The iPhone is a nightmare for carriers

Discussion in 'Apple, Industry and Internet Discussion' started by AppleScruff1, Feb 8, 2012.

  1. AppleScruff1, Feb 8, 2012
    Last edited: Feb 8, 2012

    macrumors G3

    AppleScruff1

    Joined:
    Feb 10, 2011
    #1
    Why do the carriers fight to have the iPhone when it hurts their bottom line? Sprint will lose billions in the next few years just for the privilege of selling the iPhone. It has hurt all of their bottom lines. Why do they even bother subsidizing the phone? Why not let Apple sell the phone and the carriers sell service? Is this good long term business sense?

    Full article: http://money.cnn.com/2012/02/08/technology/iphone_carrier_subsidy/index.htm?iid=HP_LN
     
  2. macrumors 604

    mrsir2009

    Joined:
    Sep 17, 2009
    Location:
    Melbourne, Australia
    #2
    Sure, the iPhone is subsidized, but doesn't the carrier make that money back by the customer paying their bill every month for two years (or however long they're lock into their contract)? I'm confused :(
     
  3. macrumors 68000

    thewitt

    Joined:
    Sep 13, 2011
    #3
    This has nothing to do with the iPhone and everything to do with being competitive.

    If these carriers want to sell their services, they need to be competitive, which means lower margins... When AT&T had a monopoly, they could get away with higher prices. Now that there are options, everyone has to run leaner.
     
  4. macrumors G4

    *LTD*

    Joined:
    Feb 5, 2009
    Location:
    Canada
    #4
    And yet, carriers are falling all over themselves to get it. The iPhone makes them relevant.
     
  5. Guest

    Joined:
    Oct 7, 2010
    #5
    They just got it and are just now finding out what it is doing to them. I think the "fighting" is over. :rolleyes:

    Some will likely try to steer others towards different phones. Also, saying Verizon wasn't "relevant" before the iPhone is a little ridiculous. I know a lot of people that were not willing to move to AT&T from Verizon because they like the service.
     
  6. macrumors 6502a

    SuperCachetes

    Joined:
    Nov 28, 2010
    Location:
    Away from you
    #6
    That is a very misleading article. Their margin may have fallen percentage-wise, but I suspect they did not lose the income they would've had they not had the iPhone, and they obviously got new subscribers because of the iPhone.

    Take my example, which isn't uncommon - I was on Verizon in 2007 and only switched to AT&T for the iPhone. Since joining AT&T, they may have subsidized a couple of phones, but I have also bought at least one at full-price. Over 4+ years I have paid well over $4000 for monthly service. That counts for something to AT&T, regardless of what % of it is profit.
     
  7. macrumors G4

    *LTD*

    Joined:
    Feb 5, 2009
    Location:
    Canada
    #7
    Consumers want iPhones. Demand is sky-high. That's all there is to it.
     
  8. macrumors G3

    roadbloc

    Joined:
    Aug 24, 2009
    Location:
    UK
    #8
    Consumers can want all they want, if companies don't see them as a decent profit maker, they won't bother with them.
     
  9. macrumors G4

    *LTD*

    Joined:
    Feb 5, 2009
    Location:
    Canada
    #9
    A losing proposition, or an investment?

     
  10. macrumors 601

    Joined:
    Aug 15, 2005
    #10
    Stop the generalizations. I just got a flip phone, leaving smartphones behind, as did my wife. I see plenty of people without a smartphone (of any brand).

    So, no, not all consumers want an iPhone.
     
  11. macrumors 6502a

    Joined:
    Apr 26, 2011
    #11
    I know MR is not debate club but you just countered a statistically supported generalization with ANECDOTAL evidence.... LOL
     
  12. *LTD*, Feb 9, 2012
    Last edited: Feb 9, 2012

    macrumors G4

    *LTD*

    Joined:
    Feb 5, 2009
    Location:
    Canada
    #12
    Soon all feature phones will be smartphones.

    Apparently, carriers are indeed "bothering with them."

    http://news.yahoo.com/apple-posts-record-13-06-bn-quarterly-net-214518686.html

    To the tune of:

    http://www.pcworld.com/article/249197/apple_surpasses_lg_as_worlds_thirdlargest_phone_maker.html
     
  13. macrumors G3

    roadbloc

    Joined:
    Aug 24, 2009
    Location:
    UK
    #13
    Well there we go then. The iPhone obviously isn't too much of a nightmare for carriers to discontinue them. But that still doesn't prove that carriers will continue if the nightmare becomes worse, just because there is consumer demand. Would you go to the large trouble of selling something for a very small profit just because customers want it? I wouldn't, I'd keep my company afloat.
     
  14. macrumors 601

    Joined:
    Aug 15, 2005
    #14
    Statistically supported? What statistics say all consumers want an iPhone? There are none that say so, because it simply isn't true.

    Feature phones certainly have changed since my last one, for sure. I noticed that my last feature phone (around 2003) was much faster than this one. This one has some email/web capability, but I have data blocked as I don't need it.
     
