AT&T (NYSE: T) is ramping up the battle for wireless customers with a new plan announced Tuesday that lowers up-front and update costs for smartphones as well as tablets.

Called “Next,” the program follows similar offerings from T-Mobile with a variety of lower-cost options, including no fees for activation and upgrades as well as no financing charge.

Customers can update every year to the latest devices with:

  • No down payment.
  • No activation fee.
  • No upgrade fee.
  • No financing fee.

Devices can be paid for over a 20-month installment plan.

The move is similar to that initiated by rival T-Mobile US Inc. in March.

“With AT&T Next, customers can get the newest smartphone or tablet every year with no down payment. That’s hard to beat, and it’s an incredible value for customers who want the latest and greatest every year,” said Ralph de la Vega, chief executive officer of AT&T Mobility.

After 12 payments, customers can trade in the phone or keep the device after 20 months of installments, Dallas-based AT&T said in a statement today.

T-Mobile was the first major U.S. carrier to introduce an installment plan as part of a campaign aimed at breaking from the industry’s focus on two-year contracts, which subsidize the cost of phones for customers. Last week, the Bellevue, Washington-based company announced a service called Jump, giving users the option to upgrade phones twice a year for a $10 monthly fee.

“The benefit of these plans has much less to do with acquiring customers than it does with retaining them,” said Michael Cote, an industry strategist with the Cote Collaborative in Chicago. Customers on installment plans tend to be more loyal because they are paying every month for their next upgrade, said Cote.

The tactics have struck a chord with some T-Mobile customers. The fourth-largest U.S. wireless carrier reversed a three-year streak of monthly subscriber losses last quarter, reaching a key milestone in its turnaround plan, according to two people familiar with the company.

‘Very Competitive’

AT&T’s new service, which starts July 26, requires customers to pay a monthly installment of $15 to $50, depending on the device selected. For example, an Apple Inc. iPhone with with 68 gigabytes of storage, which costs $849 without a two- year contract, would be about $42 a month for the first 12 months.

“It’s a very competitive market, you continually have to innovate,” De La Vega told Bloomberg news. “Our customers tell us they want the capability to get a new device every year. This makes the highest of the high-end phones available to anyone,” De La Vega said.

As the wireless industry endures a slowdown in subscriber growth, AT&T has been looking to expand into other areas, including the pay-as-you-go market. Last week, it agreed to buy Leap Wireless International Inc. for about $1.2 billion. The move would give AT&T 5 million prepay customers and additional airwaves to bolster service in more areas.