Home » Geopolitics » The extraordinary attempt by Nokia/Microsoft to crack the U.S. market in terms of volumes with Nokia Lumia 521 (with 4G/LTE) and Nokia Lumia 520

The extraordinary attempt by Nokia/Microsoft to crack the U.S. market in terms of volumes with Nokia Lumia 521 (with 4G/LTE) and Nokia Lumia 520

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Update: there was no effective result of the price elasticity trial on the U.S. market as per the below chart composed by myself from news releases from Kantar Worldpanel Comtech over the period in question:

(Credit: Kantar Worldpanel ComTech)

While we have Lumia 520 for Rs. 8850, i.e.US$ 144 in India, and US$121.5 in China as the minimum price, current prices in U.S. are much below of that (although in China there is also the improved and upgraded to 1GB RAM version, Lumia 525 is available from $103 up since December, but in all of the other places the price is up from $115, like here):

* Meanwhile the Nokia/Microsoft effort was instrumental for a new trend of ending smartphone subsidies on the U.S. market (see towards the end of the post related to T-Mobile’s so called Un-carrier strategy)
Nokia Lumia 521
[May 22, 2013 – T-Mobile U.S. $149]
July 25 –
$99 MetroPCS
Nokia Lumia 521 [T-Mobile, excerpted on Jan 18, 2014]
$126 $102 full retail price
$0 up front + $425 x 24/mo.
Nokia Lumia 521 No Contract for T-Mobile [Microsoft Store, excerpted on Jan 18, 2014]
Now $69.00
– was $99.00
– Free shipping. Free returns.
Nokia Lumia 521 (T-Mobile) by Nokia [Amazon, excerpted on Jan 18, 2014]
– List Price: $149.99
– Price: $89.95 & FREE Shipping. Details
– You Save: $60.04 (40%)
– In Stock. Sold by Cellular Specialty and Fulfilled by Amazon. Gift-wrap available.
Nokia Lumia 521 (Metro PCS) by Nokia [Amazon, excerpted on Jan 18, 2014]
– List Price: $99.00
– Price: $89.94 & FREE Shipping. Details
– You Save: $9.06 (9%)
– In Stock. Ships from and sold by Amazon.com. Gift-wrap available.
Nokia Lumia 520 
March’13 EUR 139 [US$180]
July 27 –
$99.99 as prepaid AT&T GoPhone
Nokia Lumia 520- GoPhone® [prepaid] [AT&T, excerpted on Jan 18, 2014]
– Due Today $99.99
Requires new activation and qualifying monthly voice plan.
Nokia Lumia 520 No Contract for AT&T [Microsoft Store, excerpted on Jan 18, 2014]
Now $59.00
was $99.00
– Free shipping. Free returns.
Nokia Lumia 520 GoPhone (AT&T) by Nokia [Amazon, excerpted on Jan 18, 2014]
– List Price: $99.99
– Price: $59.99 & FREE Shipping. Details
– You Save: $40.00 (40%)
– In Stock. Ships from and sold by Amazon.com. Gift-wrap available.
Nokia Lumia 520 8GB Black – International Version, Factory Unlocked WP8 by Nokia [Amazon, excerpted on Jan 18, 2014]
– Price: $136.08
– In Stock. Ships from and sold by HassleFreeCell.

Everything started to work that way in Q3 2013:


Note that:image(Credit: Kantar Worldpanel ComTech)

Android leads OS U.S. sales, as LG and Nokia see resurgence [Kantar Worldpanel press release, Jan 7, 2014]

In the 3 months ending November 2013, Android maintained its lead of smartphone sales on the U.S., capturing 50.3% of the smartphone market. iOS follows with 43.1% of smartphone sales, an increase month on month, however, down 9.9% versus the same period a year ago, according to data on the U.S. market released today by Kantar Worldpanel ComTech.

Windows Phone, the third largest OS in the U.S, sold nearly 5% of smartphones in the 3 months ending November 2013, up 2.1% points from the previous year.

