Analyst: AT&T to aggressively woo new subscribers with Apple iPhone service fee discounts

“Apple’s iPhone is slated for shipment in June, but the device raises several important questions because it represents a new market segment for the Cupertino-based company. Research firm Piper Jaffray’s senior analyst Gene Munster mulls over these questions which range from the economics of the Cingular/Apple partnership to the addressable market of the iPhone, addressing each while examining the Apple/iPhone story,” MacNN reports.

MacNN reports, “Each iPhone customer will need to sign a two-year contract with Cingular, regardless of which store they purchase the handset from, and another Piper Jaffray analyst for the Mobile space believes Cingular will not subsidize the iPhone… ‘We believe [that] Cingular will be aggressively attracting new subscribers during the launch of the iPhone by reducing service fees and announcing discounts to iPhone customers,’ Munster said.”

MacNN reports, “Apple and Cingular have signed a multi-year exclusive contract for the iPhone, but Munster says it is still unclear whether the deal applies to all iPhone models released throughout the duration of the contract. Cingular’s president of national distribution Glenn Lurie in mid-January, however, said that Apple’s contract with the cellular carrier covers ‘all models’ of the iPhone including several other devices in the works that could debut in the near future. ‘We believe Apple will release new iPhone models quickly (as the company has with the iPod) and these devices will eventually be open to other wireless carriers, possibly even before the Cingular contract expires.'”

“The analyst estimates that a 3G-based iPhone would cost an additional $100, but that Apple will eventually reap the benefits of economies of scale and favorable component markets, ultimately releasing a 3G model. Despite the current lack of 3G support, Apple’s iPhone offers WiFi support as part of its broad feature set,” MacNN reports.

Much more in the full article here.

Related articles:
AT&T: iPhone will NOT come with 18-months of free service – January 26, 2007
Jim Cramer: AT&T to promote Apple iPhone with 18 months of free service – January 25, 2007

32 Comments

  1. I really believe we’ll be looking at Apple’s first flop in a long, long time. Don’t get me wrong, I think the iPhone has a lot of potential. But it has some things working against it.

    1. Cingular. You can substitute Verizon, T-Mobile, Sprint, whomever. It doesn’t matter. None of them care about the customer.

    2. The platform isn’t open. When Steve Jobs announced it ran OS X, there was a loud cheer of approval at the keynote. Why do you think people cheered? Because everyone was thinking about getting their favorite app to run on the iPhone. Then Apple dropped the bombshell that it wouldn’t be open. I can’t believe Apple would be this dumb. I believe Cingular is behind this. Why? Because it would take about 6 hours for someone to port Skype over to this thing and have it use the wi-fi to make phone calls. And that cuts into Cingular’s profits.

    3. Price. $500 is just too expensive to get a phone that is crippled. Like I said, the iPhone has potential. But someone is holding it back. I hope it isn’t Apple.

  2. i don’t really care about surfing the web on this thing… and I’m not even sure I’d even use the iPod part that much, since I have 30Gig iPod already…

    I just want a phone that is EASY TO USE.
    I want a phone, that my parents can buy and not call me 10 times a day to ask questions about how to use it
    I want a phone that keeps phone numbers synced with all my computers..

    Surfing the web? Getting e-mail? Only if it’s cheap.. and I mean REALLY cheap.

    Look at the cost of providing wired phone service now.. anywhere between $15.00 and $50.00 a month… Cell service, regardless of what else it provides, shouldn’t cost much more.

  3. Right, an easy-to-use phone that blows the competition (and I mean all of them) out of the water like a 10-ton torpedo will be Apple’s first flop. Look, I don’t have a cellphone and one of the reasons I don’t is because their ease of use bites big monkey butts. Everyone I know, however, does have a cell phone. Aside from dropped calls and signal quality, what is their next biggest complaint? Ease of use. People who think this is going to fail just have no clue how big cell phone angst really is. Do you live in a cave somewhere, bro? I mean, if I can pick up on this, why can’t you?

  4. Odd post there Jeff, very odd. Are you really sure about what you were saying?

    If Apple can put the power of web, media and communication into the hands of non-geeks with ease, then iPhone is the revolution Jobs described it as.

    From what I have seen that’s exactly what it does…and so does Pogue, Levy, Mossberg and a few other minor commentators…

  5. I really hope Cingular/Apple won’t be refusing service to current Cingular customers who purchase the handset at full-retail. There seems to be an awful lot of emphasis on the 2-year contract, an abnormal amount. I mean they usually say “2yr required for the discount pricing” but everything I read says a contract is needed to use the phone AT ALL.

