Yahoo Finance Sprint doesn’t want you to buy your next phone
Sprint (S) would like you to get one number out of your mind when you shop for a phone: its price.
Instead, the nation’s fourth-biggest carrier wants you to consider leasing — and not just to get the high-end phones it previously reserved for such programs. Its new Flex option covers every phone it sells.
But while Flex will make it easier to upgrade every year, it will come with costs and limits of its own — starting with an end to installment-payment pricing at the carrier. In other words: Sorry, there will be math.
How it will work
Flex, announced Friday morning, starts with relative simplicity. Pay no money down, then pay a lease fee equivalent to the monthly installment-payment plans on other carriers.
After 12 months, you can turn in that phone and get a new one at no extra cost if it’s a new Apple (AAPL) iPhone or Samsung Galaxy. That’s much like Sprint’s current “iPhone Forever” and “Galaxy Forever” programs — but with Flex, you can reserve an annual upgrade on other phones if you opt into paying $5 more a month at sign-up.
On any Flex-leased phone, after 18 months you can choose to turn it in and get a new one or pay off the balance, either all at once or in six installments. Sprint can then refurbish the phone and unload it in the U.S. or elsewhere (its parent company SoftBank owns the phone-distribution firm Brightstar).
You will still be able to buy a phone from Sprint, but you’ll need to pay the full price upfront.
A separate Flex Deals option will cover some cheaper phones and also permit annual upgrades without the $5 monthly surcharge.
Four low-end models—the Samsung Galaxy J3, LG’s Tribute HD, the ZTE Max XL and the Alacatel Go Flip — will lease for $5 a month and require $25 upfront. Another four—used and refurbished iPhone 6s, the Galaxy J7 Perx and the LG Stylo 3 and X Power—will lease for $10 a month after $30 upfront.
Cost comparisons
Will you save money? Compare your costs to get a new iPhone every year via the two other major annual-upgrade schemes, Apple’s iPhone Upgrade Program and AT&T’s (T) Next Every Year.
At Apple, an iPhone 7 with 32GB of storage would cost $32.41 a month—including AppleCare+ device protection. After a year, you’d have spent $389. Because Apple sells iPhones unlocked under this program, you could hop from carrier to carrier in that time and use cheap prepaid SIMs when traveling internationally.
At AT&T, you’d spend $27.09 a month for a one-year total of $325. That doesn’t include a device-protection plan and would keep the phone locked. Travel overseas with it, and you’re stuck with extortionate roaming rates that start at $40 for 200 megabytes of data.
Sprint’s $27 lease rate for that iPhone 7 also adds up to $325 after 12 months. And because you’re renting, you also wouldn’t owe sales tax in states that collect one.
It is unclear whether you could get a Flex-leased phone unlocked for international travel. Sprint’s policy as of Thursday reads: “Sprint may be able to unlock some SIM-based devices to allow a foreign carrier’s SIM card to be inserted.”
But you can also sell a used phone after a year yourself, provided you pay up any remaining balance — that’s the only option at T-Mobile (TMUS) and Verizon (VZ), but an impossibility with Sprint’s Flex leases. The device-resale site Gazelle.com estimates that it will pay $300 for an unlocked iPhone 7 with 32 GB in good condition.
So if you bought one on an installment plan from a carrier a year ago, paid off the balance and then collected your $300, your net expense would have been $350—little more than your costs with Apple, AT&T and Sprint’s annual-upgrade plans.
Let’s not go crazy with annual upgrades
Sprint positions this as an equitable way for customers to get new phones when their favorite manufacturers ship them.
As Kohposh Kuda, Sprint’s director of marketing, said Wednesday: “[Manufacturers] bring a new phone every year, and consumers want an upgrade every year.”
But the case for annual upgrades looks increasingly thin, thanks to the slowing pace of evolution in smartphones.
“An upgrade every two years hits the sweet spot between being financially responsible and taking advantage of the new technology,” said Roger Entner, founder of Recon Analytics.
“Ordinary users will do fine hanging onto a phone for two or three years,” said Jan Dawson, analyst at Jackdaw Research. But he cautioned that this won’t be the case for lower-end Android models.
Sadly, those cheaper devices are also less likely to get Android upgrades from Google (GOOG, GOOGL) on a timely basis.
The case for annual upgrades may be stronger with carriers, Entner added. “Carriers should like faster upgrade cycles, because people with newer devices are happier with their phone,” he said. “And they use it more.”
Meanwhile, remember to consider the carriers’ networks too. Sprint’s continues to trail others’ in such large-scale, third-party tests as those released this year by OpenSignal, PCMag, and RootMetrics. And it’s that, not saving $25 or $50, that should determine which carrier gets your business.
If Sprint’s coverage does work for you, then by all means go ahead with Flex. But don’t pay a $5 premium for an annual upgrade you don’t actually need, and remember that you can turn this lease into a purchase after 18 months of paying rent.
Disclosure: Verizon is the parent company of Yahoo
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