As with the previous period, Verizon maintained its lead as the top smartphone carrier, with just under a third of sales (31.7%). AT&T, in second, had 28.3% of smartphone sales in the 3 months ending November 2013. T-Mobile, overtaking Sprint as the third largest carrier had 13.3% of sales, and was the only major carrier to see growth year on year (up 6.3%).

The data is derived from Kantar Worldpanel ComTech USA’s consumer panel, which is the largest continuous consumer research mobile phone panel of its kind in the world, conducting more than 240,000 interviews per year in the U.S. alone. ComTech tracks mobile phone behavior and the customer journey, including purchasing of phones, mobile phone bills/airtime, and source of purchase and phone usage. This data is exclusively focused on the sales within this 3 month period rather than market share figures. Sales shares exemplify more forward focused trends and should represent the market share for these brands in future.

Kantar Worldpanel ComTech Global Strategic Insight Director, Dominic Sunnebo states, “The iPhone 5S and 5C were the two bestselling smartphones in the U.S for the 3 months ending November 2013. However, increased rivalry from Android brands and a resurgence of LG and Nokia, has made year-on-year share gains for Apple difficult. This is especially true on T-Mobile.”

On T-Mobile, the ‘UNcarrier’ strategy, launched earlier in 2013, has been successful because it has attracted first-time smartphone buyers, looking to upgrade to their first smartphone. Among T-Mobile smartphone buyers in November 2013, 55% of those that purchased an LG and Nokia smartphone were first-time smartphone buyers, compared to just 39% of Apple customers.

Sunnebo continues, “First-time smartphone buyers remain a key demographic for carriers and brand alike. The lower end iPhone 5C represents an opportunity for Apple to attract these customers. Thus far the majority of 5C customers have come from other smartphone platforms, though if historical trends hold, the lower end model (historically the older iPhone model following the release of a new iPhone), should be able to attract this demographic with its lower price and comparable specs.”

image(data from Kantar Worldpanel ComTech, chart compiled by theguardian.com)

Regarding the US installed base see also Apple and Samsung Grow to Represent 68 Percent of Smartphones Owned in the US, According to The NPD Group [press release, Jan 16, 2014]

From Nokia Lumia 521 Price Deal: Lumia 521 Windows Phone 8 Smartphone Price Cut by MetroPCS to $29 [Video] [Tech: Latinos Post, Jan 15, 2014]

The price of the Nokia Lumia 521 received a significant reduction but only for MetroPCS customers.

The Lumia 521 Windows Phone 8 smartphone received a $29 price tag, although tax was not included.

The original price for the Lumia 521 was $99, but MetroPCS issued a couple discounts including a rebate offer for the $29 cost to come into fruition. To be precise, MetroPCS added an “Instant Discount” worth $50 followed by a $20 mail-in rebate.

The Lumia 521, also available with T-Mobile, can be purchased at full price $102. A $0 up-front offer is also available with T-Mobile as long as the consumer pays $4.25 for the next 204 months.

Meanwhile, the online Microsoft Store has the Lumia 521 for $69, which is a discount from the original $99 price tag. The online Microsoft Store is offering free shipping and returns.

Amazon.com also has the Lumia 521 in stock. For $79.99, the Lumia 521 can be purchased following a 47 percent discount from its original $149.99 price tag.

From Nokia Lumia 520 vs. Nokia Lumia 521 Specs: Price Cuts for Windows Phone 8 Smartphones on Online Microsoft Store End Jan. 12 [Video] [Tech: Latinos Post, Jan 9, 2014]

The Nokia Lumia 520 and Lumia 521 have received price discounts but the opportunity to purchase either Windows Phone 8 smartphones is about to end this weekend.

The Lumia 520 is available with no contract courtesy of mobile carrier AT&T for $99. The online Microsoft Store, however, is offering the Lumia 520 for $40 less than AT&T. Until Jan. 12, potential customers can purchase the Lumia 520 for $59 from the online Microsoft Store, which includes free shipping and free returns.

The Lumia 521 is also on sale on the online Microsoft Store. The Lumia 521 also had an original price tag of $99 but can be bought for $69. The online Microsoft Store will also ship the Lumia 521 for free.

