5G took center stage at Apple's (NASDAQ:AAPL) recent iPhone event. The faster network capability is one of the main selling points for Apple this year, but the feature inherently relies on the carriers' networks. And the carriers are ready to sell 5G.
Verizon (NYSE:VZ), AT&T (NYSE:T), and T-Mobile (NASDAQ:TMUS) are offering aggressive promotions to sell their customers on the iPhone 12 and their 5G networks. And that's going to be key to Apple's success this year.
AT&T and Verizon are offering deals through Apple
One of the biggest changes this year is Apple's displaying preferential pricing for iPhone 12 and iPhone 12 Mini on its website for buyers who activate their devices on AT&T or Verizon. Those customers will pay $30 less than those that want to use their phone on T-Mobile or have the freedom to choose whichever network they like.
In reality, Apple raised the price on the iPhone and at least two of the big carriers are willing to pay the iPhone maker to advertise a lower price if activated on their network. As a result, Apple could see the average selling price for the iPhone increase this year.
Furthermore, Apple's displaying trade-in offers for both AT&T and Verizon as well. And those offers are pretty aggressive.
AT&T is offering the most generous credit, up to $800 (which covers the flagship device) for trading in an iPhone 8 or newer.
Verizon isn't quite as generous. New unlimited data customers get a $550 discount on the iPhone 12 with select trade-ins and existing customers get a $450 discount. New customers can also get a $250 Verizon e-gift card when ordering directly from Verizon, further offsetting the cost of the iPhone 12.
T-Mobile's promotions don't show up on Apple's web store at all. The Un-carrier apparently wanted to wait and see what its competitors offered before rolling out its own promotion. T-Mobile isn't quite as generous as AT&T, but new customers or customers adding a line can still get a free iPhone 12 with select trade-ins.
We haven't seen all three carriers offer such big subsidies on the iPhone since 2017. The carriers may also spend more money on television and display advertisements for the new iPhone, touting their 5G networks and performance on the device. As a result, Apple should see very strong sales for the iPhone 12 lineup.
Locking consumers in before 5G takes off
One important factor about all of these promotions is they require customers to stick with their selected carrier for at least 24 months. Building a customer base equipped with 5G-capable devices and locking them in for a couple years will give them an opportunity to prove their worth as a 5G network through 2022.
Verizon and AT&T ought to be more aggressive than T-Mobile in attempting to lock in customers now. T-Mobile is the leader in 5G coverage. After the Sprint acquisition, T-Mobile has a massive advantage in available spectrum, and its 600 MHz 5G network already covers nearly 250 million people. The addition of new 2.5 GHz cell sites over the next couple years will improve speeds and bandwidth on the network. Analysts expect it to take 18 to 36 months for AT&T and Verizon to close the gap with T-Mobile.
The good news for Apple is AT&T and Verizon have lots of cash and can afford to be aggressive with their promotions. Not only are we seeing bigger promotions than in recent history, we may also see those promotions last longer, or recur more often as the telecom giants battle for 5G customers.