Verizon customers can upgrade once 50% of device is paid for
Verizon Wireless added Samsung’s latest Galaxy S7 smartphones to its Annual Upgrade Program, which allows customers to trade in their phone for a new model after 50% of the device is paid for through its monthly payment plan. The move fits in with the annual roll out of new device iterations of phone makers.
Verizon Wireless noted its program, which is connected with its monthly device payment program launched in 2013, provides more flexibility to customers than device leasing plans offered by some operators in that customers can either trade in their device or continue making payments towards full ownership. T-Mobile US and Sprint both offer customers the option of making lower monthly payments on a device connected with a leasing option, which typically require customers to either turn in their device at the end of the lease or make a balloon payment to purchase the device outright.
The addition of the latest Samsung Galaxy S7 devices follows the initial inclusion last year of Apple’s iPhone 6s models to the Verizon Wireless program. Verizon Wireless said all customers that pre-purchased either the Galaxy S7 or Galaxy S7 Edge are automatically enrolled in the program.
All four nationwide operators rolled out some form of promotion tied to the launch of the latest Samsung devices, which were unveiled just ahead of the recent Mobile World Congress event. Those promotions included Sprint adding the device lineup to its yearly upgrade program.
The move towards device leasing and monthly payment plans recently drew a stinging rebuke from one financial analyst firm, which questioned the industry – and Sprint specifically – in how they account for such financial dealings. According to Craig Moffett of MoffettNathanson, Sprint sourced 71% of its earnings before interest, taxes and depreciation from “accounting distortions” during the fourth quarter of 2015. Moffett said the accounting distortions started when carriers moved to device financing instead of subsidized pricing, and Sprint’s financials became even further divorced from reality when the carrier started leasing devices.
“Things really went off the rails when Sprint started doing leasing and I wouldn’t be surprised to see others start doing leasing because of the distortion, or benefit, that Sprint has gotten,” said Moffett. “On an as-reported basis, Sprint looks like it’s growing [earnings before interest, taxes, depreciation and amortization] at just under 30% and it looks like it’s trading at 5.7-times EBITDA, not an unreasonable number. But if you adjust for all the accounting nonsense, Sprint is actually growing EBITDA at negative 30% and it’s actually trading at 12-times EBITDA.”
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