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Apple again predicted to build low-cost iPhone for emerging markets

post #1 of 55
Thread Starter 
With the most significant growth in the smartphone market coming from low-end handsets that are popular in emerging markets, one prominent financial firm has said it continues to believe Apple will expand the iPhone lineup with a new entry-level model.

iPhones


Outside of the top six smartphone makers are a plethora of low-end handset makers, many of them from China, which already account for 28 percent of the total industry. Barclays believes the share of those companies will grow by 70 percent next year, and another 27 percent in 2014, driven by sales of inexpensive smartphones in China.

"We recognize that a key test of Apple's long-term model will be whether the company can capture the growth associated with a new wave of emerging market consumers who could enter the smartphone market through low priced Android devices," analyst Ben A. Reitzes wrote in a note to investors on Wednesday.

"In our opinion, Apple can benefit from those upgrading to higher end smart phones later on but the company also needs to make sure it can 'hook' customers into the Apple ecosystem early enough in the upgrade cycle to prevent more customers from developing loyalty to Android."

While Reitzes believes Apple will continue to capture the most profitable segments of the smartphone market in 2013, he has speculated that Apple will look to enter the low-end smartphone market in the next one to two years by introducing a new, cheaper model.

"We imagine an iPhone at a low price point to capture the initial smartphone purchase from customers upgrading from feature phones ??pushing new customers into the Apple ecosystem," he said. "We believe Apple can sell a phone with an inexpensive casing for emerging markets and a (bill of materials) below $150."

iPhones


This hypothetical low-end iPhone would be sold without a service contract or carrier subsidy. Reitzes also noted that it would not be unprecedented for Apple to offer a new low-end device, as it has done already with its iPod and iPad lineups.

Apple already continues to sell its two previous-generation handsets alongside the latest flagship model to reach lower price points. Currently, an 8-gigabyte iPhone 4 is available for free with a new two-year service contract, while an unlocked and contract-free iPhone 4 is sold by Apple for $450.

iPhones


Prior to the launch of the iPhone 5 in September, some market watchers speculated that Apple could continue to sell the iPhone 3GS, first released in 2009, as its mythical low-cost handset in emerging markets. But those predictions proved inaccurate when Apple opted to discontinue the iPhone 3GS entirely.

Speculation about a low-cost, entry-level iPhone has persisted for years, but while Apple recently expanded its iPad lineup with the new $329 iPad mini, it has not grown the iPhone lineup beyond releasing one new model per year. Instead, Apple has continued to grow sales by expanding to more carriers and conducting a global roll-out of its latest models on a much faster scale, while continuing to sell the two previous generations of iPhones at lower prices.

Earlier this year, it was said that cheap smartphones running Google's Android operating system have been "crushing" Apple's iPhone in developing markets where customers do not typically sign service contracts. That helped to further fuel speculation that Apple will eventually offer an inexpensive unsubsidized iPhone for emerging markets like China.
post #2 of 55

They did a 4GB… 3G, right? That was in Canada. That was an emerging market? lol.gif

 

Heck, they don't even need to change anything; just take 20% margins instead of 25% on the lowest model iPhone 4.

Originally posted by Marvin

Even if [the 5.5” iPhone] exists, it doesn’t deserve to.
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Originally posted by Marvin

Even if [the 5.5” iPhone] exists, it doesn’t deserve to.
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post #3 of 55
Quote:
Originally Posted by Tallest Skil View Post

They did a 4GB… 3G, right? That was in Canada. That was an emerging market? lol.gif

 

Heck, they don't even need to change anything; just take 20% margins instead of 25% on the lowest model iPhone 4.

you know... 400€ for a 3 year old phone is far from cheap in countries where everyone earns less than 500 € per month.

 

However...

 

This story is BS, obviously.

post #4 of 55
They kept saying there would be a fall iPad release and eventually there was

So now they figure if they keep saying there will be a cheap iPhone and real TV --

A non tech's thoughts on Apple stuff 

(She's family so I'm a little biased)

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A non tech's thoughts on Apple stuff 

(She's family so I'm a little biased)

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post #5 of 55
Quote:
Originally Posted by Tallest Skil View Post

They did a 4GB… 3G, right? That was in Canada. That was an emerging market? lol.gif

Heck, they don't even need to change anything; just take 20% margins instead of 25% on the lowest model iPhone 4.

