Verizon Communications (VZ) has come up with yet another promotional offer on Apple Inc.’s (AAPL) latest offering – iPhone 6. The company is offering an early upgrade option, allowing customers to upgrade their mobile handsets two months prior to their previously scheduled upgrade, so as to drive sales for iPhone 6.
While the new strategy aids in accelerating iPhone 6 sale, it also offers a competitive advantage to Verizon in the face of peers like AT&T Inc. (T) and Sprint Corporation (S) who have so far not confirmed of any early upgrade promotional plans for their users.
Earlier this month, Verizon started offering the new iPhone 6 to customers under a two-year contract, in exchange against their old iPhones. According to reports, the new ‘trade in old model’ offer would make the latest iPhone almost free against a two-year contract as there would be no upfront payment involved. The offer entails a $200 gift voucher that can be spent toward purchasing the basic 16-gigabyte version of the iPhone 6, which comes in at $199.99.
With the iPhone 6 grabbing attention, we expect more operators to join the bandwagon. We thus foresee more such competitive promotional offers are, thus, in the coming. However, while they may lead to incremental revenues arising from new subscribers, it does call for a reality check for the operators whose profit margins may suffer given hefty waivers on equipment sales.
With the wireless market becoming increasingly saturated, only time will tell how profitable the iPhone 6 turns out be for telecom carriers, given that several such equipment launches and promotional offers hit the streets every month. However, the upcoming quarterly results will mirror the true financial picture of these carriers post the iPhone 6 promotion, making actual gains and losses more vivid for the companies as well as for investors.
Verizon currently have a Zacks Rank #3 (Hold).
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