Pre-paid iPhone 3G customers may pay $600 for handset - report

Posted:
in iPhone edited January 2014
Approximately one out of every ten iPhone 3G buyers are likely to be international pre-paid subscribers who'll find themselves paying in excess of $600 for the touch screen handset, according to a new report.



Piper Jaffray analyst Gene Munster estimates that 53 percent of Apple's total addressable market for the new 3G mobile phone will be pre-paid customers who'd forgo lengthy service agreements, and thus wouldn't be privy to hefty subsidies offered to those buyers who'd sign multi-year contracts with carriers.



Therefor, pre-paid subscribes will in all likelihood wind up paying in excess of $600 for the new touch-screen handset, he said. The estimate assumes Apple charges carriers an average $425 for the new phone and those carriers then turn around and mark up the pre-paid handsets another $175 or so to turn a profit.



Given those costs are around three times more than the $199 subsidized price Apple and its wireless partners plan to charge contract customers for an 8GB iPhone 3G, the analyst believes pre-paid customers won't make up a proportionate share of global iPhone sales -- a belief he's factored into his current model.



More specifically, Munster's model calls for Apple to sell 12.9 million iPhones in 2008 and 45 million in 2009, which would garner the Cupertino-based company a 17 percent slice of the global smartphone market by the end of next year. Of the 2.9 million iPhones in 2008, he estimates 2.7 million will be purchased by pre-paid subscribers. In 2009, he sees just 5.7 million of the 45 million units going to pre-paid customers.



"While 17 percent may seem aggressive, Apple currently has 20 percent in North American driven by a $400 priced phone," he told clients. "We only expect Apple to have 20 percent or greater smartphone share in two regions, North America and EMEA (Europe, the Middle East and Africa)."







Munster issued his report on Monday mainly to address growing concerns amongst Apple investors who had begun to believe that the impact of selling iPhones in heavily prepaid markets would substantially dilute the global opportunity for the handset.



Those investors were acting on the misconception that more than half of potential iPhone customers would be forced to pay $600 or more for the new 3G handset, when in actuality that number is more likely closer to 15 percent, or 1 out of every 10 units sold, according to Munster's models.



The Piper Jaffray analyst and his team maintain a Buy rating and $250 price target on shares of Apple.
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Comments

  • Reply 1 of 61
    .mac.mac Posts: 44member
    i will be happy to get a unlocked 3G iphone for 450 €
  • Reply 2 of 61
    Hmmmmm, another price gouge by Apple- not really surprising anymore. I am starting to think they may be worse than Msoft after all these ridiculous price increases. Jobs has really gone downhill.
  • Reply 3 of 61
    $600? That is insane. Although I guess it'll mean they'll have resalve value after a year when the new model comes out.
  • Reply 4 of 61
    If it's more than the $199 Jobs promised i'm not taking the bait.
  • Reply 5 of 61
    I don't understand why apple doesn't just sell iphones for all wireless service providers. Wouldn't they make more money that way?
  • Reply 6 of 61
    smokeonitsmokeonit Posts: 268member
    Quote:
    Originally Posted by mowenbrown View Post


    $600? That is insane. Although I guess it'll mean they'll have resalve value after a year when the new model comes out.



    just look @ the iPhone 2G used market. There's no sign of a decrease in value until now!
  • Reply 7 of 61
    nanoakronnanoakron Posts: 125member
    At just £300 for a prepaid iPhone, it'll fit in perfectly and sell like hotcakes over here.



    To the other UK reader above - the US$199 was for the contract version, and yes if you check O2's prices - that equates to £99 in their pricing structure.



    For once we're not being screwed on this side of the pond.
  • Reply 8 of 61
    smokeonitsmokeonit Posts: 268member
    Quote:
    Originally Posted by AntDess View Post


    I don't understand why apple doesn't just sell iphones for all wireless service providers. Wouldn't they make more money that way?



    in some countries apple actually sell with more than one provider! i think in europe austria, italy and switzerland are countries with that multi-provider approach...



    in the countries where there's an exclusive agreement in place apple gets money from those providers. apple gets paid for that exclusivity!
  • Reply 9 of 61
    Quote:

    To the other UK reader above - the US$199 was for the contract version, and yes if you check O2's prices - that equates to £99 in their pricing structure.



    I didn't hear Jobs say anything about contract prices. But i did hear him say of the initial 22 countries that would be receiving the phone: "and in almost everyone of these countries the price is a MAXIMUM of $199". So i guess the Caveat is in the world "almost".



    Like i said in another post, lets just hope Apple's 3rd party friends don't rain on Apple's parade.
  • Reply 10 of 61
    rmm221rmm221 Posts: 29member
    Quote:
    Originally Posted by mowenbrown View Post


    $600? That is insane. Although I guess it'll mean they'll have resalve value after a year when the new model comes out.



