Analyst expects Apple to debut free iPhone 3GS with 2-year mobile contract

“Analyst Mike Abramsky with RBC Capital Markets said on Wednesday that Apple is “expected” to offer the iPhone 3GS for free when the iPhone 5 launches later this year,” Neil Hughes reports for AppleInsider. “‘While a $49 iPhone is already available (AT&T), psychologically a $0 iPhone provides a compelling offer,’ Abramsky wrote in a note to investors. ‘Proprietary survey data… suggests 14% are very/somewhat likely to buy the iPhone 3GS for free with 2-year contract, exceeding buying interest for the iPad (13%) and original iPhone (9%).'”

“Abramsky sees the offering of a free iPhone 3GS as a way for Apple to double its potential market opportunity to more than 150 million smartphones,” Hughes reports. “A lower-priced iPhone 3GS, offered $399 unsubsidized, would also increase iPhone share globally, he said.”

Hughes reports, “In May it was revealed that the iPhone 3GS, along with the first-generation iPad, often outsells many newer Android-powered devices.”

Read more in the full article here.

MacDailyNews Take: If true, settling for a Fragmandroid phone is about to get even more difficult to rationalize.

[Thanks to MacDailyNews Readers “Dan K.” and “Carl H.” for the heads up.]

16 Comments

  1. It’s not the upfront costs that are stopping many people from a smartphone, it’s the $30 for voice, $30 for data, more than $10 for text messaging per month that’s the real barrier.

    Even an unlocked iphone 4 (~600) costs much less than 2 a year contract ( 24 * 70 = 1680 ).

    1. The $30 for voice and $10 for text are going to be with any phone though. So that adds the $30 per month which I can understand. But most feature phones now days can have data plans, and a lot of people have a $15 data plan already. But the only added expense with a smartphone are upfront, and the data plan.

      As for the unlocked iPhone. That would only make sense if you had no service on the phone. If you are going to have service for 24 months then it’s not cheaper at all because you have the phone cost on top of the 24 months of service.

      Actually it makes more sense to do a contract because at least your money is going into paying off the subsidy of the phone.

      So using your estimates:

      Unlocked phone with service:
      Service for 24 months (24 * $70) = $1680 (Not including fees and taxes)
      Unlocked phone: $649

      Total cost of phone and service: $2329

      2 year contract with service:
      Unlocked phone with service:
      Service for 24 months (24 * $70) = $1680 (Not including fees and taxes)
      Which you can break down further. $450 is the subsidized cost of the phone. So service minus that subsidy is $1230.
      So at least a portion of your money is going towards the phone.
      Locked phone (2yr contract): $199

      Total cost of phone and service: $1879

      I know a lot of this is perception. But unlocked phones are not the best deal sometimes. If you are happy with your service then save the money.

  2. is this guy not paying attention? the 3GS will not run iOS 5 well, if at all. the last thing Apple wants is a strongly negative experience for first-time iPhone users, but it’s precisely what they’d get if they offered a “free” 3GS alongside iOS 5 announcements. dumb analyst is dumb.

  3. Does any carrier even still offer a $30.00voice plan anymore? Even T-Mobile plans now start at $39.95. If Apple can do that then they should have the free iPhone available only with a voice plan.

  4. we’ve been having the 3gs free for well over 18 months now in uk (and in places in europe) infact the iPhone 4 is currently free in the UK too

    poor guys in america who get screwed although, having said that we normally do with the currency conversion apple products are always more buying outright here then in US

    how can you have such bad tariffs ?

  5. Carrier charges are too expensive as far as I’m concerned. I’d have no problem paying up front for a $600 smartphone although I certainly understand many consumers would. I’d rather just pay-as-I-go with no contract. Of course, I’m still going to get stiffed since carriers will just raise the cost for users like me since they’re not getting a guarantee I’ll keep coming back every month.

    A less expensive iPhone in Asia I can understand if that’s the way those consumers are used to doing it, but I don’t see why Apple needs to chase after cheapskates in America and Europe. These damn analysts constantly chasing after market share is sickening. Why is Apple being forced to double iPhone sales just to move its share price up a lousy $25 or so? That’s just plain WS corruption. iPhones will most likely never outsell all Android smartphones combined, so I’d say that iPhone’s smaller market share is rather useless for analysts to harp upon constantly.

  6. I don’t think this is going to happen. Apple is obligated to support a “new” iPhone during it’s two-year contract period. If the iPhone 3gs continues to be “sold” as new (even at $0) for another year, “iOS 7” (the version of iOS released in 2013) would need to support it (at least partially). By that time, Apple will want to support nothing less than an A4-powered device with the newest version of iOS.

    Also, $0 may seem attractive “psychologically” to some buyers, but the real obstacle to most is the monthly cost of ownership. Apple will insist on at least $400 in up-front subsidy payment from the carrier, so that “loan” is being collected over the two-year contract in addition to the cost of wireless service.

    I think Apple will introduce a completely different phone product. It will be called “iPhone” with a suffix, but it will be designed and marketed so that it is obviously NOT a “real” iPhone, just as an “iPod” nano is obviously not an “iPod” touch. It will be targeted at customers who do not consider an iPhone today, because it is too expensive. It will be the $49 (maybe even $0) replacement for iPhone 3gs, but with a much lower monthly cost of ownership. Someone who wants a “real” iPhone will not choose it, but it will be a desirable choice for the millions of customers who now buy a low-end Android phone or a “feature” phone.

  7. Currently, the cheapest smartphone plans in America are $55, plus taxes, surcharges, fees, etc, which comes out to about $65. Out of that amount, $18 represents the $450 two-year phone subsidy. If AT&T (or T-Mobile) ever were to offer a comparable plan with NO subsidy, it would have to be for about $45 (plus fees, etc). This cheap plan gives you some voice minutes, a bit of data (250MB), and NO TEXT at all.

    Meanwhile, Virgin Mobile has a $40 plan for which you get UNLIMITED data, UNLIMITED text and 1200 minutes of voice (no contract, no subsidy). They have cheap crappy androids that sell for $200 (again, no subsidy; full price).

    If Virgin Mobile were a GSM carrier, an unlocked iPhone would on a $40 per month plan would be by far the best deal in America. Unfortunately, they are on Sprint’s CDMA network, so only Virgin phones can work.

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