These guys are talking a phone that at full price is no more than $100

A non tech's thoughts on Apple stuff 

(She's family so I'm a little biased)

Reply

A non tech's thoughts on Apple stuff 

(She's family so I'm a little biased)

Reply
post #6 of 55
Originally Posted by charlituna View Post
So now they figure if they keep saying there will be a cheap iPhone and real TV --

 

Been saying the latter for seven years. Doesn't make 'em right.


Originally Posted by charlituna View Post
These guys are talking a phone that at full price is no more than $100
 

I'm sorry, these people are allowed into society? Much less listened to as anything but a parody of reality like Scoopertino? People make financial decisions based on what these fools say?!

How stupid can they possibly be? Flip phones cost more than $100 at their full prices!

 

"Bill of materials below $150"; the iPhone already HAS that!

Originally posted by Marvin

Even if [the 5.5” iPhone] exists, it doesn’t deserve to.
Reply

Originally posted by Marvin

Even if [the 5.5” iPhone] exists, it doesn’t deserve to.
Reply
post #7 of 55

This Mork from Ork reporting on a new small iPhone Nano nano...

"That (the) world is moving so quickly that iOS is already amongst the older mobile operating systems in active development today." — The Verge
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"That (the) world is moving so quickly that iOS is already amongst the older mobile operating systems in active development today." — The Verge
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post #8 of 55
the 3GS is the wrong form factor. Once the 5 was shipped, then the 3GS form factor was legacy anchor to be cut away as soon as possible (likely by iOS 7)

An iPhone 4 is a better choice as it has the same screen as the 4s. Thus when the 5s is released, the 4 becomes a reasonable phone o retain.

As it stands, I think the barrier in emerging markets is the broadbandwidth. If you don't have HSPA in your region, why even have a iPhone?
post #9 of 55
I'm thinking that an iPod nano-esque Wi-fi only iPhone mini with an embedded OS instead of iOS may not be a terrible idea. It wouldn't cannibalize iPhone sales, and would deal a huge blow to the low-end Android handset market. The whole point of this portfolio strategy of course, would be to hurt Android. 
 
You can't deny this makes more sense after seeing Apple launch the iPad mini with re-purposed components.
post #10 of 55
Quote:
Originally Posted by pedromartins View Post

you know... 400€ for a 3 year old phone is far from cheap in countries where everyone earns less than 500 € per month.

 

However...

 

This story is BS, obviously.

The question is - what exactly would Apple do to create a low cost alternative. Like you say 20% less does not make for a cheap phone - and I can't see what they would do to significantly reduce the price and still want to keep the Apple logo on it. 

post #11 of 55
Quote:
Originally Posted by ChuckD View Post

I'm thinking that an iPod nano-esque Wi-fi only iPhone mini with an embedded OS instead of iOS may not be a terrible idea. It wouldn't cannibalize iPhone sales, and would deal a huge blow to the low-end Android handset market. The whole point of this portfolio strategy of course, would be to hurt Android
 
You can't deny this makes more sense after seeing Apple launch the iPad mini with re-purposed components.

A value less exercise. I think Apple has better thinks to do with their time than to hurt Android in these markets just for the hell of it.

post #12 of 55
Originally Posted by ChuckD View Post
…Wi-fi only…

 

Why?

 

…mini…

 

Zero apps.

 

…with an embedded OS instead of iOS…

 

How… what's the distinction?

 

It wouldn't cannibalize iPhone sales…

 

"Hmm, should I buy this phone instead of the regular iPhone? No, I'd rather have the device with the ability to have cell data at some point in the future and apps at any point."


You can't deny this makes more sense…

 

Anyone can certainly do that, just as they can deny it making any sense to make one at all.


…after seeing Apple launch the iPad mini with re-purposed components.

 

… Other than the A5, what components weren't entirely new?

