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Subsidies for Apple's iPhone are 40% higher than the industry average

post #1 of 31
Thread Starter 
The iPhone will be a $15 billion investment for Sprint over the next few years, as subsidies for Apple's smartphone carry a price 40 percent greater than other competing handsets.

About $7 billion in new financing agreements will be necessary to compensate for a cash shortfall that will be created, in part, by the new arrival of the iPhone on Sprint's network, the carrier's CEO, Dan Hesse, told Reuters on Wednesday. In all, the iPhone is expected to cost the company $15 billion over the next four years.

The high cost of the iPhone comes from a subsidy that is 40 percent higher, or $200 more per device, than the average subsidy for other smartphones. But the addition of the iPhone to Sprint's smartphone lineup is also expected to add between $7 billion and $8 billion in revenue over the next four years.

Hesse admitted that the iPhone is "expensive" for his carrier to offer, but added that it is "worth every penny," as Apple's smartphone is expected to add new customers for Sprint.

Back in September, Hesse told investors that the iPhone was the top reason that Sprint was losing customers. The carrier began offering the iPhone earlier this month, and preorders of the iPhone 4S quickly broke sales records at Sprint.

The CEO was said to have privately told his board of directors in August that Sprint will lose money on its iPhone deal with Apple until 2014. The rumored $20 billion investment in 30.5 million iPhones was characterized as a "bet-the-company" move by The Wall Street Journal.



As part of the alleged deal, Sprint is said to have agreed to purchase 30.5 million iPhones from Apple over the next four years whether or not the carrier can find customers to buy them. Together, its rivals AT&T and Verizon sold nearly 12 million iPhones in the first half of 2011.

Sprint is the third-largest carrier in the U.S. with about 52 million customers, much less than AT&T, which has roughly 100 million subscribers, and Verizon, with nearly 108 million. Sprint remains larger than T-Mobile, which has about 34 million customers.
post #2 of 31
You gotta pay if you wanna play.......
post #3 of 31
No kiddin, AI.


1. Sprint is just plain stupid.
2. Of course, it's Apple.
3. Sprint needs to fire it's CEO.
4. If they have iPhones left over, where do they put them?
post #4 of 31
The subsidy model for cellphones is ridiculous and obfuscatory at best.
post #5 of 31
Quote:
Originally Posted by Naboozle View Post

The subsidy model for cellphones is ridiculous and obfuscatory at best.

Its the consumers choice to do subsidy or outright purchase. Subsidy may get you in sooner, but paying through the nose for the life of the contract is the penalty.

It would be interesting to see what the costs for a subsidized iPhone 4S over two years would be compared to purchasing the 4S outright along with the cost of the same level of service over the same period.

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When I find time to rewrite the laws of Physics, there'll Finally be some changes made round here!

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post #6 of 31
Once again, value trumps cost. A lesson Apple's competitors either never learn, or simply are content to sweep up the crumbs.
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post #7 of 31
Quote:
Originally Posted by linkgx1 View Post

No kiddin, AI.


1. Sprint is just plain stupid.
(...)
3. Sprint needs to fire it's CEO.

Is Sprint selling its subsidized iPhones for a lower price than the competition? If not, then Sprint is paying the same subsidy premium as any of the other players; therefore, looking specifically at subsidies, Sprint would be no more stupid or in need to fire its CEO than any of its competitors...
post #8 of 31
Quote:
Originally Posted by mhikl View Post

It’s the consumer’s choice to do subsidy or outright purchase. Subsidy may get you in sooner, but paying through the nose for the life of the contract is the penalty.

It would be interesting to see what the costs for a subsidized iPhone 4S over two years would be compared to purchasing the 4S outright along with the cost of the same level of service over the same period.

On AT&T -- assuming the unsubsidized customer chose not to discontinue their service for any interval during the 2-year period, and also assuming that both the subsidized and unsubsidized customer had the exact same usage patterns and subscribed to the exact same number of monthly minutes, the exact same calling features, and the exact same data tiers: The unsubsidized customer would have the exact same monthly service fees as the subsidized customer.

