Apple will offer free iPhone 3GS with 2-year mobile contract - report

Posted:
in iPhone edited January 2014
Apple is prepared to offer the iPhone 3GS, first released in 2009, as a free subsidized phone with a two-year service contract, according to a new report.



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. He said this approach would help Apple with mid-market buyers, and would also help the iPhone counter the growth of Google's Android platform.



"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. A lower-priced iPhone 3GS, offered $399 unsubsidized, would also increase iPhone share globally, he said.



The analyst also expects Apple to release what he called a "baby" iPhone in 2012. That later release would avoid iPhone 5 cannibalization, and would allow such a device to better leverage iCloud services.



For Apple to still offer the iPhone 3GS after the launch of a fifth-generation iPhone would be a change, as in years past Apple has discontinued its two-year-old smartphone model. For example, last year the iPhone 4 launched, the iPhone 3GS was dropped to $99, and the iPhone 3G was discontinued.







In January, the price of the iPhone 3GS was reduced even further, to $49 in the U.S. The device carries an 8GB capacity, half that of the entry-level 16GB iPhone 4, which sells for $199 with a new two-year contract.



In May it was revealed that the iPhone 3GS, along with the first-generation iPad, often outsells many newer Android-powered devices. It was noted that older products can offer Apple an aggressive tiered pricing strategy that can help ward off competition.



Though the iPhone 3GS was first released in 2009, it will be compatible with Apple's forthcoming mobile operating system update, iOS 5. That update is scheduled to arrive this fall, likely alongside the release of a fifth-generation iPhone.
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Comments

  • Reply 1 of 115
    tallest skiltallest skil Posts: 43,399member
    Quote:

    The analyst also expects Apple to release what he called a "baby" iPhone in 2012.



    It'd be great if we could stop this analyst from having his own babies. This level of nonsense must be genetic, and there's no reason to sully someone else's life with it.
  • Reply 2 of 115
    bartfatbartfat Posts: 432member
    Why in the world would Apple sell a phone that is almost immediately going to get outdated. At the least they have to put an A4 if not A5 in there, so when they come out with future software updates, their customers don't feel like they've been cheated, like Samsung and the rest.
  • Reply 3 of 115
    Quote:
    Originally Posted by AppleInsider View Post


    "Proprietary survey data... suggests 14$ are very/somewhat likely



    I'm assuming that should read "14%".



    #corrections



    --Stephen
  • Reply 4 of 115
    stelligentstelligent Posts: 2,680member
    Quote:
    Originally Posted by bartfat View Post


    Why in the world would Apple sell a phone that is almost immediately going to get outdated. At the least they have to put an A4 if not A5 in there, so when they come out with future software updates, their customers don't feel like they've been cheated, like Samsung and the rest.



    If true, this shows that Apple is desperately holding onto hopes that they can still win the market share fight, or trying not to fall too far behind.
  • Reply 5 of 115
    cloudgazercloudgazer Posts: 2,161member
    Quote:
    Originally Posted by bartfat View Post


    Why in the world would Apple sell a phone that is almost immediately going to get outdated. At the least they have to put an A4 if not A5 in there, so when they come out with future software updates, their customers don't feel like they've been cheated, like Samsung and the rest.



    Supply. Apple's iPhone business is far more supply constrained than people realize. Horace Dediu of Asymco made this point a while back, no other phone maker produces one model a year and makes twice as many of that model as they did of the previous model. Every other phone maker has a big portfolio of models that allows them to handle supply more smoothly, and besides they're not growing their overall business at anything like Apple's rate.



    Apple already has functioning supply chains and assembly plants for the 3GS, so why shut those lines down for as long as the 3GS is capable of running the latest OS and is selling well? At some point they may indeed decide to upgrade the internals to an A5 - but it will depend on how that would affect the tooling on the supply line.



    As for immediately outdated - the 3GS runs iOS 5, and supposedly runs it pretty well. So the 3GS is good for at least a year, quite possibly more - which is a longer support life than the average Android phone can expect at launch. Many people don't need uber tech specs, especially people converting over from dumb-phones.



