Verizon Wireless has altered its device upgrade policy, extending the time frame in which current customers are eligible for a full discount on a new device.
The carrier noted late last week that current postpaid customers will now have to serve out their full 24 month contracts before they are eligible to receive a full discount on a new device. The carrier had previously allowed postpaid customers to receive the discount after 21 months of services in return for signing a two-year contract extension. The carrier said the change will first impact customers with contracts expiring in January 2014.
“This change aligns the upgrade date with the contract end date and is consistent with how the majority of customers purchase new phones today,” the carrier noted.
The carrier did note that some devices will be eligible for its device payment plan, which allows customers to roll the price of the device into monthly installments.
Analysts noted that the move shows Verizon Wireless’ confidence in the space and attempt to protect its future earnings from the costs associated with device upgrades.
“While we expect that this could result in a 10-plus-percent reduction in [Verizon Wireless’] annual subsidy expense and drive further margin expansion, we also view it as a milestone in the life cycle of the four-year old smartphone stampede,” explained Macquarie Equities Research in a note. “With true industry smartphone penetration near 60%, and [Verizon Wireless’] at 58% as of Q4, we think [Verizon Wireless] is simply trying to avoid the mistakes of [AT&T Mobility] and prepare for slowing sub and possibly [average revenue per user] growth in 2014 and beyond.”
Wireless carriers often allow contract customers to receive a discount on a new handset if they agree to extend the length of their contract. This has allowed carriers to lock up valuable contract customers for an extended time while also catering to the rapidly changing device landscape.
Bored? Why not follow me on Twitter?
