No money down! Low monthly payments! Is this a Chevy or an iPhone we’re talking about?
Apple rolled out a new plan that allows users to get a new iPhone every year for as little as $32 a month — a sharp reversal from its long-held insistence on charging Cadillac prices north of $650 for its latest smartphones — and then leaving it to wireless carriers to finance a customer’s purchase.
The announcement came as Apple Chief Executive Tim Cook on Wednesday rolled out the latest crop of iPhones, which sport better cameras, faster chips and more responsive touch screens.
The iPhone’s new upgrade plan — which Apple exec Phil Schiller said “makes any iPhone you want … pretty affordable” — may turn out to be the most popular feature for Apple investors, industry watchers said.
In addition to jump-starting more frequent sales of iPhones — transactions that had been curbed by two-year contracts — the plan gives Apple added control over the resale market, long a lucrative niche for sites like eBay.
Apple’s leasing plan marks the first time the Cupertino, Calif., company will directly finance consumer purchases of its iPhone.
Customers can change carriers every year upon upgrading. While the program is meant to encourage upgrades, renters can opt not to trade in their phone in 12 months for a newer model.
“Because the iPhone upgrade program isn’t tied to a single carrier, you don’t need a multiyear service contract,” Apple’s Web site blared after its splashy unveiling in San Francisco on Wednesday.
While the move to lease phones direct to its customer pits Apple against the carriers which helped make Apple the success it is, some carriers, like Sprint and T-Mobile, Nos. 3 and 4 behind Verizon and AT&T, could benefit, analysts said.
“[T]his is awesome and will benefit smaller carriers and enhance ability to switch from @ATT and @verizon to @TMobile !!!” T-Mobile CEO John Legere gushed on Twitter after the announcement.
Indeed, competition among carriers could heat up to a point,that it could force them to renew offers to subsidize the iPhone’s cost as they scramble for market share, industry watchers said.
Subsidized phones were once the industry norm but have recently been phased out.
Carriers now offer 24-month payment plans on full-priced iPhones as low as $27.
The business of subsidizing, financing and servicing iPhones has been a costly headache for carriers that Apple is better equipped to handle, said Jonathan Chaplin, an analyst at New Street Research.
But the carriers could also be losing something in the face of Apple’s new service.
Apple’s new monthly offer includes the benefit of its Apple Care service plan — a hugely profitable cash cow for Apple — while handling the entire transaction and hookup with wireless providers at its own stores and Web site.
“It ties consumers to the Apple stores more closely and to Apple as opposed to a carrier,” Chaplin said. “Apple is in the business of providing great service, and they think they can do this in a better way than the carriers can.
