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AT&T to subsidize cost of new iphone

L

liquidh2o

macrumors 6502
Original poster
Feb 4, 2004
272
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Alabama
AT&T to cut the price of Apple’s new iPhone
By Scott Moritz, writer

AT&T (T) is planning to put some extra shine on the even sleeker new Apple (AAPL) iPhone.

When the 3G iPhone is introduced this summer, AT&T, the exclusive U.S. iPhone sales partner with Apple, will cut the price by as much as $200, according to a person familiar with the strategy.

AT&T is preparing to subsidize $200 of the cost of a new iPhone, bringing the price down to $199 for customers who sign two-year contracts, the source says. Apple is expected to have two versions of the new iPhone, an 8-gigabit-memory and a 16-gigabit-memory model with price tags widely expected to be $399 and $499.

AT&T and Apple declined to comment.

At $200, the iPhone would be within reach of a much wider consumer market and give AT&T a strong magnet to pull lucrative customers away from rivals like Verizon Wireless (VZ), Sprint (S) and T-Mobile (DT). The $200 rebate or subsidy would be limited to AT&T customers and not available through Apple’s stores. The new iPhone sold by AT&T will likely be locked or programmed so buyers can’t take the cheaper iPhone to another phone service.

Subsidies of $100 to $200 are common in the U.S. phone market, where people buy their phones from their carriers. Lowering the consumer cost of the phone to win two-year subscribers is considered a small investment with a quick payoff. The average monthly wireless bill is around $50, so a phone company can recoup the phone’s cost in a matter of months.

The average iPhone user however, runs up a $100 tab each month due to the higher priced data and calling plan. This would give AT&T an even quicker payback on its $200 outlay. But AT&T doesn’t get to keep all the money it collects from its iPhone users. Unlike most other phonemakers (but like BlackBerry maker Research in Motion (RIMM)) Apple has a revenue-sharing arrangement that requires telcos like AT&T to pay somewhere between 9% and 25% of the money collected each month from iPhone users.

The new iPhone is expected to be released on the one-year anniversary of the original iPhone debut June 27 or thereabouts. A few weeks prior to that launch, Apple is planning to stop supplies of the older model iPhone, according to the source. This will help clear out inventory and stir up demand for the new device. It will also attempt to avoid the public relations pratfall Apple made when it cut the price of the iPhone without warning last year. To soothe the ire among people who bought the iPhone just before the sudden markdown, Apple issued store credits.

A few details about the new iPhone have also been confirmed by the source. The new iPhone will be 2.5 mm thinner than the 11.7 mm original. The iPhone will also have a GPS chip for navigation and other location-based services.
Click to expand...

Source: http://techland.blogs.fortune.cnn.com/2008/04/29/att-to-cut-the-price-of-apples-new-iphone/

If true this makes the iphone attractive to a greater segment of the population.
 
Just saw this. Wow! Maybe Apple can find a loophole that allows them out of the exclusivity contract!! :D I want an 8 "gigabit" iPhone!
 
Mikey B said:
Apple will NEVER let them do that!
Click to expand...

In all fairness, I don't think Apple would give a ****. AT&T will be paying their share, as will the customer. Apple wouldn't lose a cent. They'd still get the same amount of money for the iPhone, and maybe a bigger share of the AT&T plan.

I hope O2 do this in the UK. I'm not holding my breath though.
 
How would this reflect on us who already have a phone? Granted, we paid full boat for our first one but would they let us subsidize for a replacement 3G? They already have us locked into 2 year contracts of which nobody is yet half way through. Just a curiosity.
 
nineteentwelve said:
In all fairness, I don't think Apple would give a ****. AT&T will be paying their share, as will the customer. Apple wouldn't lose a cent. They'd still get the same amount of money for the iPhone, and maybe a bigger share of the AT&T plan.

I hope O2 do this in the UK. I'm not holding my breath though.
Click to expand...

I guarantee that Apple demanded that AT&T hold a certain market value for the iPhone (ie. the same as the Apple Store). They are in the retail business as well as being a wholeseller. I find it hard to believe that they would sell to AT&T at a low enough cost to justify such a hefty price cut. Do you really think AT&T is going to eat 50% of the price of a new iPhone? They would have to get it at a proportionately lower cost for that to make any sense. And I just don't see Apple allowing such cannibalization of their retail outfits.

Just my 2 cents...
 
OMG this seems too good to be true! So this means everyone will be lining up infront of AT&T stores instead of Apple stores right?

GPS and 3G !!

But why just 8GB and 16GB? The Apps store is going to call for more memory, no? Well I guess I'll just get the 16GB and be overly satisfied with my new phone haha.
 
Mikey B said:
I guarantee that Apple demanded that AT&T hold a certain market value for the iPhone (ie. the same as the Apple Store). They are in the retail business as well as being a wholeseller. I find it hard to believe that they would sell to AT&T at a low enough cost to justify such a hefty price cut. Do you really think AT&T is going to eat 50% of the price of a new iPhone? They would have to get it at a proportionately lower cost for that to make any sense. And I just don't see Apple allowing such cannibalization of their retail outfits.

Just my 2 cents...
Click to expand...

Of course you have a point, but is this not the same thing as the £100 price drop in the UK a few weeks ago?
 
nineteentwelve said:
Of course you have a point, but is this not the same thing as the £100 price drop in the UK a few weeks ago?
Click to expand...