From AdDuplex Windows Phone Statistics Report for December 2013 [AdDuplex blog, Dec 30, 2013]

… The raw data analyzed was collected over the day of December 27th, 2013 (UTC time) unless otherwise stated. …

United States


We have a new number 2 in the US and that’s the global leaderLumia 520. Therefore, the share of Lumia 52x devices in US is now pretty much aligned with global situation. It’s notable that L520 has jumped 3 places in just one month and that is, most likely, the result of the aggressive pricing we’ve seen recently.


Another notable fact about US is that T-Mobile is the new number 2 Windows Phone 8 operator in the country with 23.3% of the market. We will see if Verizon is able to come back next month when, hopefully, their new Windows Phone flagship is out. But, if history is any indication, it is the low end that drives the market share. So it is more likely that we won’t see any major changes in the lineup next month.

Note that according to MetroPCS Aggressively Expands, Adding 15 New Markets; Triples Reach to 45 Markets across the United States just Six Months after T-Mobile-MetroPCS Combination [press release Nov 5, 2013]

About MetroPCS
MetroPCS provides the freedom and convenience of unlimited, no-annual-contract wireless services on an advanced nationwide 4G LTE network for a flat rate. With MetroPCS, customers get great value and a wide variety of device choices from leading brands. A flagship brand operated by T-Mobile US, Inc. (NYSE: “TMUS”), MetroPCS products and services are available online and across the United States through a network of company-owned stores, authorized dealer locations, and leading national retailers.

In addition to that MetroPCS Broadens 4G Smartphone Lineup with Addition of New Nokia, LG Phones and Access to Nationwide 4G Network [press release July 25, 2013]

Nokia Lumia 521 is MetroPCS’ First Windows Phone 8 Smartphone; LG Optimus F3™ Adds LTE to Popular Optimus Line

In conjunction with the expansion of its MetroPCS brand into 15 new markets, T-Mobile US, Inc. (NYSE: TMUS) is tomorrow introducing two new smartphones to the brand’s 4G portfolio: the LG Optimus F3™ and the Nokia Lumia 521. These devices can be paired with MetroPCS’ affordable 4G service plans, featuring unlimited data, talk and text – taxes and regulatory fees included – starting at just ‘$40, period’ and all on a nationwide 4G network.

The Nokia Lumia 521 and LG Optimus F3 join MetroPCS’ lineup of recently launched HSPA+ and LTE smartphones — delivering all the speed wireless consumers need for a great mobile experience.

As the first Windows Phone 8 product in the MetroPCS lineup, the Lumia 521 is another way the company is delivering what consumers demand – more choice – and at a great price for just $99 (plus taxes and fees).

From Nokia Lumia 521 Specs, Price Deal Offer: Microsoft Store Cuts Lumia 521 Windows Phone 8 Smartphone Cost to $69 [Video] [Tech: Latinos Post, Dec 26, 2013]

The online Microsoft Store has reduced the price of the Nokia Lumia 521 Windows Phone 8 smartphone just as the holiday shopping season ends.

Previously priced at $99, the Lumia 521 can be purchased on the online Microsoft Store for $69. Back on Dec. 1, the online Microsoft Store had priced the Lumia 521 at $79.

The online Microsoft Store will also ship the Lumia 521 for free.

On Amazon, as of Christmas Eve, the Lumia 521 could be purchased for $97.93, which is a savings of $52.06 or 35 percent from the original price. The Lumia 521 was previously listed at $149.99 for its original price.

From Nokia Lumia 521 Specs and Price in USA: Amazon, T-Mobile New Price Offers for Lumia 521 Windows Phone 8 Smartphone [Video] [Tech: Latinos Post, Dec 7, 2013]

As Latinos Post reported on Dec. 4, Amazon had priced the Lumia 521 Windows Phone 8 smartphone for T-Mobile at $135.99. The price change comes two days after it was priced at $79.95 instead, which was a 47 percent discount from the original listed price of $149.99.

