Analyst: Handset upgrade programs could juice carriers' margins, for a short time

The device upgrade plans recently introduced by T-Mobile US (NYSE:TMUS), AT&T Mobility (NYSE:T) and Verizon Wireless (NYSE:VZ) could help spike the carriers' margins, according to a new research report, but that margin boost may be eroded by intensifying competition.

According to a research note from New Street Research analyst Jonathan Chaplin, the installment plans "could provide a meaningful boost to carrier margins. Our survey suggests at least 10-15% of [subscribers] will take these plans, and it could be as much as 20% if the carriers decide to push them aggressively."

Although the plans are largely the same, each carrier offers a slightly different take on handset upgrades. Verizon's Edge program divides the cost of a phone over 24 months, and if after six months 50 percent of the retail price of the phone is paid, the customer can upgrade to a new device. Under AT&T's Next program, the cost of the phone is broken into 20 payments, and customers can upgrade after 12 months. Finally, with T-Mobile's Jump program, customers can pay $10 a month (in addition to the cost of their phone) and can then upgrade their phone twice every year after the initial six-month enrollment period has expired.

Although the plans could improve carriers' margins, Chaplin argued the boost could be short-lived. He wrote that "competitive intensity is rising and will likely rise further in coming quarters, driving higher churn and pressuring margins. The cost of higher competition may sap much, if not all of the margin gains from installment plans."

Meanwhile, Verizon's Edge program has just gone live, and, according to the blog Droid Life, Verizon is introducing new data plans for customers who sign up for the program. The blog said customers with older, unlimited data plans cannot keep those data plans if they sign up for Edge, but will instead be directed to sign up for "Verizon Max" plans, which include 8 GB of data with tethering for a $50 option or 6 GB of data without tethering.

A Verizon spokesman did not immediately respond to a request for comment on the Max plans.

The plans are notable in light of two factors. One is that they offer more data than Verizon's comparable Share Everything shared plans, which offer 1 GB of data for $60 per month or 6 GB for $80 per month. Verizon Communications CEO Fran Shammo also said in July that under Edge "we will not touch our service pricing."

For more:
- see this Verizon FAQ
- see this The Verge article
- see this DroidLife article

Related Articles:
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18% of Americans would sign on to a handset upgrade plan, according to survey
Verizon's Shammo doesn't expect many to sign up for Edge upgrade program
Verizon gives handset upgrades every 6 months with new Edge program
T-Mobile slams AT&T's 'Next' handset upgrade program
AT&T's 'Next' program allows smartphone, tablet upgrades every 12 months
T-Mobile gets 'jump' on the competition with new handset upgrade program

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