Optus here had a similar report 9 months ago after the first iPhone 3G. It basically said how much money they'd lost by subsidising the iPhone, but that they expected it to be made up.
That, of course, was not a "hope" but a guaranteed result... it just wasn't reported that way. And at the end of the financial year the report was that they had increased numbers of subscribers with increased spending and overall a better financial position through their high subsidies of the phone... a very good result.
(Optus sold the high end iPhone for US$140 on a US$50/mth plan, free on higher plans).
Quote:
Originally Posted by willychu
"The pity of it is that then people expect to be able to get a free upgrade at 12 months."
Here's what's pitiful. After two years, when AT&T has recouped its so-called "subsidy," why does my monthly rate NOT GO DOWN??? Hmmmm.......
This subsidy-over-two-years scheme is obviously a sham , an out right lie , just a sneaky way to gouge us
The system is geared to a 2 year lifespan of phones. The plans nearly all seem to assume that - and if you replace your phone every 2 years then you get the best you can out of it. And if you don't replace your phone that often the phone company makes extra.
Quote:
Originally Posted by willychu
But if you want to keep your old phone, which is in theory paid for free and clear after two years, shouldn't your monthly rate go down?
In theory, absolutely.
You are free to change plans once your contract is up, and sometimes there are plans that are cheaper if you "BYO Phone", at least there are in Australia.
Vodafone here, 5 years back, tried making all phones paid upfront with lower monthly and call charges. Unfortunately lots of business moved to the other telcos as people wanted a "cheap phone", and perceived Vodafone as more expensive. So they gave up on that.
Yes, there is the deferred revenue, but I don't think that you can just add that in to the numerator and result in $595 per phone.
You see underlying the "recognized" revenue number includes deferred revenue from earlier periods. For simplicity I've chosen to assume they cancel each other out. If the earning cycle is in fact 24 months then you end up with a ramp up/ramp down revenue situation with a plateau in between (if they stopped making phones today they would still see "revenue" for another two years.) Revenue can look much "smoother" than it really is with this approach. In the middle, the amount deferred can be easily offset by some amount now recognized from an earlier period. I don't know the exact pattern they are using to recognize it but it not unreasonable that it would be proportional over 24 periods.
I think it's great that Apple can make a superior product and make good money. What I'm tired of is the straw argument that ATT is not making enough money because they have to subsidize. They outlay 100 to 400 and then get a buyer to put in another 2400 (roughly) over two years and still manage a net 10% profit. Sounds pretty good for a commodity service.
Brilliant!
Please read that paragraph of footnote (a) carefully:
It specifically stated that non-GAAP adjustment of $1.405 billion is by:
(1) REVERSING all previous deferred revenue (that is included in this current period) as if Apple never decided to have deferred revenue recognization in the last 2 years;
(2) ADDING all the future deferred revenue from the 5.208 million iphones sold in the current period.
$1.689 billion + (MINUS all previous deferred revenue that is being recognized in this current period PLUS all the future deferred iphone revenue from the 5.208 iphones sold = $1.405 billion) = $3.094 billion.
You have absolutely no clue what you are talking about.
PS: AT&T is NOT making enough money off the iphone --- that's why since the iphone was launched 2 years ago --- AT&T's share price dropped 40% and Verizon's share price dropped only 30%. That's why on today's AT&T's earning announcement, AT&T share price went up 2.5% and Verizon's share price went up almost 4%.
Optus here had a similar report 9 months ago after the first iPhone 3G. It basically said how much money they'd lost by subsidising the iPhone, but that they expected it to be made up.
That, of course, was not a "hope" but a guaranteed result... it just wasn't reported that way. And at the end of the financial year the report was that they had increased numbers of subscribers with increased spending and overall a better financial position through their high subsidies of the phone... a very good result.
(Optus sold the high end iPhone for US$140 on a US$50/mth plan, free on higher plans).
I think it's more or less an "accounting" issue.
Even though it is the US that is creating all the current economic mess in the whole world right now --- unfortunately they are still better than everybody else in terms of public company disclosure laws and accounting laws.
Strange, isn't it --- that there are dozens and dozens of carriers around the world giving out "zero" dollar iphones --- but none of them had to announce anything on how that massive handset subsidy would affect their earnings. AT&T is the ONLY carrier in the whole world that had to legally announce a profit margin warning due to the iphone handset subsidy --- and they don't even have a zero dollar iphone.
But if you want to keep your old phone, which is in theory paid for free and clear after two years, shouldn't your monthly rate go down?
I tell you, this whole concept of paying back AT&T's subsidy over two years is a farce . Before the two years are up, AT&T certainly keeps close accounting of how much of this "subsidy" you have paid back to see when you qualify for a newly subsidized phone, but after two years, why does this "subsidy" continue??? What are you subsidizing now, other than AT&T's coffers?
Of course it's a farce. Which is fine, since ATT never said you were paying back any subsidy over two years.
You sign a two year contract to use the iPhone in America.
Your monthly fee is $x.
That's all.
There's no repayment of anything - all your money goes to ATT and they can use it as they wish. If you don't like it, there's one sure way to make sure your monthly ATT bill goes down - stop using the iPhone and stop using ATT.
I think it's great that Apple can make a superior product and make good money. What I'm tired of is the straw argument that ATT is not making enough money because they have to subsidize. They outlay 100 to 400 and then get a buyer to put in another 2400 (roughly) over two years and still manage a net 10% profit. Sounds pretty good for a commodity service.
