Sprint Joins Verizon In Cancelling Smartphone Subsidies, Rolling Out Phone Leasing Plans

Sprint Joins Verizon In Cancelling Smartphone Subsidies, Rolling Out Phone Leasing Plans

On Monday, Sprint Corp. announced that it too is doing away with two-year contracts and entirely moving to a model where consumers choose – and pay for – their smartphones.

Earlier in the month, Verizon Communications Inc. announced that it would no longer use contracts, while T-Mobile Inc. eliminated contracts over two years ago.

AT&T Inc. is now the only U.S. wireless company that offers contracts and subsidized smartphones.

Contracts have been the custom since the beginning of the wireless industry. Consumers signed and got a cut-rate price on a brand new smartphone.

As smartphones prices rise and margins decline carriers are switching to low-cost monthly plans without contracts, but in which consumers to pay the price in full for their phones, usually in monthly payments spread out two to three years.

Sprint started offering a contract-less alternative last year, and in a Monday interview, Sprint CEO Marcelo Claure said the carrier will shift completely to that plan by year-end.

Leasing or paying in full will be the only ways to obtain a new device from the carrier.

According to Sprint, 51% of consumers who bought a new phone last quarter went for the lease option.

As part of the complete shift, on Monday Sprint launched a new leasing arrangement referred to as iPhone Forever that begins at $22 per month for an iPhone, besides the monthly service charge.

The plan allows consumers to upgrade to the most recent iPhone every year as soon as it is launched. That is a development over its present renting option, which only allows consumers to upgrade to a new iPhone after every two years.

Paying $22 every month and acquiring a new phone annually implies that a buyer will pay approximately $264 for one year’s use of an iPhone 6, which has a $649 vendor price.

To be eligible for the plan, consumers must trade in their present phone and it must be in working condition.

Buyers can still purchase the iPhone entirely if they would like, at the full retail cost.

Mr. Claure said Sprint’s affiliation with its main company, SoftBank Group Corp., will assist it in monetizing the traded-in devices, thus making up for the phone’s discounted price.

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