About 25 percent of iPhone buyers are 'switchers' to AT&T - firm

Posted:
in iPhone edited January 2014
About one quarter of consumers adopting Apple's heavily-hyped iPhone handset are 'switchers' to AT&T from other carriers, financial firm American Technology Research reported on Friday, citing unnamed sources.



"We find these numbers impressive, showing that a fair amount of customers are willing to pay high early cancellation fees (~$125-$200) to get out of their existing service contracts for an iPhone," analyst Shaw Wu wrote in the report.



The analyst said the only other product in recent history to command a similar type of respect (at least in the beginning) was the Motorola RAZR in mid- to late-2004. Initially priced at $500 with a service contract and $800 without, the super-slim handset eventually saw subsidies and went on to enjoy phenomenal success, selling in excess of 50 million units.



"We believe both instances indicate that high price points are not an issue for early adopters who purchase the first few million units," Wu told clients.



Meanwhile, the analyst also cited sources in reiterating that Vodafone remains the front-runner and most likely carrier partner for iPhone in Europe, primarily due to its large subscriber base, broad geographic coverage, and investment in advanced technology.



"However, due to AT&T's success and ability to gain new customers with iPhone in the USA, other carriers including Orange, T-Mobile and O2 are aggressively bidding for European iPhone rights, giving Vodafone stiff competition," Wu wrote. "From our understanding, there could be a scenario where iPhone has multiple carrier partnerships (maximizing its market potential) with each tailored for specific regions and/or countries, i.e. Vodafone in the UK, T-Mobile in Germany, and Orange in France."



Regardless of which carrier gets picked for iPhone rights in Europe, the AmTech analyst believes Apple is in a strong position to end up with terms just as favorable as those granted by AT&T in the U.S, where the company collects bounties and recurring monthly service fees from the carrier.



"We believe that potential carrier partners are more willing to accept Apple's tough terms and conditions given Apple's strong brand name and mainstream appeal and iPhone's ability to lure customers away from other carriers," he wrote.



Over the next 2-3 years, Wu expects iPhone to bring smart phone technology into the mainstream, particularly as Apple rounds out the handset's product line with mid-range and entry-level offerings, just as it did with the iPod and portable media players.



"We believe the iPhone is among must-own gifts for this year's holiday shopping season," he told clients.



Wu, who maintains a 'Buy' rating on shares of the Cupertino-based Apple, said he's already seeing the potential for upside to his $165 per-share target.
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Comments

  • Reply 1 of 84
    solipsismsolipsism Posts: 25,726member
    An intelligent well rounded review by Shaw. I guess he's been reading these forums lately.
  • Reply 2 of 84
    anantksundaramanantksundaram Posts: 19,420member
    Quote:
    Originally Posted by solipsism View Post


    An intelligent well rounded review by Shaw. I guess he's been reading these forums lately.



    Switching doesn't necessarily mean paying cancellation fees -- there are probably many like me who switched (from Verizon in my case) and gave the previous phone, with the number and all, to a family member.



    So Wu's analysis may be overestimating the negative impact on ATT's competitors. The iPhone may well have expanded the market for mobile phones.
  • Reply 3 of 84
    I wonder how many people did what I did...

    I switched 2 days before the iphone came out. That way, I got 3 free camera phones, then bought 3 iphones and activated them.

    That way, I was an existing customer (so no problems with activation and portability), but switched for the iphone.

    I guess technically I was not an iphone switcher, but in reality, I was.
  • Reply 4 of 84
    bageljoeybageljoey Posts: 1,763member
    Quote:
    Originally Posted by studiomusic View Post


    I wonder how many people did what I did...

    I switched 2 days before the iphone came out. That way, I got 3 free camera phones, then bought 3 iphones and activated them.

    That way, I was an existing customer (so no problems with activation and portability), but switched for the iphone.

    I guess technically I was not an iphone switcher, but in reality, I was.



    How did that work? did you sign up with 2 year contracts and then re-up for 2 more years on the iPhone? Or did the iPhone contract trump the existing contracts?



