Whether it's in the form of subsidies, interest-free financing, or promotional discounts, intense competition between carriers looks poised to continue to be a boon for smartphone sales. Apple (NASDAQ:AAPL), of course, with its hot selling iPhone, is a major beneficiary or the telecom industry symptoms of deep competition. And two recent offers from T-Mobile US (NASDAQ:TMUS) and Sprint (NYSE:S) yet again provide clear reminders that this key catalyst for iPhone sales in the U.S. isn't going anywhere.
"Let us help you upgrade your smartphone"
This is the battle cry carriers have used for years to both draw in new customers and to keep current customers. Sure, many have predicted smartphone subsidies to eventually end. And, indeed, they are on the decline. But where subsidies are dissolving they are being replaced by equally aggressive alternatives, including interest free financing (sometimes requiring no money down) and offers to pay off early termination fees.
Consider Sprint's new promotion. The company is offering to cut the bills of switching customers from Verizon and AT&T in half while waiving activation fees and and buying out contracts, paying up to $350 per line.
T-Mobile continues to offer a similar plan, paying up to $350 per line for early termination fees for switching customers from any major carrier. But T-Mobile is now out with another aggressive promotion, offering a 64GB iPhone 6 for the price of a 16GB version. In other words, customers are getting a $100 discount on the 64GB iPhone 6. Pair this with T-Mobile's offer for $0 down interest-free financing, and the company is making an iPhone upgrade look quite compelling.
These are just some of the promotions offered by the major national carriers in the U.S. that make upgrading to the latest iPhone easier. While iPhones aren't the only phones that carriers are making it easier for customers to upgrade to, Apple is definitely a primary beneficiary of the trend. Highlighting the iPhone's popularity in the U.S., the company has approximately a 32.6% share of the installed base of smartphones in its home market, according to recent data from Kantar WorldPanel.
Likely Apple's best year ever
Just a few months into iPhone 6 sales, Apple's largest product segment is off to a roaring start for fiscal 2015. Already, analysts are predicting record iPhone sales by a long shot in Q1. As Apple catches supply up to demand, carrier promotions will play a key role in helping Apple continue its strong momentum throughout the rest of the fiscal year.
The symptoms of carrier competition in the U.S. that make upgrading easier is a very important catalyst for Apple. At 56% of Apple's revenue, the company's iPhone sales have the biggest impact on the tech giant's bottom line. Further, the U.S. is the company's biggest market. While Apple doesn't break out U.S. sales as an individual country, its Americas sales at 38.6% of revenue hints at just how important the U.S. market is to the company.
While investors shouldn't count on the carrier battle to spur such generous efforts to help customers buy new iPhones forever, there is no sign that such promotions will disappear anytime soon.
Daniel Sparks owns shares of Apple. The Motley Fool recommends and owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. 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.
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