AT&T's Cricket offers handset financing on prepaid phones, including interest-free loans and leases

Cricket, the new prepaid brand of AT&T Mobility (NYSE: T), is now offering a wide range of financing options to customers who want to purchase expensive phones. The financing options include an interest-free plan, a 29.99 percent APR plan with 6 months deferred interest, and a 12-month leasing plan.

The carrier initially made the announcement on its Facebook page. Cricket spokeswoman Nneoma Njoku confirmed the plans to FierceWireless. She said they have been available since Sunday.

Here are the details of the plans, which are available to customers depending on their credit scores:

Tier I Installment loan:

  • 0 percent APR for 24 months (minimum monthly payment of 4.16 percent of initial balance)
  • Available for devices $149.98 and higher (accessories not eligible)

Tier II Installment loan:

  • 29.99 percent APR with 6 months deferred interest and 24-month term (minimum monthly payment of 5.4 percent of initial balance)
  • Available for devices $149.98 and higher (accessories not eligible)

 Lease to own:

  • 12-month lease term.  At end of term, customer owns device.
  • 90-day same-as-cash payoff option
  • Available for devices $149.98 and higher (accessories not eligible)

AT&T closed on its acquisition of Cricket provider Leap Wireless earlier this year, and on Sunday the carrier debuted its newly refreshed Cricket branding and pricing plans. AT&T folded its previous prepaid brand, Aio Wireless, into its new Cricket offering.

Cricket noted that the above options are available in legacy Leap Wireless Cricket stores and may not be available in legacy Aio stores. The company said that eventually it would offer the same financing options across both groups of legacy stores, but that it hasn't yet decided exactly what the details of that final offer will be.

Cricket joins a large and growing number of carriers that are offering financing options on smartphones. T-Mobile US (NYSE:TMUS) kicked off the trend last year by uncoupling the cost of phones and the cost of its services. In place of the traditional handset subsidy with a two-year service contract, T-Mobile now allows customers to pay for the cost of their phones via interest-free monthly installments.

In response to T-Mobile, Sprint (NYSE: S), AT&T and Verizon Wireless (NYSE: VZ) all subsequently launched similar programs. And, according to new data, consumers appear to be extremely supportive of the new financing options:  Consumer Intelligence Research Partners found that fully 25 percent of all smartphones sold in the first quarter are being paid for through handset financing plans, a figure that it up from just over 15 percent in the fourth quarter. And Ben Schachter at Macquarie Research recently predicted that fully 43 percent of all smartphones sold by the end of this year will be paid for through handset financing plans and not through traditional wireless carrier subsidies.

Although handset financing represents a significant change to the way wireless carriers sell smartphones, carrier executives have widely said that the change from subsidies to financing won't dramatically affect their bottom line. Essentially, handset financing programs like AT&T's Next and Verizon's Edge move the cost of the phone from a carrier's service revenues to its equipment revenues--an accounting change but not a material one. Indeed, Verizon CFO Fran Shammo noted during the carrier's first quarter earnings conference call that the carrier's Edge program "had a favorable effect on profitability," according to a Seeking Alpha transcript of the event.

Interestingly, AT&T's Cricket could be the first major prepaid carrier to offer a handset financing plan. Sprint's Virgin Mobile, as well as Leap Wireless and MetroPCS before they were acquired, tested handset financing programs last year. In addition,  AT&T prepaid MVNO Consumer Cellular announce its EasyPay financing program last year.  However,  no major prepaid carrier has strongly pushed a financing program as of yet.

Related Articles:
Analyst: Almost half of Q4 smartphone sales will be financed
AT&T caps Cricket's peak download speeds to 8 Mbps on LTE, 4 Mbps on HSPA+
AT&T's revamped Cricket will take on T-Mobile's MetroPCS with Aio-like look, rate plans
Virgin Mobile, C Spire testing handset financing programs
Leap Wireless, MetroPCS launch handset financing programs

Article updated May 22 to correct information about the nature of the financing plans, which are interest free. Article updated May 23 to clarify the difference bewteen legacy Aio stores and legacy Leap stores.

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