    I wonder if this analyst has information from suppliers that leads him to believe that the 3GS supply is not being run down ahead of the iPhone5/4S launch.
  • Reply 6 of 115
    kent909kent909 Posts: 695member
    I would rather pay $99 for an iPhone 4 when 5 comes out than get a free 3GS. The very reason millions get the latest says why we say goodbye to the previous shiny object. Who knows after they tell me all about the iPhone 5 I may change my mind and only want that!
  • Reply 7 of 115
    dagamer34dagamer34 Posts: 494member
    Sigh, this is praying on idiots. The cost of the phone at $49 is only 2.7% of the minimum total cost for a cellphone plan on AT&T (450 minutes, 2GB data = ~$75/month w/ taxes * 24 = $1800).



    If this makes a major dent, then I think people need to be sent back to a 3rd grade math class.



    EDIT: forgot about the $15 250MB plan. (450 minutes, 250MB data = ~$60/month w/taxes * 24 months = $1440), $49/$1440 = 3.4% of the total minimum cost of a cellphone plan. Still doesn't change my point.
  • Reply 8 of 115
    asdasdasdasd Posts: 5,171member
    Quote:
    Originally Posted by stelligent View Post


    If true, this shows that Apple is desperately holding onto hopes that they can still win the market share fight, or trying not to fall too far behind.



    Gosh, yes, the desperation of continuing to sell - at a cheaper price - the second most popular device in the US ( and possibly the world).



    The sheer desperation.
  • Reply 9 of 115
    asdasdasdasd Posts: 5,171member
    Fact is the CPU in the 3GS delivers, in the real world, about the same speed as the iPhone 4. Less pixels to worry about for sure, but it feels just as zippy. I say rename it the iPhone Classic - have two or three models. Update it every year with last years chip, and never have a retina display so as to not canibilise your top end models. Then drop the lower end on that baby to $250, but have more options at the higher end - that is: the classic sells from $250-$350, and the iPhone 4/5 form $450-$700.
  • Reply 10 of 115
    asdasdasdasd Posts: 5,171member
    Quote:
    Originally Posted by dagamer34 View Post


    Sigh, this is praying on idiots. The cost of the phone at $49 is only 2.7% of the minimum total cost for a cellphone plan on AT&T (450 minutes, 2GB data = ~$75/month w/ taxes * 24 = $1800).



    If this makes a major dent, then I think people need to be sent back to a 3rd grade math class.



    It will probably be free on all plans. Only in America - apparently - is there one plan for all users of a phone. If the carriers can get it fro $200 less they can take that off their plans.
  • Reply 11 of 115
    tallest skiltallest skil Posts: 43,399member
    Quote:
    Originally Posted by asdasd View Post


    If the carriers can get it fro $200 less they can take that off their plans.



    Can. But won't.
  • Reply 12 of 115
    aross99aross99 Posts: 86member
    I just don't see why the cost of the phone ($99 or $49 or even $0) is such a big deal when it requires a minimum of a $15/monthly data plan?



    Who is going to say "I'm not willing to spend $49 on an iPhone, but I will add $15/month to my cell phone bill?"



    This only makes sense if they finally drop the requirement for the data plan. Before you say "what is the point of an iPhone with out 3G data", there are plenty of people (including many high school and college students) who are constantly surrounded with WiFi and won't spend the $15/month for a data plan, but who want an iPhone...



    I would have paid $199 for iPhones for my kids years ago if I could have eliminated the data plan - it would have been CHEAPER than buying them iPod touches...
  • Reply 13 of 115
    Quote:
    Originally Posted by aross99 View Post


    I just don't see why the cost of the phone ($99 or $49 or even $0) is such a big deal when it requires a minimum of a $15/monthly data plan?

    ...

    I would have paid $199 for iPhones for my kids years ago if I could have eliminated the data plan - it would have been CHEAPER than buying them iPod touches...