As of Dec. 7, the Lumia 521’s price changed and slightly better than the previous $135.99 cost. The Lumia 521’s new price tag is $94.97, which is a savings of $55.02 from the original $149.99 list price.

From Nokia Lumia 521 Specs and Price in USA: Amazon, T-Mobile New Price Offers for Lumia 521 Windows Phone 8 Smartphone [Video] [Tech: Latinos Post, Dec 7, 2013]

The Lumia 521 can also be purchased from the official T-Mobile website with $0 up front. On T-Mobile’s website, the full retail price of the Lumia 521 is $102, which is down from $126 previously listed. With the $0 up front offer, the T-Mobile customer will have to pay $4.25 for the next 24 months. If the consumer cancels the wireless service, the remaining balance on the Windows Phone 8 device will be due. With the purchase of the Lumia 521 from T-Mobile’s official website, the consumer will receive a $20 app credit.

From Nokia Lumia 520 Specs and Price in Amazon at $30 Off From Original $99.99 Price Tag for AT&T GoPhone Prepaid Plan [Video] [Tech: Latinos Post, Nov 26, 2013]

As seen on Amazon, the Lumia 520 Windows Phone 8 was originally offered for $99.99 as part of AT&T’s GoPhone prepaid plans. Amazon, however, reduced the price by $30, or the equivalent of 30 percent.

The new price for the Lumia 520 is $69.99 and with free shipping due to the item costing more than $35.

According to Amazon, the Lumia 520 is ranked as No. 35 in the Cell Phones and Accessories Best Sellers Rank. The Windows Phone 8 device is No. 2 among the No-Contract Cell Phones rank.

Meanwhile, AT&T’s official website is offering the Lumia 520 at the original cost with the GoPhone plan. AT&T has the Lumia 520 for $99.99, but the item comes with free shipping.

From AdDuplex Windows Phone Statistics Report for October 2013 [AdDuplex blog, Oct 14, 2013]

… The raw data analyzed was collected over the day of October 11th, 2013 (UTC time) unless otherwise stated. …

United States


US now has a new leader and if you combine it with its 520 sibling you can see that almost quarter of the Windows Phones in US is now represented by the lower end 52x line. There’s also a new leading operator for Windows Phone 8.


AT&T has reclaimed the crown from Verizon, and MetroPCS and T-Mobile continue to steal the market share from the 2 leaders.


Windows Phone 8 is now on almost 83% of devices in the US, so if you are targeting US market, I guess, you can start developing for WP8-only.



I don’t think we’ve covered Canada ever before, so it’s time to fix that. Lumia 520 and 920 almost share the top spot and it’s pretty clear that the smaller sibling will claim the crown next month. What is interesting to see is that Samsung ATIV S is at number 3 with a solid 14%. Not a picture we are used to seeing.

T-Mobile US Inc TMUS, Q3 2013 Earnings Call Transcript [Morningstar, Nov 5, 2013]

Our Un-carrier strategy continues to separate us from the competition, so let me give you a quick refresher of what we’ve done at a torrid pace so far this year. Un-carrier 1.0, Simple Choice, announced in March, got rid of the annual service contracts and introduced a radically simplified consumer rate plan. Un-carrier 2.0, JUMP!, launched in July, gave consumers the freedom to affordably upgrade their device when they want, not when they are told.

We already have more than 2.2 million net enrollments. It’s really working. Simple Choice for family launched at the same time as JUMP! Less families get rid of annual service contracts and offers affordable service plan with no credit check.

Simple Choice for business launched in August extended the benefits that consumers had been enjoying, no annual service contracts and simple rate plan. Businesses of all size can decouple services from the cost of devices to get rid of unpredictability.

Un-carrier 3.0 Simple Choice Global launched in October made the world our customer’s network as we now offer unlimited data in texting worldwide at no extra charge in over 100 countries.

Most recently, Un-carrier 3.0 part 2 where we unleashed tablets without up to 200 megabytes of three 4G LTE data every month. We think it’s insane that most tablet owners don’t even signup for mobile Internet data services, because they are worried about high fees and overages.

