Free iPhone 6 in return for 2-year contract and trading in used phone

The iPhone 6 and the iPhone 6 Plus are shown during an Apple event at the Flint Center in Cupertino, California, September 9, 2014. REUTERS/Stephen Lam

WASHINGTON: Verizon Communications will give subscribers who trade in an old iPhone a free iPhone 6 in exchange for a two-year contract, the country's largest wireless carrier announced hours after Apple Inc unveiled the widely anticipated device.

The announcement came as critics speculated that Apple's newest phone, starting at $199 with a two-year contract, would not be competitive as more carriers eliminate contracts and unbundle service charges from the cost of devices.

Analysts say that by making the cost of devices more transparent, equipment financing plans make expensive handsets like the iPhone less appealing. On the other hand, the plans allow customers to pay for devices in installments, making pricy devices like the iPhone more accessible.

Customers who trade in an iPhone 4, 4s, 5, 5c or 5s in working condition will receive a $200 gift card to pre-order the 16-gigabyte version of the newer model, Verizon said in a statement. The offer does not apply to Apple's other new phone, the larger iPhone 6 Plus.

Verizon has been more reluctant than competitors to dive into equipment financing, and its promotion indicates its attachment to the older contract model, which binds subscribers to the carrier for a fixed term, said Jan Dawson, analyst at JackDaw Research.

"There is an inherent risk in the shift to installment billing that it creates more loyalty to the device than to the carrier," said Dawson.

"Verizon sees the value of the two-year contract in that tying a device to a two-year plan can prevent churn," said Dawson.

He pointed out that new device releases are major factors for subscribers in deciding whether to switch carriers.

As the market for new smartphone customers shrinks, carriers have been competing aggressively for subscribers, slashing prices and engaging in creative promotions to poach each others' customers.

On Monday, T-Mobile announced it would beat any other major carriers' trade-in rates and give customers a $50 credit as well. - Reuters