Apple (NASDAQ: AAPL) stores are going to change how they sell iPhones to AT&T Mobility (NYSE: T) customers, according to a 9to5 Mac report.
According to the report, which cited unnamed sources, AT&T customers will only be able to buy iPhones through Apple's online and physical stores using AT&T's Next equipment installment plan option. An Apple spokeswoman declined to comment.
The 9to5 Mac report also said Verizon (NYSE: VZ) customers buying iPhones at Apple stores on Verizon's Edge program will need to pay off the full cost of their iPhones before upgrading to a new one. Verizon spokesman David Samberg confirmed to FierceWireless that the changes to its Edge handset upgrade program, which require customers to pay off the full cost of smartphones before upgrading, apply to all of its national retail partners.
The change to AT&T's policies was expected after reports emerged last month that AT&T was moving away from offering two-year contracts and subsidized devices at national retail partners and local dealers. According to CNET, citing an AT&T spokeswoman, AT&T's national retail partners plan to stop offering two-year contracts and subsidized smartphones, but each retailer will make that transition at their own pace.
"Our customers increasingly choose AT&T Next, so we're responding by featuring Next as the most prominent way to get a new smartphone at our national retailers and local dealers," AT&T said in a statement. "Customers who would rather have a two-year contract still have that option."
It's likely that in addition to Apple, other retailers like Walmart and Best Buy will shift away from offering two-year AT&T contracts and subsidized smartphones over the next few weeks or months.
The shift toward Next-only sales at national retail partners will mean that AT&T will likely realize more equipment revenue and lower subsidy costs on its balance sheet. For Apple in particular, it could mean a bit more sticker shock for customers who will need to pay off the cost of their $650 iPhones in monthly installments instead of getting a subsidized iPhone for $199 with a two-year contract. Verizon is still offering two-year contracts at its national retail partners.
AT&T still plans on offering two-year contracts through its own online sales channels and at its 2,000 company-owned retail stores.
AT&T has been enthusiastic about shifting as many smartphone sales to Next as possible. AT&T said 65 percent of its postpaid smartphone gross adds in the first quarter came from its AT&T Next plans, up from 58 percent in the fourth quarter. AT&T has said that more than 30 percent of its postpaid smartphone base was on AT&T Next at the end of the first quarter, and that 62 percent, or 35.4 million, of its postpaid smartphone subscribers were on no-device-subsidy Mobile Share Value plans. Those plans typically have discounted service pricing.
The changes at national retailers for Verizon smartphone sales come on the heels of changes the carrier just made to its Edge program. On Sunday Verizon changed its Edge plans so that customers will need to pay off the full cost of their devices before they upgrade. However, customers will now be able to do so at any time and will be able to keep their smartphones once the device is fully paid off instead of having to turn them in.
Previously, Verizon said customers needed to wait 30 days after they purchased their device to upgrade, and only needed to pay off 75 percent of the device's cost. Customers also needed to turn in their device when upgrading. Now, although customers will need to pay off more of the device's cost before upgrading, those restrictions are dropping away.
Verizon is currently seeing 50 percent of customers who are buying new smartphones or upgrading to a new smartphone choosing Edge, up from 39 percent at the end of the first quarter.
- see this 9to5 Mac article
- see this CNET article
AT&T offers new Next option requiring 30% down payment up front
Verizon: Edge customers now must pay off smartphone before upgrading, but get to keep old phone
Report: AT&T to abandon 2-year contracts at national retailers and local dealers
AT&T subscribers flock to Next installment plans in Q1, making up 65% of all smartphone sales
Analysts: As equipment installment plans boom, carriers likely to focus on tighter credit standards
Article updated June 2 at 2:05 p.m. ET to clarify that AT&T customers will not pay more money up front for smartphones they buy at Next-only locations than at company-owned retail stores.