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Apple Financing iPhones is a Huge Boost for Smaller Carriers like T-Mobile but Causing Havoc for Incumbents

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I don't think that it comes as much of a surprise that Apple's entry into iPhone financing is starting to dislodge some customers from the biggest carriers and sending them shopping for cheaper, smaller providers like T-Mobile US Inc.


It's being reported today that "T-Mobile said last week it had its best iPhone quarter ever, not only because of surging sales in its own stores but also from consumers who bought their handset directly from Apple, just as analysts had predicted. Specifically, promotions and lease plans that start at $5 a month for 18 months with a trade-in helped boost new monthly phone subscriber additions to 843,000 last quarter.


T-Mobile's gains are almost twice as many as Verizon's at 430,000, with AT&T losing 459,000 phone customers, according to JPMorgan Chase & Co. analyst Philip Cusick. Sprint Corp.'s quarterly results on Tuesday may show more evidence that Apple's September move to sell iPhones in monthly installments is so far benefiting lower-priced carriers.


Apple's program, starting at about $32 a month for handsets that can work on any carrier's network, threatens to displace wireless carriers from the crucial person-to-person sales role. Without loyalty to a carrier, consumers will make their decisions based on cost comparisons on service plans, which gives T-Mobile and Sprint an edge versus the two largest U.S. carriers, Verizon Communications Inc. and AT&T Inc.


Bloomberg further notes that "Separating the phone sale from the carrier is bad for the incumbents," said Kevin Smithen, an analyst with Macquarie Securities USA Inc. "If consumers take the time to go to Apple and get an unlocked device, then they have already decided not to go the easy route and just get an upgrade from the carrier."


With the dramatic shift taking place this quarter away from the original carriers that put the iPhone on the map, you have to wonder if Apple will pay a price for this in the future. For more on this, click here.


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