AT&T Mobility (NYSE:T) said it will start letting its customers upgrade their smartphones and tablets every 12 months if they agree to add a monthly installment payment to their bill. The plan, called "Next," follows T-Mobile US' (NYSE:TMUS) announcement last week of its "Jump" upgrade program, which lets subscribers upgrade their wireless devices up to two times per year after an initial six-month enrollment period.
Under AT&T's Next program, customers buy a smartphone or tablet with no down payment and agree to pay monthly installments for the device over the course of 20 months. However, after 12 payments, if the device is in good working order, customers can trade it in and upgrade to a brand new device with no down payment, or can keep using their device and have no more payments after 20 months.
After 12 months, if customers sign up for a new wireless plan when they trade in their device, AT&T will waive the remaining unbilled installment payments. For example, an AT&T customer could buy a 16 GB Apple (NASDAQ:AAPL) iPhone 5, which costs $650 fully unsubsidized, and pay $32.50 each month on top of their service plan. After 12 months, the customer would have paid $390 but could trade the phone in and not have to pay the remainder of the cost of the device.
AT&T said the Next program is available for new AT&T customers or existing customers who are upgrade eligible. In June AT&T said it would make customers wait 24 months instead of 20 months to upgrade to a new, subsidized device. That change affects any AT&T customer whose contract expires in March 2014 or later. AT&T said its Next plan has no activation fee, no upgrade fee and no financing fees.
The new upgrade plan is designed to lower the costs that AT&T pays to subsidize devices and appeal to customers who want the latest smartphone.
"[The plan] keeps customers in the latest technology, keeps them buying new phones, using our network as it advances--basically, it has a churn benefit," AT&T CMO David Christopher told AllThingsD.
With T-Mobile's Jump program, customers can enroll by upgrading to a new phone, financing it through the T-Mobile EIP (equipment installment plan) and then paying $10 per month per phone. The $10 fee lets customers upgrade their phone twice every year after the initial six-month enrollment period has expired. T-Mobile said the $10 fee not only pays for the enrollment in the Jump program but also is an insurance plan that covers damaged or lost phones. T-Mobile emphasized that the insurance program alone is $8 per month, so enrolling in Jump is just an additional $2 per month.
And AT&T may not be the only carrier following T-Mobile's Jump program. According to the blog Droid Life, which cited internal carrier documents, Verizon Wireless (NYSE:VZ) will launch in August a program called "VZ Edge" that will let customers upgrade their device after paying off just 50 percent of the cost of the gadget. A Verizon spokeswoman declined to comment on the report.
For its part, Sprint (NYSE:S) appears to be considering its options in terms of handset financing. The carrier currently allows customers to upgrade to a new, subsidized phone after 20 months--AT&T and Verizon recently extended that period to 24 months. "While we are always evaluating the marketplace, we have not made any announcements regarding a change to this policy," Sprint spokeswoman Kristin Wallace told FierceWireless.
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