“The new $199 price for Apple’s iPhone announced Monday is partly the result of Ralph de la Vega agreeing to foot the bill. The chief executive of AT&T Inc.’s wireless unit hopes the new phone, which AT&T will subsidize, will ring in huge profits for the telecom company down the road, even though it will hurt its earnings in the short term,” Amol Sharma reports for The Wall Street Journal.
“Mr. de le Vega worked closely with Apple Chief Executive Steve Jobs on the deal that made AT&T the exclusive U.S. provider of the iPhone, which was a smash hit in its first year. Now he’s betting the encore version with faster Web access and new features like Global Positioning System technology will maintain that momentum,” Sharma reports.
Apple’s new iPhone 3G, which begins rolling out on July 11, “will tap into the latest ‘3G’ network, which AT&T has expanded in the last year from 160 markets to 280. Download speeds on 3G reach up to 1.7 megabits per second, on average, about 10 times faster than what iPhone users had been using on the early network, but still much slower than the typical landline broadband connections,” Sharma reports.
In an interview, Mr. de la Vega stated, “It seems like $199 is the right kind of price point to get significant mass-market adoption. It’s going to impact earnings in 2008 and 2009 in a negative way, but will turn very profitable in the long term. We generate a lot of revenue from iPhone users, about twice as much as other customers. And I feel very confident that we’re going to have very low customer turnover, based on what we’ve seen from the initial version of the iPhone,” Sharma reports.
In response to a question of whwther the recent spate of iPhone lookalikes pose a threat to the new iPhone, de la Vega said, “‘I’m pretty comfortable that the iPhone will hold its own. I just think it is going to expand the market. Keep in mind less than 20% of our customers today have smartphones. I think this is going to reach people that would otherwise never put $199 into a mobile device,'” Sharma reports.
Much more in the full article here.
Charge less upfront, but it costs more over the long-term. That’s just perfect for the mentality of the average Windows PC buyer; they’ll only see the sticker price and not comprehend or just ignore the rest.