(Bloomberg) — Let the iPhone 13 price wars begin.
With the debut of Apple Inc.’s newest phones, AT&T Inc. on Tuesday embarked on a second year of giveaways, offering the new iPhone 13 Pro free to new and existing customers who have qualifying trade-ins and unlimited data plans, a deal worth as much as $1,000. T-Mobile US Inc. is matching the iPhone 13 Pro credit, while Verizon Communications Inc. is offering up to $800.
Data-plan price wars used to be the main front in wireless competition. But they have faded into history, replaced by phone discounts and giveaways. AT&T has been the most aggressive, with a standing offer to give free or deeply discounted phones to all of its customers on unlimited plans.
With all three carriers, subscribers who sign on for the deals will see a monthly charge for the phones and an offsetting credit. Additional storage capacity will cost extra, according to an Apple price page that lists all three carriers’ promotions.
The iPhone 13 Pro has a retail price starting at $999, a cost that Dallas-based AT&T is more than willing to absorb to fuel subscriber growth. That’s become the carrier’s top priority since it decided to ditch its WarnerMedia entertainment operations and return to its roots as a phone company focused on wireless and broadband service.
T-Mobile, based in Bellevue, Washington, has followed along at times in a fight to keep market share, while New York-based Verizon has sparingly used free phones and steep discounts through limited-time offers.
The giveaways have had a direct impact on subscriber growth. Last quarter, AT&T was the top gainer in mobile phone subscribers, adding 789,000 customers in the second quarter, exceeding the 627,000 gained by perennial growth leader T-Mobile. Verizon, the No. 1 U.S. wireless carrier, had the smallest gains.
“The industry has always been competitive,” T-Mobile Chief Financial Officer Peter Osvaldik said Tuesday at a Bank of America Corp. investor conference. “We’ve proven we can compete and grow profitably.”
Growth isn’t cheap. The cost of giving away phones is spread out, usually over many month period. But it cuts into the average revenue per user, or ARPU, a key measure of financial performance for wireless companies.
Cost to Carriers
“Is this going to result in a little bit lower ARPU? Maybe. Yeah, but with that said, over time our ARPU is still very attractive relative to others in the industry,” AT&T Chief Financial Officer Pascal Desroches said earlier at the same conference.
Handset sales have been on an upswing for the past year, fueled by attractive prices, the arrival of a new generation of 5G phones and consumer reengagement after more than a year and a half of the pandemic, Verizon consumer chief Ronan Dunne said at a presentation for the same bank on Monday.
Store and online sales are up “very significantly,” because people have money in the bank, Dunne said. “Probably 70% of households in the U.S. probably have higher savings today than they did 12 months ago,” he said.
(Updates with T-Mobile CFO’s comments in eighth paragraph. Details of the Verizon and T-Mobile promotions were corrected in an earlier version of this story.)
More stories like this are available on bloomberg.com
©2021 Bloomberg L.P.
