NEW YORK (AP) — Verizon Wireless, the country's largest cellphone carrier, on Thursday said it's joining AT&T and T-Mobile in providing an installment plan for its phones, aiming to satisfy customers who want to upgrade their devices faster or avoid paying the upfront cost of their phones.
The plan, dubbed Edge, will be introduced Aug. 25, and allows the buyer to spread the full retail price of the phone, without subsidies, over 24 months. A buyer who has paid off 50 percent of the cost of the phone can upgrade to a new phone after six months.
"We have a lot of customers in the technology edge that want to upgrade sooner than they would under our historical, legacy, subsidy model, if you will. And we have other customers who don't want to pay upfront for the large cost of the phone," Verizon Communications Inc.'s chief financial officer, Fran Shammo, told analysts on a conference call Thursday.
Now that nearly every adult American has a cellphone, easy growth in the wireless industry has ended, and carriers are looking to other avenues for growth. One way to do that is to boost phone sales, but most phones are sold at a big loss, so any gains in phone sales under the traditional model are counterproductive. The phone companies subsidize the cost of, for example, an iPhone, by hundreds of dollars to get retail price down to $200.
With Edge, Verizon isn't paying a subsidy, and the buyer shoulders the entire cost the phone. That means frequent upgrades help Verizon rather than hurt it. For customers, Edge makes financial sense only if they are unwilling to deal with the hassle of selling their old phones when they want to upgrade to a new device; for those buyers, the trade-in option is convenient.
Rumors about Verizon Edge had surfaced on several blogs earlier this week.
Competitor T-Mobile US Inc. stopped signing up customers for two-year service contracts in March, in favor of selling phones on installment plans. To further cater to frequent upgraders, it introduced an option called "Jump" last week It provides device insurance and more frequent upgrades for $10 a month.
On Tuesday, AT&T announced its own frequent-upgrade option, called "Next," which is very similar to Verizon's Edge. Starting July 26, customers will be able to buy their phones on installment plans, with the option to trade in the devices after a year.
Shammo made his comments while discussing the company's second-quarter results on a conference call with analysts.
Verizon Wireless added 941,000 devices to its contract-based plans in the April to June period, exceeding analyst estimates and continuing a strong run. It boosted service revenues by 8.3 percent from a year ago. Its closest rival, AT&T, is seeing revenue increases of around 4 percent.
Almost all of the gains on the wireless side were due to customers upgrading to higher-priced plans or adding more devices to their plans, as opposed to an influx of new customers.
Analysts saw some weakness in the results, pointing to a decline in the profit margins on the wireless side, and Shammo's comment that the rate of device upgrades would be roughly the same as last year. Because the company subsidizes each new smartphone by hundreds of dollars, frequent upgrades are costly.
Verizon shares fell $1.15, or 2.3 percent, to $49.60 in morning trading. It was the first time the shares went below $50 this month. The shares hit a 12-year high of $54.31 on the last day of April.
Shammo said margins were in line with the company's own forecasts, and that the slight miss compared to analyst expectations was due to the large number of new subsidized devices added to the network.
Net income at Verizon Communications was $2.25 billion, or 78 cents per share, up 23 percent from a year ago, the company said Thursday. Excluding a pension-related gain, earnings were 73 cents per share. That beat the average estimate of analysts polled by FactSet by a penny.
Revenue was $29.79 billion, up more than 4 percent from a year ago and in line with analyst expectations.
New York-based Verizon Communications owns 55 percent of Verizon Wireless, which means that only that percentage of its profits flow to its bottom line. The rest goes to joint venture partner Vodafone Group PLC, a British cellphone company with wide-ranging international interests.
Verizon Communications has a long-standing interest in buying Vodafone out of Verizon Wireless, and analysts expect a deal could be reached later this year. Shammo had no comment Thursday on the prospects for a deal.
Shammo reiterated that Verizon is interested in buying into the Canadian wireless market, since there is a government auction coming up for a band of the airwaves that Verizon already uses in the U.S. However, the company is only in the early stages of exploring a Canadian venture, he said.
