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Verizon Sees Handset Subsidies as a Long Term Game

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Although two of its rivals are moving away from the classic handset subsidy model, USA based Verizon Wireless has indicated that it is likely to stick with the proven model for the time being.

T-Mobile USA relaunched itself as an uncarrier, where the handset subsidy is implicitly paid for, typically over a 24 month period, while AT&T allows handset upgrades before the contract expires, if the customer pays a monthly premium.

At a bank conference, Verizon Communications' Chief Financial Officer, Fran Shammo however said that from their perspective, the subsidised handset is here to stay.

Verizon offers an AT&T style early upgrade option, but also limits it to those customers with a good long term credit record. The main worry is that customers who leave early might not pay the early termination fee, and Shammo admited that in such a situation, the chances of recovering the money are "next to nil".

For that reason, they think the classic handset subsidy model is here to stay, if only for economic reasons.

"So there is a lot of risk with the installment sale that has to be monitored." Shammo said.

"We believe that the subsidy model is an extremely good model. It has done wonders for us in this industry," Shammo added. "So I think to abandon that I think is a mistake. But I do think that there are customers out there that want that installment sale."

On the web: Cnet

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Tags: verizon  USA