    Is that Cingular’s part in the deal? Is that why they agreed to give Apple an unusual amount of control? They will only sell this to new customers?

  6. If anyone just wants an easy-to-use phone, and that’s it, I don’t think the iPhone is going to do it for you. Whether it’s easy to use or not, as a phone, and inspite of Apple’s insistance that it’s a feature-laden cell phone, it’s not. Its an up-and-coming PDA that also does telephony.

    If you just want a phone then the iPhone is clearly too much money to acheive that singular goal, and just plain too much phone all the way around. Buy yourself an LG, Nokia, Samsung, whatever, and avoid setting yourself up for disappointment at a high price.

    I, on the other hand, want a true PDA, not a cell phone that can play music, a true PDA, and the iPhone, inspite of its name, comes the closest to a full featured PDA and cell that I’ve ever seen ever. If I can use the wi-fi features without activiation, and get good plug-n-play sync with my Mac running OS X, then I’m in heaven – screw the phone, unless ATT gets service out here of course, then I’ll officially become a switcher.

  7. You really need to look at what you are saying before putting them in words.
    1. No company has a perfect record of customer service. Prove me wrong.
    2. The platform isn’t open. Is the MS platform open? The answer is no. It only works on MS and no one else. The tight integration between software and hardware is what distinguishes between Apple and MS. Apple provides the user experience with ease of use. Apple makes the complicated uncomplicated. Whereas, MS makes the complicated more complex. If you need proof of this, just take a look at Vista: over 5 years in the making with over $5B in budget and with more engineers than Apple has. But, what did Vista really bring to the user experience? More frustration.
    3. Too expensive. In terms of what? It is expensive if you only look at the $$$$$. But you break it down, you will see the real numbers. You are lookin at it from only one aspect of the product. It is an iPod, a phone, and an internet communication device all rolled into one. If you look even further, you will see the details:
    1. 4GB iPod: $199
    2. iPhone: ~ $399
    3. internet: assumed as 0 for caclulation purposes

    When the crackberry/treo came out, there prices were astronomical. At Sprint, thre Treo 700p is $699 without discount. The crackberry 703e is $499, again, without discount. Both phones do not officer a 4GB mp3 player. So that question is, which one is really more expesinve. I’ll leave that up to you to figure out.

    AJ

  8. I would be really upset if Cingular, or AT&T or SBC (who they really are) states this is for new subscribers only.

    I would not put it past SBC. I can see that teh promo is not for existing subscribers and we have to pay full price.

  9. That is a big difference in price, when you do not factor in carrier subsidies. Since Apple won’t let Cingular discount the phone, then I think you should compare it to the retail prices of the other phones. And since most of those subisidies usually imply some sort of wonderful mail-in rebate than I really have to wonder if those prices really are correct. For example, I signed on to Cingular about 2 years ago and bought what I thought was a $30 phone. No, I had to pay up front the full cost of the phone ($60) and apply for the rebate through the mail. About 8 weeks later, I got the “rebate” which was a lousy Visa card with 30 bucks on it. Eventually I picked up the RAZR when it came down in price. But if you buy a RAZR now, with no subsidies, it will cost $250. Now that’s half the price of the iPhone. And I don’t know about you, but now the iPhone is looking like a bargain.

  10. Cingular’s president of national distribution Glenn Lurie is so out of the loop. I have it on good authority (Verizon customer service rep Lisa) that Cingular is having serious trouble in finding someone to manufacture the iPhone. Not to mention that rollover minutes will soon be a thing of the past.

    Lisa’s reaction to me telling her that I can hardly wait for June to get out of my Verizon contract and go with Cingular and an iPhone, was “Good luck!” She reads from her internal telecom newsletters that no one seems to want to make an iPhone for Cingular, and that it is in fact a separate thing from Apple’s iPhone. Furthermore, Apple will have to create their own network before anyone will be able to use their model of the iPhone. She didn’t want to hear me say anything to the contrary so I just told her to wait and see, and hung up.

    Can you believe that?

  11. Cingular is having serious trouble in finding someone to manufacture the iPhone.

    ???? what are you talking about,

    Apple will have the phones shipped to them for distrubution, you don’t really think any one other than apple will build the iPhone???

  12. AT&T has already stated that they will not be aggressively discounting their phone service just to sell iPhones.

    They don’t have to. Cingluar will sell as many iPhones as Apple can provide. No discounts are necessary.

    Stupid analysts.

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