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US carriers' move to installment plans seen accelerating iPhone upgrade cycles

The shift of U.S. carriers from contract subsidies to installment pricing for smartphones could speed up upgrade cycles for Apple's iPhone, according to a new memo by financial services firm Piper Jaffray.

Such plans let people pay no money down, and more importantly let some people upgrade ahead of a previously standard two-year window, analyst Gene Munster said this week in a research note, a copy of which was provided to AppleInsider. It's estimated that in the third and fourth quarters of last year, 21.4 million and 32.6 million American smartphone owners were on installment plans respectively.

While not all of those people may be eligible for an early upgrade, or choose to take the option if they are, even a portion of them might be enough to invigorate iPhone numbers.

Munster calculated that if 30 percent of people plan to upgrade at the 12-month point, that implies 6.4 million upgrades in the third quarter of 2015, and 9.8 million in the fourth quarter. Assuming U.S. iPhone marketshare of 45 percent in 2015, Apple could theoretically see 2.9 million extra iPhone upgrades in the third quarter and 4.4 million in the fourth quarter. In the June quarter, Apple controlled 44.1 percent of the U.S. market.

Another complicating factor is that because carriers have been rolling out installment plans on a relatively gradual basis, for instance by letting old plans lapse, Apple may not see any sudden surges but rather an overall improvement.

Early upgrades also frequently demand that person trade in their old device, and millions of people trading in year-old iPhones could eat into Apple's own sales of older models, particularly if resold units undercut the company's prices. The net effect though could be to skew Apple's iPhone sales further towards the high-end, increasing the average selling price, Munster commented.

Apple is expected to reveal new phones — the iPhone 6s, 6s Plus, and possibly a 6c — as soon as Sept. 9, presumably shipping them later in the month. The devices could be the first iPhones to see a meaningful contribution from people on installments.