Apple's (NASDAQ:AAPL) iPhone may be getting a boost from major U.S. wireless carriers.
Verizon (NYSE:VZ), Sprint (NYSE:S), and T-Mobile (NASDAQ:TMUS) all offer plans that favor the Cupertino tech giant's handsets at the expense of those of its rivals, including those from Samsung (NASDAQOTH:SSNLF). If these policies continue, Apple may gain U.S. market share.
Early upgrades, iPhone Forever, and JUMP! On Demand
The gradual decline of contract plans has sparked a wave of innovation in the U.S. wireless industry. In the past, consumers mostly signed two-year agreements in exchange for heavily subsidized handsets. Today, they have a vast array of choices, including installment options and leasing programs. Most of these plans reduce upfront costs by doing away with down payments, and give consumers the ability to upgrade their smartphones more often.
But some of these plans -- the most advantageous, in fact -- are only available to buyers of Apple's iPhone.
In August, Verizon abolished two-year contracts. Customers who join Big Red's network can bring their own phone or purchase one outright, but most are likely to opt for its financing plans. After completing 24 monthly payments (two years), Verizon customers own their handsets outright, and can begin financing a new model. They can upgrade earlier, but in order to do so, they must first pay off their phone. The cost will vary based on the model and number of payments left, but could be in excess of several hundred dollars.
Verizon, however, is making a special exception for iPhone 6s and iPhone 6s Plus owners. Verizon customers who finance either of those phones can, if they choose, trade them in after making 12 payments, and immediately begin financing a new iPhone (presumably the iPhone 7 and iPhone 7 Plus next year). This perk does not extend to any other handsets, including Samsung's line of Galaxy phones.
Sprint offers iPhone customers an even better deal in the form of its "iPhone Forever" program. For $92 per month, Sprint customers can lease a 16GB iPhone 6s with unlimited monthly data. Unlike Verizon's plan, they don't have to wait 12 months, but can instead trade their iPhone in for the newest model as soon as it's released. Sprint offers similar leasing plans for its other phones, but they can't be upgraded as often. For an additional $10 per month, Sprint customers can add an early upgrade rider to their Samsung Galaxy S6 lease, but they still have to wait at least 12 months to upgrade.
T-Mobile's JUMP! On Demand lets customers upgrade their phone up to three times per year, regardless of the model. But T-Mobile is currently offering a special perk for the iPhone 6s, reducing the monthly cost of the phone to just $5 with an eligible smartphone trade-in. T-Mobile offers credits for other smartphones traded in toward different devices, but has no special programs promising cheaper monthly payments.
Apple competes with the carriers
Sprint's iPhone Forever program is the successor to its iPhone for Life plan, a similar program that promised regular iPhone upgrades to purchasers of the iPhone 6 last year. But Verizon and T-Mobile's offerings may have been prompted by Apple's own competitive program, the iPhone Upgrade Program.
U.S. iPhone buyers now have the option of financing an iPhone through Apple rather than through their carrier, and trading it in for the newest model after 12 months. Given the timing -- Verizon and T-Mobile's announcements followed shortly after Apple unveiled the iPhone Upgrade Program -- these policies may have been launched in an effort to keep customers buying their iPhones from the carrier rather than from Apple.
Samsung does not currently offer anything like the iPhone Upgrade Program, nor do any of the other Android vendors. In September, Forbes reported that Samsung planned to copy the iPhone Upgrade Program with something similar, but two months later, it hasn't been confirmed. Without that competition, carriers face no pressure to offer Samsung buyers more regular upgrades.
Many factors may influence smartphone customers, but the freedom to upgrade more often is significant. On Apple's last earnings call, CEO Tim Cook said the company was seeing its highest rate of Android switchers it had ever measured. With carriers offering special iPhone incentives, that trend could continue.
Sam Mattera has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool recommends Verizon Communications. 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.