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iPhone war is back as airlines compete for 5G customers

Apple iPhone 12 Pro Max is revealed during a virtual product launch.

Daniel Acker | Bloomberg | Getty Images

The price that Americans pay for an iPhone 12 depends on what cell service they plan to use it with. The three U.S. carriers are actively competing for subscribers by discounting the new iPhone sold next week, hoping to lock customers inside for many years on their wireless service.

It starts with a $ 30 discount. For people with AT&T, T-Mobile or Verizon service, an iPhone costs $ 1

2 $ 799 before taxes and other fees. If you want an unlocked one without activating it on an operator, it’s $ 829.

Customers can get even bigger discounts on the new devices if they are willing to commit to monthly payments for the next few years, if they get unlimited data plans, and if they swap their old phone. For example. Can AT&T customers get as much as $ 800 off a iPhone 12, which covers almost the entire cost of the device.

“It’s the biggest campaign we’ve ever seen on an iPhone launch day that topped $ 650 offers from all airlines back in 2016 and topped the $ 700 that Verizon offered to new subscribers last year,” wrote LightShed analyst Walter Piecyk and Joe Galone this week. and said it heralded the return of the “fat grant.”

Verizon and T-Mobile also offer competing promotions.

For Apple, the wave of carrier promotions could increase iPhone sales in the United States by reducing the cost of a new phone. They could also help shorten Apple’s smartphone upgrade cycle by asking users to upgrade to a new phone faster. Apple says the typical lifecycle of an iPhone today is three years, and the company multiplies its new releases accordingly, releasing a fairly large redesign every three years, mixed with more minor updates.

For operators, iPhone campaigns represent an opportunity to bring together existing subscribers and potentially get new ones in hopes of covering the cost of the devices over multi-year payment plans.

The new iPhones also support 5G networks, which are still under construction in the United States. Locking customers into 30-month commitments means that some users cannot switch if one operator’s network suddenly looks better than the other two.

“We believe Verizon is likely to see this as a way to move customers to higher tariff plans as well as a way to ensure that the mmWave spectrum used is used,” Goldman Sachs analyst Rod Hall wrote this week. “We have long expected U.S. carriers to help drive Apple 5G sales, although we believe the economic attraction outside the U.S. is less clear given the lack of mmWave implementation.”

Small differences

All operator campaigns in the US have two things in common: Customers must shop in an old unit with some value – a phone from the last few years that has not been broken – and they are required to make monthly payments.

But they differ in how they target new customers and how the mechanics of the offers work. The best price for a given user depends on their current operator.

How they break down:

  • AT & T’s campaign applies to both new and existing customers. To get a free iPhone 12, AT&T requires a swap, and the customer must activate it on an unlimited plan that costs at least $ 65 per. Month for one person. AT & T’s installment plan lasts for 30 months. Piecyk estimates that AT&T subsidizes new and existing customers by about $ 800.
  • T-Mobile offers as much as $ 850 in credit on iPhone 12 models spread over 30 payments. Users must sign up for the T-Mobile service and shop with an old device, and the discount amount is tied directly to the value of the exchange. It also offers deals to customers who buy multiple iPhones at the same time. The best deals are reserved for new subscribers, though with less discounts for existing Sprint or T-Mobile subscribers.
  • Verizon offers a free iPhone 12 to new customers, but they have to deal with an old phone, logging on to an unlimited data plan that costs at least $ 80 per. Month for one person and stick to it for 24 months. Existing customers can get an iPhone 12 for $ 15 per. Month with an exchange. Piecyk estimates that Verizon is effectively offering a $ 800 grant to new customers.

Back to the good old days

The wave of competing discounts from the three U.S. carriers is actually a return to operator subsidies, which was a major factor in the U.S. smartphone market in its early years.

Ten years ago, the price of a new iPhone was often raised to $ 199 because that’s how much the device cost when users bought it from an operator with a two-year contract, usually with a large early cancellation fee. These contracts also held a number of consumers in a two-year smartphone upgrade cycle.

Carriers began phasing out smartphone contracts in 2013, revealing to many consumers that the upfront price of a premium smartphone is $ 700 or more, allowing them to cancel without incurring major costs.

In recent years, carriers have effectively recreated the same customer lockout using device payment plans – customers do not have to pay hundreds of dollars in advance for a new iPhone or Samsung Galaxy, but they have to commit to paying between $ 30 and $ 50 per. month for at least two years with a lump sum if they cancel early.

Airlines found ways to lure new customers with promotions tied to their unit upgrade plans, often by overestimating a replacement unit. But in the last two years, aggressive campaigns became less common, and competing airlines often did not match them.

Now, with 5G hyped as an important growth cycle for the telecommunications industry, the three airlines are working to steal customers from their rivals or lock them inside for the next two years using the 5G iPhone.

Meanwhile, Apple has boosted its own device billing plans in several different ways, even though they do not offer subsidies like the airlines. People with Goldman Sachs Apple cards can buy an iPhone and pay over 24 months without paying interest.

Apple also has an upgrade program that combines an iPhone paid in monthly installments with an extended warranty, does not tie users to a single operator and allows them to upgrade to the latest iPhone after one year.

“One of the things we do is try to make it simpler and easier for people to come up with these kinds of monthly forms of financing,” Apple CEO Tim Cook said last December.

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