    Having 4 teenage boys - they too would have loved iPhones - even without data plan. Like the touch, WiFi would have been plenty for data. So they get to carry two items, cheap boring phone and a touch.... maybe verizon will......
  • Reply 14 of 115
    jukesjukes Posts: 213member
    This sounds very un-Apple. They've never shown much interest in continued support for old hardware in terms of the OS and application minimum hardware requirements. I don't know why they'd start now, in particular given that they're going to great lengths to leverage OpenCL everywhere---a place where the 3gs will be subpar momentarily, if it isn't already.
  • Reply 15 of 115
    originalgoriginalg Posts: 381member
    At the very least they could change the housing on the thing so people don't look like they're using an outdated phone.
  • Reply 16 of 115
    solipsismsolipsism Posts: 25,726member
    I can see it. The cost has likely dropped by $49 over the past year and it's a way to shore up the lower end of the market whilst still allowing for a wild array of App Store ecosystem tie in. This could put a hurt on the Android sales where people just go for has the perception of being free.
  • Reply 17 of 115
    michael scripmichael scrip Posts: 1,912member
    What is this exactly? The headline is "Apple will offer free iPhone 3GS with 2-year mobile contract"



    But Apple doesn't have contracts... it sells hardware.



    ???



    OK.... so it's free if I walk in off the street and pick one up... because I'm giving the carriers about $90 a month for 2 years.



    What is Apple getting in return? Is Apple cutting the carriers a break?



    With the $49 3GS... you know Apple isn't getting only $49 per phone... they still get the $500 from the carriers.
  • Reply 18 of 115
    blastdoorblastdoor Posts: 1,888member
    Huh. Color me skeptical.



    I do believe that Apple will try to go after more price points. But I find the combo of an iPhone 4S and iPhone 5 to be a more compelling rumor than this. The problem with keeping the iPhone 3GS going another year is that it could limit progress on iOS. A major competitive advantage of the iPhone is OS upgrades. It would suck if apple came out with iOS 6 next year and dropped 3gs support with some people having just bought a 3gs a few weeks/months prior.



    Even in China (and other emerging markets) where Apple would like to hit lower price points on unsubsidized phones, I'll bet they don't go *too* low. Apple isn't going to sell crap to anybody, anywhere in the world. Nor are they going to sell a soon-to-be-obsolete product to anybody anywhere in the world. Doing those sorts of things might boost the bottom line in the short term, but they tarnish the brand. Apple is building a strong brand in China -- they aren't going to do anything to undermine their brand as a status symbol.



    One thing I could imagine Apple doing, though perhaps not this year, is figuring out a way to charge Chinese customers a monthly fee so that they can sell the iPhone at a subsidized up-front price (totally independently of the carrier). Heck, something as simple as offering consumer credit would be one way to do that. Offering consumer credit in developing markets is tricky, which is why others don't do it. But with iTunes/iCloud Apple might find a way to make it work. In essence, Apple could create something like GMAC used to be for GM -- an in-house financing company that makes it easier for customers to get financing for Apple products.
  • Reply 19 of 115
    What rubbish is this? Telus and Bell (in Canada) already offer the iPhone 3GS for 0$, and for a while now, and there's no iPhone 4S or 5 anywhere. What is this mate talking about?
  • Reply 20 of 115
    as someone who sold cellphones for almost a year, this could be HUGE.



    to the average consumer does the fact that the iphone 3gs does not have a dual core processor matter? no. Does the fact it lacks a front facing camera, super high rez screen, kitchen sink matter? no. Is it cheap, does it do email, phone, txt, and web and some apps and games? yes. Sold, no second thought from the customer



    another example is the Inspire 4g and the atrix 4g, 99% of the customers that walked into that store saw a few things and ignored the rest: price and screen size. Selling the atrix was very tough when compared to the inspire because "dual core and qhd display" mean jack squat to the customer.



    The only people who care about a phone being "outdated" are the people who read gadget blogs, and we make up probably 1% of the market if that. To all the people who whine about the 3GS being such and old phone, and who would buy one etc, wake up and realize that a free iPhone, would be a MASSIVE hit for Apple no matter how old the hardware was, because at the end of the day, for the normal user, the 3GS does everything the latest greatest big bad iphone or android device does.
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