According to a recent report by Engadget, U.S. telecom behemoth AT&T, Inc. T will discontinue its policy of subsidizing phones for new customers by doing away with two-year service contracts, effective Jan 8, 2016.
Notably, both new and existing customers will thereafter be able to get hold of new phones at AT&T by paying the full price upfront, or through the carrier’s equipment installment plan – AT&T Next.
However, the new policy will not be applicable for business customers with a qualified wireless service agreement.
The move marks another nail in the coffin for what was once the norm of the U.S. wireless industry. Notably, two-year contracts have been phased out in favor of selling devices at full price to customers, usually via monthly installments over two years, or through cheaper monthly plans with no contract.
For instance, T-Mobile US, Inc. TMUS stopped offering subsidized pricing and discarded annual contracts way back in 2013.
Verizon Communications Inc. VZ also declared in August that it has decided to shift from two-year service contracts and dropped its policy of subsidizing phones for new customers. Sprint Corp. S has also vowed to stop offering them by the end of 2015 and intends to move entirely to a device leasing model.
Meanwhile, AT&T Next, which offers customers with early upgrades to smartphones and tablets every 12 or 18 months without any down payment, activation charge, upgrade cost or financing fee, has been increasingly gaining traction. Thus, the carrier believes that AT&T Next will soon become the primary way of obtaining a new smartphone at AT&T.
Notably, AT&T first discarded two-year contracts with its third party outlets back in June. However, the carrier has been relatively slow in completely distancing itself from two-year contracts.
But now, AT&T has finally followed in the footsteps of its rivals in an endeavor to simplify things for customers. However, only time will tell whether what appears to be a winning formula to most carriers, can bear fruit for AT&T or not.
AT&T currently has a Zacks Rank #3 (Hold).
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