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Upgrade? No, thanks: Americans sticking with older phones

The Wall Street Journal. logo The Wall Street Journal. 10/29/2018

Americans are holding on to their smartphones for longer than ever.

Pricier devices, fewer subsidies from carriers and the demise of the two-year cellphone contract have led consumers to wait an average of 2.83 years to upgrade their smartphones, according to data for the third quarter from HYLA Mobile Inc., a mobile-device trade-in company that works with carriers and big-box stores. That is up from 2.39 years two years earlier.

Apple Inc. iPhones traded in during the period were an average of 2.92 years old, and those phone owners held on to them longer than Android users, HYLA’s data through the third quarter show.

Smartphone makers have launched increasingly pricey phones in recent years, with some premium devices costing more than $1,000. Apple’s highest-end phone, the iPhone XS Max, costs $1,099.

That has meant that some buyers try to make their phones last longer. Many families pass down to their children smartphones that are fully paid for or hand them to other relatives on their plans.

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Changes to the structure of wireless phone contracts have forced more customers to pay full price for devices that were once subsidized by big carriers like Verizon Communications Inc. and AT&T Inc. Carriers in recent years have offered less-generous promotions and separated the cost of a phone from a customer’s monthly service fees, leading to the demise of the two-year ritual of upgrading devices and service contracts simultaneously.

“Once you’ve paid the phone off, you realize that you’re getting a considerable sum knocked off your bill every month. When you get a new phone you lose that financial advantage,” said Jeffrey Moore, a telecom-industry analyst and principal of Wave7 Research. Smartphones are also less differentiated today, he said, making some consumers less eager to upgrade.

Sprint Corp. currently offers a “bring your own phone” deal that cuts $10 a month per line on some of its unlimited plans.

UBS Group AG analysts expect 22.8% of U.S. postpaid phone users—or those that pay their bill monthly under longer-term contracts—to upgrade their device in 2018, down from 30% in 2015.

Customers keeping devices longer can help carriers hang on to clients because upgrading is a time when consumers may jump to another service provider.

The shift had helped improve churn rates for wireless carriers, Citigroup analysts wrote earlier this month, referring to the rate at which customers leave.

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