Analyst estimates Apple reaping huge iPhone profits from AT&T deal

“Apple’s iPhones could be far more profitable than we thought. Based on an analysis of iPhone revenue that Apple reported yesterday, Piper Jaffray analyst Gene Munster estimates today that carrier partner AT&T pays Apple $18 per month for each of its iPhone subscribers. Over the course of a two-year contract, that’s $432-per-sub payment ,” Dan Frommer reports for Silicon Valley Insider.

“Assuming a $400 iPhone and a $18 monthly contribution from AT&T, Apple would record $832 in revenue over two years per phone,” Frommer reports. “At Apple’s current U.S. run rate of about 1.8 million iPhones per quarter, that’s about $1 billion in gross profit per quarter (which will be recorded over two years).”

“This morning, AT&T said that it has activated 1.1 million iPhones. But Apple has sold 1.4 million since they went on sale in late June. Assuming Munster’s new AT&T payments, 300,000 un-activated iPhones means Apple is losing out on almost $130 million in gross profit over two years,” Frommer reports.

Full article here.

[Thanks to MacDailyNews Reader “Investor” for the heads up.]

To the innovator goes the spoils. Also, it would be a mistake to assume that those 300,000 un-activated iPhones are in use as unlocked devices on non-AT&T networks as a significant portion of them could well be gifts just waiting to be given.

Conversely, if the majority of those 300,000 un-activated iPhones actually are in use as unlocked devices on non-AT&T networks, that’s a nice “problem” for Apple to have as it proves the device’s popularity and bodes very well for future iPhone sales success.

23 Comments

  1. @MDN:

    “a significant portion of them could well be gifts just waiting to be given”????

    C’mon MDN, lose the rose-colored glasses. Highly doubtful that 300,000 iPhones are already wrapped up for Christmas. Much more likely that the vast majority of these iPhones were not activated through AT&T;but instead were hacked to operate on other networks.

  2. I’m with lbuschjr. That statement is ridiculous. So I think I’ll ridicule it:

    Ah ha, MDN dropped the ball in a Take.

    Didn’t you just rip on Apple for stretching credulity in their “300 New Features” listings? Said something like it was overreaching and unnecessary? Perhaps even counter to the cause?

    I’m just saying…

  3. I read through the 300 new features list, I was surprised that the vast majority were legitimate new features. I started counting which ones were BS – either because they already appear in another OS without apple meaningfully enhancing it, or because you can pretty much already do it Tiger. I counted 30 BS features, 270 real new features. That’s not too shabby.

    I’m impressed with Leopard in general. More so then any particular feature, the OS as a whole seems very polished, well thought out, and better then just the sum of its parts. I’m looking forward to this weekend.

  4. It’s already been reported that thousands of iPhones have made their way to countries like India, where there are no current plans for an official release and they are selling like hotcakes.

  5. Its all about the hardware. Thats where the money is really made. Apple cares not where the hardware lands, as long as its in the hands of a paying customer.

    I think that the assumed ATT revenue to Apple is a little something to assuage the soul after dealing with the devil. Of course Apple had to deal with an established network provider to get into the cell-phone game.

    Once the hardware penetrates the industry, its a wide open frontier for software and content creators. Apple will continue to reap the benefits of hardware sales. Win-Win!!

    (and brilliant)

  6. In the company i work for in Oslo more than 10 people already have the iPhone. But we will all go legit as soon as somebody can offer a local subscription in Norway. So Apple is only losing revenuesharing for now.

  7. AT&T;’s figures do not include all those iPhones activated with a gophone contract as this is a non-standard way of activation yet is the only solution for those wanting an iPhone and not having ‘appropriate’ credit rating for an 18 month contract.

  8. I sold 5 iPhones wholesale to unlocking shops in Bangkok. They are all over the place here. See people using them on the Skytrain all the time.

    Sorry AT&T;, but there’s no way I was gonna wait till this thing got here, and no way I could “roam” without spending about a million dollars a month.

    And I agree, I’d go legit in a second if they’d get the damn things over here, UNLOCKED, for world-travelers such as myself. I don’t usually roam, just pick up a cheap pre-paid SIM card wherever I go.

    Except in the US where I pick up an EXPENSIVE T-mobile SIM card if I’m back for a while.

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