AT&T CEO: ‘We Can’t Afford to Subsidize Phones for Much Longer’

AT&T CEO: ‘We Can’t Afford to Subsidize Phones for Much Longer’

AT&T CEO Randall Stephenson says wireless carriers such as AT&T will not be able to continue subsidizing smartphones, saying the current model is not economically viable. Mr. Stephenson’s comments came during an investor conference on Wednesday.



With more than 75 percent of mobile phone users owning smartphones — and that number growing towards 90 percent — Stephenson said carriers will “move into maintenance mode” and that “the model has to change” because carriers “can’t afford to subsidize devices like that”. 

“When you’re growing the business initially, you have to do aggressive device subsidies to get people on the network,” he said. “But as you approach 90 percent penetration, you move into maintenance mode. That means more device upgrades. And the model has to change. You can’t afford to subsidize devices like that.”

Stephenson noted that breaking customers of their habit of upgrading their device every 18 months to two years will not be an easy task, but said that a business model focused on financing rather than providing a subsidy would be “transformative” for the industry.

The CEO said the his company’s new AT&T Next program, a no-money-down with 0% financing scheme, could drive smartphone sales in a more sustainable way.

“If you are a customer and you don’t need to upgrade your device, you can get unlimited talk and text and access to the data network for $45 all-in,” he said. “You can use your own device or finance it. I think this will be very powerful. It’s where we see the market going.”

AT&T has also introduced a new “value plan” that gives customers a $15 per month discount on their smartphone plans if they bring their own off-contract device, buy a phone at full retail, or use the AT&T Next financing plan.