The great thing about a commodity service is that anyone can join in the competition.
So, let us know when you start your wireless company, and how your negotiations with Apple go.
Comments
That, of course, was not a "hope" but a guaranteed result... it just wasn't reported that way. And at the end of the financial year the report was that they had increased numbers of subscribers with increased spending and overall a better financial position through their high subsidies of the phone... a very good result.
(Optus sold the high end iPhone for US$140 on a US$50/mth plan, free on higher plans).
"The pity of it is that then people expect to be able to get a free upgrade at 12 months."
Here's what's pitiful. After two years, when AT&T has recouped its so-called "subsidy," why does my monthly rate NOT GO DOWN??? Hmmmm.......
This subsidy-over-two-years scheme is obviously a sham
The system is geared to a 2 year lifespan of phones. The plans nearly all seem to assume that - and if you replace your phone every 2 years then you get the best you can out of it. And if you don't replace your phone that often the phone company makes extra.
But if you want to keep your old phone, which is in theory paid for free and clear after two years, shouldn't your monthly rate go down?
In theory, absolutely.
You are free to change plans once your contract is up, and sometimes there are plans that are cheaper if you "BYO Phone", at least there are in Australia.
Vodafone here, 5 years back, tried making all phones paid upfront with lower monthly and call charges. Unfortunately lots of business moved to the other telcos as people wanted a "cheap phone", and perceived Vodafone as more expensive. So they gave up on that.
Yes, there is the deferred revenue, but I don't think that you can just add that in to the numerator and result in $595 per phone.
You see underlying the "recognized" revenue number includes deferred revenue from earlier periods. For simplicity I've chosen to assume they cancel each other out. If the earning cycle is in fact 24 months then you end up with a ramp up/ramp down revenue situation with a plateau in between (if they stopped making phones today they would still see "revenue" for another two years.) Revenue can look much "smoother" than it really is with this approach. In the middle, the amount deferred can be easily offset by some amount now recognized from an earlier period. I don't know the exact pattern they are using to recognize it but it not unreasonable that it would be proportional over 24 periods.
I think it's great that Apple can make a superior product and make good money. What I'm tired of is the straw argument that ATT is not making enough money because they have to subsidize. They outlay 100 to 400 and then get a buyer to put in another 2400 (roughly) over two years and still manage a net 10% profit. Sounds pretty good for a commodity service.
Brilliant!
Please read that paragraph of footnote (a) carefully:
It specifically stated that non-GAAP adjustment of $1.405 billion is by:
(1) REVERSING all previous deferred revenue (that is included in this current period) as if Apple never decided to have deferred revenue recognization in the last 2 years;
(2) ADDING all the future deferred revenue from the 5.208 million iphones sold in the current period.
$1.689 billion + (MINUS all previous deferred revenue that is being recognized in this current period PLUS all the future deferred iphone revenue from the 5.208 iphones sold = $1.405 billion) = $3.094 billion.
You have absolutely no clue what you are talking about.
PS: AT&T is NOT making enough money off the iphone --- that's why since the iphone was launched 2 years ago --- AT&T's share price dropped 40% and Verizon's share price dropped only 30%. That's why on today's AT&T's earning announcement, AT&T share price went up 2.5% and Verizon's share price went up almost 4%.
Optus here had a similar report 9 months ago after the first iPhone 3G. It basically said how much money they'd lost by subsidising the iPhone, but that they expected it to be made up.
That, of course, was not a "hope" but a guaranteed result... it just wasn't reported that way. And at the end of the financial year the report was that they had increased numbers of subscribers with increased spending and overall a better financial position through their high subsidies of the phone... a very good result.
(Optus sold the high end iPhone for US$140 on a US$50/mth plan, free on higher plans).
I think it's more or less an "accounting" issue.
Even though it is the US that is creating all the current economic mess in the whole world right now --- unfortunately they are still better than everybody else in terms of public company disclosure laws and accounting laws.
Strange, isn't it --- that there are dozens and dozens of carriers around the world giving out "zero" dollar iphones --- but none of them had to announce anything on how that massive handset subsidy would affect their earnings. AT&T is the ONLY carrier in the whole world that had to legally announce a profit margin warning due to the iphone handset subsidy --- and they don't even have a zero dollar iphone.
You have absolutely no clue what you are talking about.
You nailed it, I have absolutely no clue what I am talking about.
Thanks for the clarification.
But if you want to keep your old phone, which is in theory paid for free and clear after two years, shouldn't your monthly rate go down?
I tell you, this whole concept of paying back AT&T's subsidy over two years is a farce
Of course it's a farce. Which is fine, since ATT never said you were paying back any subsidy over two years.
You sign a two year contract to use the iPhone in America.
Your monthly fee is $x.
That's all.
There's no repayment of anything - all your money goes to ATT and they can use it as they wish. If you don't like it, there's one sure way to make sure your monthly ATT bill goes down - stop using the iPhone and stop using ATT.
I think it's great that Apple can make a superior product and make good money. What I'm tired of is the straw argument that ATT is not making enough money because they have to subsidize. They outlay 100 to 400 and then get a buyer to put in another 2400 (roughly) over two years and still manage a net 10% profit. Sounds pretty good for a commodity service.
The great thing about a commodity service is that anyone can join in the competition.
So, let us know when you start your wireless company, and how your negotiations with Apple go.
Isnt iPhone the real hearo for AT&T?.
Yeah. HERO.