NEW YORK, July 18 Verizon Wireless will allow customers who want frequent upgrades of their cellphones to pay for their mobile devices in installments, but the popularity of the new offering may be limited because the company has ruled out any change in service fees.
Analysts said that Verizon's plan, and a similar offering announced this week by No. 2 U.S. mobile service provider AT&T Inc, would have limited success because customers would effectively be paying for their smartphone twice.
"We will not touch our service pricing," Verizon Communications Chief Financial Officer Fran Shammo said in an interview after the company's earnings conference call on Thursday.
He also said that the change would not have an impact on Verizon's financial results. Shammo said he does not expect a large percentage of Verizon customers to opt for the new plan, whose details will be announced in the next two days.
Shammo said that Verizon Wireless will follow in the footsteps of AT&T and T-Mobile US with an option for more frequent phone upgrades.
Verizon currently requires customers to commit to contracts in exchange for offering a sharp discount on the upfront price of their phone. Under the current model Verizon pays an upfront subsidy to phone makers and recoups the cost gradually through the monthly service fees it charges its customers.
Some consumers, who like to own the latest gadgets, have been frustrated with this approach because it limits them to phone upgrades only once every two years.
But the requirement to pay in installments on top of the same service fee they are used to paying will be unlikely to lead many consumers to choose the new option, analysts said.
"You'd have to be out of your mind," to accept this offer, Moffett Research analyst Craig Moffett said.
"The plans Verizon and AT&T are talking about where they're cutting subsidies upfront without lowering the service price are unlikely to have any impact in the market whatsoever," he said.
In comparison, T-Mobile, the No. 4 U.S. wireless provider, cut service fees when it started offering phones without subsidies.
Verizon Wireless is a venture of Verizon Communications and Vodafone Group Plc.