Record Number of Consumers Waiting to Upgrade Their Cell Phones

(Bloomberg) -- Wireless customers are hanging on to their old phones longer than ever.

That’s the message from Verizon Communications Inc., which said its upgrade rate fell to a record low last quarter -- a harbinger of tough times ahead for the iPhone and other devices.

Faced with $1,000 price tags on moderately improved phones, consumers may be waiting to hear more about new 5G networks before committing to new models. The faster, more advanced services won’t roll out in earnest until 2020.

Record Number of Consumers Waiting to Upgrade Their Cell Phones

“Incremental changes from one model the the next, hasn’t been that great, and it hasn’t been enough of an incentive,” Verizon Chief Financial Officer Matt Ellis said in an interview Tuesday after the company reported fewer-than-expected new customers for the first quarter. He expects replacement rates to be down for the year.

Apple Inc., the largest U.S. mobile-phone supplier, has been under pressure as sales of its popular device slow in major markets. Wells Fargo analyst Aaron Rakers cut his forecast for iPhone shipments to 40.4 million from 44 million for Apple’s second quarter, which ends this month.

The trend started nearly five years ago, when carriers pinched by costly promotions stopped offering deeply discounted phones in exchange for two-year service plans. Instead, they marketed installment payment plans for new phones priced at up to $1,000.

Some Apple fans, who flocked to the iPhone 6 in 2014 and 2015, its biggest sales year, say the device reached a design peak with that model, making upgrades less necessary.

“Our first data point from Verizon is not a positive sign for Apple,” said Walt Piecyk, an analyst with BTIG LLC. “It’s been more than four years since the iPhone 6 ‘super cycle,’ and the replacement cycle continues to lengthen.”

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