BayStreet Research. (Samsung Electronics)

Samsung’s Galaxy S20 smartphone series launched Friday and carriers have rolled out promotions that may be needed to entice customer adoption of the pricey new premium 5G handsets.

The S20 series has three models; two that can tap carriers’ deployments of both high-band millimeter wave 5G signals and low-band 5G, and one base model that currently only supports sub-6 GHz but still retails for about $1,000:

  • 6.2-inch Galaxy S20 5G: retail $999.99, sub-6 GHz 5G capable only
  • 6.7-inch S20+: S20+ 5G: 128GB $1,199.99 retail; 512GB $1,349.99; sub-6 GHz and mmWave support
  • 6.9-inch S20 Ultra: 128GB $1,399.99; 512GB $1,599.99; sub-6 GHz and mmWave support

It should be noted that Verizon isn’t offering the smaller S20 model yet because it doesn’t support the carrier’s high-band millimeter wave 5G signals. Verizon plans to launch a mmWave/sub-6 GHz-capable version of the S20 5G in the second quarter.  

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RELATED: New Samsung 5G phones can tap both sub-6 GHz and millimeter wave spectrum

When analyzing preorder promotions for the latest Samsung series, Cliff Maldonado, principal analyst and founder at BayStreet Research, noted the firm found carriers’ applicable discount values were significantly higher for the S20 lineup compared to the Galaxy S10 launch last year.

“Promotions are roughly twice as strong year over year, driven by the lack of down payment required at T-Mobile,” Maldonado said.

T-Mobile historically had applied the breaks to super premium phones by requiring a down payment to walk out of the store, he noted, but with the S20 series is giving up to $650 off the required down payment and up to $500 off for trade-ins. By BayStreet calculations, T-Mobile’s preorder discount value average for the S20 device line was 40% at the end of February, compared to 23% during the same time last year for the Galaxy S10 series.

Average discount values at each AT&T, Sprint and Verizon also at least doubled for the Galaxy S20 lineup, according to BayStreet, including a jump to 21% this year at AT&T compared to 8% in February for S10 preorders (note these percentages don’t translate directly to monetary dollar amounts to consumers). 

Combined, preorder device promotion values for the four largest carriers increased to 26% for Galaxy S20 lineup, versus 13% for Galaxy S10 series, according to BayStreet.

Are promotions enough?

Each carrier is offering some form of free Galaxy S20, including buy one get one (BOGO) promotions, with deals for new lines and trade-ins. Samsung also offered an up to $200 preorder credit for the new smartphones. While most customers pay through device installment plans, even the least expensive S20 may still feel pricey at a time when 5G benefits remain somewhat murky to consumers.

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Jeff Moore, principal at Wave7 Research noted that while all four carriers offer a variant of a free Galaxy S20, this practice has essentially become the norm for new flagship phones.

“With a starting price tag of ~$1,000 for the Galaxy S20, on paper this is a deep discount, there is a perception that the new phones are priced too high,” he said in comments to FierceWireless. “AT&T today sweetened its offer to up to $1,200, but AT&T’s offer does require a trade-in, unlike offers from other carriers.”

On Friday Verizon was offering a BOGO offer for the S20+ and S20 Ultra, as well as a $150 upgrade credit offer that stacks with either the BOGO offer or a $300 trade-in credit.  

Notably, all carriers but Sprint are offering upgrade eligible promotions—which both Maldonado and Moore acknowledged is when customers most often purchase a phone, rather than instances of needing a new line or two phones. To get a free S20 at Sprint, customers need to switch or add a new line.

“These offers and a preorder credit of up to $200 from Samsung are being used to reduce the impact of the high pricing, but this may not be enough,” Moore said. “Most purchases are upgrades, with no new line added, so the high Galaxy S20 price likely will lead to reduced demand.”

During preorders for last year’s Samsung S10 launch, only Verizon and T-Mobile had upgrade-eligible promotions. AT&T, meanwhile, didn’t have any upgrade eligible offer for the S10, but with the S20 offers $300 credit for trade-ins on unlimited plans.

“Bottom line, promotions are stronger,” Maldonado said. “They need to be stronger because the devices are more expensive.”

Recent Counterpoint Research data found Samsung captured 74% of total 5G smartphone sales in the U.S. in 2019. Still, with less than 2 million sold overall, 5G phones only represented 1% of total smartphone sales, though the firm expects that to increase this year as network coverage spreads and lower cost 5G phones come on the scene.   

“While 5G penetration in 2019 was just 1% of total smartphone sales, we expect penetration to increase to around 25% in 2020,” said Jeff Fieldhack, Research Director at Counterpoint Research, in a statement. “Much of this growth will be fueled by Apple iPhones having 5G capabilities from Apple’s expected September 2020 launch, and the proliferation of sub-$500 5G smartphones.”

Samsung’s decision to only offer premium priced 5G phones at a time when 5G networks are still maturing and there appears to be a strong appetite for more mid- priced phones like the iPhone 11, could put the smartphone maker in a tricky spot, Maldonado indicated.

“Samsung took a very big risk putting all of their eggs in the 5G basket in this portfolio,” he said. Maldonado noted that customers may feel they’re paying for the utility of 5G without really seeing results, which runs the risk of customer dissatisfaction and ultimately returns.

Alongside the price tag, carriers dealt with increased fourth-quarter churn, as Maldonado noted, so driving promotional activity is both the premium pricing of Samsung’s new phones and carriers’ need to protect the customer base by offering upgrade-eligible deals instead of switching offers only.

RELATED: Q4 summary: T-Mobile revels in high industry-wide churn

“We’re getting into a different era of promotional activity, much more aggressive,” Maldonado said.

Counterpoint Research also expects more carrier promotion around 5G this year.

“In 2020, we expect to see strong promotional offerings from carriers and OEMs for consumer 5G sales and for adoption to increase,” said Maurice Klaehne, Research Analyst at Counterpoint, in a statement."As an example, the newly announced Samsung Galaxy S20, S20 Plus and S20 Ultra are all being offered with big monthly credits from carriers when a customer adds a new line or switches to a new 5G unlimited plan.”

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