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AT&T Moves Up Upgrade Eligibility For IPhone Users

AT&T Moves Up Upgrade Eligibility For IPhone Users

AT&T Inc. (T) on Sunday changed its phone upgrade policy to allow more of its customers to purchase a new Apple Inc. (AAPL) iPhone sooner.

The move comes ahead of the expected unveiling of a new version of the iPhone from Apple on Monday. By letting existing iPhone users upgrade their device early, AT&T can lock them in for another two years–which could be a crucial play given the speculation the carrier may eventually lose its exclusive agreement to sell the vaunted smartphone. But it could cut into margins for the next quarter.

Customers typically have to go through a majority of their contract before they can again take advantage of the subsidized phone prices new customers enjoy. But AT&T adjusted its policy for some of its higher value customers, allowing some iPhone 3GS users who purchased their device a year ago to upgrade to a new phone with the full subsidy.

Macquarie Securities analyst Philip Cusick said some users have seen their eligibility date moved from as late as November to June 21. Customers were only asked to pay an $18 upgrade fee, although in some cases the fee is waived.

As with a year ago, the launch of a new iPhone brought higher upfront costs because of the subsidies AT&T pays to Apple for each device. Cusick said the early upgrades could bring further pressure to wireless margins in the third quarter.

For every 1% of the contract customer base that upgrades their phone, AT&T takes a $200 million hit to earnings before interest, taxes, depreciation, and amortization, or 2 cents to per-share earnings, Cusick said, adding he is looking for about 8.8% of the base to upgrade.

While AT&T may pay a higher cost upfront, it is virtually guaranteeing a strong number of high-value customers even if it loses its status as the sole iPhone partner. The carrier recently upped its early termination fee for smartphones to $325 from $175.

The upgrade also may help to push customers to AT&T’s tiered data pricing structure. Under the new data plans, customers pay $15 for 200 megabytes of data or $25 for 2 gigabytes of usage. Customers who exceed their limit must pay $15 or $10 additional, respectively.

AT&T shares rose 1.2% to $24.45.

[Thanks: http://online.wsj.com]

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