(Bloomberg) -- AT&T Inc. is embarking on a second year of mobile-phone giveaways, saying it will offer the new iPhone 13 free to new and existing customers who have qualifying trade-ins and unlimited data plans.
Subscribers who sign on for the promotion will see a monthly charge for the phone and an offsetting credit, making the device free, AT&T said Tuesday in a statement.
Apple Inc.’s iPhone Pro has a retail price of as much as $999, a cost that Dallas-based AT&T is more than willing to absorb to fuel subscriber growth. That’s become the carrier’s top priority since it decided to ditch its WarnerMedia entertainment operations and return to its roots as a phone company focused on wireless and broadband service.
Data-plan price wars used to be the main front in wireless competition. But they have faded into history, replaced by phone discounts and giveaways. AT&T has been the most aggressive, with a standing offer to give free or deeply discounted phones to all of its customers on unlimited plans.
T-Mobile US Inc. has followed along at times in a fight to keep market share, while Verizon Communications Inc. has sparingly used free phones and steep discounts through limited-time offers. Both carriers are expected to announce their new promotions on Tuesday as well.
The giveaways have had a direct impact on subscriber growth. Last quarter, AT&T was the top gainer in mobile phone subscribers, adding 789,000 customers in the second quarter, exceeding the 627,000 gained by perennial growth leader T-Mobile. Verizon, the No. 1 U.S. wireless carrier, had the smallest gains.
Growth isn’t cheap. The costs of giving away phones is spread out, usually over the 24-month period. But it cuts into the average revenue from per user, or ARPU, a key measure of financial performance for wireless companies.
“Is this going to result in a little bit lower ARPU? Maybe. Yeah, but with that said, over time our ARPU is still very attractive relative to others in the industry,” AT&T Chief Financial Officer Pascal Desroches said in a presentation to Bank of America Corp. investors Tuesday.
Handset sales have been on an upswing for the past year, fueled by attractive prices, the arrival of a new generation of 5G phones and consumer reengagment after more than a year and a half of the pandemic, Verizon consumer chief Ronan Dunne said at a presentation for the same bank on Monday.
Store and online sales are up “very significantly,” because people have money in the bank, Dunne said. “Probably 70% of households in the U.S. probably have higher savings today than they did 12 months ago,” he said.
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