“AT&T is paying a subsidy of $325 for the new Apple iPhone 3G, according to Oppenheimer analyst Yair Reiner. He notes that the typical smartphone gets a subsidy of about $200. The new phone will be sold at retail for $199 for 8 GB of memory, or $299 for 16 GB,” Eric Savitz reports for Barron’s.
“The higher subsidy rate for the iPhone, he says, ‘reflects AT&T’s faith in the iPhone’s ability to attract new subs and increase ARPU.’ And he also says it has positive implications for Apple, since it effectively results in a playing field that is tilted in their favor. ‘Rivals must scramble to hit a lower, less profitable price point,’ he writes,” Savitz reports.
“Reiner also says that AT&T is paying Apple an extra $100 for subscribers signed up in Apple stores, for a total commission of $425. Reiner figures that all in, Apple is getting the same revenue for the 3G iPhone as it received for the old version, only now all the payments are coming up front,” Savitz reports.
More in the full article here.
[Thanks to MacDailyNews Reader “James W.” for the heads up.]
….now where was that article about how Apple was “betting the farm” on the iphone 3g and what a high risk/bad deal it was for Apple?
Still, when does this AT&T;exclusivity end? *So* many people I know just won’t leave Verizon or Sprint…
If the rumored 5-year exclusive contract is in place. When did it start, at contract signing (~2 years ago) or when the 1st Gen iPhone was released (~1 year ago)?
Sprint was forced to lower their new Samsung iPhone knockoff to $130. They were probably uncomfortable with the original price of $199 so I can’t imagine the hit they’re taking now.
RIM is supposedly about to release their “iPhone killer” the BlackBerry Thunder and I doubt they were prepared to hit a $199 pricepoint even after the Verizon (rumored carrier) subsidy. If they want any kind of success, however, they’ll have to bite the bullet.
iPhone 3G will do to smartphones what the iPod nano did to the flash MP3 player market.
“….now where was that article about how Apple was “betting the farm” on the iphone 3g and what a high risk/bad deal it was for Apple?”
It’s here:
http://www.time.com/time/business/article/0,8599,1813117,00.html
I get the feeling that the AT&T;contract won’t end until 4G (LTE and/or WiMax) really arrives for the consumer, which is in about 4 years. I believe, all US carriers except Sprint, are moving to LTE, with Sprint moving to WiMax.
I think Apple has no interest in making a separate CDMA phone, or in adding still another chip to support T-Mobile’s 3G GSM band.
Exactly. This phone will be GSM only, and that will make it an AT&T;(and possibly T-Mobile) in the US. Verizon will just slowly wither away (not to mention Sprint).
Multiply that $325 times “10 million iPhone 3G units to ship in third quarter”. That’s a tidy sum. I’m hanging on to my AAPL stock,
Up the ace, Cramer, naysayers, et al.
Tom,
Don’t forget that Apple only take one-eighth of that in any one quarter!
Admittedly, that’s still over $400 million/quarter for the next two years.
And if they’re expecting 10 million in the first quarter, they must be thinking of 15 million in the holiday quarter which means $1 billion when they report in January.
Of course, the funniest thing in all this is that – if their prediction is fulfilled – they will have sold 10m real phones into the hands of real subscribers, whilst Microsoft is still having to live down that excruciating passive-aggressive “junk” mail it sent out in the week before WWDC where it boasted about projecting 20m Windows Mobile licenses being sold to OEMs during 2008.
I am not sure that I believe the numbers that are quoted in the Barron’s article. The article seems to fail to recognize the difference between wholesale and retail prices. I would be willing to believe that Apple receives $325 for every phone that AT&T;sells for $199. Those numbers make the wholesale price $325 and the nominal retail price $650, which is more in line with the “no-plan” numbers that have been reported by the European carriers.
With this scenario AT&T;is losing $125 for every phone sold by themselves. This number is more consistent with the speculation that AT&T;is paying Apple $100 for every phone that Apple sells. Obviously AT&T;more than makes up this loss by charging the customers $240 more for the 2 year contract (which is going to cost the customer close to $3000 over the two years).
For Apple this scenario would return $325 of revenue for every iPhone that is sold by AT&T;. For iPhones that are sold in the Apple stores and activated on the AT&T;network, Apple earns $300 of revenue. These numbers would be comfortable wholesale prices for Apple, if the manufacturing costs are really below $150 as has been speculated by others.
Why are ; always after AT&T;?
@DogGone
It appears to be a function of how the page’s input mechanism handles Ampersands.
“Why are ; always after AT&T;?”
Because the ampersand triggers it in MDN’s HTML aware comment posting form.
If you use the html code for an ampersand, it won’t.
See line two of the table:
http://rabbit.eng.miami.edu/info/htmlchars.html
Ampersand symbol then amp then a semi-colon yields an &
Thanks guys.
So what happens if I do this?
AT
AT&
AT&T;&T;T&T;
I typed
AT
ATand
ATandT
andT
TandT
iP 3G, $200
Activation, $35
Early termination fee, $175
Running iP 3G on another network, priceless.
Just kidding, I love AT&T;, but I hate contracts, unless they will adjust termination fee over time, like Verizon does.