AT&T extends wait for phone upgrades to two years

AT&T is extending from 20 months to 24 months the time it takes for customers on contract-based plans to earn a fully subsidized upgrade to a new phone.

The move announced Sunday follows an identical one by Verizon Wireless in April. AT&T Inc.'s new policy applies to any customer whose contract expires in March 2014 or later.

Extending the time between phone upgrades saves the phone companies money, since they subsidize each new phone by hundreds of dollars to make it available to customers for $199 or less. AT&T executives had said they planned to rein in spending on phone upgrades this year.

The change reflects the growing popularity of expensive smartphones. Verizon subsidized upgrades after just 13 months until January 2011, just before it introduced the iPhone, one of the most expensive phones on a wholesale basis. Carriers pay Apple over $600 for it.

Dallas-based AT&T is the country's second-largest cellphone carrier. It activated 6 million smartphones in the first three months of this year.

AT&T shares rose 55 cents, or 1.5 percent, to $36 in morning trading. The shares hit a five-year high of $39 in April.

Breaking with industry practices, No. 4 wireless carrier T-Mobile USA ditched its service contracts and phone-upgrade waiting periods in March. It now sells phones on installment plans, giving customers more flexibility on the timing of their phone upgrades.