AT&T And Verizon Offering Smartphones On The Cheap, But With Long Contracts

Can you hear me now?

Verizon has begun to offer trade-in credits worth as much as $800 toward new iPhone and Android models—a nearly identical promotion to the one AT&T started last Fall.

But there’s a catch: both companies require customers to lock into an unlimited data plan for a set period. That means carrier contracts are making a comeback. Maybe the flip phone renaissance will be next?

The Almighty Recurring Dollar

Analysts say the promotional strategy hearkens back to the early days of smartphone sales, when carriers would nearly give phones away in exchange for long term contracts:

• Then, a paradigm shift in 2013 prompted carriers to start hawking “no contract” wireless plans to lure away the customers of their competitors.
• Fast-forward to today: the race to lock customers into long-term contracts – largely to support ongoing investment in critical 5G network upgrades – has reached a fever pitch.

And these campaigns have some heavy cashflow behind them. AT&T is shelling out $2 billion per quarter to front smartphone device purchases, according to research institute MoffettNathanson. And busting out the big banknotes is paying off: the Dallas company gained 1.4 million new postpaid subscribers in the six months from October to March.

Churn, Baby, Churn

Along with steeply discounted device upgrades, major telecoms have also been packing more and more perks into their data plans to keep customers loyal:

• Verizon customers who upgrade to premium-tier plans receive a “free” subscription to Disney+. AT&T runs a similar promo, instead offering premium-tier customers access to HBOMax.

Smartphone Saturation: The emergence of customer retention plans may be a symptom of a maxed-out market. 85% of Americans now own smartphones, up from just 35% in 2011, according to a recent Pew Research poll.