• Wireless carriers could sell iPhones without owning inventory
  • Apple may see quicker buying cycles and boost from used sales

Apple Inc. could take a page from the auto industry and lease iPhones, providing a lower-cost option for consumers and carriers that could boost the pace of phone upgrades, Macquarie Securities USA Inc. analyst Kevin Smithen wrote in a note Wednesday.

As the wireless industry moves away from deep discounts and two-year contracts to phone financing, where subscribers pay full price for devices in monthly installments, leasing has become a cheaper option for consumers. If Apple chooses to jump in, carriers, consumers and even Apple itself would benefit, Smithen said. Carriers would be free from millions of dollars worth of iPhone inventory, consumers would have a lower cost option for phone purchases and Apple could sell more devices, according to Smithen, who said he has no direct knowledge of Apple’s plans.

“By setting up LeaseCo arrangements with the big-4 U.S. carriers, Apple could benefit in two ways,” Smithen wrote. Leasing would speed up a buying cycle as users are forced to turn in their phones at the end of the term. This could mean a sales boost of 5 million to 7 million more iPhones a year in the U.S. for Apple, Smithen estimated. And Apple would get a second chance at selling its “certified” used phones in U.S. or international prepaid markets, Smithen wrote.

T-Mobile, Sprint

In a bid to lure subscribers away from larger carriers like Verizon Communications Inc. and AT&T Inc. the smaller shops -- T-Mobile US Inc. and Sprint Corp. -- have moved to leasing offers and Sprint said last month it is creating a leasing company to handle the financing.

Through its own leasing arm, Apple could join the trend by stepping in as a third party, letting carriers offer iPhones on a lease basis without requiring the carrier to buy the phone first.

Just like with cars, consumers could get new models for less. And after a couple years of use, consumers can trade in the old phone for a newer version. Through installment purchases, customers end up owning relatively good phones at the end of the payment period and are less apt to buy a new phone. This has put pressure on sales at phone makers.

For the carriers, particularly smaller players Sprint and T-Mobile, the financial burden of carrying a large inventory of iPhones would be lessened.

“This alleviates a big portion of their capital spending and takes pressure off the balance sheet,” Smithen said in a phone interview. “It frees them to compete more on service prices and features.”

AT&T, Verizon, Sprint and T-Mobile representatives declined to comment. Trudy Muller, a spokeswoman for Apple, didn’t immediately return a call seeking comment.

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