Therefore, at the end of 2 years, the unsubsidized customer would end up worse off due to the increased upfront costs.

T-Mobile has so-called "value" plans, which reward unsubsidized customers with lower monthly fees than their subsidized counterparts. But you still have to commit to a 2-year agreement to access the value plans, even though you didn't receive a subsidy. If T-Mobile even offered the iPhone, then there might have been an interesting comparison to be made there.
post #9 of 31
Quote:
Originally Posted by mhikl View Post

Its the consumers choice to do subsidy or outright purchase. Subsidy may get you in sooner, but paying through the nose for the life of the contract is the penalty.

How is that? If you want to get service from AT&T or Verizon, it looks to me like you end up with the same monthly cost for iPhone service, even if you own the device. How do you save money with a device you purchased outright?

I am looking to keep visual voicemail, etc, so I don't think I can use TMobile or Virgin services for the unit. What am I missing ('cause I hate the big bill!)
post #10 of 31
Quote:
Originally Posted by lfmorrison View Post

Is Sprint selling its subsidized iPhones for a lower price than the competition? If not, then Sprint is paying the same subsidy premium as any of the other players; therefore, looking specifically at subsidies, Sprint would be no more stupid or in need to fire its CEO than any of its competitors...

Sprint commited whether they sell phones or not. I mean ,seriously. The shares are down. Investors are HATING the CEO right now (Um....HE'S SPENDING ALL THEIR CASH REVERSES UPGRADING TO LTE). That's what's pissing me off. How can you commit to apple when your stocks are below $3 a share, you have a terrible retention rate and don't have a large profit margin (HOW'D THAT ACQUISITION OF NEXTEL GO, HMM?).
post #11 of 31
Quote:
Originally Posted by linkgx1 View Post

(HOW'D THAT ACQUISITION OF NEXTEL GO, HMM?).

I agree, "Push to Talk" services have fallen off a cliff, that was another mistake in my opinion. However, I will admit that my comment relies on hindsight having 20/20 vision.
post #12 of 31
Push to talk was always stupid. I got over my interest in walkie talkies when I was 12.

So for the 40% higher subsidy to be $200, that means the carrier is paying Apple $500 per phone and then I would assume $600 and $700 for the larger storage units. Also for those who say it makes more sense to buy the phone outright, yeah it probably does if you are using T Mobile or live in a country that isn't the US. None of the other major US carriers give your plan a discount if you own the phone outright.
post #13 of 31
Quote:
Originally Posted by kresh View Post

I agree, "Push to Talk" services have fallen off a cliff, that was another mistake in my opinion. However, I will admit that my comment relies on hindsight having 20/20 vision.

Lolz.
post #14 of 31
Quote:
Originally Posted by SSquirrel View Post

Push to talk was always stupid. I got over my interest in walkie talkies when I was 12.

So for the 40% higher subsidy to be $200, that means the carrier is paying Apple $500 per phone and then I would assume $600 and $700 for the larger storage units. Also for those who say it makes more sense to buy the phone outright, yeah it probably does if you are using T Mobile or live in a country that isn't the US. None of the other major US carriers give your plan a discount if you own the phone outright.

I think the benefit is that you are NOT in contract. I mean, unless LTE is nation/carrier wide then most of the phones are tied to carrier anywho.
post #15 of 31
Quote:
Originally Posted by mhikl View Post

Its the consumers choice to do subsidy or outright purchase. Subsidy may get you in sooner, but paying through the nose for the life of the contract is the penalty.

It would be interesting to see what the costs for a subsidized iPhone 4S over two years would be compared to purchasing the 4S outright along with the cost of the same level of service over the same period.

