It’s official. Leasing and installment payments are in, contracts are out.
According to an internal memo obtained by Android Central, Sprint plans to shift gears into promoting its Lease and Easy Pay offers for smartphone users, though tablets will still be available for purchase on a subsidy.
The move comes as Sprint has sought to establish itself in the device lease space with its new device lease company and is consistent with previous comments that the carrier would kill contracts by the end of 2015.
In November, Sprint announced a $1.2 billion lease back deal and 2.5 million device tranche to jumpstart its new, independent device leasing company, Mobile Leasing Solutions. A second tranche is expected sometime in the first quarter 2016.
At the time, Sprint CFO Tarek Robbiati said the deal would “immediately improve the company’s liquidity position” and create a “repeatable structure to sell future leased devices.”
With Sprint now promoting device leasing over subsidized phones, the lease company will likely see another boost.
Despite the lack of two-year contracts, however, it is important to note that customers are still tied to their service through the lease or installment term. Those who opt out before that term is finished face penalties in the form of having to pay off the remaining balance for the device in one lump sum.
In December, several consumer groups accused T-Mobile of misleading advertising practices for promoting its services as “no contract” obligations when the majority of month-to-month services are tied to two-year equipment financing plans that carry financial penalties for early termination.
The consumer groups asked regulators at the Consumer Financial Protection Bureau to investigate, saying they were “concerned that, without regulatory intervention, consumers will continue to enter into service agreements expecting a no obligation, month-to-month arrangement only to find that they are saddled with hefty equipment-related expenses if they terminate service.”
At the time, analysts suggested consumer confusion surrounding the end of traditional two-year contracts was to blame for the accusations.