Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Verizon Communications Inc. (VZ): Does It Already Have T-Mobile Envy?

Just weeks after No. 4 wireless carrier T-Mobile launched its “Un-carrier” initiative, ditching subsidies and contracts in favor of installment plans, is top dog Verizon Communications Inc. (NYSE:VZ) Wireless already getting envious?

While Big Red CEO Lowell McAdam acknowledged that he’d be “open” to ditching contracts that certainly doesn’t mean he wants to. McAdam was mostly saying the company could respond to changes in consumer preference if need be, but contracts and subsidies (along with device exclusivity) are just part of carriers’ attempts to avoid service commoditization.

There’s at least one important way that Verizon Communications Inc. (NYSE:VZ) is now looking to follow in T-Mobile’s footsteps: installment plans. The No. 1 domestic carrier just tightened its upgrade policies, extending the time frame for upgrade eligibility from 20 months to 24 months. At the same time, Verizon launched its new Device Installment Program, seemingly a direct response to T-Mobile’s new strategy.

Starting next week, customers can purchase certain devices at full price without any contract renewals and pay them off over the course of 12 months through equal payments. There’s a $2.50 per month “finance charge” until the balance is paid off, and most devices that cost over $350 are eligible. That’s slightly different than T-Mobile’s two-year installment plans, but still the same notion.

Verizon Communications IncThat way, Verizon Communications Inc. (NYSE:VZ) can test the waters and see if there’s interest in its 98.2 million retail subscriber base for buying devices on installment plans instead of subsidies with strings attached. When Spanish carriers ditched subsidies, the move promptly backfired. Although one key difference is that T-Mobile is offering installment plans, so consumers don’t get hit with smartphone sticker shock. That eases the blow a little bit, but also has much less disruptive potential.

I also highly suspect that T-Mobile hasn’t been able to completely ditch subsidies, particularly when it comes to Apple Inc. (NASDAQ:AAPL)‘s iPhone. The Un-carrier is rather excited to finally get that device in its lineup, addressing a historical weakness, but the monthly payments simply don’t add up to Apple’s pricing. It’s inconceivable that the Mac maker would sell the iPhone for so much less to the least important carrier and directly undermine its more profitable relationships with bigger players like Verizon.

Verizon Communications Inc. (NYSE:VZ) isn’t ready to totally ditch subsidies and contracts, but it looks like it’s willing to dip its big red toes in a little bit.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.