AT&T's Lumia 900 Price Cut: Sign of Trouble or Part of the Plan?

Move Could Put More Users on LTE Network, But Raises Issues About Windows Phones

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AT&T and Nokia say price cut is routine promotion.
AT&T and Nokia say price cut is routine promotion.
After investing more to launch Nokia's Lumia 900 than it did for the iPhone, AT&T just slashed the price on the smartphone by half.

As both Nokia and Microsoft looked to regain a foothold in the U.S. smartphone market and AT&T hoped to catapult a third competitor to Google and Apple with the device, the price drop on Lumia's sole carrier has been seen as a last-ditch ploy to goose sagging sales just months after launch. On top of that , according to The New York Times, "Lumia 900 owners would not be able to upgrade its software to Windows Phone 8."

Nokia has not released sales figures, though rave reviews for the device were believed to sustain healthy sales initially. The phone was introduced at $99, which meant it was already priced as a more affordable option to market leader iPhone or high-end Samsung smartphones. As of this past weekend, it is available for $49.

"We continue to be pleased with sales of the Lumia, which is part of our industry-leading portfolio of smartphones," an AT&T spokesman said via email. "We routinely offer promotions on handsets."

A Nokia spokeswoman calls price adjustment three to four months after a phone launch "normal" for the industry and points to a similar $50 drop for the Samsung Galaxy S II by AT&T last summer. "This isn't unusual at all -- it's just the normal lifecycle management of a phone in the current smartphone market," she said via email.

The Lumia joins a handful of HTC, LG and Samsung LTE devices at $49 or cheaper.

If sales aren't the issue, what is ? Forrester mobile analyst Charles Golvin looks to AT&T's top priority these days: its newly installed high-speed LTE mobile network. The Lumia 900 runs on that new network. "From AT&T's side, they want to put more LTE phones into consumers' hands, even though the network is still in process of being built out," Mr. Golvin said. "It's like building an entirely new freeway next to the old one. It's not very useful unless there are cars on it."

"It's important that LTE not be synonymous with the most expensive devices," he added. "It's important to have all price tiers, so LTE is open to the widest possible audience." Getting customers to spend more on smartphone data packages is the No. 1 growth driver for AT&T and its peers.

In Nokia's defense, the Lumia launch in April has coincided with some modest gains for Microsoft in U.S. smartphone market share. Microsoft has long been bleeding U.S. market share to Apple and Google's Android and, in May, soon after Lumia hit the market, had a tiny gain for the first time all year. Microsoft was still the No. 4 U.S. smartphone platform by far in May, according to ComScore.

AT&T kicked in as much as $150 million to launch the Lumia 900, Ad Age reported in April, and also invested heavily in its retail stores to get consumers familiar with the new smartphone software.

Lumia 900 was also up against two other big smartphone launches: the HTC One and Samsung Galaxy SIII. And that 's among a pool of mobile users in the U.S. that largely already own a smartphone and have already picked a favorite among iPhone or Android, said independent mobile analyst Chetan Sharma.

"The remaining consumers may have never used a smartphone," he said. AT&T has the highest volume of smartphone owners among its subscribers than any of its competitors.

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