T-Mobile (NASDAQ:TMUS) is certainly not one for engaging in the status quo. Through its Un-carrier initiatives, the company has attacked established wireless providers AT&T, Verizon, and Sprint, and grown its subscribers -- mostly at the expense of the latter. According to research firm Strategy Analytics, T-Mobile recently edged out former No. 3 provider Sprint during the first quarter of 2015 by adding nearly 8 million subscribers during the last year, while Sprint added a paltry 2 million subscribers during that period.
One of the big changes that allowed T-Mobile to attack established players was a move to eliminate device subsidies. Considering the company no longer paid device manufacturers, the company could move away from the more onerous facets of a wireless contract -- most notably, the standard two-year contract was replaced by a pay-as-you-go relationship. In addition, the company was able to offer lower monthly wireless bills, as it no longer had to price in the cost of the device subsidy, which can be as high as $450.
The flip side of this arrangement is that it can -- at least in theory -- hurt high-end device sales. Research firm Kantar found that, in the device-subsidy-heavy markets of the U.S. and Japan, Apple (NASDAQ:AAPL) had a smartphone market share of 40%+, while its global market share was only 12%, as it was pulled down by non-subsidy countries. However, T-Mobile's current Un-carrier update could actually boost Apple sales.
JUMP! for iPhone sales
T-Mobile's newest Un-carrier initiative is actually a reboot of an existing one. The initiative is called JUMP!, and is designed to allow the subscriber to switch leased phones with no waiting period or additional upgrade fees. While the service technically allows users to switch phones up to three times a year, it's of very little benefit to die-heard iPhone users to upgrade that frequently, as the company's phone cycle is only once a year.
However, T-Mobile is specifically marketing the iPhone with its JUMP! program. The entry-level iPhone 6 is $15 per month with an 18-month lease, at which time you're allowed to buy the phone, or enter into another lease. And as previously stated, you can upgrade to another device before that time, up to three times per 12 months. This allows users to always get the newest iPhone. And while this may be considered a lease between the end user and T-Mobile, Apple books this as a sale on its financial statements.
In many ways, Apple's resell value allows this plan
For T-Mobile, there's an obvious risk. Assume a person enters into its JUMP! plan, and jumps from iPhone to iPhone every year. Those forfeited iPhones will revert to T-Mobile -- essentially, T-Mobile is long the risk of iPhone inventory, and needs to ensure there's a healthy secondary market to absorb the product. That could be internal, with new users looking for cheaper used phones, or external, by selling the phones to other retailers. Regardless of the manner T-Mobile chooses to monetize used iPhones, however, the company needs iPhone demand to continue.
Perhaps unsurprisingly, used iPhone demand appears to be healthy enough to support T-Mobile's plan. More recently, Piper Jaffray Apple analyst Gene Munster found Apple resale value for the iPhone 6 is higher than previous editions by holding 72% of its full retail price. Using the initial model's price for a hypothetical $650, a used unit would sell for $468 in the used markets. The price difference between new and used amounts to about 12 months of $15 payments.
While it's important to note used iPhone prices can change, and typically drop before a new launch, the key point is that Apple's healthy used-phone markets allow T-Mobile to offer this program at $15 per month. This is just one example of how Apple's value is helping to drive iPhone sales.