Why people are now keeping their phones for over 3 years, according to Verizon's CEO

By Weston Blasi

Verizon chief executive Hans Vestberg said the 'exciting times' when people would upgrade their phones every year are now over.

'Our customer now holds their phone way over 36 months, which is very long'

That was Verizon Communications Inc. (VZ) Chair and Chief Executive Hans Vestberg, discussing how people are no longer upgrading their smartphones as often as they used to in an interview with CNBC on Monday morning.

"I mean, we remember when we changed the phone every year," Vestberg said. "That was exciting times."

While Vestberg was speaking specifically about Verizon customers and not all smartphone holders, he said that one of the reasons he believes people are now upgrading their phones less frequently is because of the overall advancement of the devices.

"The resilience and the quality of the phones has improved quite dramatically over the last five to 10 years, so people can keep them much longer," he said.

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Americans kept their smartphones for an average of 2.67 years in 2023, according to Statista, and that number is projected to increase to 2.93 years by 2027. Back in 2015, Americans upgraded their phones more frequently, every 2.53 years.

The global smartphone cycle is even higher, as people worldwide upgrade their devices every 3.6 years on average, according to research conducted by SellCell, a technology-device trade-in company.

Another reason people might be keeping phones longer is because the devices have gotten more expensive. For example, an iPhone 6 in 2015 was $499. The iPhone 15 today is $799, and the iPhone Pro Max with 1TB of storage costs $1,599.

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Analysts at MoffettNathanson recently gave a number of reasons for the elongated smartphone-holding cycle. For one, companies are packing many new features into software updates that are available to owners of older devices. Plus, battery lives have gotten better, and there hasn't been much innovation in smartphones beyond Samsung Electronics Co. Ltd.'s (KR:005930) foldable phones, the analysts said.

The lengthening of the smartphone-upgrade cycle is of interest right now, as Apple Inc. (AAPL) plans to roll out new artificial-intelligence features that will only be available to people who have the iPhone 15 Pro line of devices, or presumably the new models that Apple will introduce in the fall. For Apple investors, that spurred hope of a "supercycle" in which people would upgrade their phones with more urgency than before.

Interestingly, that wouldn't necessarily be good news for Verizon. "It's not just that handsets tend to be heavily subsidized, and that a higher upgrade rate would therefore mean a much higher total spend on customer acquisitions," the MoffettNathanson analysts wrote ahead of Verizon's report. "It is also that an accelerated handset cycle would mean higher churn; handset purchase occasions are overwhelmingly the most important trigger for changing carriers."

When asked by CNBC whether it was to the "disappointment" of Verizon that consumers are holding onto phones for longer, Vestberg said that wasn't the case.

"We're disciplined as well," he commented, noting that Verizon is thoughtful about how it conducts promotions for various segments.

Vestberg's comments come as Verizon reported its quarterly earnings on Monday, which showed that the company added 148,000 net retail postpaid phone subscribers, but that growth was entirely driven by Verizon's business segment. Its consumer business lost 8,000 wireless retail postpaid phone subscribers, even after benefiting from a Second Number program that allows people to put an additional number on their phones to help separate communications.

Verizon reported that its net income fell to $4.7 billion from $4.8 billion one year earlier.

Emily Bary contributed.

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-Weston Blasi

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07-23-24 1347ET

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