    That is not insane you putz... If you remember correctly last June Apple was selling an inferior, slower, 8GB IPHONE without GPS for $599.



    It makes sense for apple to make nice with AT&T since AT&T is paying them over $200 per phone.



    $199 is the magic price for alot of people to buy an IPHONE.. .$600 is the price unlockers will have to pay.



    Makes sense to me.
  • Reply 11 of 61
    wirwzdwirwzd Posts: 5member
    So if there is a way to make the phone work with pay as you go (US) and its $20 a month data plan, the higher price per unit still works out cheaper. I pay $100 per year for a pay as you go account.





    Pay as you go:

    $600 iPhone

    $480 Montly data 24 mos

    $200 24 mos pay as you go

    ====

    $1280



    Normal:

    $299 iPhone

    $1680 Data + voice

    ====

    $1979
  • Reply 12 of 61
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by AntDess View Post


    I don't understand why apple doesn't just sell iphones for all wireless service providers. Wouldn't they make more money that way?



    In the short term they would, but Apple appears to be looking at things differently than most people and companies. There are plenty of reasons why Apple is pairing with carriers: some technical, some psychological. I'll post them later if someone else doesn't get to it first.



    PS: By all, I assume you mean all GSM carriers with certain 3G radios, because if you mean all carriers then Apple has to create different versions for many different carriers. Just in the US they would need at least 3 models.



    Quote:
    Originally Posted by mowenbrown View Post


    $600? That is insane. Although I guess it'll mean they'll have resalve value after a year when the new model comes out.



    Insane for what? A basic cell phone, sure. A smartphone, no.
  • Reply 13 of 61
    slewisslewis Posts: 2,081member
    Null.
  • Reply 14 of 61
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by rmm221 View Post


    That is not insane you putz...



    Your point comes across better without the personal attack.



    Quote:
    Originally Posted by wirwzd View Post


    So if there is a way to make the phone work with pay as you go (US) and its $20 a month data plan, the higher price per unit still works out cheaper.



    So far there are no pay-as-you-go plans for the next iPhone with AT&T. If you can unlock it*, then you may benefit from that if they don't increase the data rate. But I think they will increase it to $30/month or more.



    * It appears that buying the iPhone outright does not get you a factory unlock, but instead just frees you from having a contractual obligation to AT&T.
  • Reply 15 of 61
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by Slewis View Post


    According to AT&T, the deal has been renegotiated and that's no longer true.



    I've only read bout he profit sharing being nixed. AT&T is still holding getting an exclusivity to the iPhone, which they will be paying to Apple as the subsidy. That breaks down to AT&T payng a little more for each handset than it would if there were on exclusivity, though with AT&T being the only major carrier in the US that can use a HSDPA iPhone they really shouldn't be too concerned.
  • Reply 16 of 61
    abster2coreabster2core Posts: 2,501member
    Quote:
    Originally Posted by tuneman07 View Post


    Hmmmmm, another price gouge by Apple- not really surprising anymore. I am starting to think they may be worse than Msoft after all these ridiculous price increases. Jobs has really gone downhill.



    Let's see. You can a Nokia N95 and it will cost you between $440 and $785.



    There is an interesting comparison of the iPhone vs N95 8 GB. http://www.allaboutsymbian.com/featu...ia_N95_8GB.php



    In particular, in this example, the total costs for the N95 + service plan ran about the same "or more" than for the iPhone.



    Try getting a 'comparable' Blackberry for less than $600 without a plan
  • Reply 17 of 61
    jb510jb510 Posts: 128member
    Quote:
    Originally Posted by AppleInsider View Post


    ...Therefor, pre-paid subscribes will in all likelihood wind up paying in excess of $600 for the new touch-screen handset, he said. The estimate assumes Apple charges carriers an average $425 for the new phone and those carriers then turn around and mark up the pre-paid handsets another $175 or so to turn a profit..



    I keep see people doing math based on the idea that carriers are paying $425 to Apple for the iphone. What on earth is the based on?



    It seems to be based on the idea that AT&T is offer the phone at a subzided price of $199 and therefore since subsidies are usually about $200 that they must be paying Apple about $400 for the phone. Hold it... that assumes that carriers pay MSRP for the phone! They never pay MSRP for the phone. Most phones actually cost them <$20 (reference the recent hearings before the FCC and court cases in california against Verizon et al). The subsidy is a fictitious mark down from thier advertised retail cost, not their wholesale cost



    The iphone has a materials cost of about $100. This is exceptionally high for a mobile handset, even a smart phone, but I trust the tear down numbers from both sources that have independently reported them. Adding manufacturing and development costs it seems reasonable the the wholesale price could run as high as $200-$300. That is an astronomically high wholesale cost to a reseller, but believable. However people are taking what sounds to me like a $425 MSRP price and adding $175-200 in profit on top of that? To guess what the phone cost without subsidy.



