AT&T CEO: The era of big subsidies for devices is coming to an end

BY Gautam Prabhu

Published 12 Dec 2013

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While speaking at the investor conference yesterday, AT&T’s CEO Randall Stephenson indicated that the era of subsidies is coming to an end.

He noted that with smartphone penetration at 75 percent, and soon reaching 90 percent, carriers cannot afford to subsidize smartphones and would have to move into maintenance mode.

CNET reports:

Stephenson also acknowledged that breaking customers of their habit of upgrading to a new phone every 18 months to two years is not an easy task. But he said a business models focused on financing rather than providing a subsidy would be “transformative” for the industry. He said the company’s new AT&T Next program, which offers no-money down and 0-percent financing, drives smartphone penetration in a way that is more sustainable over time.

“If you are a customer and you don’t need to upgrade your device, you can get unlimited talk and text and access to the data network for $45 all-in,” he said. “You can use your own device or finance it. I think this will be very powerful. It’s where we see the market going.”

Stephenson also mentioned that carriers can now focus on lower end on the market, now that the data capacity issues have been fixed with the launch of LTE networks (not really what customers have to say about that).

This doesn’t come as a surprise as AT&T has already been moving in that direction with the launch of new Mobile Share value plans earlier in the month with ‘no annual service contract’ option and $15 per month savings. Though it has been seen as a response to T-Mobile’s uncarrier strategy, which has done away with carrier subsidy on mobile devices.

One of the major reasons for the higher smartphone penetration in the U.S. has been due to the carrier based subsidies that have made them a lot more affordable. It remains to be seen what impact the change in strategy by carriers will have on smartphone sales.

[Via CNET]