Do These Words Portend Apple's Doom in the U.S. Smartphone Market?

Yesterday, AT&T  (NYSE: T  ) CEO Randall Stephenson suggested that smartphone subsidies can't be sustainable with where the smartphone market is heading, which has some potential implications for Apple  (NASDAQ: AAPL  ) . Stephenson acknowledged that the industry is attempting to shift toward a financing model instead of the subsidy model. The executive noted that subsidies were useful during the adoption phase of smartphone growth, but now smartphones are shifting to "maintenance" mode and that carriers "can't afford" to continue subsidizing at current levels.

Apple has made big moves in the past at the hint that subsidies are going away, yet shares didn't react much today. The important part is that AT&T and other carriers aren't removing subsidies altogether, and would replace them with financing plans that have the same net effect of reducing upfront costs by spreading them out. Financing is just a more transparent model. In fact, Apple could benefit if the result is that upgrade cycles shorten, since new upgrade programs allow users to upgrade very 12 to 18 months instead of waiting a full two years. Those programs may not be the best deal, but it's still too early to tell how the shift will affect upgrade cycles. For now, Apple will be just fine.

In this segment of Tech Teardown, Erin Kennedy discusses the future of mobile with Evan Niu, CFA, our tech and telecom bureau chief.

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Comments from our Foolish Readers

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  • Report this Comment On December 11, 2013, at 9:01 PM, spyfly2 wrote:

    Another click bait headline when the article says the opposite.

    "In fact, Apple could benefit if the result is that upgrade cycles shorten, since new upgrade programs allow users to upgrade very 12 to 18 months instead of waiting a full two years."

    Does MF stand for M---er F----r now?

  • Report this Comment On December 11, 2013, at 9:34 PM, EyeHateFools wrote:

    The fact is consumers have been paying for the phones anyway. The "subsidy" was always fully paid by the consumer, it's not like the wireless providers were some sort of benevolent corporation that gave out free money. With this new model consumers can save a few bucks if they use their phone for more than 2 years, but that will probably hurt the low-end smartphone makers more than the high end.

  • Report this Comment On December 11, 2013, at 10:06 PM, mjrkong wrote:

    Umm, given the base intelligence level of MF, here's a much better headline for all the ignorant eyeballs:

    "L PAGE SAVES ORPHANS FROM VEHICLE FIRE ON LONELY COUNTRY ROAD, T. COOK JUST WATCHES FROM HELO."

    Get it now?

  • Report this Comment On December 11, 2013, at 10:40 PM, larryw101 wrote:

    Mr. Niu,

    Do you have any idea how much Motley Fool's reputation has gone down hill over the past several months due to worthless articles such as the the one here?

    Motley and it's cast of fools have been on an Apple bashing crusade for quite some time now.

    Furthermore, the vast majority of your authors have no credentials whatsoever. Motley is being mocked on almost every investment chat board. You are a laughing stock whether you admit to it or not. No one seems to have any respect for MF any longer. The shame of it is that MF use to be a good source of financial advice. That is no longer the case.

    Your steady stream of articles with titles that bait readers to click on a story is glaring. It is so obvious that you are only trying to bait and attract readers to show advertisers how many clicks you get.

    It's garbage journalism at it's best.

    Shame on Motley and it's fools !

  • Report this Comment On December 11, 2013, at 11:38 PM, johnestromjr wrote:

    Evin, They are NOT subsidies. The customer pays for the iPhone in the rip-off two year contract. The customer can also pay cash for the iPhone and then go to any provider they choose. That is the better option. And stay away from AT&T which, like Bank of America, is a predator.

    These so-called subsidies are financing gimmicks to sell more iPhones and nothing more. Many would never be able to buy an iPhone if they had to pay in cash. That's like calling the financing of a car from a dealer as a subsidy. You need to learn what a subsidy is. It's NOT selling iPhones over time. And the telecos make a tidy profit on those "subsidized" iPhones. They ain't free Evan.

  • Report this Comment On December 12, 2013, at 10:04 AM, larryw101 wrote:

    To show you just how credible, or should I say un-credible Evan Niu is, he wrote wrote an article back in April of this year. Realixe that was just 7 months ago. Apple was over $400 at the time.

    His article said Apple was heading to $320 and was titled as such.

    These bozos belong writing for The National Inquirer or some other tabloid. They flip flop every week baiting readers with ridiculous article titles to earn their penny a click.

    Shame on Motley and shame on Tom Gardner their founder for such garbage journalism.

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