AT&T wants the “iPain” to end.
CEO Randall Stephenson said yesterday the telecom giant is looking at ways to cut down on the hefty subsidies it pays Apple for every iPhone it sells to a customer.
Stephenson suggested he was waiting to see how T-Mobile’s strategy plays out. The smaller rival is allowing customers to pay off their iPhones over the length of their contracts.
“That’s something we’ve looked at on several occasions. I kind of like that idea,” Stephenson told analysts during the firm’s earnings call.
“It’s something we’re going to be watching.”
While AT&T reported a record 8.6 million iPhone activations in the fourth quarter, those phones cost it $450 a pop to lock customers into two-year contracts, or $3.7 billion in subsidies.
AT&T, Verizon and Sprint are all seeing their profit margins squeezed by the dough they pay in order to offer the iPhone at a lower price to new subscribers.
Sprint had to pony up billions to guarantee sales to Apple before it was allowed to start selling the smartphone last year.
Verizon this week also chafed at its $2.8 billion Apple bill when it released earning results, along with its record 6.2 million iPhone sales.
Verizon executives said they were also looking at ways to minimize the subsidy effect, but indicated the competition among smartphone platforms would bring down prices.
T-Mobile, the fourth-largest wireless provider, does not have the same cash power as its bigger rivals.
It held off on carrying the iPhone — the must-have option for carriers with demanding customers — until it came up with a plan for eliminating subsidies.
T-Mobile said it will start selling iPhones in the next few months by applying the financing method. While customers don’t save money on the phone up front, T-Mobile hopes they will be swayed by lower-cost monthly plans that can save them money over the long haul.
Average bills at AT&T and Verizon are rising after the companies switched to billing that charges for data usage, not calls and texts.
The data-sucking iPhones encourage users to spring for more. For example, AT&T’s wireless data revenue was up 15 percent, to $6.8 billion, from the year-earlier period.
AT&T’s $32.6 billion in revenue was level, however.