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AT&T plans to increase revenue by reducing mobile phone subsidies and encouraging consumers to share data allowances between multiple devices, according to a May 17 Reuters report on an AT&T investors meeting that day.
The news follows Verizon Wireless CFO Fran Shammos statement, at a JP Morgan conference taking place this week, that Verizon plans to stop offering unlimited data for $30 to subscribers holding on to their old contracts through a grandfather clause, once those subscribers upgrade to Verizons 4G services. Eventually, Shammo explained, all subscribers will be moved into shared data plans, which will help encourage the use of tablets on wireless broadband networks, instead of just over WiFia tack many subscribers have taken, not wanting to accrue the cost of an additional wireless contract.
We need to ¦ allow customers to connect those tablets to some of the existing data plans that they have to be able to share them in a way that will drive more revenue for us, but also give a good deal to customers, Ralph de la Vega, president and CEO of AT&T Mobility, said during the call, according to the report.
AT&T executives added that they plan to keep 2012 smartphone sales limited to 2011 levels to cut down on upgrade costs, according to Reuters. Such costs include the subsidies that AT&T and other carriers pay, in exchange for the ongoing fees paid to them for their wireless services.
De la Vega said he was working to reduce subsidies for the phones AT&T sells, though he wouldnt offer more detail.
You can take it to the bank that our thrust is to lower that in every case we can, he added, according to the report.
Carriers pay higher subsidies for the Apple iPhone than for any other smartphone. In the September timeframe, Apple is expected to begin offering its latest iPhone, which, with high consumer demand, will require a considerable investment from the carriersthough one that pays off.
Technology Business Research Analyst Eric Costa recently explained this to eWEEK, offering AT&T as an example.
Despite margins tanking each time a new iPhone model is released, AT&T actually increased its OIBDA [or operating income before depreciation and amortization, a slippery accounting term for income] and operating margins since the iPhones introduction to the carrier in [the third quarter of 2008], said Costa. This is due to increased iPhone activations and data usage driving data revenue upward, which is helping the operators overcome the impact of the higher equipment subsidies.
Where the carriers do manage to avoid paying a subsidy is on the Apple iPad.
Verizons Shammo, at the JP Morgan conference, went into some detail about this, saying that for now Verizon is holding pretty strong to the no-subsidy model for iPads, and that with dongles and other Internet-connected devices, it has really compressed that subsidy down.
Sounding not unlike AT&Ts de la Vega, Shammo said that several European carriers have managed to move away from the total subsidy model on smartphones, and Verizon is taking note.
They are going to more of an installment sale, leasing-type transaction. I think the industry is going to look hard at these types of models going forward, and I think that is all a benefit for us, Shammo said. But I do not see us moving away from the no-subsidy model on the iPad and the other [tablets] that we sell. I think we will stick with what we have.