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AT&T Inc. (T - Analyst Report) – the second-largest telecom operator in the U.S. – will be rolling out a device upgrade service called AT&T Next on Jul 26. The new service will be available at all AT&T stores.

The device upgrade program will allow AT&T subscribers (both new and existing customers) to change their old smartphones or tablets every year without any up gradation fee or down payment. The payment for the handset will be made through monthly installments and the users who want to retain their handsets will not have to pay after 20 months.

AT&T Next device program’s price varies from $15 to $50 per month, depending on the handset bought. Moreover, the customer can pay the entire amount without any fine.

A few days back, T-Mobile US, Inc. (TMUS - Snapshot Report) also launched a similar program called Jump plan, which allows the subscribers to upgrade their handsets twice a year. T-Mobile US will be charging $10 a month for this new service, which also offers insurance coverage on the new phone.

In addition, the company also started another contract-less service called Uncarrier, where subscribers to buy smartphones like Apple Inc.’s (AAPL - Analyst Report) iPhone at $100 and pay the balance in installments of $20 per month for the next two years. The new plan gained huge popularity and helped the company improve its subscriber base.

Hence, we believe that AT&T will be launching AT&T Next, keeping in mind the success of T-Mobile US’ contract-free services. Moreover, we believe that the continuous launch of smartphones and tablets have forced these carriers to come up with such new device programs, that will allow customers to constantly upgrade their handsets at minimal cost, thereby improving customer churn.

AT&T is gradually narrowing the gap, in terms of covering 4GLTE markets, with the country’s leading carrier, Verizon Communication Inc. (VZ - Analyst Report). AT&T has already deployed its service in 328 U.S. markets and plans to cover 300 million people or 90% of its footprint by the end of 2014.

Currently, AT&T Inc. has a Zacks Rank #3 (Hold).

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