AT&T paying Apple $325 subsidy on every iPhone 3G sold - report

Posted:
in iPhone edited January 2014
AT&T is paying Apple a $325 subsidy on each new iPhone 3G sold in the US in addition to offering the electronics maker a hefty bounty for each subscriber addition it gains from sales of the handset at Apple retail stores, according to a new report.



Oppenheimer equity research analyst Yair Reiner told clients in a research report that the subsidy is more than 50 percent higher than most other smart phones, which are typically subsidized by about $200.



He said the abnormal concession on AT&T's part reflect the carrier's confidence in the iPhone's ability to grow its subscriber base and drive an overall increase in the average revenue it makes off customers through higher margin services and data plans.



The net result, according to the analyst, is a disproportionally stacked offense in Apple's favor that will leave rivals like Research in Motion and Nokia "scrambling" to hit lower price points at the expense of their respective bottom lines.



What's more, Reiner said he also believes that AT&T is paying Apple an extra $100 for each new subscriber to AT&T signed up through Apple's brick-and-mortar stores, for a total commission of $425. That data point alone suggests that the analyst believes AT&T is also paying Apple the $325 subsidy on phones Apple sells.



The net result, Reiner added, is that Apple will be generating the same amount of revenue through iPhone 3G sales that it did under its original deferred revenue share agreement with the nation's No. 1 carrier, only this time around the cash will be up front and on the table.
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Comments

  • Reply 1 of 58
    ktappektappe Posts: 770member
    Quote:
    Originally Posted by AppleInsider View Post


    AT&T is paying Apple a $325 subsidy on each new iPhone 3G sold



    I think this explains a lot. It explains why the data plans have jumped $10/month. It explains why AT&T has yet to reveal whether any SMS will be included in the rate or if texting will cost extra (I'm now betting the latter.) With subsidies that high, AT&T has to get its $325 back somewhere....anywhere it can. I don't at all feel sorry for AT&T and am no apologist for them, but am recognizing the simple $$ of the situation. And now I'm less likely to be mad at AT&T for higher iPhone fees and more likely to be mad at Apple 'cos it seems that's where the money is really flowing.

  • Reply 2 of 58
    salmonstksalmonstk Posts: 560member
    I am confused. How much total does Apple get per phone. It sounds like its 199+325 or 524.



    Thats more than before
  • Reply 3 of 58
    cam'roncam'ron Posts: 503member
    Quote:
    Originally Posted by salmonstk View Post


    I am confused. How much total does Apple get per phone. It sounds like its 199+325 or 524.



    Thats more than before



    That is what it sounds like to me.
  • Reply 4 of 58
    kasperkasper Posts: 941member, administrator
    Quote:
    Originally Posted by salmonstk View Post


    I am confused. How much total does Apple get per phone. It sounds like its 199+325 or 524.



    Thats more than before



    Yeah -- I did a quick search of all the prior estimates on the per-month revenue share payment ($3 - $14) and it seems that if this analyst is correct, Apple would be making a lot more. But given that the original rev share deal was never made public, everything is estimated so it's kind of a he said, she said kind of deal...



    K
  • Reply 5 of 58
    tundraboytundraboy Posts: 1,620member
    Quote:
    Originally Posted by salmonstk View Post


    I am confused. How much total does Apple get per phone. It sounds like its 199+325 or 524.



    Thats more than before



    You forget they don't get a share of the monthly subscriptions anymore.
  • Reply 6 of 58
    tenobelltenobell Posts: 7,014member
    Last year when people complained Apple was being greedy with revenue sharing. I thought even if Apple switched to subsidizing they still would charge an extreme premium and in the end not make much difference.
  • Reply 7 of 58
    nagrommenagromme Posts: 2,834member
    I don't like the subsidized concept.... but if I have to have a subsidy plan, at least let AT&T be paying a bundle
  • Reply 8 of 58
    jamiecjamiec Posts: 42member
    Quote:
    Originally Posted by Cam'ron View Post


    That is what it sounds like to me.



    It's more money for Apple upfront (or somewhat less, compared to the initial 8gig iPhone price). However, it's less money overall, since Apple no longer gets a portion of the monthly contract price from AT&T.



    It was a good move for Apple to ditch the revenue-sharing aspect for the 3G iPhone. I'm surprised that there hasn't been more discussion about the fact that this obliterates the last big hurdle to the iPhone's adoption in China.



    Further, if Apple didn't care much about black-market iPhones in the past, they REALLY don't care much now -- it's up to AT&T to go after people for the early termination fee.
  • Reply 9 of 58
    ghostface147ghostface147 Posts: 1,629member
    I currently pay about 104 bucks a month with all taxes included. That includes 900 minutes and 1500 text messages. With the 3g data plan adding 10 bucks a month extra, plus SMS not being included (speculated, but highly likely)......I think I will be staying with my current iPhone. The reason why I say SMS is not included is because that falls in line with their other 3g data plans. Oh well. 1st gen iPhone it is for me....
  • Reply 10 of 58
    mrjoec123mrjoec123 Posts: 223member
    Quote:
    Originally Posted by ktappe View Post


    I think this explains a lot. It explains why the data plans have jumped $10/month.



