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July 1, 2022

Smartphone promotions aid service revenue gains

According to GlobalData’s Smartphone Promotions: US Market – Q1 2022 report, the most popular types of smartphone promotions in Q1 2022 were trade-ins, followed by upgrade/trade-in and preorder offers. A growing trend among US carriers, both postpaid and prepaid, has been the addition of a premium unlimited plan requirement clause to their trade-in and upgrade promotions to drive customers to high-end plans and increase average revenue per user (ARPU).

Among US postpaid carriers, Verizon Wireless and T-Mobile utilize this strategy heavily to increase the appeal of their overall portfolios. Full-value upgrade promotions target customers who either have or will upgrade to a premium 5G unlimited plan. Verizon Wireless requires users to opt for its 5G Play More or higher plan (priced at $90 for a single line – $10 higher than the previous tier), whereas T-Mobile requires users to opt for its Magenta MAX plan (priced at $90 for a single line – $15 higher than the previous tier) to get the maximum trade-in discount value of up to $1,000 in some cases.

Verizon and T-Mobile also use similar strategies to increase the sale of their connected devices, namely tablets and smartwatches. T-Mobile offers select tablets free if users subscribe to its 5GB or higher plan and up to $250 off its smartwatches when the device is bought with a compatible plan. Verizon users can save up to $310 on some tablets if users subscribe to a tablet plan and up to $300 off its smartwatches when the device is bought with a service plan.

Benefits of smartphone and service plan discounts

While bundling service and device promotions helps expose users to the benefits of high-end service plans that often include access to perks such as complimentary streaming subscription services and hotspot data, it also helps the carrier increase its percentage of high-value subscribers.

Carriers typically split the trade value of users’ devices over a period of 24 or 36 months (matching the EIP term of the new handset), and the user is required to remain subscribed to the high-end plan for the entire duration of the term to ensure compliance. If the customer switches carriers or downgrades to a lower tier plan, they lose the remainder of their trade-in promotional balance. This guarantees revenue from high-end plans for a predictable timeframe.

Also, by offering top dollar for used devices, in some instances handsets with cracked screens, carriers are helping reduce e-waste while financially enabling a vast majority of users to upgrade to high-end handsets if they remain subscribed to compatible plans.

While smartphone promotions may not be the sole indicator of growth in earnings, phone deals, when combined with competitive service pricing, quality of network and improved customer service, can drive an increase in essential metrics. As the wireless market teeters toward saturation, we can expect carriers to come up with similar promotion options in the near future to increase their subscriber bases and revenue while limiting user turnover.