AT&T’s Next plan
In the last part of this series, we learned that AT&T’s (T) wireless revenue increased marginally during 2Q15. The year-over-year (or YoY) growth in equipment revenue more than offset the decline in the segment’s service revenue. We also learned that installment billings of AT&T’s Next plan aided in the growth of equipment revenue during the quarter. The popularity of the plan has increased significantly on a YoY basis. New smartphone users choosing the plan increased from ~51% in 2Q14 to ~68% in 2Q15.
Next has evolved as an attractive financing option for AT&T’s postpaid customers. As we can see in the above chart, Next’s take rate has continued to rise evenly on a sequential basis since 4Q14. Customers on the Next plan represented ~37% of the company’s smartphone base at the end of 2Q15.
The company expects the penetration of the Next plan in the smartphone base to increase in the future, especially considering the high Next take rates and relatively lower overall penetration of the plan in its smartphone base in 2Q15.
About AT&T’s Next plan
AT&T’s Next is an installment plan to purchase devices. It is similar to Verizon’s (VZ) Edge and T-Mobile’s (TMUS) Jump. Customers can buy a device on this plan without making a down payment, though it is subject to certain credit requirements. Customers can pay for a smartphone in equal monthly installments of up to 30 months. They can also upgrade their devices during the period.
Instead of directly investing in AT&T, investors can get diversified exposure to the company by investing in the Technology Select Sector SPDR Fund (XLK). The ETF had a ~4.6% exposure to the carrier on June 30, 2015. Also, investors can consider the iShares Core S&P 500 ETF (IVV). The ETF had a ~1% exposure to the carrier on the same date.