Is Apple the Big Loser in AT&T's Price War?

AT&T's new shared data plan is bad news for Apple's iPhone.

Feb 3, 2014 at 3:00PM

AT&T (NYSE:T) turned heads over the weekend by slashing the price of its shared data family plan, but a new wrinkle in the offering could be bad news for Apple (NASDAQ:AAPL).

AT&T's new pricing offers families unlimited minutes, unlimited texting, and 10 gigabytes of data to share among their devices starting at $130 for two smartphones. That may not seem like much of a bargain, but each additional line only sets families back just $15 per handset. In other words, a family of four would pay only $160 a month. That's a 20% discount to its previous offering. 

There's no free lunch here, though. A big difference in this new plan is that AT&T won't be subsidizing new phone purchases. You won't be getting the iPhone 5s for $199 the way you would through the three major carriers. You would have to pay the full off-contract price of $650 or go with AT&T's Next plan and pay $25 a month for the next 26 months. This is the model similar to what T-Mobile (NASDAQ:TMUS) has been using with a great deal of success. AT&T's mobile subscriber counts have barely moved higher over the past year as T-Mobile's accounts have grown 10% to 46.7 million. 

As you can probably imagine, this won't be good news for handset makers that were banking on wireless carrier customers upgrading to new devices every two years. This plan will encourage owners to hold on to their older phones longer. It will also encourage customers to seek out the growing number of pre-owned phones available at healthy discounts. In short, that two-year upgrade cycle is toast.

However, the lack of phone subsidies is going to hurt Apple the most. Outside of Japan -- the lone country where iOS smartphones are more popular than their Android counterparts -- and the United States, the world tends to gravitate to cheaper Android devices. It's not a coincidence that the iPhone is a hard sell in countries where wireless carriers refuse to take hits of several hundred dollars to shave the end-user price on a new device. The high-end Android devices are comparable in price to the iPhone, but there are plenty of devices selling at bigger discounts than $199 to the iPhone in the off-contract world.

T-Mobile's success at a time when the three larger wireless carriers are growing slower isn't a fluke. You can expect more plans to sprout where customers pay less for bringing their own devices that are compatible with the carrier's network. It won't be what Apple wants, and now it will be up to Apple to decide if it really wants to put out a true entry-level smartphone on the market. 

There's another way to play the smartphone revolution
Want to get in on the smartphone phenomenon? Truth be told, one company sits at the crossroads of smartphone technology as we know it. It's not your typical household name, either. In fact, you've probably never even heard of it! But it stands to reap massive profits NO MATTER WHO ultimately wins the smartphone war. To find out what it is, click here to access the "One Stock You Must Buy Before the iPhone-Android War Escalates Any Further..."

Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information