Sorry, but I do not believe this is true in the US, because whether you buy the subsidized phone or the full price one, you still pay the same for your service. Who would buy a full priced iPhone in the US (except for frequent world travelers) when this is the case? As long as my service costs me the same, I will go with the subsidized phone, thus the carrier wins again as they have locked the conditions to be this way. It would be nice if things were different, but in the US right now they aren't.
post #16 of 31
Quote:
Originally Posted by cwoloszynski View Post

How is that? If you want to get service from AT&T or Verizon, it looks to me like you end up with the same monthly cost for iPhone service, even if you own the device. How do you save money with a device you purchased outright?

I am looking to keep visual voicemail, etc, so I don't think I can use TMobile or Virgin services for the unit. What am I missing ('cause I hate the big bill!)

Unsubsidized phones are unlocked and can utilize pay-as-you-go plans.

I recently went to BestBuy, bought a $10 GoPhone, activated the SIM online, signed up for $25 voice/text, and $15 data service and slipped the SIM into my off-contract 3GS.

It's not unlimited, but it also means I'm not locked into 24 outrageous monthly bills.

I'm actually thinking about canceling my iPhone 4S order and just buying one outright and having it unlocked. I don't need unlimited data as most places I go usually have WiFi.
Disclaimer: The things I say are merely my own personal opinion and may or may not be based on facts. At certain points in any discussion, sarcasm may ensue.
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Disclaimer: The things I say are merely my own personal opinion and may or may not be based on facts. At certain points in any discussion, sarcasm may ensue.
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post #17 of 31
Quote:
Originally Posted by lfmorrison View Post

On AT&T . / / The unsubsidized customer would have the exact same monthly service fees as the subsidized customer.
Therefore, at the end of 2 years, the unsubsidized customer would end up worse off due to the increased upfront costs. . . .

Quote:
Originally Posted by cwoloszynski View Post

How is that? If you want to get service from AT&T or Verizon, it looks to me like you end up with the same monthly cost for iPhone service, even if you own the device. . . .

Quote:
Originally Posted by SSquirrel View Post

. . . Also for those who say it makes more sense to buy the phone outright, yeah it probably does if you are using T Mobile or live in a country that isn't the US. None of the other major US carriers give your plan a discount if you own the phone outright.

Quote:
Originally Posted by SixnaHalfFeet View Post

Sorry, but I do not believe this is true in the US, because whether you buy the subsidized phone or the full price one, you still pay the same for your service. . . .

Wow! This doesnt make any sense at all.

What seems obviously lacking is true competition. Maybe there should be another breakup of telephone companies in the US.

Appreciate the info.

When I find time to rewrite the laws of Physics, there'll Finally be some changes made round here!

I am not crazy! Three out of five court appointed psychiatrists said so.

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When I find time to rewrite the laws of Physics, there'll Finally be some changes made round here!

I am not crazy! Three out of five court appointed psychiatrists said so.

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post #18 of 31
Ah, so maybe that's why my Verizon corporate store pushes Android and has the iPhones over in the corner to sell themselves.
post #19 of 31
Quote:
Originally Posted by mhikl View Post

Wow! This doesn’t make any sense at all.

What seems obviously lacking is true competition. Maybe there should be another breakup of telephone companies in the US.

Appreciate the info.

Break up? AT&T, the 2nd largest carrier, is trying to buy up T-Mobile, the 4th largest, leaving only 3 big carriers in addition to a few regional MVNOs, and I fully expect it to go through, much to the detriment of us consumers. Our choices are shrinking while their profits are growing.

I'm glad Sprint is now on equal footing to the other two with devices, but it's only a matter of time before they adopt the same behavior as the other two - expensive fees, long contracts, and soon no more unlimited plan.
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post #20 of 31
Quote:
Originally Posted by mhikl View Post

Its the consumers choice to do subsidy or outright purchase. Subsidy may get you in sooner, but paying through the nose for the life of the contract is the penalty.

It would be interesting to see what the costs for a subsidized iPhone 4S over two years would be compared to purchasing the 4S outright along with the cost of the same level of service over the same period.

