AT&T is extending from 20 months to 24 months the time it takes for customers on contract-based plans to earn a fully subsidized upgrade to a new phone.
The move announced Sunday follows an identical one by Verizon Wireless in April. AT&T Inc.’s new policy applies to any customer whose contract expires in March 2014 or later.
Extending the time between phone upgrades saves the phone companies money, since they subsidize each new phone by hundreds of dollars to make it available to customers for $199 or less. AT&T executives had said they planned to rein in spending on phone upgrades this year.
The change reflects the growing popularity of expensive smartphones. Verizon subsidized upgrades after just 13 months until January 2011, just before it introduced the iPhone, one of the most expensive phones on a wholesale basis. Carriers pay Apple over $600 for it.
Dallas-based AT&T is the country’s second-largest cellphone carrier. It activated 6 million smartphones in the first three months of this year.
AT&T shares rose 55 cents, or 1.5 percent, to $36 in morning trading. The shares hit a five-year high of $39 in April.
Breaking with industry practices, No. 4 wireless carrier T-Mobile USA ditched its service contracts and phone-upgrade waiting periods in March. It now sells phones on installment plans, giving customers more flexibility on the timing of their phone upgrades.
In other news, AT&T Inc. on Monday said it’s adding a walkie-talkie-like application to the iPhone for its corporate customers, replicating a hallmark feature of the Nextel network, which is being shut down this summer.
A push-to-talk feature is available on some non-Nextel phones from Sprint, Verizon and AT&T, but this is the first time it’s available on the iPhone in the U.S.
With push-to-talk systems, the user pushes a button to broadcast a voice message to a group — in the case of the AT&T app, of up to 250 people. This type of service has been popular for work sites and first responders.
Sprint is shutting down the Nextel network this summer because it doesn’t support high-speed data traffic. It’s trying to get as many Nextel users as possible to switch to Sprint phones with push-to-talk capability, but it’s competing with Verizon Wireless and AT&T.
Dallas-based AT&T said the push-to-talk function won’t work just by downloading the app — the company has to work with its corporate customers to integrate it.