Samsung looks to follow Apple with its own Galaxy leasing program

Threat to carriers is real, but not immediate

galaxy s6 edge plus and note 5

Samsung's Galaxy S6 Edge Plus and the Note 5.

Credit: Samsung

Samsung is expected to launch its own smartphone leasing plan, following the recent lead of Apple in a long-term attempt to wrest customer control away from U.S. carriers.

"If Apple does it, then it must be good enough for Samsung," said Roger Entner, an analyst at Recon Analytics. "The two companies are in an intense fight and Samsung cannot let Apple have a leg up on just about anything."

Samsung did not comment directly on any plans to set up a leasing program, but a spokeswoman did tell Computerworld, "Samsung continuously evaluates trends and assesses business growth opportunities.... We remain committed to growing our mobile business in the U.S."

Samsung launched its newest Galaxy devices on Aug. 21: the Galaxy S6 Edge Plus and Note 5.

Forbes reported Sunday that Samsung may be launching its leasing program for Galaxy devices within the next several months in the U.S., quoting an unnamed industry official.

Apple announced its iPhone Upgrade Program on Sept. 9; it lets a U.S. customer select an unlocked iPhone at an Apple retail store after making an appointment.

The Apple customer chooses a wireless carrier and then pays for the device over 24 months, with the ability to upgrade to the newest iPhone after the first year. Monthly prices start at $32.41 for an iPhone 6S with 16GB. The phone is covered by the AppleCare+ aftermarket warranty, which includes accidental damage coverage.

After the Apple announcement, several financial and technology analysts declared Apple's move as a bold one that allows savvy smartphone users to mostly bypass a carrier. Jan Dawson, an analyst at research firm Jackdaw, called Apple's upgrade plan a game-changer.

More recently, two analysts said the move by Apple and possibly other handset makers, could threaten the consumer-to-carrier relationship and lead to more "churn" -- the practice of customers moving their business from one carrier to another.

But that impact could take years to be felt.

Much depends on the scale of retail operations, which weigh heavily in favor of the carriers. "The average U.S. carrier has 3,000 brick-and-mortar stores, compared to just 266 for Apple, so that's a small number," Entner said. "In the short-term, Apple's program doesn't make a difference."

While Apple's distribution of installment plan phones is limited, Samsung's "will be even more limited, unless Samsung can get some retailers to partner with for distribution," Entner added. Samsung today sells devices through Best Buy and other U.S. retailers, but Entner said that is still a limited channel. He estimated the top four U.S. wireless carriers together have 10,000 retail outlets.

Of course, Apple could eventually convert its Upgrade Program to online, with devices delivered direct to homes. But that prospect seems a ways off.

Tuong Nguyen, an analyst at Gartner, said Apple customers might be more savvy about wanting quick phone upgrades than Samsung customers. What could really change the ecosystem is whether Android phone makers like LG and Motorola jump on the leasing bandwagon. "If that happens, then carriers might be concerned, since phone makers would be taking a little bit of control away from operators," Nguyen said.

"Leasing programs are most attractive to those users that change devices often," added Jack Gold, an analyst at J. Gold Associates. "For Apple, that's a relatively high number, and perhaps not so much for Samsung."

Entner said it makes sense for phone makers to set up installment payment programs to be able to have more control over the replacement of older devices with new devices. "Apple can accelerate its replacement cycle, which was 21.7 months two years ago and is now 27.4 months, and getting closer to 30 months," he said.

The biggest affect of Apple's Upgrade Program will be on used phone sales, Nguyen said. "There's huge potential for second-hand sales with refurbished and gently-used devices turning over every year," he said.

Major U.S. carriers have mostly been quiet about the Apple announcement, and didn't respond to questions about Samsung's expected launch of a leasing plan.

"Carriers aren't really concerned about it yet," Entner said. "In the short-term, it doesn't make a difference. As long as distribution [by Apple and others] is limited, it will have no impact on their bond with the consumer."

Sprint CEO Marcelo Claure did note Apple's Upgrade Program at CTIA Super Mobility Week 2015, when he appeared onstage Sept. 10 and spoke on a wide range of topics.

Claure noted that Sprint introduced a leasing program a year ago, and was the first of the major carriers to do so. "It's great to see Apple copied it yesterday, and others carriers [have] basically copied it," he said, referring to Sprint's program.

This story, "Samsung looks to follow Apple with its own Galaxy leasing program" was originally published by Computerworld.