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AT&T CEO says he likes concept of handset financing

While it may be premature to call an end to smartphone subsidies, AT&T appears to have an open mind about an age-old practice.

Verizon iPhone 4S, Virgin iPhone 4, and AT&T iPhone 4
The Verizon and AT&T iPhones carry hefty subsidies, while consumers share the burden with the Virgin iPhone. Josh Miller/CNET

AT&T has looked at the idea of making consumers pay for their own smartphones in monthly installments, according to CEO Randall Stephenson.

The idea of handset financing runs counter to the current model of subsidizing phones at a lower initial price in exchange for a higher monthly bill. Under handset financing, consumers would pay an upfront fee for the phone, and then steadily pay off the phone's cost over the next few months.

In exchange, the consumer would presumably get a lower rate on their phone bill, and could conceivably leave whenever they want after paying off the phone.

T-Mobile has already used it to great effect, and CEO John Legere has already hinted that the option would be available for the iPhone, which the carrier plans to offer later this year.

Stephenson, speaking to analysts during an earnings conference call today, said handset financing was an option he had looked at several times, and is one that he likes. He added he would monitor how the offer is received at T-Mobile before making any decisions.

The high monthly fee for contract service has many looking at no-contract options, something that AT&T was unable to address in the fourth quarter. While it added a net 780,000 contract subscribers in the period, it lost 166,000 prepaid customers.

T-Mobile and MetroPCS are expected to merge later this year, creating a more formidable opponent that will go after no-contract customers. Stephenson said he doesn't see much of an impact this year, but could see the combined company making moves that would require a response in 2014.

With the T-Mobile-MetroPCS and Sprint-SoftBank deals in the works, 2013 promises to be chaotic.

"In terms of industry dynamics, it should be an interesting year," he said. "It's kind of hard to estimate what's going to happen."