Here's What Apple Investors Need To Know About iPhone 13 Carrier Subsidies

The annual iPhone launch is the biggest product of the year for Apple Inc (NASDAQ: AAPL), but it’s also a major sales catalyst for wireless carriers Verizon Communications Inc. (NYSE: VZ), AT&T Inc. (NYSE: T) and T-Mobile Us Inc (NYSE: TMUS).

Carrier Incentives: Bank of America analyst Wamsi Mohan said this week the incentives these carriers offer can have a major impact on iPhone replacement cycles. Mohan estimates customers will pay an average of $100, or $300 including Apple Care, in upfront costs for the new iPhone 13 if they switch carriers and/or sign a new two to three-year contract.

“The trade-in promotions suggest that the carriers want customers to upgrade their iPhones roughly every 2-3 years (max trade-in benefit up to $1000) vs. much lower trade-in values for older iPhones ($350-400),” Mohan said.

Related Link: Is Apple's Stock Overvalued Or Undervalued?

Growing Secondary Market: As a result, he said there is now a large and growing secondary market of faster, high-end used iPhones that may end up pressuring sales of new low-end iPhone models.

Verizon is currently offering $800 in credit toward an iPhone 13 for a trade-in of an iPhone X or newer model in certain unlimited plans. That promotion is roughly in-line with the $800 in credit toward an iPhone 12 for trade-ins of iPhone 8 or newer models it offered a year ago.

AT&T is offering a virtually identical $800 credit for iPhone X models or newer.

T-Mobile is offering Magenta Max plan customers up to $1,000 in credit for trade-ins of iPhone 11 or 12 Pro/Pro Max models and up to $800 in credit for iPhone 11, 12 or X family models.

For now, Mohan is maintaining a cautious approach for Apple given concerns over potential supply chain disruptions. Bank of America has a Neutral rating and $160 price target for Apple.

Benzinga’s Take: Nothing about the updated carrier promos suggest consumers will behave any differently than they did concerning the iPhone 12 promos last year.

The key difference between the last iPhone cycle and the current one is the potential for significant supply chain disruptions, which could delay shipment and even potentially push back demand for next year’s iPhone models in a worst-case scenario.

Photo: Courtesy Apple