As Apple tries to climb out from its recent sales slump, the iPhone maker will be depending on big wireless companies to give it a hand.
The iPhone 15 models unveiled Tuesday offered few big hardware upgrades aside from new casings and connector ports, but they came attached to plenty of offers bundled with U.S. wireless plans.
AT&T and Verizon kept offering iPhones to customers who trade in older devices and subscribe to more expensive wireless plans, a strategy similar to past iPhone releases. The deals nudge customers toward plans that pay off the handset purchase price over three years.
T-Mobile offered similar deals for new iPhone 15 models and tied the most generous discounts to its premium plans, which encourage device upgrades every one or two years. Dish Network's new Boost Infinite service went a step further: It promised customers who sign up for a $60 monthly plan free iPhone upgrades each year.
The upgrade plans aim to address a conundrum that has hurt sales for all kinds of smartphones: Many users are happy with the devices they have.
"People just aren't getting as many smartphones as they used to," said Jeff Moore, an analyst at Wave7 Research. "They're all slabs of glass that largely look alike. The lack of differentiation helps lower upgrade rates."
Apple has worked closely with the wireless industry ever since AT&T won the exclusive right in the U.S. to market the first iPhone in 2007. The co-dependence between the smartphone maker and its network partners has since broadened and deepened to include aggressive trade-in deals, joint spending on advertising and carrier marketing of add-on media services.
Wireless carriers accounted for nearly four of every five U.S. iPhone sales during the June quarter, well above what Apple sold directly to customers, according to a Consumer Intelligence Research Partners survey. Their share of iPhone sales hasn't been that high since 2016, and was well above the 48% trough hit in 2021.
At the same time, the carriers rely on Apple -- to help them get new subscribers and give existing ones a reason to keep their pricey service plans.
Apple's slice of all smartphone sales is also growing while other manufacturers lose ground. The iPhone hit 55% of new U.S. phone sales in the second quarter, up from as low as 28% six years earlier, according to Counterpoint Research.
The carriers, which also have reported slowing revenue growth in recent years, don't earn a profit on most of the major smartphones they sell, so they rely on people spending for top-tier service plans and accessories to boost business. But those smartphone swaps have tumbled over the past decade as American consumers opt to hold on to the same gadgets for longer stretches.
"Upgrade rates have been slow," Verizon consumer division chief Sowmyanarayan Sampath said Wednesday at an investor conference. "The next couple of weeks makes the quarter for us in terms of upgrade rates depending on how customers pick it up."
Apple last month reported its longest revenue slump since 2016, a trend executives partly attributed to cooling domestic demand for its products. Its new smartphones, available for preorder Friday before going on sale Sept. 22, are expected to continue powering most of the company's profit despite continuing efforts to sell more hardware accessories and subscription services.
The three top carriers have for the past few years sold new iPhones "on us," often providing the devices to customers at no upfront cost if they trade in an older smartphone and commit to remain on a premium wireless plan for as long as three years. Apple discourages partners from calling its products "free" in marketing -- customers typically pay them off over time through their rate plans.
T-Mobile recently launched a smartphone upgrade plan called Go5G Next that encourages subscribers to order a new smartphone each year. Offers from AT&T and Verizon often steer subscribers toward deeply discounted smartphones tied to three-year contracts, which discourages them from snapping up a new device sooner.
That tactic makes sense to Wave7's Moore, who notes that carriers value stability above all.
"I don't think the carriers really care that much about upgrade rates," he said, adding that their main goal is keeping subscriber losses as low as possible.
Cheaper prepaid services can hawk older models and sell to customers who bring their own devices. But top-tier "postpaid" brands that don't offer the latest iPhone, often at a deep discount, risk losing valuable customer relationships to rivals who do.
The "iPhone is important, because it's obviously a big part of the market share out there," Dish Chairman Charlie Ergen told analysts in a May conference call. "It'd be very difficult to be successful in the postpaid business without it."
