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Why you should expect AT&T phone subsidies to go away

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Don’t be surprised if one of these days AT&T announces that it will no longer subsidize smartphones.

Speaking at an investor conference in New York, AT&T Chief Executive Randall Stephenson said that the era of device subsidies is coming to an end, according to CNET.

Stephenson said smartphone penetration is at more than 75% and will soon reach 90% of all customers. That makes subsidizing a smartphone every two years for all those customers an expensive task that Stephenson doesn’t think his company can afford to do.

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“When you’re growing the business initially, you have to do aggressive device subsidies to get people on the network,” Stephenson said, according to CNET. “But as you approach 90% penetration, you move into maintenance mode. That means more device upgrades. And the model has to change. You can’t afford to subsidize devices like that.”

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Instead, AT&T needs to move toward a model in which users will hold on to their devices longer or finance their gadgets rather than get them on subsidies, he said.

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Already, the Texas-based company has been making moves related to such a shift. Earlier this year, it announced AT&T Next, a program that lets users upgrade their devices more frequently but requires that they pay a separate monthly payment for the device.

More recently, AT&T announced that users who purchase their phone outright, bring their own device, use a device for more than two years or get a device using AT&T Next can save $15 per month for their service use.

AT&T has yet to announce that it will do away with phone subsidies, but if it did, it wouldn’t be the first major U.S. carrier to do so.

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T-Mobile stopped subsidizing smartphones in early 2013. Now it only sells devices with down payments followed by 24 monthly payments.

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