Apple Inc. (NASDAQ: AAPL) began taking orders for its new iPhone 8 on September 15 last year and began shipping to customers one week later. The new device was not an instant hit because everyone was waiting for the iPhone X, the top of the line phone that was due for release on November 3.
It didn’t take long for carriers to offer deals on the iPhone 8. The iPhone 8 discounts were meant to hold existing wireless customers for each carrier, or perhaps to take some from the competition. One of the earliest deals came from AT&T Inc. (NYSE: T), which had a “preorder” deal for the iPhone 8 with 64 gigabytes (GB) of storage for $23.34 a month at 0% annual percentage rate (APR) for 30 months. AT&T also sold customers the iPhone 8 for $699, which allowed people independence from AT&T’s long-term wireless programs.
The “special preorder” deal is still in effect, seven months later. The requirements to get the low monthly price for the iPhone 8 were — and remain — dizzying:
Credit approval required. For smartphones only. Tax on sales price due at sale. Requires 0% APR monthly installment agreement and eligible service. Divides sales price into monthly installments. AT&T Next: 30-month agreement with trade-in to upgrade when 80% of sales price is paid off. AT&T Next Every Year: 24-month agreement with trade-in to upgrade when 50% of sales price is paid off. $0 down: Requires well-qualified credit. Limit as low as 2 smartphones at $0 down. Down payment: May be required and depends on a variety of factors. Down payment if required will be either 30% of sales price or a dollar amount ranging from currently $0 to $600 (amount subject to change, and may be higher).
But wait, there’s more. Now customers can do even better. AT&T is offering an iPhone 8 for 50% off with a TV deal. Here’s most of the fine print:
Limited-time offer. Elig. Phones: Must buy on 0% APR 24-mo. AT&T Next Every Year or 30-mo. AT&T Next agreements w/elig. wireless. Tax on full retail price due at sale. Retail price is divided into monthly installments. Apple iPhone 8 64GB ($23.34/mo. for 30 mos. or $29.17/mo. for 24 mos.) is 50% off. May get $350 off iPhone 8 256GB ($28.34/mo. for 30 mos. or $35.42/mo. for 24 mos.) iPhone 8 Plus 64GB $26.67/mo. for 30 mos. or $33.34/mo. for 24 mos.), iPhone 8 Plus 256GB ($31.67/mo. for 30 mos. or $39.59/mo. for 24 mos.), iPhone X 64GB ($33.34/mo. for 30 mos. or $41.67/mo. for 24 mos.), iPhone X 256GB ($38.34/mo. for 30 mos. or $47.92/mo. for 24 mos.) which are discounted but not 50% off. Bill Credits: Max credit $350 (credits are $11.67/mo. for 30 mos., or $14.59/mo. for 24 mos.) Applied in equal amounts to device over entire agmt term. To get all credits, wireless line must remain active, with eligible service, and on agmt for entire term. If you cancel service, upgrade or pay up/off agmt early your credits may cease. Req’d Wireless: New or existing customers adding a new line or upgrading to an eligible phone and maintain elig. current postpaid wireless voice & data plans (min. $45/mo. for new svc with AutoPay and paperless bill discount. Pay $55/mo. until discount starts w/in 2 bills.). Upgrades require new elig. TV service. Other exclusions apply. If you cancel wireless, will owe device balance of up to $1149.99. Activation/Upgrade Fee: up to $45. Return: w/in 14 days. Restocking fee up to $45 each may apply. DIRECTV: New or existing residential customers with elig. svc. (min. $29.99/mo). Excludes DIRECTV NOW. Existing customers must add new wireless line. If new customer, 24-month agmt, up to $35 Activation fee, & equipment lease req’d. Must be installed w/in 30 days of device activation to receive credits; if cannot be installed, must return device w/in 14 days of notification from AT&T or are bound to the terms of your installment agreement. Residents of select multi-dwelling units are not eligible for this offer. For Puerto Rico: Excludes prepaid. Min $31.99/mo. svc req’d. Account holder must go to AT&T store & present proof of DIRECTV service & provide consent of sharing of account information between DIRECTV & AT&T. Limits: See your sales rep before any purchases to determine if eligible. May not be combined w/certain other offers, discounts or credits. Purchase, financing & other limits & restr’s apply. Participation in this offer may make your wireless account ineligible for select other offers (including select bill credit offers) for a 12-month period. Limit one offer with upgrade & new TV service per wireless account.
Got all that? What, you didn’t read it? We’re shocked.
The 30-month, 24-month or 12-month plans lose money for the carrier in the first several months. However, as the contract goes on, AT&T recoups the cost of the phone, its marketing costs and costs to provide the wireless service. If the customer renews beyond the 30 months, AT&T’s profit likely soars.
The margins for wireless carriers have frayed as Sprint Corp. (NYSE: S), T-Mobile US Inc. (NASDAQ: TMUS), Verizon Communications Inc. (NYSE: VZ) and AT&T play for position among customers in a saturated market. The iPhone 8 still gives them a chance to go after one another with a new chess piece.