    I am only 6 months into a 2 year with Cing--AT&T and I figured that I would have to wait another year before getting the iPhone or end up with a really long contract or something. To be honest, I didn't want to be tempted to get the iPhone right away, so that was working for me, but I guess I should know if I was under a misapprehension...
  • Reply 5 of 84
    cameronjcameronj Posts: 2,357member
    Quote:
    Originally Posted by Bageljoey View Post


    I am only 6 months into a 2 year with Cing--AT&T and I figured that I would have to wait another year before getting the iPhone or end up with a really long contract or something. To be honest, I didn't want to be tempted to get the iPhone right away, so that was working for me, but I guess I should know if I was under a misapprehension...



    What, like you would then have a 3.5 year contract or something? That's not how it works
  • Reply 6 of 84
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by anantksundaram View Post


    Switching doesn't necessarily mean paying cancellation fees -- there are probably many like me who switched (from Verizon in my case) and gave the previous phone, with the number and all, to a family member.



    So Wu's analysis may be overestimating the negative impact on ATT's competitors. The iPhone may well have expanded the market for mobile phones.



    In Wu's defense, he said "a fair amount" are willing to pay cancelation fees. He did not specify that all switchers were willing to or needed to.



    If Wu's numbers are correct. Then 25% of a supposed 1M is 250k customers. If you assume that half of these were previous smartphone owners and half weren't and figure a monthly average of $60 for service, then the total yearly loss is $180,000,000. There is in no way to be accurate here without having more exacting figures but it does give you an idea of what the iPhone has already done for AT&T, why the other carriers aren't happy about it and how this is helping Apple's overseas negotiations. If we consider how many will be willing to switch once their contracts are up and, to a lesser degree, the ones who are willing to stay with AT&T because of the iPhone then we really start to see a massive revenue stream for AT&T and a noticeable dent in the other carriers in years to come. I just hope AT&T has decided to up their network to 3G in preparation for the next iPhone.
  • Reply 7 of 84
    kenaustuskenaustus Posts: 911member
    I have a feeling that a lot of switchers to ATT were already out of contract with their old carrier. I'm out of contract with ATT, but just keep paying them monthly. If I had been with Sprint I could have changed at no cost. One of the reasons why we were given a 6 month warning on the iPhone - about 25% of the 2 year contract customers will be able to let their old contract expire before the iPhone was available, and about 50% will eb free by the Christmas shopping season.
  • Reply 8 of 84
    Quote:
    Originally Posted by cameronj View Post


    What, like you would then have a 3.5 year contract or something? That's not how it works



    I did the same thing. Got my 2 free phones with AT&T and made sure I liked the service coverage, etc. 30 days later got my iPhones, and sold the first 2. So I was an existing AT&T customer for 29 days but switched from Sprint for the purpose of the iPhone.



    Also, I got &200 in rebates on my old/new phones and sold them for another $75. So in essence I went from a family plan with Sprint at $95 a month to a family plan with roll over with ATT/2 iPhones for $90 a month and sold equipment for $275.00. So all in all, it was a fair shift considering how I could not get a new Sprint phone very cheap, only a mere 100 rebate, so this way I got the phone I wanted, more minutes, data and such for slightly less.



    My contract that was 29 days old was null and voided by the iPhone which extended 2 years from the date I activated it. Very simple.
  • Reply 9 of 84
    bageljoeybageljoey Posts: 1,763member
    Quote:
    Originally Posted by cameronj View Post


    What, like you would then have a 3.5 year contract or something? That's not how it works





    ARE YOU CALLINg ME STUPID??/? I am offended!!!



    Oh, wait. Wrong thread.



    I dunno. I always thought you had to wait until one contract was up to start another. Does that not apply to the iPhone because there are no consumer subsidies? Or was I just missing something all these years...



