Leap (LEAP), MetroPCS (PCS) Now 'Subsidizing' Expensive Devices (AAPL) (NOK)
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Recently, Leap Wireless (Nasdaq: LEAP) and MetroPCS (NYSE: PCS) offer contract-less wireless plans, a robust and growing market in the U.S.
One thing that may have held some investors back is the recent shift in technology for higher-end smartphones, making even new feature phones look like they were made 10 years ago. It's not a great selling point if you're trying to draw in new customers. Generally, a user will need to pay the full price on a device before being able to reap the benefits of a lower month-to-month outlay, generally resulting in a few hundred dollars in savings over a two-year period (the general length of contract for carriers like Verizon (NYSE: VZ) and AT&T (NYSE: T)). Those upfront costs, particularly as Apple's (Nasdaq: AAPL) iPhone gets put into the mix, can easily hit customers with costs over $500.
But, that all might be changing, thanks to a relatively unknown financier. Recently, the two have tapped Progressive Finance, which basically subsidizes the initial cost of handsets for users, making money on repayments over the next few years as the phone is paid off. Almost like a postpaid plan, really.
PCS is working with Progressive and BillFloat on financing, while Leap's Cricket segment is sticking with just Progressive for the time being.
In addition to being a benefit for the carriers, PCS and Leap's actions are likely to drive sales for Apple, Samsung, HTC, Nokia (NYSE: NOK), and OEMs/ODMs who feel more comfortable offering their wares through the prepaid providers.
No credit checks are done on the customers, they only need to provide a bank account. Those that pay back the loan within 90 days are not assessed any interest fees either, another benefit to the financing.
Ahead of the opening bells Friday, Leap and PCS are mixed.
One thing that may have held some investors back is the recent shift in technology for higher-end smartphones, making even new feature phones look like they were made 10 years ago. It's not a great selling point if you're trying to draw in new customers. Generally, a user will need to pay the full price on a device before being able to reap the benefits of a lower month-to-month outlay, generally resulting in a few hundred dollars in savings over a two-year period (the general length of contract for carriers like Verizon (NYSE: VZ) and AT&T (NYSE: T)). Those upfront costs, particularly as Apple's (Nasdaq: AAPL) iPhone gets put into the mix, can easily hit customers with costs over $500.
But, that all might be changing, thanks to a relatively unknown financier. Recently, the two have tapped Progressive Finance, which basically subsidizes the initial cost of handsets for users, making money on repayments over the next few years as the phone is paid off. Almost like a postpaid plan, really.
PCS is working with Progressive and BillFloat on financing, while Leap's Cricket segment is sticking with just Progressive for the time being.
In addition to being a benefit for the carriers, PCS and Leap's actions are likely to drive sales for Apple, Samsung, HTC, Nokia (NYSE: NOK), and OEMs/ODMs who feel more comfortable offering their wares through the prepaid providers.
No credit checks are done on the customers, they only need to provide a bank account. Those that pay back the loan within 90 days are not assessed any interest fees either, another benefit to the financing.
Ahead of the opening bells Friday, Leap and PCS are mixed.
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