Originally posted by Marvin

Even if [the 5.5” iPhone] exists, it doesn’t deserve to.
Reply

Originally posted by Marvin

Even if [the 5.5” iPhone] exists, it doesn’t deserve to.
Reply
post #13 of 55
Quote:
Originally Posted by paxman View Post

The question is - what exactly would Apple do to create a low cost alternative. Like you say 20% less does not make for a cheap phone - and I can't see what they would do to significantly reduce the price and still want to keep the Apple logo on it. 

make an android device. lol

post #14 of 55

This is pure fantasy of course and Apple will never do it (at least not in the way described here), but even if they did it would sell far better in the "non-emerging" markets than it would in the "emerging" ones.  Plus the whole idea of making a phone specifically for poor folks in India and Africa is more than a bit distasteful.  I don't know how they get away with saying it all the time.  

 

Why not just say "entry-level, off-contract phone"?  I'm sure more than just the Africans would be interested in such a thing if it ever happened.   

post #15 of 55
Quote:
Originally Posted by charlituna View Post


These guys are talking a phone that at full price is no more than $100

 

I just don't see the point. There's no money to be made, and typical users aren't going to be, "developing loyalty to Android."

 

We're talking about people who, once they get the phone aren't going to be investing much, if anything, in the ecosystem. Thus, there's really no significant cost to switch. (And, other than a few geeks, I don't think we'll see anyone, "developing loyalty to Android," on any other basis.) Also, in these markets, owning an Apple product is likely to be a status symbol, so, if they can afford it, they aren't going to blink before switching. (Think cars, for example, does anyone develop loyalty to cheap car brands?) Probably, the "Android dominance" in these markets accounts for not only a good bit of Androids marketshare, but also a good bit of the disparity in web usage we see, where Android usage is minuscule compared to iOS, despite the fact that the claimed marketshare is higher.

 

In other words, unless Apple decides that marketshare is more important than profits, there's nothing in it for them to build a low-cost iPhone for emerging markets, nothing gained by doing it, nothing lost by not doing it.

post #16 of 55

I don't think Apple will go after that market. They never had with any other products. They don't make cheap plastic Macbook Airs just to gain market share.

Apple had me at scrolling
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Apple had me at scrolling
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post #17 of 55

I despise these meddling analysts to pieces.

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

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post #18 of 55
I think there is actually a market for an iPod-mini (2012)-turned-iPhone at $350 without subsidy ($250 without patent rights...). Not a perfect device, but an easy way to phase out the 30-pin connector across the portfolio a little faster.
post #19 of 55
Quote:

Originally Posted by Tallest Skil View Post

Why?

Hello? Apple faces an ecosystem war against Google and Amazon.

Tim Cook keeps coming back to the low to non-existing web-browsing usage amongst Android users, and we all know they're cheapskates that won't pay for quality apps. A wifi-only iPhone mini would target this typical Android user behavior and bring down monthly service costs.


 

Quote:
Originally Posted by Tallest Skil View Post

How… what's the distinction?

 


Doesn't cause headaches for iOS developers having to support yet another iPhone model.

 



Quote:
Originally Posted by Tallest Skil View Post

Anyone can certainly do that, just as they can deny it making any sense to make one at all.


Just as long as you truncate the most important part of someone's point. Just tell me, why did Apple make an iPad mini to begin with?



Quote:
Originally Posted by Tallest Skil View Post

… Other than the A5, what components weren't entirely new?


iPad mini screen is the same 163ppi iPhone 3GS screen simply cut in a bigger size.

 


Quote:
Originally Posted by Tallest Skil View Post
"Hmm, should I buy this phone instead of the regular iPhone? No, I'd rather have the device with the ability to have cell data at some point in the future and apps at any point."

 


What part of the term "emerging markets" do you not understand? 


Edited by ChuckD - 12/5/12 at 2:43pm
post #20 of 55
Quote:
Originally Posted by ChuckD View Post

The whole point of this portfolio strategy of course, would be to hurt Android. 

I'm all for the smaller form-factor as an option, but doing *anything* primarily to harm a competitor is a bad business strategy. Offering more products dilutes the experience, unless they are somehow able to expand the overall ecosystem: Would selling a 2.5" screen iPhone Nano help to increase sales of an iPad or iPad mini?

BTW, Android isn't hurt most by unit sales, it is hurt by: slower upgrade cycles for customers, lower profit potential for developers, and a perception that it isn't as good as iOS.
post #21 of 55
Originally Posted by ChuckD View Post
Hello? Apple faces an ecosystem war against Google and Amazon.

