Don't Expect Your Carrier to Help Pay for Your $1,000 iPhone -- 2nd Update

By Drew FitzGerald and Ryan Knutson Features Dow Jones Newswires

Discounts on Apple Inc.'s newest iPhone models haven't kept up with their climbing prices.

Continue Reading Below

Wireless carriers are offering less generous deals on new iPhones than in years past as executives bristle at the handsets' cost. Apple on Tuesday unveiled two iPhone 8 models starting at $699 alongside a premium device, the iPhone X, for $999. That is up from a base price of $649 last year for the iPhone 7.

The rising cost is prompting wireless companies to look for other ways to lure customers to their service. Buying a new handset is often the easiest way for the carriers to steal subscribers from rivals, but the cost of the devices, which customers usually pay back over time at zero interest, cuts into their profitability.

"I think we should invite the manufacturers to share a little of the cash flow burden," Sprint Corp. Chief Executive Marcelo Claure said at an investor conference in New York Thursday. "We're not too excited with the prices going up and also having to finance that."

Mr. Claure said Sprint isn't planning to let customers have a $999 iPhone X without at least making a down payment or paying interest, though it hasn't made a final decision about how it will be sold.

"The model is not sustainable where we are buying devices at high prices and then were just basically providing interest-free financing to customers," he said.

Continue Reading Below

Apple didn't immediately respond to a request for comment.

Last year, shortly after Apple unveiled the iPhone 7, the four major U.S. carriers were quick to offer free iPhone 7s to customers who traded in the previous model. This time, executives say they don't want the newest iPhones to spark another promotional brawl.

"I'm encouraged, frankly, by the discipline there appears to be around promotions for the iPhone," Verizon CEO Lowell McAdam said Thursday, adding that the discipline will help the company boost revenue following price cuts and its return to unlimited data plans earlier this year.

Mr. Claure, who echoed Mr. McAdam's pleasure with the soft promotions, said Sprint would respond aggressively to any rival offers, but doesn't want to take the first swing. "In the case that somebody becomes aggressive, we are going to be the one with the most enticing offer," he said. "But so far things seem to be very responsible, which is good."

Jefferies analyst Mike McCormack said most companies' promotions focused on trade-in offers for old devices, "a much more measured approach than the free-iPhone deals we saw last year."

AT&T Inc. said it would broaden an existing buy-one-get-one offer to include a $699 credit for iPhone buyers adding a second phone line. But the deal only applies to the iPhone 8 and iPhone 8 Plus, not the iPhone X, and subscribers also need DirecTV or U-verse to qualify.

Verizon and T-Mobile US Inc. are both offering trade-in customers up to $300 off the newest models instead of the $650 credits on tap last year, which covered the cost of a basic iPhone 7. The major carriers also let customers finance the latest devices over 24 months, in some cases upgrade again next year. Apple has an installment program, which costs $50 a month, that includes its AppleCare insurance and free upgrades each year.

Mike Sievert, T-Mobile's chief operating officer, said last year's deep discounts weren't as effective as the company had hoped. "Within a few days, everybody had copied it," he said on Thursday. "What exactly does this accomplish?"

T-Mobile's network could be another reason for caution. Apple's new devices aren't compatible with a sliver of airwave licenses T-Mobile bought for $8 billion earlier this year. Samsung Electronic Co.'s latest device also doesn't support the frequency, which the company is counting on to give it an edge over competitors.

People keep their phones for about 2 1/2 years, so T-Mobile has an incentive to make its customers upgrade later, when more devices work with its full network. Mr. Sievert suggested as much Thursday, noting this year's iPhone was never part of its plans when it plotted the network expansion.

A T-Mobile spokeswoman said the company doesn't want its customers to hesitate to buy a new phone if they are ready to upgrade.

For now, T-Mobile's most generous offer applies to customers who stick it out until 2018. Members of its upgrade program can trade in today's new iPhone for the next-generation version, expected a year from now, and have the carrier pay off the remaining balance on their old device.

--Tripp Mickle contributed to this article.

Write to Drew FitzGerald at andrew.fitzgerald@wsj.com and Ryan Knutson at ryan.knutson@wsj.com

(END) Dow Jones Newswires

September 14, 2017 16:10 ET (20:10 GMT)