Here’s How Long Customers Are Waiting To Upgrade Their Phones, According To Verizon CEO

A big problem for telecommunications companies such as Verizon Communications (VZ 0.57%) Consumers aren’t rushing to upgrade their phones these days. In an era where inflation is forcing people to stretch their budgets, one easy way to cut costs is to resist the urge to upgrade from a cell phone that’s working well, and avoid potentially having to sign up for a more expensive phone plan.

Here’s how long consumers are waiting to upgrade their phones and why that could soon change.

Consumers keep their phones for more than 36 months

Verizon CEO Hans Vestberg said in a recent interview with CNBC that his current customers are keeping their phones for “well over 36 months,” compared to the past, when it was normal to upgrade every year. The company offers promotions for 36 months to help pay for a new phone, but Vestberg’s statement suggests consumers are keeping them even after the promotional period ends.

Even though Verizon increased the length of its payment terms a few years ago, it is still possible for customers to pay off their phones early. The long period of time consumers have to wait to upgrade is indicative of both current economic conditions and the lack of urgency to upgrade. Consumers see no incentive to upgrade early, perhaps even after they have paid off their phone in full.

Why an upgrade cycle could be coming soon

Even if the economy doesn’t improve anytime soon and fears of a recession grow, customers might at least have an incentive to upgrade their phones soon.

Apple Apple is launching new phones with artificial intelligence (AI) capabilities that could prompt consumers to upgrade their phones sooner rather than later. While some of Apple’s new AI features may not be available until next year, users will need to upgrade to the latest and most powerful iPhones to take advantage of them, including image generation and a more advanced assistant.

Critics say Apple is doing this to force customers to upgrade, triggering what some are calling a potential “supercycle” of upgrades. Not only could Apple benefit from more upgrades, it would also be good news for Verizon and other telecom companies that would lock customers into new contracts and plans.

In Verizon’s most recent quarter, which ended in June, its total operating revenue of $32.8 billion rose just 0.6% from a year earlier, with the company blaming some of the increase on “lower upgrade volumes.”

Should You Buy Verizon Stock?

A refresh cycle, or “supercycle,” could be just what Verizon needs to accelerate its growth rate and attract much-needed investor attention. Over the past three years, the stock has fallen 28%, making it an overall disappointing investment. With investors focusing on growth stocks, Verizon has simply fallen out of favor in the market.

But with a high dividend yield of 6.5% and a potential catalyst on the way for its revenue, now may be a good time to add Verizon to your portfolio, perhaps before its growth rate improves and before it appears on the radar of investors who may have been waiting for another reason to invest in the stock. While Verizon isn’t a very powerful growth machine, it could be a solid income stock to buy and hold for the long term.