 

So? This means what, in "requiring" a cheaper iPhone?

 

Tim Cook keeps coming back to the low to non-existing web-browsing usage amongst Android users…

 

In what capacity?


…won't pay for quality apps. A wifi-only iPhone mini would target this typical Android user behavior and bring down monthly service costs.

 

Except only in the US and Canada are data plans forced. Except apps ≠ cell data. You're saying "cell data is too expensive, so don't let them have apps". I don't get it.

 

Doesn't cause headaches for iOS developers having to support yet another iPhone model.

 

Brand new OS for Apple to support, zero apps for it, entirely new ecosystem… It's a wretched idea.


If it doesn't run iOS, it's not an iPhone. And you still didn't answer my question.

 

Just tell me, why did Apple make an iPad mini to begin with?

 

Still trying to figure it out, myself. Your idea, however, is completely and utterly different in every measurable way from the iPad mini.


iPad mini screen is the same 163ppi iPhone 3GS screen simply cut in a bigger size.

 

And that's somehow a "recycled" component?

 

What part of the term "emerging markets" do you not understand? 

 

What part of "Apple doesn't compromise on experience" is unclear to you

Originally posted by Marvin

Even if [the 5.5” iPhone] exists, it doesn’t deserve to.
Reply

Originally posted by Marvin

Even if [the 5.5” iPhone] exists, it doesn’t deserve to.
Reply
post #22 of 55
Quote:
Originally Posted by Tallest Skil View Post
And that's somehow a "recycled" component?

 

Your words, not mine.

post #23 of 55
Although I'm sure this story's BS, the whole upgrade route is something to think about.

Apple's been down this road before as they lost the PC market to lower-cost competitors. Even when someone was ready to move up to a high-end PC, it was too late. The consumer was already used to Windows, had invested in applications, and perhaps even more importantly, the Mac's low market share led to a dearth of applications.

It could happen again in the phone market if Apple doesn't strategize correctly.
post #24 of 55
I hate to be crass here but what's the upside for Apple making a cheap phone for places like India and Africa. That might increase iOS marketshare but how does it increase Apple's bottom line? I presume that's all Wall Street cares about...
post #25 of 55
Quote:
Originally Posted by TokyoJimu View Post

Although I'm sure this story's BS, the whole upgrade route is something to think about.
Apple's been down this road before as they lost the PC market to lower-cost competitors. Even when someone was ready to move up to a high-end PC, it was too late. The consumer was already used to Windows, had invested in applications, and perhaps even more importantly, the Mac's low market share led to a dearth of applications.
It could happen again in the phone market if Apple doesn't strategize correctly.
When did Apple ever own the PC market? Also Apple and Samsung are dividing up the lions share of profits. How long can competitors like HTC and Nokia survive? I have yet to see either of them make a dent in Samsung's market share, even though they're discounting their phones. But how long can they afford to sell their top line phones for cheap?
post #26 of 55
Quote:
Originally Posted by Tallest Skil View Post

So? This means what, in "requiring" a cheaper iPhone?

...



Except only in the US and Canada are data plans forced. Except apps ≠ cell data. You're saying "cell data is too expensive, so don't let them have apps". I don't get it.

 


This means most people in India and China (not upper middle-class) realistically, would never be able to afford an iPhone service plan which requires both voice and data. Apple could develop a data-only version, but it would not be able to fetch the same industry-leading subsidies which engorge its margins.

Let's face it, once Apple kills voice, by commoditizing data (where voice becomes another service over IP), the ASP of iPhone would instantly plummet. This is the only way the current iPhone can become more accessible to the last 50% of the market yet to embrace the smartphone. Everything that strays from Apple's current iPhone business model is a compromise.

post #27 of 55

Apple is in the business to make money.  They will NOT go after a low price point market until, and maybe not ever, they hit a certain saturation point with their current selling products.  The world is a big market and Apple has lots of upside yet to capture.