Smartphone sales showed continued growth coming in at 5.6 million devices or 88% of total phone units. This is a great trend that will continue as we now have all the leading devices in our lineup.

So, the strategy is managing to peel people away from AT&T, Sprint, Verizon, and the other carriers and you’ve seen churns start to elevate at some of the other carriers as the Un-carrier strategy at T-Mobile has taken hold.

In Bonn, we talked about the Un-carrier pain point strategy and how it would be successful, and we pointed out that the most vulnerable was AT&T, but not that we would solely take share from AT&T. But any customer that was feeling these pain points and that’s really been the process, but in the beginning obviously a lot of the ease of switching technology-wise were AT&T customers. We’re actually in a new phase now where there has been a lot of discussion recently in the industry about potential network speeds in 2015 or trials of speed in 25% of five Metro markets. What Neville and his team have announced now, are smoking fast industry-leading speeds everywhere now. That clearly along with our full device portfolio and our Un-carrier strategy does make us a threat across the entire market. So we will continue to attack the same foes. …

… We’re taking share from the low end and the high end. At the high end, it’s particularly AT&T and Sprint, and at the low end from a variety of prepaid players. I think we’ve described before that the Un-carrier strategy is about establishing a really effective midmarket space that’s in no trade-offs positioning. Meaning, traditionally people have had to down at the low end trade off what’s great about wireless to get great value or at the high ends go after one of the top two or three networks, but suffer restrictions and lack of value and lack of transparency and pricing, et cetera. What we do, as John just said, is provide a no-apologies, fantastic, market-leading network position booked back by the Un-carrier value proposition that’s simple and transparent, fair and flexible. So it’s a midmarket position, and therefore it’s taking share from above and from below, but more from above. So more of the share coming from AT&T and Sprint so far.

T-Mobile drops upfront price of Nokia Lumia 925 and 521 to zero [Neowin, July 26, 2013]

T-Mobile just started selling the Nokia 925 in the US less than 10 days ago for $49.99 upfront, but starting tomorrow that new Windows Phone 8 device, and indeed nearly all of the smartphones that T-Mobile sells, will have the low, low upfront price of zero.

T-Mobile Promotes Unprecedented Deal This Summer – Zero Dollars Down for All Devices [press release, July 26, 2013]

T-Mobile Promotes Unprecedented Deal This Summer – Zero Dollars Down for All Devices

America’s Un-carrier offers the ultimate promotion with the lowest upfront price on devices