Nobody in North America buys a phone outright because the carriers charge the same amount per month for voice/data whether you own the phone or have a subsidized one from them.

I'd love to be corrected on this point. Can anyone show me a carrier that offers a better deal to those who bring their own phone?
post #21 of 31
Quote:
Originally Posted by yuusharo View Post

I'm glad Sprint is now on equal footing to the other two with devices, but it's only a matter of time before they adopt the same behavior as the other two - expensive fees, long contracts, and soon no more unlimited plan.

As I point out in so many threads, none of the other companies charged an extra $10/line smartphone fee like Sprint is doing to help absorb the cost of high data usage. If Sprint gets rid of the unlimited plans, they would have to ditch this line fee too, both moves that would be phenomenally stupid for them
post #22 of 31
Regardless of the TCO, unsubsidised phones means not tied to a long contract (anything can happen in 2 years), can upgrade or change to a new phone anytime you like, can use local SIM when abroaf and where options exist, you can use PAYG for cheaper monthly cost.
post #23 of 31
I went the unsubsidised route in the UK. $16 (inc. 20% tax) gets me 250 minutes, unlimited texts and truly unlimited data with GiffGaff's rolling 1 month contract SIM.

I'm saving quite a bit over the course of two years.
post #24 of 31
Quote:
Originally Posted by Splash-reverse View Post

Regardless of the TCO, unsubsidised phones means not tied to a long contract (anything can happen in 2 years), can upgrade or change to a new phone anytime you like, can use local SIM when abroaf and where options exist, you can use PAYG for cheaper monthly cost.

ATT gives me a $500 gift in the form of subsidy every 12 months. Lower billed users get it every 18. I have paid exactly zero dollars (net) on iPhones since I paid for the first one. Sell the old one, buy the new one for the same or less. Gee, sounds like all you Euros who brag about free iPhones!

An ATT user who does not intend to switch would be an idiot to not sign a contract.

If I had bought unsubsidized phones each time I would have spent about $2000 more than I did spend. And yet you think this is the smart way to do it?
post #25 of 31
Quote:
Originally Posted by richl View Post

i went the unsubsidised route in the uk. $16 (inc. 20% tax) gets me 250 minutes, unlimited texts and truly unlimited data with giffgaff's rolling 1 month contract sim.

I'm saving quite a bit over the course of two years.

i hate you.
post #26 of 31
Quote:
Originally Posted by cameronj View Post

ATT gives me a $500 gift in the form of subsidy every 12 months. Lower billed users get it every 18. I have paid exactly zero dollars (net) on iPhones since I paid for the first one. Sell the old one, buy the new one for the same or less. Gee, sounds like all you Euros who brag about free iPhones!

An ATT user who does not intend to switch would be an idiot to not sign a contract.

If I had bought unsubsidized phones each time I would have spent about $2000 more than I did spend. And yet you think this is the smart way to do it?

ATT upgrades you yearly? How much you gotta pay each month?
post #27 of 31
Quote:
Originally Posted by mjtomlin View Post

Unsubsidized phones are unlocked and can utilize pay-as-you-go plans.

I recently went to BestBuy, bought a $10 GoPhone, activated the SIM online, signed up for $25 voice/text, and $15 data service and slipped the SIM into my off-contract 3GS.

It's not unlimited, but it also means I'm not locked into 24 outrageous monthly bills.

I'm actually thinking about canceling my iPhone 4S order and just buying one outright and having it unlocked. I don't need unlimited data as most places I go usually have WiFi.

The prepaid data plan will not work with the iPhone 4/4S. I have many friends who bought unlocked iPhone 4 and their prepaid data did not work. They called AT&T and were told the prepaid data plans will not work with the iPhone 4.

Beside, there is no unlimited data plan anymore. You get a $25/month for 2GB or $15/month for 200MB.
post #28 of 31
Quote:
Originally Posted by Splash-reverse View Post

Regardless of the TCO, unsubsidised phones means not tied to a long contract (anything can happen in 2 years), can upgrade or change to a new phone anytime you like, can use local SIM when abroaf and where options exist, you can use PAYG for cheaper monthly cost.

