U.S. Wireless Carrier’s Aggressive Promotions for iPhone 12 explained
- The launch of the iPhone 12 has sparked a battle for U.S. carriers to entice devices upgrades.
- AT&T, T-Mobile, and Verizon’s aggressive promotional pricing reflects the higher perceived lifetime value of attracting and retaining 5G wireless consumers.
The U.S. wireless carriers are betting that steep iPhone 12 promotions will more than pay off over time. Here’s why:
- U.S. wireless carriers are turning to promotions now in hopes that they will be able to secure new or retain customers throughout the 5G era. The most common time for wireless carriers to lose or gain subscribers is when customers switch smartphones, per The Wall Street Journal.
- The unusually aggressive device promotions also likely reflect the higher lifetime value of 5G customers. By 2025, 5G subscribers are expected to generate 2.5x more revenue per connection for carriers than the average cellular connection, according to Juniper Research forecasts cited by Light Reading.
- Wireless carriers are also likely attempting to meet US customers halfway, since so many people are cutting back on spending amid the economic slowdown. In Q2 2020, the average sale price of smartphones in the US sank to $503, representing a 10% year-over-year decline, according to Canalys.
Analyst colleague Craig Moffett generated this iPhone 12 Q & A in a blog post for his clients:
1. Why was Verizon featured so prominently in Apple’s iPhone launch?
Answer: Their millimeter wave broadband, sparsely available though it may be, is the only credible showcase for what 5G can do.
2. Why do Apple’s new iPhone’s sold outside of the U.S. not support millimeter wave signals?
Answer: Millimeter wave drains battery life incredibly quickly, and generates unwanted heat in the handset.
3. Why do Apple’s new phones in the U.S. default to turning off the very feature that is supposedly the reason to buy them?
Answer: To reduce heat and extend battery life.
4. What are the use cases that make 5G worth having?
Answer: We don’t know yet.
5. Why did AT&T decide to offer such a rich promotion – a free iPhone with almost any trade-in – for their existing subscribers?
Answer: Again, we don’t know.
6. Will 5G produce a high ROI for wireless carriers?
Answer: Most expect that 5G will mean higher capital intensity (capex), and therefore lower ROI.
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