AT&T: Next approaching 50% of smartphone sales

AT&T has been aggressively promoting its Next program to smartphone buyers, and that effort appears to be paying off. This week the nation’s second largest carrier says that roughly half its smartphone sales are now part of its device financing program, with about 3.2 million handsets sold through the Next program during the second quarter.
The company also said yesterday that it expects about 800,000 postpaid subscriber net adds for Q2, and that about one half of its postpaid smartphone subscribers are now on its Mobile Share plans, and that it expects two thirds to be there by the end of the year. AT&T said that as customers move to Next and Mobile Share, equipment revenues are rising as service revenues and ARPU decline. AT&T expects service revenue to be flat for the second quarter.
Carriers usually have more control over service pricing than they do over device pricing, so AT&T and its competitors are all looking for ways to boost this service revenue. Options include proprietary offerings for customers and revenue share agreements with content providers.
The move from contracts and subsidized smartphones to device financing was started last year by T-Mobile US, and other carriers have followed suit. This week NPD Group said that almost one of every three smartphone buyers is now enrolling in an early upgrade program. Those results are based on a survey of 3,500 smartphone buyers.
The early upgrade model offers customers a lower upfront payment (sometimes no money down) followed by a monthly bill for service and for payments on the device. The customer needs to pay for a certain number of months (usually 12-18) before s/he is eligible to trade in the handset for a new model without incurring an additional cost. The model fits well with the new realities of the smartphone market, since new and improved handsets tend to become available every few months.
As part of its forecast for the second quarter, AT&T also provided an update on its Project Velocity IP. The carrier said that Project VIP is ahead of schedule, with AT&T’s 4G LTE network now covering nearly 290 million people. Roughly 400,000 enterprise customers are expected to have access to fiber connections through Project VIP by the end of the quarter.
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