"tied to a long contract"? Huh?

Ok, maybe i'm stupid, so follow me here, and please point out where I'm wrong.

Looking online, the unlocked iPhone 4 sells for anywhere between $400-$800, so let's go with $600 as being a REAL price (the $400 might be a scam, the $800 full retail).

I can get an iPhone 4S (better and newer than the 4) at AT&T for $200 today, and if I break that "long contract" tomorrow, I owe them another $375 for breaking the contract - total cost $575.

To me, that's a wash. Same cost, no longer under contract. What am I missing? Except if I decide to stay under contract, every month they lop $10 off that $375, so actually if I stay with them one year, I only owe them $275 to break the contract at that point.

Again, what am I missing?
post #29 of 31
Quote:
Originally Posted by Bregalad View Post

Nobody in North America buys a phone outright because the carriers charge the same amount per month for voice/data whether you own the phone or have a subsidized one from them.

I'd love to be corrected on this point. Can anyone show me a carrier that offers a better deal to those who bring their own phone?

Look up T-Mobile's "value plans".

Essentially, T-Mobile has three tiers of pricing with respect to the receipt of a subsidy. Assuming 200 MB, 500 minutes, and unlimited text, you would pay:

1) If you bring your own phone, or buy a phone outright, you can use a "value plan" and pay $45 per month.

2) You can buy a new phone with a 0% APR loan consisting of 20 monthly payments of $5.00 (for feature phones), $10.00 (for low-end smartphones), or $15.00 (for high-end smartphones), with a down payment at the time of purchase to make up the difference between the full retail price and the total loan amount. In that case, you can use the same value plan (200 MB, 500 minutes, unlimited texting), paying a total of $50, $55, or $60 per month for the first 20 months, and then $45 per month thereafter.

3) You can acquire a phone using the traditional subsidy model, and use T-Mobile's "classic" price plans. In that case, your monthly service fees for 200 MB, 500 minutes, and unlimited texting will be $60 per month, for the full duration of your service agreement.
post #30 of 31
Quote:
Originally Posted by SSquirrel View Post

Push to talk was always stupid. I got over my interest in walkie talkies when I was 12.

So for the 40% higher subsidy to be $200, that means the carrier is paying Apple $500 per phone and then I would assume $600 and $700 for the larger storage units. Also for those who say it makes more sense to buy the phone outright, yeah it probably does if you are using T Mobile or live in a country that isn't the US. None of the other major US carriers give your plan a discount if you own the phone outright.

Actually, if Sprint is paying 40% higher in subsidy for the iPhone than for others, and if that 40% = $200 as stated, then the subsidy for other phones would $500 (because % change is always calculated with the original amount as the reference). And the subsidy for the iPhone 4S would be $700. This cannot be right. Either the Sprint CEO misspoke, or was misquoted.
post #31 of 31
Quote:
Originally Posted by NasserAE View Post

The prepaid data plan will not work with the iPhone 4/4S. I have many friends who bought unlocked iPhone 4 and their prepaid data did not work. They called AT&T and were told the prepaid data plans will not work with the iPhone 4.

Beside, there is no unlimited data plan anymore. You get a $25/month for 2GB or $15/month for 200MB.

Actually it does work, if you know what you're doing. And yes, I know there isn't an unlimited data plan anymore. When I said unlimited, I meant voice. The prices you quoted aren't GoPhone data rates, which are currently, $5/10mb, $15/100mb, and $25/500mb. Yes, those rates suck, but again, you're not tied to a contract.
Disclaimer: The things I say are merely my own personal opinion and may or may not be based on facts. At certain points in any discussion, sarcasm may ensue.
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Disclaimer: The things I say are merely my own personal opinion and may or may not be based on facts. At certain points in any discussion, sarcasm may ensue.
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