LAS VEGAS--Now that Apple's (NASDAQ: AAPL) iPhone 6 and 6 Plus have been announced, U.S. carriers are getting down to brass tacks to try to take advantage of consumer excitement. Sprint (NYSE: S) has already signaled it will aggressively try to attract switchers and T-Mobile US (NYSE:TMUS) has made no secret that it sees the launch as a major opportunity to get customers.
Both Sprint and T-Mobile are going to be more assertive in winning iPhone share--in part because they have smaller iPhone subscriber bases than Verizon Wireless (NYSE: VZ) and AT&T Mobility (NYSE: T), and in part because they have cast themselves as the carriers that are looking out for customers the most. The onus is especially on Sprint CEO Marcelo Claure, who has refreshed the company's rate plans for families and individuals and positioned Sprint as the value-leader in wireless. The iPhone launch could be a major opportunity for Sprint to gain customers, or at least stop the bleeding in terms of subscriber losses.
AT&T is clearly a big target. According to estimates from New Street Research, AT&T has the largest iPhone base among U.S. carriers, which is logical since it was the exclusive carrier for the iPhone for years after the gadget's launch. New Street estimates AT&T has 39 million iPhone subscribers, compared with 31 million at Verizon, 14 million at Sprint and 4 million at T-Mobile, which only started offering the iPhone in April 2013.
"AT&T will likely sell the most iPhone 6 handsets because they have the largest iPhone base; however, I think TMUS may gain the most incremental share of iPhones," New Street analyst Spencer Kurn said. "I expect TMUS to be aggressive in going after iPhone subscribers."
The iPhone launch could spur customers to consider jumping ship to another carrier. T-Mobile CEO John Legere said at the end of July that "if a switching event is coming, a major one, we've got a big pool of players that are moving. I think we've got a huge opportunity." T-Mobile is hosting its "uncarrier 7.0" event today, and though it's unclear if it will be at all related to the iPhone launch, T-Mobile is already giving any customer on its Simple Choice plans unlimited LTE data for a year if they bring a new customer to T-Mobile.
Sprint tried to pre-empt its competitors by offering a new $50 unlimited plan to customers that choose a new iPhone. The company is also launching a leasing program that lets customers pay off new iPhones in cheaper monthly installments and lets them trade in for a new iPhone after 24 months. Through the end of October, Sprint will also pay up to $350 per line in early termination fees for customers who switch over.
556 ventures analyst William Ho said carriers' promotional activity during the next few weeks is likely going to be intense, especially as carriers try to goose their third-quarter numbers. The new iPhones go on sale Sept. 19, just 11 days before the end of the quarter. T-Mobile and Sprint "have to get the message out."
Others are not going to stand still though. Verizon said it will give customers a $200 gift card that can be applied to the regular $199.99 price of the 16 GB iPhone 6 when they trade in their old iPhone and sign a new two-year contract. Verizon said customers can trade in the iPhone 4, 4S, 5, 5c and 5s, but that the offer does not apply to Apple's new iPhone 6 Plus.
Kurn said "promotional activity is likely to increase with the launch of the iPhone and we expect competitive intensity to increase further in the back half of 2014 as Sprint tries to make a comeback and TMUS fights for iPhone share."
Two other factors are likely going to make this iPhone launch different--and more intense--than past ones heading into the holiday shopping season. First, over the past year U.S. carriers have more eagerly embraced handset financing and early upgrade programs, especially AT&T through its Next program. That will mitigate the pressure that major smartphone launches have tended to put on carriers' margins, and could lead carriers to more aggressively promote the new iPhones than they did in the past.
Additionally, the year-old iPhone 5s will start at $99 for the 16 GB model and $149 for the 32 GB model, and the 8 GB iPhone 5c will go free with a contract, in keeping with past Apple practices of dropping the prices of older iPhone models. Both of those devices support LTE, and carriers will be trying to get as many customers as possible off legacy 3G networks and onto LTE. That's not only because LTE networks are more efficient and tend to drive more data usage, but, as Ho noted, because the more subscribers carriers can get off 3G networks the earlier they can start refarming legacy 3G spectrum.
Given the competitive pressures Sprint is facing, T-Mobile's aggressiveness in the market and the other aforementioned factors, the iPhone 6 and 6 Plus launch is shaping up to be the most dynamic, unpredictable and hard-hitting iPhone launch U.S. carriers have ever seen. --Phil