AT&T paying Apple $325 subsidy on every iPhone 3G sold - report
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.
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.
Comments
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.
Thats more than before
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.
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
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.
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.
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?
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.
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
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 .
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.
Further, if Apple didn't care much about black-market iPhones...
[CENTER]"Apple doesn't care about black markets"
[/CENTER]
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.
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.
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...
I don't think so... :^/