AT&T Inc. Increased Penetration of Next Pricing

Based on exit take rates for 2013, analysts have revised assumptions around the success of the company’s Next pricing plan. Approximately 15%, or 1.2 million, of the 7.9 million smartphones purchased on the AT&T network were associated with the Next plan in the fourth quarter, with that percentage escalating to around 20% at the end of the fourth quarter.

The Next plan was introduced in July 2013 as a way for consumers to upgrade every 12 or 18 months to a new phone without having to commit to a 2-year service agreement and with no down payment or up-front activation fees. Essentially, the price of the unsubsidized phone is broken out over the span of 20/26 months and the consumer is allowed to upgrade every 12/18 months.

The introduction of the Next plan in conjunction with AT&T’s new Mobile Share Family Value plan has begun to successfully decouple the services costs from the handset costs. This improved transparency into pricing, the fact that smartphone penetration could reach close to 90% in 2014, and the potential for a larger-than-average iPhone upgrade cycle have caused us to revisit our assumptions around the Next plan take rates.

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