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

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 (NYSE: 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..."


Read/Post Comments (1) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 03, 2014, at 4:26 PM, Cintos wrote:

    In my case, AT&T will likely benefit. I spend lots of $$$ on iPads and Macs, with no subsidy. My current family plan from VZ will be tun out and I will move the to AT&T model where the monthly rate is lowered, rather than being artificially hight just to get the phone subsidized. No more 2-year obligations for me! Rather than quash my iPhone upgrades, I will get what I want NOW, rather than waiting the required time. The iPhone resale values go a long way to minimize the actual cost of the new device.

    AT&T is the iPhone provider for my company-provided iPhone, and I have been quite satisfied with their service. Time to take the family over there, as AT&T has historically been more supportive of Apple.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2821046, ~/Articles/ArticleHandler.aspx, 9/18/2014 7:58:25 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement