Phone Financing Good for Carriers, Fitch Ratings Says

Carriers benefit financially from providing cellphone installment plans, Fitch Ratings said in a news release Thursday. “The advent of cellular equipment installment plans (EIPs) and the securitization of pools of the payments on those plans diversifies cell phone carriers' financing, provides liquidity and can lower carriers' overall financing costs,” it said. “EIPs can also provide transparency to consumers in terms of device cost, rather than having carriers heavily subsidizing it.” Since 2013, carriers have moved away from subsidizing customer phones, replacing that practice with financing costs with loans or leases, it said. “This creates a distinct receivable, separate from the contract on the wireless service, which can be pooled into a securitization. The carrier may then issue debt with exposure to its broad book of customers.” Carriers like Sprint are paying close attention to equipment-leasing costs (see 1603090024).