Two-year contracts were declared dead last month when Sprint became the last of the four major carriers to finally abolish them. However, Sprint made an about face last week by quietly bringing them back.
As of last Friday, the carrier added a fourth option for purchasing a new phone. You already had the choice of paying either the full retail price, entering into a 24-month installment payment plan, or a monthly lease. Now you also have an additional choice, which is to pay a discounted price in exchange for a two-year agreement, as if it never went away. For example, the brand new Galaxy S7 can be had for $200 instead of the full retail price of $650.
Why the sudden change of heart? Sprint told Fierce Wireless, “We listened to our customers and are giving them more choices to get their new device. Sprint is the only carrier to offer the most choices to obtain a new device — lease, installment bill, two-year contract or pay full retail price.”
It should be pointed out that customers who chose the two-year contact route will cough up more money per month for the service since the discounted price of the phone has to be subsidized over the contact term. So if you were to purchase the Galaxy S7 with a two-year contract, you would pay $200 upfront, and your monthly cost would be $65 with 1GB of data. If you paid the full retail price of the phone, and spread it out over 24 monthly installments, your monthly cost would be $67.09 for the same 1GB Plan. The $67.09 is made up of $40 for the service and a $27.09 monthly payment towards the purchase of the phone.
The two-year cost with the contract is $1,760, but the total cost without the contract would be $1,610. That’s a savings of $150, but it increases even further if you keep the phone beyond two years. Those who paid the full retail price will only pay $40 per month since the phone will be paid off. Two-year contract customers will continue to pay $65 even after the contract has been fulfilled.
Interestingly enough, two-year contracts weren’t completely dead at Sprint, but it was on life support. Last month, Sprint told Digital Trends that new customers would no longer be able to purchase a device under a two-year contract. However, existing customers would still have the option as a last resort if the carrier wasn’t able to encourage them enough to switch.
Bringing back two-year contracts is an interesting move since it would appear that ditching them hurt sales growth. The carrier touted its highest subscriber gain in 3-years during its fiscal third quarter, but that period closed on December 31, 2015 — before the change took effect. It’s possible that Sprint is now experiencing weaker numbers than it had anticipated going into the new year.