US Wireless Carriers Dial Back Discounts On New iPhones

The electronic ecosystem, aka, the digital domain, is working. Customers are becoming more locked in to the model of their choice, which means fewer discounts are required. JL

Sheila Dang reports in Reuters:

New phone launches have long offered carriers a chance to gain market share by offering incentives such as free service and discounts. But customer defection rates fell to record lows in the last quarter as most people already have cell phones, a situation that creates less urgency to launch costly promotions to lure customers, analysts said.“In retrospect, there’s some regret on how promotional they were."

U.S. consumers who want Apple Inc’s (AAPL.O) newest iPhones, including its most expensive model yet, the iPhone X, may find fewer deals as wireless carriers are less willing to offer subsidies on devices in a saturated market.

New phone launches have long offered carriers a chance to gain market share by offering incentives such as free service and discounts. But customer defection rates fell to record lows in the last quarter as most people already have cell phones, a situation that creates less urgency to launch costly promotions to lure customers, analysts said.

Deals for the iPhone 8, 8 Plus and X have been pared back from the deals offered for the iPhone 7. (tmsnrt.rs/2f2Gche)

“In retrospect, there’s some regret on how promotional they were,” said Craig Moffett, a telecom analyst at MoffettNathanson. The iPhone 7 trade-in offers were too easily copied by rivals, resulting in a costly move that offered no competitive advantage, he said.

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The iPhone 8 model starts at $699, while the iPhone X will start at $999, Apple announced on Tuesday.

T-Mobile US Inc (TMUS.O) said Tuesday it will give customers $300 off a new iPhone if they trade in an iPhone 6 or newer. Meanwhile, Sprint Corp (S.N) customers can save 50 percent off the monthly lease price of the iPhone 8 if they trade in an iPhone 6 or newer, as well as eligible Android devices.

AT&T Inc (T.N) said it will include a 32GB iPad for $100 if customers buy the iPhone 8 or 8 Plus on a plan that allows subscribers to upgrade their phones as frequently as every year.

Verizon Communications Inc (VZ.N), the No. 1 wireless carrier, said customers can get $300 off the iPhone 8 or 8 Plus when they sign up for unlimited and trade in select phones.

But the offers are less rich than last year, when all four major carriers offered up to a $650 credit if they traded in an iPhone 6, 6S or high-end Android device, BTIG Research said.

Jefferies analysts characterized the latest round of offers as a “more rational” approach in a note on Wednesday, as last year’s free iPhone deals weighed heavily on the carriers’ margins.

Representatives for T-Mobile, Verizon, AT&T and Sprint did not provide additional details on their marketing plans, such as whether they will offer incentives for the iPhone X.

Even with less generous promotions, the new iPhones should attract enough high-income consumers, including wealthy customers in China, said Brian White, analyst at Drexel Hamilton. “It’s great for Apple because they’re starting to segment the market more, and now the consumers have more options,” he said.