Two-year contracts are disappearing from the U.S. wireless industry.Sprint Corp. said Monday it is doing away with two-year contracts and will shift entirely to a model where customers lease their smartphones. Earlier this month, Verizon Communications Inc. said it would no longer sell contracts, and T-Mobile US Inc. did away with contracts more than two years ago. AT&T Inc. is the only major U.S. carrier that still offers to subsidize new smartphone purchases.Two-year contracts had been the norm for years, in which customers signed the agreement in exchange for a discounted price on a phone. Now, carriers primarily offer cheaper monthly plans without contracts, but require customers to pay full price for their devices, typically in monthly installments spread out over two years.Sprint began offering a lease option last year, and in an interview Monday, Sprint Chief Executive Marcelo Claure said the carrier will move entirely to that model by the end of the year. That means paying full price or leasing will be the only ways to acquire a new phone from the carrier. Sprint says that 51% of customers who purchased a new phone last quarter used its lease option.As part of the shift, Sprint unveiled Monday a new leasing plan called iPhone Forever that starts at $22 a month for an iPhone, in addition to the monthly service fee. Customers can upgrade to the latest iPhone each year as soon as it comes available. That is an improvement over its current leasing offer, which only lets customers upgrade to a new iPhone every two years.Paying $22 a month and getting a new phone every year means a customer will effectively pay about $264 for a year’s use of a 16 gigabyte iPhone 6, which has a $649 retail price. To qualify for the upgrade, customers must trade in their current device and it must still work. Customers will still be able to purchase the iPhone outright if they would like to keep it.Mr. Claure said Sprint’s partnership with its parent company, SoftBank Group Corp., will help it monetize the traded-in phones, thus offsetting the phone’s discounted cost.
Source: Sprint to Abandon Two-Year Contracts – WSJ