    No it doesn't. The data plans are now $30 because they're 3G. Period. Any 3G phone on AT&T will cost you $30 a month for data. Why would an iPhone be cheaper than all the other 3G phones AT&T offers?
  • Reply 11 of 58
    breezebreeze Posts: 96member
    [QUOTE=ktappe;1267229]I think this explains a lot. It explains why the data plans have jumped $10/month. It explains why AT&T has yet to reveal whether any SMS will be included in the rate or if texting will cost extra (I'm now betting the latter.)



    If ATT excludes SMS, they risk a major rebellion and alienation that will lead to jailbreaking in masses just to get out of the contract with them. Also other telcos will be happy to try and lure ATT deserters by offering free SMS.
  • Reply 12 of 58
    webfrassewebfrasse Posts: 147member
    Quote:
    Originally Posted by nagromme View Post


    I don't like the subsidized concept.... but if I have to have a subsidy plan, at least let AT&T be paying a bundle



    and you don't think they will charge you in the end...sucker:-)



    /Mikael
  • Reply 13 of 58
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by salmonstk View Post


    I am confused. How much total does Apple get per phone. It sounds like its 199+325 or 524.



    Thats more than before



    It sounds about the same to me. And Apple can now earn a profit off the upfront subsidy payments .





    Quote:
    Originally Posted by mrjoec123 View Post


    No it doesn't. The data plans are now $30 because they're 3G. Period. Any 3G phone on AT&T will cost you $30 a month for data. Why would an iPhone be cheaper than all the other 3G phones AT&T offers?



    The iPhone's unlimited EDGE data plan was only $20/month, which was unheard of at the time. I think AT&T charged $40-45 per month for Blackberry data plans, which were still only EDGE capable. The prices for unlimited data has only come down in the recent months.



    The price increase may be more attributed with the billions that AT&T has put into getting a decent HSPDA network setup over the country since the original iPhone's release.





    Quote:
    Originally Posted by jamiec View Post


    Further, if Apple didn't care much about black-market iPhones...



    [CENTER]"Apple doesn't care about black markets"

    [/CENTER]
  • Reply 14 of 58
    eduardoeduardo Posts: 181member
    Quote:
    Originally Posted by nagromme View Post


    I don't like the subsidized concept.... but if I have to have a subsidy plan, at least let AT&T be paying a bundle



    Actually-those of us who have or will have an iPhone with AT&T will be paying a bundle. So the is not with AT&T or Apple but with us.
  • Reply 15 of 58
    surfratsurfrat Posts: 341member
    Quote:
    Originally Posted by mrjoec123 View Post


    No it doesn't. The data plans are now $30 because they're 3G. Period. Any 3G phone on AT&T will cost you $30 a month for data. Why would an iPhone be cheaper than all the other 3G phones AT&T offers?



    Exactly. I'm getting tired of all these people claiming AT&T has *raised* the price on iPhone's data plan. Simply not true. The cost of a 3G data plan from AT&T for ANY phone has always been $30 a month.



    Let's try and keep up people, this info is common knowledge.
  • Reply 16 of 58
    dagamer34dagamer34 Posts: 494member
    AT&T has definitely increased the footprint of it's 3G network. It's here in Detroit suburbs when it wasn't as recently as 2-3 weeks ago.
  • Reply 17 of 58
    nvidia2008nvidia2008 Posts: 9,262member
    Holey moley Apple is totally raping the service providers. Good on them.
  • Reply 18 of 58
    bageljoeybageljoey Posts: 1,755member
    Quote:
    Originally Posted by webfrasse View Post


    and you don't think they will charge you in the end...sucker:-)



    /Mikael



    Or maybe he owns AAPL and he is counting on making a bunch more from Apple than he pays to at&t...
  • Reply 19 of 58
    marklarkmarklark Posts: 18member
    If Apple is making as much money from AT&T as they were with the original iPhone... Will we see any other companies in the US selling iPhones?



    I don't think so... :^/
  • Reply 20 of 58
    I think Apple will make out well in the end. A $325 subsidy and $10 extra a month means you'll break even in 2.7 years. In that time Apple will have almost surely released at least 2 new versions of the iPhone, and I'm sure many who have the iPhone 2.0 will upgrade to at least one of them. Even if they don't want to break their contract and get the latest phone, they're eligible for a new subsidy after 2 years, which means an extra $70 for Apple from every 2.0 owner who upgrades before AT&T has made a profit on the 3G data upgrade.
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