1. Give It To Your Kids So They Stop Taking Yours...
Every parent, aunt and uncle knows that no toy in the history of toys has ever been as appealing to a kid as an iPhone. They are shiny, they have games and grown-ups use them for important things. More importantly, they are either off-limits or doled out in limited quantities as a reward for, say, sitting still for a minute. Load up your old iPhone with games and give it to a deserving child in your life.
2. ...Or To Your Mom So She Can Finally See The Light
Alternately, if a Luddite adult has been thinking of taking the plunge into the world of smartphones, your old iPhone may help him or her get over the hump. If you have an iPhone 4 or 4S, you might also find someone who's still hanging on to an earlier model and give them the gift of an upgrade. You may just buy a friend for life (or at least until iPhone 6 comes out).
3. Use It As A Teeny-Tiny iPad
You'll be able to watch videos, send email and search Wikipedia for random facts to end cocktail-party disagreements with your decommissioned iPhone -- as long as you have a Wi-Fi connection. There's even a camera, which means you can avoid being that guy (or gal) at the concert who's turning heads for taking photos with an iPad.
4. Donate To Charity
Several charities accept old phones for donation, though it's worth remembering that these groups likely won't physically give your old phones to people in need. Rather, they work with phone recyclers and sell your donated phones to them. A nonprofit group called Cell Phones for Soldiers will take your "gently used" phone and sell it to recycling company ReCellular. It will then use the proceeds to buy calling cards for soldiers. The National Coalition Against Domestic Violence works with another recycling group in a similar manner. About 60 percent of the phones it collects are refurbished and resold. The money goes toward supporting the coalition. The remaining 40 percent of the phones are recycled, according to the group's website. It pays for shipping if you are mailing three or more phones. There are a few more suggestions from New York's Department of Environmental Conservation at: http://www.dec.ny.gov/chemical/8818.html .
5. Alarm Clock
Do you still use that old radio alarm you bought for your college dorm room in the 20th century? Join the 21st century by turning your old iPhone into an alarm clock. Hide it in a different spot in your bed each night for an added challenge.
6. Sell, Sell, Sell!
Join the eBay hordes and sell your phone for a few hundred bucks if you can. There will likely be a flood of the gadgets soon after people start getting their new phones, so it might make sense to wait a little. A company called Gazelle, meanwhile, will make an offer for your old phone based on its condition, your phone carrier and other information. A 32 gigabyte iPhone 4S on Verizon Wireless, for example, was recently going for $237 if it's in good condition and $90 if it's broken.
7. Trade In At GameStop
The video game retailer offers cash or store credit for old iPhones (along with iPods and iPads). The service is only available in stores and not online. A 32 gigabyte iPhone 4S on Verizon will get you up to $335 in store credit or up to $268 in cash.
8. Stream Music
Stick that baby in a speaker dock, spring for a Pandora subscription ($36 per year) or Spotify ($10 per month) and bam, you have a stereo. Or try SoundCloud. Although it's meant to let you create and share music with people, it's also a good place to listen to DJs you like or discover new ones. TuneIn, meanwhile, will let you listen to online radio stations playing music, sports, news or talk shows.
9. Keep As A Backup In Case You Lose Your Fancy New One.
Nearly one-third of cellphone owners have had their gadgets lost or stolen, according to a recent survey from Pew Internet & Pew Internet & American Life Project.
10. Use As A Camera
At its core, a decommissioned iPhone is a hard drive with a camera. Snap photos with it. No Canon needed. You can also use the iPhone to move photos and other files from one computer to another.
11. Recycle With Apple
Apple Inc.'s own recycling program will give you an Apple gift card if it is determined to have a "monetary value." A 32 gigabyte iPhone 4S with some light scratches but in good working condition was recently estimated at $280. That's higher than Gazelle, but you'll have to spend the money at Apple. The company also accepts broken phones for recycling but you won't get any money for them.