Verizon (VZ) To Cut One of the Best Offerings It Has
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Today's Overall Ratings:
Up: 16 | Down: 7 | New: 60
Rating Summary:
17 Buy, 35 Hold, 1 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 16 | Down: 7 | New: 60
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The big news yesterday -- which seemed to be surprisingly lackluster -- was that Verizon (NYSE: VZ) and Apple, Inc. (Nasdaq: AAPL) will be teaming up to bring the iPhone to the Verizon network, ending years of rumors from blogs and industry analysts.
It seems, however, that many are missing an important implication of yesterday's news: the cancellation of Verizon's "New Every Two" program.
According to reports from the WSJ's SmartMoney, starting on January 16, 2011, Verizon will stop offering the credit to new customers, and existing customers won't be re-enrolled in the program following the use of their last upgrade. SmartMoney confirmed this with officials after asking sales reps about it.
What does that mean for customers and Verizon itself? Well, with potential credits of $30 to $100 being eliminated (based on your choice of phone), savings would amount to $1.37 - $4.55 billion per year (based on 93 million subs, with only about half upgrading per year).
Notably, the iPhone may be the potential catalyst to wipe that slate clean pronto, as the iPhone 4 will be available for $99.99 - $199.99 (for 16 GB and 32 GB models, respectively). Attractive to many, especially those that have been waiting for the iPhone and were afraid to commit to AT&T's shaky network.
One analyst notes that "the longer you can get customers to go between upgrading their phones, the stronger the profitability for the carrier," making it even sweeter for carriers to cut subsidies.
A concern for investors may be whether or not tacking on fees is a smart move to do amid a recovery from a recession and fears of inflation on the horizon. But, as Apple has proven already, if you make a product well enough, and innovative enough, consumers will pay the extra price to have it.
Cutting subsidies might be a good thing for everyone after all; it might spur more competition amongst the carriers for service, and may also cause more rapid, and solid, improvements among manufacturers to make their product stand out against peers' offerings.
It seems, however, that many are missing an important implication of yesterday's news: the cancellation of Verizon's "New Every Two" program.
According to reports from the WSJ's SmartMoney, starting on January 16, 2011, Verizon will stop offering the credit to new customers, and existing customers won't be re-enrolled in the program following the use of their last upgrade. SmartMoney confirmed this with officials after asking sales reps about it.
What does that mean for customers and Verizon itself? Well, with potential credits of $30 to $100 being eliminated (based on your choice of phone), savings would amount to $1.37 - $4.55 billion per year (based on 93 million subs, with only about half upgrading per year).
Notably, the iPhone may be the potential catalyst to wipe that slate clean pronto, as the iPhone 4 will be available for $99.99 - $199.99 (for 16 GB and 32 GB models, respectively). Attractive to many, especially those that have been waiting for the iPhone and were afraid to commit to AT&T's shaky network.
One analyst notes that "the longer you can get customers to go between upgrading their phones, the stronger the profitability for the carrier," making it even sweeter for carriers to cut subsidies.
A concern for investors may be whether or not tacking on fees is a smart move to do amid a recovery from a recession and fears of inflation on the horizon. But, as Apple has proven already, if you make a product well enough, and innovative enough, consumers will pay the extra price to have it.
Cutting subsidies might be a good thing for everyone after all; it might spur more competition amongst the carriers for service, and may also cause more rapid, and solid, improvements among manufacturers to make their product stand out against peers' offerings.
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