AT&T said on Tuesday that effective July 26 its customers will be allowed get a new AT&T smartphone or tablet every year with no down payment, no activation fee, no upgrade fee, and no financing fees.
The catch is that customers must pay full price for the devices. Under contract plans, the cost of the devices is generally subsidized.
The deal requires customers to sign a 20-month, zero percent APR installment agreement and have qualifying credit.
AT&T's offer is available to new customers and existing customers who are eligible for an upgrade.
(Read more: Leap Wireless shares double as AT&T agrees to $1.2 billion acquisition)
Last week, T-Mobile US said that customers would be allowed to upgrade phones every six months and it unveiled a family plan for prepaid customers as it moves to lure customers away from its three bigger rivals.
Verizon Wireless andSprint Nextel offer phone discounts in exchange for tying customers to two year contracts and typically do not allow phone upgrades during that period.
—Reuters contributed to this report.
First published July 16 2013, 8:30 AM