Report: AT&T to abandon 2-year contracts at national retailers and local dealers

AT&T Mobility (NYSE: T) customers will no longer be able to purchase smartphones with two-year contracts at some national retail and local dealer locations by June 1, according to multiple reports. However, AT&T will still be offering two-year contracts to customers in its other retail and online channels.

According to an internal Walmart document viewed by FierceWireless, on May 28, Walmart will no longer offer two-year contracts with subsidized smartphones to AT&T customers. Instead, customers will only be able to purchase phones at full retail price or via AT&T Next, the carrier's equipment installment plan. The document states that this change is "not just limited to Walmart. It affects all national retailers."

Walmart representatives did not immediately respond to a request for comment.

According to reports from Droid Life and The Verge, which cited unnamed sources, third-party AT&T retailers will no longer be offering two-year contracts. Droid Life said the changes will affect national retail partners as well as local authorized dealers, and that the change would go into effect June 1. It's unclear how many national retail or dealer locations will be affected. AT&T will still be offering two-year contracts via its own retail stores, customer service and online sales channels, Droid Life and The Verge reported.

"Customers love AT&T Next, and we are continuing to focus on it as the preferred way that customers want to shop," AT&T said in a brief statement to FierceWireless. "We have 2-year plans available for those customers who choose them."

The carrier declined to comment on the June 1 date for the changes.

AT&T has been aggressively promoting Next for its smartphone customers. Under Next, customers pay off their device in monthly installments, can upgrade earlier than if they had a two-year contract, and also get a discount on service pricing.

AT&T had 6.2 million postpaid smartphone gross additions and upgrades in the first quarter. The company said 65 percent of its postpaid smartphone gross adds in the quarter came from AT&T Next, up from 58 percent in the fourth quarter. The company also had 313,000 bring-your-own-device gross adds. That means 70 percent of the carrier's smartphone transactions in the first quarter were for non-subsidized phones.

Further, AT&T 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.

Other carriers are embracing the move away from subsidies for smartphones. T-Mobile US (NYSE:TMUS) started the trend more than two years ago. At the end of the first quarter, 92 percent of the carrier's branded postpaid customer base was on a no-contract Simple Choice plan, which do not come with subsidized devices.

Verizon Wireless (NYSE: VZ) saw more customers choose its Edge equipment installment plan in the first quarter, with 39 percent of phone activations in the quarter happening on Edge. Verizon had expected that figure to be at most 35 percent. Around 25 percent of Verizon customers chose Edge in the fourth quarter of 2014. 

Sprint (NYSE: S) said 53 percent of its postpaid smartphone sales were on an equipment installment plan or a leased plan in the first quarter, up from 46 percent in the fourth quarter. In the first quarter Sprint said 37 percent came from leasing and 16 percent came from installment billing.

For more:
- see this Droid Life article
- see this The Verge article

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