    Anyway, if that would have worked for anyone, Studiomusic makes other switchers look like fools if he really did get three free other phones in the bargan... Wish I was that smart...
  • Reply 10 of 84
    nofeernofeer Posts: 2,422member
    AI can you stop that HP add it takes forever to get rid of and is obtrusive



    this gathering of competitors cutomers is a huge thing, it cost a bundle to switch a player in the "old pre iphone world" and europe, japan , asia etc are watching. i raised this in another post, but this is what AT&T wanted and what verizon was scared about. how much NOW will it cost verizon to get them back....maybe never, if apple keeps upgrading iphone, intergrates with ipod and boom a new business model. gee actually be able to keep your customers get away from the rebates and push this new sensation. other markets are listening VERY close,. having the iphone is a huge competitive edge regardless of the "network". it could make a number 2 or 3 or 4 in market number one for a long time
  • Reply 11 of 84
    nofeernofeer Posts: 2,422member
    Quote:
    Originally Posted by kenaustus View Post


    I have a feeling that a lot of switchers to ATT were already out of contract with their old carrier. I'm out of contract with ATT, but just keep paying them monthly. If I had been with Sprint I could have changed at no cost. One of the reasons why we were given a 6 month warning on the iPhone - about 25% of the 2 year contract customers will be able to let their old contract expire before the iPhone was available, and about 50% will eb free by the Christmas shopping season.





    i hink apple making the announcement and the rumors lasting over 6 months "told" many to hold off extending their contract. thats me, i heard then waited...bingo will get the iphone. Christmas season will therefore be HUGE. this puts more momentum to the iphne and enhances SJ's negotiations with the other markets.
  • Reply 12 of 84
    I'm with the poster who said he got three phones. I'm only getting one, but I plan on selling it to support my iPhone fix. I'm might just pay 30 bucks to get a nice phone and sell it for $250.00 .
  • Reply 13 of 84
    tomkarltomkarl Posts: 238member
    Quote:
    Originally Posted by anantksundaram View Post


    Switching doesn't necessarily mean paying cancellation fees -- there are probably many like me who switched (from Verizon in my case) and gave the previous phone, with the number and all, to a family member.



    So Wu's analysis may be overestimating the negative impact on ATT's competitors. The iPhone may well have expanded the market for mobile phones.



    Second.



    I held off renewing a contract with T-Mobile in anticipation of the iPhone being locked to a carrier. I left them paying no cancellation fee.
  • Reply 14 of 84
    melgrossmelgross Posts: 31,986member
    Quote:
    Originally Posted by Bageljoey View Post


    How did that work? did you sign up with 2 year contracts and then re-up for 2 more years on the iPhone? Or did the iPhone contract trump the existing contracts?



    I am only 6 months into a 2 year with Cing--AT&T and I figured that I would have to wait another year before getting the iPhone or end up with a really long contract or something. To be honest, I didn't want to be tempted to get the iPhone right away, so that was working for me, but I guess I should know if I was under a misapprehension...



    Usually, though I can't say for all carriers, you can restart a new 2 year agreement. If you get a new phone discount after some specified time, that wouldn't make sense, but as you are purchasing a new phone without discount, it's different.
  • Reply 15 of 84
    melgrossmelgross Posts: 31,986member
    Quote:
    Originally Posted by solipsism View Post


    In Wu's defense, he said "a fair amount" are willing to pay cancelation fees. He did not specify that all switchers were willing to or needed to.



    If Wu's numbers are correct. Then 25% of a supposed 1M is 250k customers. If you assume that half of these were previous smartphone owners and half weren't and figure a monthly average of $60 for service, then the total yearly loss is $180,000,000. There is in no way to be accurate here without having more exacting figures but it does give you an idea of what the iPhone has already done for AT&T, why the other carriers aren't happy about it and how this is helping Apple's overseas negotiations. If we consider how many will be willing to switch once their contracts are up and, to a lesser degree, the ones who are willing to stay with AT&T because of the iPhone then we really start to see a massive revenue stream for AT&T and a noticeable dent in the other carriers in years to come. I just hope AT&T has decided to up their network to 3G in preparation for the next iPhone.



    The monthly average would be higher though. Most smartphone users are paying a fair amount more a month than $60, and those going for this phone would very likely already be using fairly expensive, internet capable phones like the one I bought for my daughter. I think the average could be closer to $80 a month, when including the internet fees, esp. from Verison, whose fees are high.



    If so, it then comes out to $240 million on a yearly basis.



    And that's just for the first 10 days of customers. We don't know how many more have signed up since the stores have started to be re-stocked.