    Everyone also needs to be clear that the "subsidy" isn't so much about giving a customer a break on equipment as the phone companies would like you to think, it's about locking you into a contract that minimizes the carriers overhead costs attributable to marketing and churn. Signing a contract gets you not only a free/discounted phone but also a lower monthly rate and the monthly service discount is actually more valuable to the end user than the phone they subsidize. It's just not as marketable of a sales tool since it point out the unsavory side of contracts.
  • Reply 18 of 61
    xamaxxamax Posts: 135member
    Hum, let's see:



    The smartphone market is running at some 20% and growing of the overall cellphone market.



    Munster says the iPhone has got 20% of that 20% and he expects it to be likewise globally. Let's just say that it is so, I would expect it to be less but then there are all these subsidizing schemes going on all over and it is really different psychologically to buy at $199 than at $600.



    Based on the probable subscriber list - ~1.2 billion - then 20% of 20% of 1.2 billion = 48 million.



    That, I would say, is the lower expectation number. Yearly.



    In reality, if there would be no Iran war, no credit market crash, no oil price manipulation and all that it's being artificially created for the profit of the same ol' same ol' handful, then I would expect Apple to sell at least 10 million iPhones per month like it now does for iPods - after all what's the big difference? Actually iPhones have bigger sales potential than iPods. But then again, if none of that were true (oil, war, etc) then I guess AAPL would be at ~200 now too.



    And now for people who scream it's crazy to have a smartphone at $600 - and the iPhone is really smart, not to be confused with crappy Windows Mobile would-be-smart-but-is-incredibly-dumb phones - then what about the just released HTC Diamond?! Barrons seems to be promoting it heavily, they act like a MSFT propaganda machine! They only lack an ecommerce setup!



    Months ago I bought a GPRS HTC Touch (no 3G no GPS) that is just a joke like all WM and it went for ?450. That's $693! And it was inexpensive in comparison at the time! Now it goes for ?299/$460. But there's the HTC Touch Dual who is 3G with sliding keyboard but no Wi-Fi or the HTC Cruise with 3G, GPS and Wi-Fi and both go for ?499 or $759!



    And what about the newly available HTC Diamond? It goes for ?589! That, my friends, is $907 - nine hundred and seven US dollars! That's the iPhone killa! Ahahah



    Still you think it's not gonna sell?! It will!! People like to flaunt their newest flashy hardware, it's like having a Rolex. Or a diamond in this case.



    And many of you here like to compare Rolex with Casio on feature grounds. That is so ridiculous.



    By the way, the prices I quoted are for fully unlocked models. So all in all, it's all relative.



    Meanwhile, at the moment I really don't see the advantage of buying prepaid. Remember that pay-as-you-go always have more expensive data rates and in the short run (more so in the long run) the bill goes way higher than in contractual terms.



    I think the prices I have been seeing for monthly unlimited data plans are more than reasonable. The other day I went on vacations and decided to check out the web on this piece of crap and in some 5 days I spent an enormous amount of money, more than any 'crazy' monthly plan!



    Prepaid/pay-as-you-go iPhones will be for that track of population who want an iPhone but are really not crazy about surfing the web. Average iPhone users will want the data plans and contracts because they will want to surf the web wherever they are. If not at first, they will quickly change to those contractual plans, they will see the advantages.



    Unless, of course, carriers will start to compete big time with the unlimited data plans and you will want the freedom to hop off to the next cheapest rate/carrier available - in which case you will want to buy unlocked. Not so in the US, there's no such freedom in the land of supposed freedom.



    Here in Europe there is (that freedom) and the norm is buying unlocked smartphones more than contract ones. Actually, in my country carriers only offer PDAphone/smartphones in professional / corporate contracts! So you have no choice but to go to the retailer and buy that shiny new HTC. My preferred retailer - FNAC - also carries Macs and their no questions money back guarantee is hands down the best. I really hope they get the iPhone like the German retailer is getting. Actually it wouldn't make any sense not to.
  • Reply 19 of 61
    macinthe408macinthe408 Posts: 1,050member
    I don't like the tone of this article. It makes it sound like people are being "victimized" by Apple for pricing their handset at a price that makes it unaffordable to most.



    In a related news item, I am launching a campaign against Bugatti for pricing the Veyron beyond the reaches of my meager income. How dare they!



    Instead of $1.25 million, why not $12,500?



    C'mon Apple, make something crappy and price it at $49.99 or, better yet, FREE!
  • Reply 20 of 61
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by macinthe408 View Post


    In a related news item, I am launching a campaign against Bugatti for pricing the Veyron beyond the reaches of my meager income. How dare they!



    I've read that Volkwagon is losing money on each Veyron; that each only cost many times more than the price they are being sold at.



    PS: Top Gear started a new series/season last night. WOOT!
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