The smartphone industry is changing. More and more customers are switching to equipment installation plans, whereby the cost of the handset is disclosed at the start of the arrangement and is paid back over a period, typically two years. Customers also have an air time agreement signed at the same time, which is independent to the handset repayment plan. This is one way that customers can save money on their smartphone plans: the cheaper the handset, the less the regular monthly payment and this is something that has not always been consistent with the old fashioned plans. Carriers generally like equipment installation plans as they are able to charge full price for hardware rather than subsidize it, and by January 2016 all four of America’s national carriers had phased out the old, legacy style, subsidized service plan in favor of the new style equipment installation plan.
However, only a few weeks after stopping the traditional style two year service plan we have learned that Sprint has reintroduced them. America’s smallest national carrier explained that it was reintroducing the plans in order to provide customers with more choice. Sprint’s spokeswoman, Michelle Leff Mermelstein, told our source: “Sprint is the only carrier to offer the most choices to obtain a new device — lease, installment bill, two-year contract or pay full retail price.” Sprint’s website was updated this morning to include the new, old, way of buying a cell phone.
Sprint’s decision is interesting because it reverses the trend within the industry that T-Mobile US started in 2013. Industry experts believe that Sprint is reinstating the traditional contract because it offers something that the competition do not, even though one of the reasons for the change in the industry is because customers appear to prefer the equipment installation plans. Verizon Wireless reported that in the fourth quarter, two thirds of phone activations were on equipment installation plans compared with just one quarter for the end of 2014, although the company admitted that the take-up of installation plans was a little below their expectation of 70%. However, as at the end of 2015, over 40% of Verizon’s customers were on an unsubsidized device service plan. It will be interesting to see how many of Sprint’s customers adopt the traditional two year contract going forward, and if the trend of switching to service plans continues regardless of the reintroduced offer.