By Sinead Carew
NEW YORK, July 18 Verizon Wireless will let
customers upgrade cellphones more frequently if they pay for
their devices in installments, but analysts expect few takers
unless the leading wireless provider lowers monthly service fees
Analysts said customers would effectively be paying for
their smartphone twice under Verizon's plan and a similar
offering announced by No. 2 U.S. mobile service provider AT&T
Inc on Tuesday.
"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
He said the new Verizon Edge offer, to be launched on August
25, 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 Edge as most customers would still prefer
to buy a new phone at a discount upfront and wait two years for
"You'd have to be out of your mind," to accept this new
offer, Moffett Research analyst Craig Moffett said.
More frequent upgrades should mean more sales for phone
makers including Apple Inc and Samsung Electronics Co
But "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,"
Under Verizon's new plan, customers would pay for new phones
over 24 months, but they can upgrade after 6 months as long as
50 percent of the device cost is paid up. Monthly service fees
Verizon Wireless, a venture of Verizon Communications and
Vodafone Group Plc, currently requires customers to
commit to contracts in exchange for a sharp discount on the
upfront price of their phone. Verizon pays an upfront subsidy to
phone makers and recoups the cost gradually through the monthly
service fees it charges customers.
Consumers who like to own the latest gadgets have been
frustrated with this approach because it makes them wait at
least 2 years for an upgrade. Carriers have recently been
allowing upgrades less frequently in order to save on the
subsidies, which tend to hurt their profit margins.
AT&T has also said that it would not change the service
pricing under its new upgrade plan called AT&T Next.
However, T-Mobile US, the No. 4 U.S. wireless
provider, cut service fees when it started offering phones
without subsidies. Earlier this year it completely eliminated
Shares of Verizon, which reported quarterly results on
Thursday, fell 1.8 percent to $49.84 on the New York Stock