 

This is the kind of argument you hear about lots of premium brands and companies.  If only Rolex would offer a cheaper version, they could sell lots more watches. If only Mercedes would make a cheaper car, they'd sell lots more (this has been proven to be NOT true given their Smart brand is floundering at best).  When analysts make comments like this, it just makes me mad that they can make boatloads of money and be complete idiots.

 

Any time you find yourself in a race to the bottom, you're in the wrong race.  Just look at what happened to the PC market.  Sure, prices come down at retail, which is good for consumers, to a point.  Once you reach that point, then everything and everyone suffers - the manufacturers suffer in not making the margins they once did, the retailers suffer not making the real dollar profit they once did, the consumer suffers getting cheap product (getting what they paid for) with a poor user experience.

 

Also, Apple, due in part to their phenomenal marketing and of course their high quality and well designed products (including iPhones) becomes a product that consumers aspire to.  They, Apple, are taking a page from Levis back in the late 70's and early 80's, where in emerging markets, Levis were something people saved up for and went out of their way to get them.  They aspired to own a pair of Levis.  This exact thing is happening now in other parts of the world, but people are now aspiring to own an iPhone.  Sure they may get a cheap Android phone and use it until they've saved enough money to buy an iPhone, but the iPhone is what they want and the Android phone simply becomes a step along their way to getting an iPhone.

 

So tell me again why Apple should be trying to make an emerging markets iPhone lite?  

post #28 of 55
Quote:
Originally Posted by Rogifan View Post

When did Apple ever own the PC market? Also Apple and Samsung are dividing up the lions share of profits. How long can competitors like HTC and Nokia survive? I have yet to see either of them make a dent in Samsung's market share, even though they're discounting their phones. But how long can they afford to sell their top line phones for cheap?

Apple had the lead in the PC market when there wasn't really a PC market.  They were first to the gate before the racetrack was even built.  Do you remember when only a few select independent retailers sold computers?  And when mass retailers first started?  Apple was part of it for sure - but their decision not to license their software in the same way MS did ended up killing their hopes of being part of the PC revolution.

post #29 of 55
In emerging markets only small parts of the people have the money for iPhones. If this part is big enough Apple will go into that market at full prices and ignore the rest.
post #30 of 55
Quote:
Originally Posted by Rogifan View Post

When did Apple ever own the PC market?

Well, they owned the GUI PC market, roughly analogous to the smartphone market.
post #31 of 55
Quote:
Originally Posted by ChuckD View Post


This means most people in India and China (not upper middle-class) realistically, would never be able to afford an iPhone service plan which requires both voice and data.

Not true. Just because iPhone service plans cost $80 a month in the U.S., don't assume the same is true everywhere. In China I pay about US$5 a month for my voice/data plan.
post #32 of 55

No way!!

I don't think this will happen in a long time, or maybe not at all!

My argument for this is that they don't need to, Apple sells the most expensive phone in the market like hot cakes, a significantly cheaper offering should be also significantly cheaper to manufacture, like a nano version... and a nano version won't run apps on a nano screen.. so they will canibalize themselves and also risk loosing application sales.

 

What I really think Apple would be aiming for is expanding it's portfolio with new products, opening new markets, and everything related to selling more apps and new services.

 

Stepping into the living room sounds more plausible if they can secure a good deal with content distributors, also if we where to dream like this, an iPad Pro running full OSX and big apps sounds logical if they're interested in bumping up Mac sales.

Such a product could be positioned right between the iPad and macbook air where there is a little price gap that could be exploited with such a product.

 

What do you people think?

post #33 of 55
Quote:
Originally Posted by TokyoJimu View Post


Not true. Just because iPhone service plans cost $80 a month in the U.S., don't assume the same is true everywhere. In China I pay about US$5 a month for my voice/data plan.


What iPhone model do you have and how much did it cost?

post #34 of 55
Originally Posted by ChuckD View Post
This means most people in India and China (not upper middle-class) realistically, would never be able to afford an iPhone service plan which requires both voice and data. 

 

So what. They can just buy a plan without data. Why does the phone have to omit a $0.60 chip?


Apple could develop a data-only version…

 

Why?


Let's face it, once Apple kills voice, by commoditizing data (where voice becomes another service over IP)…

 

How can they possibly do this when they have absolutely no control whatsoever over either aspect of the network?

