Verizon Wireless plans to change its policy on handset upgrades so that customers are forced to wait longer before they can get their hands on new devices.
Under the current system, customers can upgrade their phones every 20 months, but when the change comes in they will have to wait two years before they can rid themselves of older smartphones.
“This change aligns the upgrade date with the contact end date and is consistent with how the majority of customers purchase new phones today,” said the operator in a statement on its website.
Verizon Wireless – a joint venture between Verizon Communications (New York, NY, USA) and Vodafone (Newbury, UK) – said the first customers that would be affected by the change are those whose contracts expire in January 2014.
Analysts have seen the modification as an attempt by Verizon Wireless to boost its margins, which suffer when customers upgrade their phones because of the hardware subsidies the operator has to bear.
According to Dow Jones Newswires, Verizon Wireless is aiming to increase its margin in 2013 to around 50%, compared with 46.6% in 2012.
The publication also reports that 9% of Verizon Wireless customers upgraded their phones in the fourth quarter of 2012, compared with 7% in the third quarter and 10% in the fourth quarter of 2012.
Operators have been prepared to subsidize smartphones because their users spend more money on data services than customers with more basic devices.
Nevertheless, as larger numbers of customers choose smartphones, operator revenues do not appear to be rising as quickly as device-related costs.
The alignment of the upgrade schedule with the duration of contracts is a risky move by Verizon Wireless because chief rivals AT&T (Dallas, TX, USA) and Sprint (Overland Park, KS, USA) still plan to let customers change phones every 20 months.
Moreover, fourth player T-Mobile USA (Bellevue, WA, USA) – owned by Deutsche Telekom (Bonn, Germany) – is pioneering a new no-contract arrangement under which customers pay off device fees on a monthly basis, after which their overall monthly bill falls dramatically.
T-Mobile USA’s new prices appear to offer substantial savings to customers compared with tariffs from Verizon Wireless and AT&T.
Verizon Wireless said that some of its new devices would be available to purchase from April 15 through a Device Payment Plan that appears to be a response to T-Mobile USA’s no-contract moves.
The operator has provided few details so far, but the Device Payment Plan would allow customers to pay off device costs over an extended period, according to press reports.