Smartphone replacement rate data from a trio of research companies indicated a recent push by T-Mobile US to lure subscribers with two-year deals could prove successful, though its main rivals AT&T and Verizon are not entirely disadvantaged by three-year contract terms.

Analysts at Kantar Worldpanel Division (ComTech Panel) and Counterpoint Research told Mobile World Live replacement rates in the US are now longer than a decade ago, typically standing at around three years.

Jennifer Chen, Kantar head of technology and entertainment on demand services North America, said granular data shows a quarter of US smartphone owners are “currently using a device bought three or more years ago”, presenting a “substantial number of dormant” buyers.

So there is an opportunity for T-Mobile to begin luring those subscribers with shorter device terms, however Chen also highlighted there is a challenge because the “proportion of devices held” for more than two years among the total installed base of smartphone users in the US had remained stable since Covid-19 (coronavirus) impacts abated.

Counterpoint Research associate director, devices and ecosystem Hanish Bhatia offered a broadly similar estimate of the current replacement cycle, at 33 months rather than the 36 cited by Kantar, and concurred the timeframe had been broadly “stable for a few years now”.

Bhatia noted there “is a range of people distributed between” one year and five year replacement cycles, again backing this as an opportunity for T-Mobile which “will be able to tap” a section of users “who would like the option of quicker upgrade”.

Another potential benefit for T-Mobile is a reduction in costs related to device finance plans due to the shorter terms involved, Bhatia noted.

There are potential hurdles for T-Mobile: a survey of 4,423 US consumers by S&P Global Market Intelligence during Q1 found a broadly even split between those replacing their smartphone every two years compared with those on three-year cycles.

Overall, the research found 28.8 per cent upgrade every two years compared with 22.2 per cent on a three-year cycle. Interestingly, 20.9 per cent said they replace their device annually, 12.2 per cent every four years and 15.9 per cent five years.

It poses a challenge to T-Mobile CEO Mike Sievert’s assertion there are “millions of customers” trapped in three-year contracts.

The three year device deals themselves could prove a challenge to T-Mobile’s strategy, with the contract terms widely reckoned to now be necessary to keep monthly device repayments affordable.

Chen noted there is evidence showing users who hold onto their phones for longer “are more likely to be network loyal”, adding customers of MNOs “have the longest smartphone sales cycles”.

“However, loyalty does get offset by value, where customers with longer replacement cycles are less valuable. Therefore, incentivising shorter sales cycles will drive higher average spend per customer,” she noted.

Chen also highlighted a challenge from smaller MNOs and MVNOs, which often play to users wanting to keep their current device but switch service provider, along with those “coming to the market to buy a device outright”.

The expert does not believe T-Mobile is “out of touch with the replacement cycle reality”, but argued it will need to be aware of variables including the “socioeconomic climate, with inflation leading to conscious spending” along with a “lack of smartphone innovation” steering consumers to lower tiers in place of flagship models.