  15. Guest

    Joined:
    Oct 7, 2010
    #15
    Most of the people I know don't have them and don't want them but I digress. Although I agree the iPhone is in demand, these companies are still taking a hit as they now have to upgrade their networks to keep up with the data demand that the iPhone puts on their networks. This cost is not recovered from iPhone sales so there is a loss. Simple math...
     
  16. macrumors 68000

    thewitt

    Joined:
    Sep 13, 2011
    #16
    It depends on volume.

    If I can sell 2M iPhones a quarter at 18% margins, but only 200k other phones at 50% margins, I will continue to offer both...
     
  17. macrumors Nehalem

    GoCubsGo

    Joined:
    Feb 19, 2005
    #17
    It's also not covered by payment over the course of the contract. One cannot assume that the margin is narrowed by way of repaying the contract over 24 months because it is a well known fact that most carriers allow the 24 month contract to end in 18 if you upgrade to the newest iPhone. If they're saying that somewhere in that 24 months the negative turns into a positive, allowing the premature cancellation of a contract in place of a new one causes a shift and a negative amortization effect, for lack of better words.
     
  18. macrumors 603

    Menel

    Joined:
    Aug 4, 2011
    Location:
    ATL
    #18
    Good thing I'm not much a fan of the carriers.
    Turning into a pretty big fan of Apple.

    =) I see nothing wrong with this news post.
     
  19. macrumors G4

    *LTD*

    Joined:
    Feb 5, 2009
    Location:
    Canada
    #19
    As usual, Dilger's comments are especially lucid, and point to the bigger picture.

     
  20. macrumors 68020

    jayducharme

    Joined:
    Jun 22, 2006
    Location:
    The thick of it
    #20
    As many articles have pointed out, Sprint is willing to take the short-term hit to realize long-term gains. The iPhone brought them a new customer base of 40%! That's huge! And people who sign on to a new carrier will often renew with that carrier. When the carrier subsidizes a $700 device once and from that brings in $1400 over two years, that's not a bad deal for the carrier. And I wouldn't doubt that any loss the company takes from the subsidy can at least partially be written off in their taxes.

    I think if Apple had forced their original AT&T revenue sharing agreement on other carriers, the iPhone wouldn't be expanding nearly as quickly.
     
  21. macrumors G3

    rhett7660

    Joined:
    Jan 9, 2008
    Location:
    Sunny, Southern California
    #21
    And yet the companies still want the iPhone regardless of the losses they are taking right now. Seems to me they are bothered by not having them. :)
     
  22. macrumors demi-god

    kdarling

    Joined:
    Jun 9, 2007
    Location:
    Device engineer 30+ yrs, touchscreens 24+.
    #22
    Exactly. Those of us who used smartphones for over a decade have seen a lot of changes because of the iPhone popularity, and it hasn't all been for the better.

    Nowadays the airwaves are far more crowded, some promotions have gone, ETFs have skyrocketed and data plans cost more.

    OTOH, apps are cheaper and new phone models come out faster (non-Apple phones, I mean).

    Nonsense. There's not enough sold to do that, and their price quickly drops.

    The high price tag for hot Android models is a) because they can and b) because most of those high end users are legacy unlimited data owners.

    --

    As for the subsidy, that's a loan to the customer, and is figured into the plan prices... and the long term cost of doing business.

    AT&T has stated before that, on the average, they get repaid for the iPhone subsidy (or any subsidy for that matter) around the 20th month of a contract.
     
  23. thread starter macrumors G3

    AppleScruff1

    Joined:
    Feb 10, 2011
    #23
    Sprint may well be broke before they fulfill their deal with Apple. And without improving their network, how long are people going to stay for the unlimited data at slower than dial up speeds? And Verizon did just fine without the iPhone.

    If they don't make a profit on the service with the phone or it doesn't lead to more customer spending somewhere, there's not much point in it. If you buy apples for a dollar and sell them for a dollar, you have to sell a lot of apples to make a profit.


    Which raises the question, why? Why not let the consumer buy the phone from Apple and the service from the carrier of their choice?
     
  24. macrumors Core

    MacNut

    Joined:
    Jan 4, 2002
    Location:
    CT
    #24
    Stop bolding your articles, it makes them hard to read and is very obnoxious.
     
  25. macrumors demi-god

    LethalWolfe

    Joined:
    Jan 11, 2002
    Location:
    Los Angeles
    #25
    The reality of the situation is that Apple, because of such strong consumer demand for their products, is able to strong arm anyone they do business with (be it part suppliers, manufacturers or cell phone carriers) and their partners live on the hopes that the expense of doing business with Apple will eventually be outweighed by the profit/prestige of doing business with Apple. Whether or not this is sustainable for the long haul is the question. Welcome to the new Apple Tax. ;)

    Not to make this thread any more inflammatory, but this is basically the same thing Walmart does in the retail space. They squeeze their suppliers to the point of little to know profits.

    W/regards to Sprint's CEO, does anyone expect him to not publicly be optimistic? I mean, do you actually think he's going to come out and bitch about the $15 billion hail marry pass to save the company? I don't think so.


    Lethal
     

Share This Page