AT&T CEO Says Big Subsidies for Smartphones is Coming to an End

AT&T CEO Randall Stephenson says that big subsidies for smartphones is coming to an end as wireless carriers can no longer afford to fund a constant upgrade cycle, reports CNET.

Speaking at an investor conference in New York City on Tuesday, AT&T CEO Randall Stephenson said that with smartphone penetration at over 75 percent and soon reaching 90 percent, wireless operators need to work harder to get customers to use more of the network rather than simply getting on the network.

"When you're growing the business initially, you have to do aggressive device subsidies to get people on the network," he said. "But as you approach 90 percent penetration, you move into maintenance mode. That means more device upgrades. And the model has to change. You can't afford to subsidize devices like that."


AT&T is trying to break the constant upgrade cycle by offering incentives to customers who keep older phones, saving up to $15 a month on their bill. For those, who want to change devices frequently, the company has introduced AT&T Next which lets customers receive a new device for $0 down then pay monthly installments until their next upgrade in 12 or 18 months.

"If you are a customer and you don't need to upgrade your device, you can get unlimited talk and text and access to the data network for $45 all-in," he said. "You can use your own device or finance it. I think this will be very powerful. It's where we see the market going."

T-Mobile is the first carrier to do away with subsidized devices entirely and offer a device financing plan instead. It appears that AT&T may be planning to do the same eventually.

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