BELLEVUE, Wash. – July 26, 2013 In time for back-to-school, T-Mobile US, Inc. (NYSE: TMUS) will drive an unparalleled promotion this summer, dropping the upfront price on its entire lineup of devices in stores nationwide to zero dollars down. With this promotion, new and existing well-qualified consumers and small business customers will get affordable and hassle-free access to the latest 4G LTE smartphones, tablets, mobile hotspots and feature phones at the upfront price of $0 down with monthly device payments[1].
This limited-time promotion is available starting tomorrow, July 27, 2013. In addition to the promotion, customers also can take advantage of T-Mobile’s groundbreaking upgrade program, JUMP!(TM), which enables them to sign up to upgrade their phones when they want, up to twice a year as soon as six months from enrollment.
The number of reasons not to switch to T-Mobile this summer is ZERO,” said John Legere, president and chief executive officer, T-Mobile US. “This is a fantastic offer and we’re making it easier than ever for customers to get the latest amazing devices. Adding Zero Down in addition to JUMP!, and Simple Choice with no contract is all about making wireless work for consumers and shaking up this industry.”
The hottest devices of the summer at the lowest upfront cost combined with T-Mobile’s Simple Choice Plan, unlimited data on a nationwide 4G network and no annual service contracts gives customers an opportunity that’s tough to beat. The promotion will be available nationwide at participating T-Mobile retail stores, via customer care, and online athttp://www.T-Mobile.com. A selection of the devices included in the promotion is as follows:
Down Payment
Monthly Payments
24 equal monthly payments for 0% APR on approved credit1
Samsung Galaxy S® 4
Samsung Galaxy Note® II
Samsung Galaxy S® III
Xperia® Z from Sony
iPhone 5[2]
Nokia Lumia 925
Nokia Lumia 521
BlackBerry® Q10
HTC One®
Samsung Galaxy Tab(TM) 2 10.1
JUMP!, only from T-Mobile, offers customers the freedom to upgrade to a new device more frequently and affordably, and it includes handset protection that helps to protect against malfunction, damage, loss or theft – all for just $10 per month, per phone (plus taxes and fees). Customers can upgrade to a new phone, financed through T-Mobile’s Equipment Installment Program (EIP), twice every 12 months after they’ve been in the JUMP! program for six months.[3] Simply trade in an eligible T-Mobile phone in good working condition at a participating store location. Any remaining EIP payments will be eliminated, and current customers can purchase new phones for the same upfront pricing as new customers, with device financing3 and a no-annual-service contract Simple Choice Plan.
Simple Choice Plan
T-Mobile’s Simple Choice and Simple Choice for Business Plan start with a base rate of $50 per month for unlimited talk, text and Web with 500MB of high-speed data. Customers can get 2.5GB of high-speed data for $10 more per month per line or unlimited data for an additional $20 per month per line. Customers can add a second phone line for $30 per month, and each additional line is just $10 per month. There are no caps and no overages on T-Mobile’s network, and no restrictive annual service contracts.
When small business customers activate a new line or renew an existing line of service with a Simple Choice for Business plan (min. 500 MB data required), they can access T-Mobile’s Business Extras bundle for added value. Business Extras customers with capable devices may opt into a free year of 24/7 remote IT support from a well-recognized, third-party service provider and a year of T-Mobile North American Flat-rate Data feature, allowing free monthly access to up to 150MB of overage-free, high-speed data across North America, including Canada and Mexico on our partner networks.[4] Other benefits include two free paper-to-mobile form conversions, waived activation fees, Business Care support, Wi-Fi Calling on enabled devices, and free Smartphone Mobile Hotspot on select rate plans.
T-Mobile’s 4G LTE Network
T-Mobile’s 4G LTE network now reaches more than 157 million people across the United States and is live in 116 metropolitan areas. T-Mobile remains on target to deliver nationwide 4G LTE coverage by the end of the year, reaching 200 million people in more than 200 metropolitan areas. In addition, T-Mobile’s 4G HSPA+ service is available to 228 million people nationwide. By combining 4G HSPA+ and LTE network technologies, T-Mobile can provide customers with a strong, seamless nationwide 4G network experience[5].
About T-Mobile US, Inc.:
As America’s Un-carrier, T-Mobile US, Inc. (NYSE: “TMUS”) is redefining the way consumers and businesses buy wireless services through leading product and service innovation. The company’s advanced nationwide 4G and 4G LTE network delivers outstanding wireless experiences for customers who are unwilling to compromise on quality and value. Based in Bellevue, Wash., T-Mobile US operates its flagship brands, T-Mobile and MetroPCS. It currently serves approximately 43 million wireless subscribers and provides products and services through 70,000 points of distribution. For more information, please visit http://www.t-mobile.com.

Statement: Nokia Lumia 521 [T-Mobile, May 22, 2013]

Beginning May 22, the Nokia Lumia 521 – an exclusive to T-Mobile – will be available online at www.T-Mobile.com, at T-Mobile retail stores, select dealers and national retailers for $29.99 down with 24 equal monthly payments1 of $5 0% APR O.A.C. for well-qualified customers with the new Simple Choice Plan

Powered by Windows Phone 8, the Lumia 521, which will run on T-Mobile’s fast nationwide 4G network, is a perfect, everyday smartphone that will embody a range of high-end features at an affordable price.  The smartphone features a super sensitive 4″ touch screen, HD Voice, 5MP camera with auto focus and 720p HD video recording.  It will also include exclusive Nokia applications such as Nokia Music, Cinemagraph, Creative Studio, Panorama, Smart Shoot and HERE Drive, Maps and Transit. 