    If this holds true for the rest of the year, and we see 5 million sales (one analyst is expecting 8 million!), the losses for other carriers, and the gains to ATT would be phenomenal.
  • Reply 16 of 84
    wingswings Posts: 261member
    USA Today is reporting that a survey conducted by Interpret of Santa Monica found that 51% of iPhone buyers were switchers to ATT, and this survey says 25%. Wonder who is right. (If either one)
  • Reply 17 of 84
    cameronjcameronj Posts: 2,357member
    Quote:
    Originally Posted by Bageljoey View Post


    I dunno. I always thought you had to wait until one contract was up to start another. Does that not apply to the iPhone because there are no consumer subsidies? Or was I just missing something all these years...



    Nope, doesn't apply to any phone or carrier that I'm aware of. You can always start up a new service of some kind and restart your two year commitment. The only thing that they really limit is when you can get a discount on a new phone, which is only with less than 6 months left on your contract.
  • Reply 18 of 84
    fraklincfraklinc Posts: 244member
    [QUOTE=Bageljoey;1111442]How did that work? did you sign up with 2 year contracts and then re-up for 2 more years on the iPhone? Or did the iPhone contract trump the existing contracts?



    I am only 6 months into a 2 year with Cing--AT&T and I figured that I would have to wait another year before getting the iPhone or end up with a really long contract or something. To be honest, I didn't want to be tempted to get the iPhone right away, so that was working for me, but I guess I should know if I was under a misapprehension...[/QUOT



    this is how it works, i got 2 phones from att for free with a 2 years contract a month ago, when iphone came out i sold them on ebay, since there was 23 more months left on the contract, an i have got new phones the original contract gets cancel and you start fresh again for 2 year, some people don't know that you can always extend the contract again so you wont have to pay full price on your phones
  • Reply 19 of 84
    Ok, so AI is in my daily rumor reading list.., but then again , so is Macrumors.com.



    How about i just read an article from MR... citing some very incongruent stats with what is mentioned in this article. I find that very odd... that 2 entities "in the know" could be so far apart in their reports...



    Here is an excerpt from the MR article.



    ------------------------

    USA Today reports that early iPhone adopters are overwhelmingly happy with their iPhones.

    In one of the first such studies, 90% of 200 owners said they were "extremely" or "very" satisfied with their phone. And 85% said they are "extremely" or "very" likely to recommend the device to others, says the online survey conducted and paid for by market researcher Interpret of Santa Monica, Calif. The firm surveyed 1,000 cellphone users July 6-10.





    Of course, early adopters are a special population and may not reflect the satisfaction of later consumers as a whole. Some other interesting statistics that came from the studies are included:



    ? 51% of buyers were switching to AT&T from another carrier

    ? 35% of carrier switchers paid an early termination fee (avg $167) to switch

    ? 3 of 10 were first-time Apple customers.

    ? for 4 of 10, the iPhone was their first iPod

    ? New iPhone owners expected to pay about $35 more a month than their previous cellphone.



    Meanwhile, Forbes publishes a report that Telefonica SA's O2 mobile phone unit has reached an agreement to become the exclusive network partner for Apple's iPhone in the UK. Sales are reported to begin "shortly". Vodafone had reportedly been a front runner in negotiations but in the end felt that the commercial terms were not viable.



    -------------------------



    51% is alot different that the reported 25%....



    and how does one guy say Vodafone is still the front runner... and another guy say O2 is....



    ON THE SAME DAY?





    Someone needs to do some more digging
  • Reply 20 of 84
    tundraboytundraboy Posts: 1,624member
    Quote:
    Originally Posted by NOFEER View Post


    How much NOW will it cost verizon to get them back....maybe never, if apple keeps upgrading iphone, intergrates with ipod and boom a new business model. gee actually be able to keep your customers get away from the rebates and push this new sensation. other markets are listening VERY close,. having the iphone is a huge competitive edge regardless of the "network". it could make a number 2 or 3 or 4 in market number one for a long time



    If I were a board member of Verizon, I would be very upset at management. What we have here is a case of hubris leading to a failure of vision. When Apple approached them, they probably thought 'Who is this upstart demanding these unprecedented terms thinking he knows the cell phone business?' With that attitude, they probably prejudged the proposal and failed to truly listen and imagine the implications of what Jobs was pitching. Nothing closes the mind as much as arrogance.
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