That’s how long Verizon’s CEO says customers are waiting to upgrade their phones

A big problem for telecom companies like Verizon Communications (See 0.57%) Nowadays, consumers are in no rush to upgrade their phones. At a time when inflation is forcing people to stretch their budgets, an easy way to keep costs down is to resist the urge to upgrade to a well-functioning cell phone and avoid possibly having to get 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 customer keeps their phone for “well over 36 months” compared to in the past when it was normal to switch a phone every year . The company offers promotions for 36 months to help pay for a new phone, but Vestberg’s statement suggests that consumers are keeping them even after the promotional period ends.

While Verizon increased its payment terms a few years ago, it’s still possible for customers to pay off a phone sooner. The length of time consumers go through before upgrading their phone is indicative of both current economic conditions and a lack of urgency to upgrade; consumers see no incentive to upgrade early, even after their phone is fully paid off.

Why an upgrade cycle could be coming soon

While the economic situation may not improve anytime soon, with fears of a recession on the rise, there could at least be an incentive for customers to upgrade their phones soon.

Apple is releasing new phones with artificial intelligence (AI) capabilities that could give consumers the incentive they finally need to upgrade their phones sooner rather than later. Even though some of Apple’s new AI features may not appear 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 believe Apple is doing this to force customers to upgrade, triggering what some call a potential upgrade “supercycle.” Not only could Apple benefit from more upgrades, but this would also be welcome news for Verizon and other carriers that would lock customers into new contracts and plans.

In Verizon’s most recent quarter, which ended in June, total operating income of $32.8 billion rose just 0.6% year over year, with the company blaming in part on “lower volumes of upgrade”.

Should You Buy Verizon Stock?

An upgrade cycle, or “supercycle,” could be just what Verizon’s business needs to accelerate its growth rate and attract much-needed attention from investors. Over the past three years, the stock has fallen 28%, making it an overall disappointing investment. As investors focused on growth stocks, Verizon simply fell out of favor with the market.

But with a high dividend yield of 6.5% and a potential catalyst on the way to its top line, now may be a good time to add Verizon to your portfolio, possibly before its growth rate improves and before it hits the radar of investors who may have been waiting longer for a reason to invest in stocks. While Verizon may not be a strong growth machine, it can create a solid income stock to buy and hold for the long term.