Lumia 521 smartphones sold through T-Mobile will also feature Wi-Fi Calling.  Customers who have already purchased or ordered a Lumia 521 through HSN, Microsoft Retail Stores or Walmart will receive an over-the-air maintenance release beginning May 20, which will enable the Wi-Fi Calling feature.

The Nokia Lumia 521 will go on sale at Microsoft Retail Stores for $149 and at Walmart for $129.88 on May 11, as previously announced.  For more information on T-Mobile’s Nokia Lumia 521, please visit the media kit.

1 If you cancel wireless service, remaining balance on phone becomes due.

T-Mobile’s Growth Is Bad News for Apple [The Motley Fool, Jan 8, 2014]

No wonder rival AT&T (NYSE: T ) has gotten so aggressive — T-Mobile‘s (NYSE: TMUS ) “un-carrier” initiatives have proven to be wildly successful. According to new data from Kantar Worldpanel, T-Mobile almost doubled its share of U.S. smartphone sales in the third quarter of 2013, while market-leaders AT&T and Verizon lost ground.

T-Mobile’s growth flies in the face of industry observers, who have long argued that consumers favor smartphone subsidies. If current trends persist, subsidies could soon become a thing of the past — and that’s not good for Apple(NASDAQ: AAPL ) shareholders.

T-Mobile ends contracts

T-Mobile spent 2013 rolling out a number of initiatives that cumulatively comprise its un-carrier strategy, the most significant of which has been the end of two-year contracts. Starting in 2013, T-Mobile did away with them — new subscribers pay for their service strictly on a month-to-month basis. Because T-Mobile’s subscribers now have the freedom to easily ditch their service, T-Mobile no longer pays for its subscribers’ handsets. T-Mobile customers can buy their phones in full, or pay them off in monthly installments, but either way, they’re paying the full retail price.

This stands in stark contrast to the business model long championed by T-Mobile’s rivals, including AT&T. Under the standard, two-year contract model, carriers foot the bill for much of their subscribers’ handsets, but lock them up with a contract.

AT&T warns smartphone subsidies are coming to an end
AT&T, however, could soon join T-Mobile in ditching subsidies. Last month, AT&T’s CEO warned that the current smartphone subsidy model cannot continue to persist.

AT&T still offers subsidies and contracts for now, but in December the carrier rolled out a new initiative structured much like T-Mobile’s. AT&T’s new “Mobile Share Value” plan lets subscribers pay for their service on a month-to-month basis but doesn’t cover the cost of their phone. Last week AT&T went further, offering to give T-Mobile subscribers up to $450 in credit if they switched to one of AT&T’s new plans.

Based on Kantar’s recent numbers, AT&T has reason to shake up its business: last quarter, AT&T sold just 28.3% of new US smartphones, down from nearly 35% in the same quarter last year.

Apple’s iPhone business remains subsidy-dependent
A war between the two companies is good for consumers, but potentially bad for Apple. The King of Cupertino still derives the vast majority of its profit from the iPhone, and sales could take a hit if smartphone subsidies go away.

Although Apple has just slightly more than 13% of the global smartphone market, it sells more than 43% of the smartphones in the U.S. The reason for the discrepancy comes down to subsidies — U.S. carriers’ willingness to heavily subsidize Apple’s iPhones has made them affordable to U.S. consumers. In most other countries around the world, smartphone subsidies are uncommon.

The pricing pressures that drive global consumers to pick alternative handsets could apply in the U.S. if smartphone subsidies go away. Without subsidies, the $350 Nexus 5 looks much more attractive when compared to Apple’s $649 iPhone 5s. And even if consumers continue to buy Apple-made handsets, they could choose to hold on to their old models for longer, resulting in much longer upgrade cycles.

Watch for other carriers to copy T-Mobile
T-Mobile’s incredible success has shown rival carriers that it’s possible to attract customers even without offering smartphone subsidies. With AT&T’s sales on the decline (according to Kantar), the carrier seems to be following T-Mobile’s lead in abandoning subsidies.

If this trend spreads to other major U.S. carriers, Apple shareholders should be concerned.


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