 

This is the only way the current iPhone can become more accessible to the last 50% of the market yet to embrace the smartphone.

 

…What. Apple has zero control over plan prices. I fail to see how this is a concern.

Originally posted by Marvin

Even if [the 5.5” iPhone] exists, it doesn’t deserve to.
Reply

Originally posted by Marvin

Even if [the 5.5” iPhone] exists, it doesn’t deserve to.
Reply
post #35 of 55

In emerging markets Apple should pull an Amazon.  Dump at cost a 99$ cell phone and make money on the ecosystem. All they need to make is a 3 gs type phone with a long batterie life. Cheap, heavy duty and long battery life are the key metrics.

 

Speaking of international markets, in Canada, Apple is now selling multilingual movies.  There is a bunch of movies with english, french and spanish soundtracks.

post #36 of 55
So lets see 3.5 inch non retina screen A5(probably single core) 3G/2G only 8 gb 5 megapixel camera with FaceTime VGA 30 pin connecter running the lowest end IOS 6 thick as original model, 1 mic. 1 speak.
This is always a possibility yet it fails, we'll it would be like Samsung with S3 and S3 mini cheaper smaller, hay, well were talking released with IPhone 6(not 5S). This would contain features from IPhone 3GS-4-4S which none would be selling at the Time(if standards stay) IPhone mini could easily be $100 with no
contract well it would require apple to lose its quality title(IPad mini is compared to IPad 2, New IPad, IPad with retina all selling this year Plus the IPad mini has better specs than this IPhone mini, I more likely see the IPhone 4 selling longer than this a IPhone with smaller screen worse specs but brand new.
post #37 of 55
At some point the iPod touch and iPhone will have to merge. As low cost handsets begin to approach iPod touch functionality the appeal of a music player without cellular connectivity will diminish.

Android handsets are already positiioning to become a relatively profitless exercise in the same way that the netbooks category did. Apple deosn't need to race to the bottom of the price barrel. But they do need to be aware people are attracted by android prices and y.

The challenge for Apple is how to differentiate their low end and premium phone products so the low end can still represent something of value without canabalising too many high-end sales.
post #38 of 55
Quote:
Originally Posted by Rogifan View Post

When did Apple ever own the PC market? Also Apple and Samsung are dividing up the lions share of profits. How long can competitors like HTC and Nokia survive? I have yet to see either of them make a dent in Samsung's market share, even though they're discounting their phones. But how long can they afford to sell their top line phones for cheap?

 

 

BTW Apple almost died because it place itself in a pc market niche.  With the ecosystem wars you must keep a significant market share to avoid a massive exodus from you're ecosystem by both customers and developers.  Maintaining a critical mass is key.

 

And Apple could have a better offering on the cheap side in any market,  the iPhone 4 at 8g is still too expensive compare to the Android competition.  You can have better phones at 250$ unlock.

post #39 of 55
Quote:
Originally Posted by Tallest Skil View Post

Why?


I wonder why.
 

 

Quote:
Originally Posted by Tallest Skil View Post

How can they possibly do this when they have absolutely no control whatsoever over either aspect of the network?


Have you heard of iMessage?
 

Quote:
Originally Posted by Tallest Skil View Post

…What. Apple has zero control over plan prices. I fail to see how this is a concern.


They do, indirectly, as a result of the subsidies they demand. Ask T-Mobile.

post #40 of 55
Originally Posted by ChuckD View Post
I wonder why.

 

That would be why I asked, yes.


Have you heard of iMessage?

 

Having… what to do with either the voice or data aspect of the telecoms' networks? 

So, in your mind, because Apple has iMessage, you can… stop… having cell data? Or telephony? And not only will iMessage magically keep working, Apple can break free of the telecoms and offer a "cheaper experience"? I don't get what you're saying.

 

They do, indirectly, as a result of the subsidies they demand. Ask T-Mobile.

 

The subsidies… which are the same as all other phone subsidies… and the plans… which are the same price if you get a different phone.

 

WHAT are you talking about?!

Originally posted by Marvin

Even if [the 5.5” iPhone] exists, it doesn’t deserve to.
Reply

Originally posted by Marvin

Even if [the 5.5” iPhone] exists, it doesn’t deserve to.
Reply
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