AT&T just nixed its 30-month equipment installment plans (EIP), i.e. cell phone contracts in disguise, and instead replaced them with even longer, 36-month plans.
This way the monthly payments look much better to the uncritical eye, plus more and more people are keeping their phones for 3 years now, instead of the two when contracts were all the rage, or even instead of AT&T’s previous 30-month option that Verizon also offered for some phones.
If you have a 30-month installment plan you can keep it, of course, but all new phone payment schemes going forward will be 36-month plans. According to Jeff Moore, principal of Wave7 Research:
I think the No. 1 correlation is there’s really nothing that revolutionary about newer phones. They’re 4G/5G capable, and the upgrades are marginal, where the camera gets a little better and the processor a little faster, but one is very much like the other and it’s been that way for a while now. The big picture is obvious. We’re moving toward longer EIPs.
At least for AT&T, that strategy seems to be paying off – it has been offering the free iPhone and then $700 credit towards a new phone since last fall, and managed to clock its best quarter in ten years with 823,000 wireless postpaid additions, in contrast to Verizon losing 178,000 in Q1.
T-Mobile added a hefty number, too – 773,000 – yet its profitability is still a fraction of what Ma Bell and Big Red are netting each quarter despite the uptick in free phone offers which reportedly costs AT&T $2 billion per quarter.
With the prolongation of its cell phone contracts equipment installment plans from 30 to 36 months now, AT&T is again one step ahead of the pack when it comes to churn strategy, so we’ll keep an eye on everyone’s second quarter results.