My telecom provider is offering a discount before a predicted drop in phone price; why?

Question

Currently I have a 2 year phone plan that ends in early October. This plan came with a smartphone – an iPhone SE – so every month I pay for both minutes/data and the phone. Since Apple predictably presents new products in September, in October the prices of all the older iPhones generally drop considerably. This is why my phone plan starts in October.

Recently, my telecom provider sent me an email offering discounts on various phones, provided I renew my phone plan for another 2 years with them. In October (after the end of my current phone plan) I could switch providers (and I plan to do so if I can get a better deal elsewhere). Among these offers is an option where I will have the exact same phone plan (with the same monthly cost) except with an iPhone 8.

Ordinarily, I would consider this a great deal. However, this deal ends August 29 (just before the Apple announcements in September) and the combination of artificial time pressure and aggressive marketing (multiple emails/phone calls after two years of just a monthly newsletter) to have me renew my phone plan now makes me think the phone company is so keen on having me renew now it has to be in their interest rather than in mine.

Why are they offering this discount?

There are three possible scenarios:

1. The price they are offering now is lower than it will be in October.
   I would think this a stupid move for a for-profit company.
2. The price is the same as it will be in October.
   This seems more reasonable but if I take the same offer in October I will have a contract with them for one more month. This also doesn't seem in the interest of the company.
3. The price is higher than it will be in October, yet lower than it is now.
   This seems the most reasonable explanation of the motivations of the company, but it would mean that the one-year-old iPhone 8 would become cheaper than the one-year-old iPhone SE (which was supposed to be a cheaper model). I would find that very surprising.

Note that this question is about the motivations of the phone company. Obviously I want to know this because I am trying to decide whether or not to take the discount, but my question is not "should I take this deal", but rather "why is the company offering this deal".

Answer 1

There are many possible reasons, for example:

• If you are taken by the features of the new iPhones and want one, you have to pay through the nose to get out of this contract you just signed.
• prices for the old iPhones will drop significantly when the new ones come out. You basically bought the old one for a higher price.
• by keeping your contract date just before the new iPhones come out, they have you in the same place two years from now and can milk you again.
• with the new phones, there will be new plans from other providers and you might get the idea to change providers.

Answer 2

2-years of profit from your contract exceeds the cost of the discount (if any) they are actually providing you, keeping you under contract is their motivation. To that end, providing you an incentive (real or simply perceived) to sign up for another 2-years starting now makes a lot more sense than risking you switching providers at end of your contract.

We don't know the inner-workings of Apple's arrangement with your provider to assess how much of a deal this is from their perspective, but I'd wager your provider is already getting a discounted price in anticipation of new phones. Alternatively, they could just be trying to clear inventory before demand dips, with the added bonus as @Aganju mentioned of some people paying to upgrade sooner than 2-years based on the new shiny features.