Where Have All the Subsidies Gone?

April 25, 2017


Verizon Wireless seemed to be a holdout in the smartphone and tablet subsidy game but recently announced an intention to phase out these subsidies.  Purchasing phones at full price is not news to the global community, but it is a recent development in the US.  

It began a few short years ago with T-Mobile, who is now taking a hardline approach and not offering other options to enterprises at all for the most part.  T-Mobile does, however, offer two flavors of this purchase plan.  The phones may be purchased up front for full retail cost, or they can be billed on the monthly invoice for 24 equal payments.  

AT&T is stepping into this ring as well, with a slightly more mild approach for the enterprise sector.  The phones may be purchased in the same manner we have all become accustomed to if preferred: for a subsidized price with a two-year contract.  They are, however, incentivizing enterprise and business accounts to buy phones on an installment plan.  When purchasing phones in this manner and adding them to the AT&T Mobile Select plans, the plan is discounted $25 per month.  Over 24 months, (the length of a typical contract) this equals $600; the average subsidy discount at which AT&T bought down the price of the phones.

Sprint has several different purchasing options as well: contracts, installments, and a true lease program.  The lease program is unique to Sprint among the larger carriers.  With a typical installment plan, if the service is cancelled, one must continue to pay off the remaining amount owed for the equipment.  With Sprint's lease program, if the service is cancelled, the phone may be returned, and no additional money is owed.  This option does not, however, apply to all enterprise accounts and plans.

Overall, the decision comes down to CAPEX vs. OPEX.  For example, if a company is in a position where they need to buy 500 smartphones for a large project or new software deployment, and those phones cost $700 each,  in a subsidized scenario, the cost could be worked into the monthly bill and recorded as a zero dollar upfront operating expense.  If unsubsidized, this would a $350k upfront capital expense.  One thing to keep in mind, specifically with the similarities of newer iPad and iPhone versions to their previous generations, it is feasible to hang onto these phones longer, which can help businesses keep their costs down.

If you are now asking the question, "Which of these options works best for me and my business?" give us a call.  Since every business is unique, we will get to know your mobility environment and assist in writing mobility policies and formulate the strategies to help you manage your business' fleet of phones in the most cost efficient and effective way possible.