Kind of. But that was more of a sale to move out inventory that they know longer plan to sell. This AT&T "subsidy" is more about growing customer base. They might do it for a very short period of time, perhaps, but I doubt for any prolonged period of time...
 
At $200, the iPhone would be within reach of a much wider consumer market and give AT&T a strong magnet to pull lucrative customers away from rivals like Verizon Wireless (VZ), Sprint (S) and T-Mobile (DT). The $200 rebate or subsidy would be limited to AT&T customers and not available through Apple’s stores. The new iPhone sold by AT&T will likely be locked or programmed so buyers can’t take the cheaper iPhone to another phone service.
Click to expand...

Wow, Fortune Magazine is a pretty reputable source!
Interesting that the $200 rebate/subsidy would be limited to AT&T customers, but not be available through Apple's stores.
To me this can only mean one thing, that those 3G iPhones being sold at the Apple Store or through Apple will be unlocked.
That would leave me with an interesting dilemma...
 
Man if we can actually get around that rebate and then sell unlocked iPhones on eBay

Chaaaa CHING :D

And i'm glad CNN also agrees with my prediction of June 27th.
 
StuPidQPid said:
Wow, Fortune Magazine is a pretty reputable source!
Interesting that the $200 rebate/subsidy would be limited to AT&T customers, but not be available through Apple's stores.
To me this can only mean one thing, that those 3G iPhones being sold at the Apple Store or through Apple will be unlocked.
That would leave me with an interesting dilemma...
Click to expand...
What dilemma would that be?
AT&T has the only 3G GSM network in the US right now.
T-Mobiles 3G network (when operational) will operate on a different frequency, so unlocking to run on T-Mobile will not be possible.

The only thing would make this be workable is if it ships with a multi band 3G chip.
 
rjohnstone said:
What dilemma would that be?
AT&T has the only 3G GSM network in the US right now.
T-Mobiles 3G network (when operational) will operate on a different frequency, so unlocking to run on T-Mobile will not be possible.

The only thing would make this be workable is if it ships with a multi band 3G chip.
Click to expand...

Oh, didn't realize that. Thanks!
Will that mean Apple will have to ship iPhones with different frequency 3G chips in different countries? A multi band 3G chip would seem to make more sense.

EDIT:
Actually I just checked and the Broadcom 3G chip (likely to be in the iPhone) incorporates a multiband transceiver - at least according to Arstechnica.

Arstechnica Article
 
Mikey B said:
I guarantee that Apple demanded that AT&T hold a certain market value for the iPhone (ie. the same as the Apple Store). They are in the retail business as well as being a wholeseller. I find it hard to believe that they would sell to AT&T at a low enough cost to justify such a hefty price cut. Do you really think AT&T is going to eat 50% of the price of a new iPhone? They would have to get it at a proportionately lower cost for that to make any sense. And I just don't see Apple allowing such cannibalization of their retail outfits.

Just my 2 cents...
Click to expand...

It is $200 off retail value - who knows what AT&T actually gets them at wholesale. Say its $300, then they are really only eating $100 which is paid off in at most two months - the rest of the two years is all $$$. If the $199 price point makes a ton more consumers switch over to AT&T to get the iPhone (now that they can afford it), i would imagine it would pay off. The $200 would essentially be a rebate from AT&T so the retail cost would stay the same - provided this is allowed in their contract with Apple.
 
Wow.
This just seems way too good to be true.

That said, I wonder how this would effect current iPhone users who are planning to upgrade when 3G is shipping?
 
Who in the crap runs up a $100/month bill? I do, but only because I have TWO OTHER PHONES on the account. I'm assuming most people get the 450 minutes plan for about $40 then add on the $20 data plan. That's $60, then add $5 in all those fees and taxes.

All this being said, thank goodness I went refurbished. All I'm missing out on is probably 3G for the extra $50 I spent. I also can't believe that they wouldn't have a 32GB model out, even if it's $600.
 
Mikey B said:
Do you really think AT&T is going to eat 50% of the price of a new iPhone?
Click to expand...

Uh, yeah. You mean the same way they do with all the other phones they sell? Do you think the free phones you can get from phone companies are actually free? The carriers pay for them. It'll be the same thing here. Apple would get the full retail price.

So since all carriers eat the price of many cell phones, I don't see why you have a tough time believing this.

And as for Apple "losing" sales, yeah, I'm sure they'll be real upset that people are buying $400 - $500 iPhones instead of $300 - $500 iPods. Should work out the same for them.
 
Its going to be pretty sweet to have the 3G and GPS. The only thing that bothers me are all these reports going around about how they are going to change the form factor.

Thinner means a smaller battery, with the new stuff going in cant really see that as a bonus when the thinness of the iPhone at the moment is perfect.

Reducing the screen size would be a strange one as I have heard, no mention here hope they don't do that either as the size of the screen really gives it the usability and cool factor.

Already in an iPhone contract there is no way that I will get any money of the new one I doubt but good news for people getting their first one if true.

Am getting impatient about this bad boy getting released!! Roll on June!!!

EDIT: Wow that is a really sporadic and bitty post, sorry..... :(
 
Wirelessly posted (Mozilla/5.0 (iPhone; U; CPU like Mac OS X; en) AppleWebKit/420.1 (KHTML, like Gecko) Version/3.0 Mobile/4A102 Safari/419.3)

Apple will still sell it at their stores. You'll probably see a $200 credit on your AT&T bill when you sign up...
 
Michael CM1 said:
Who in the crap runs up a $100/month bill? I do, but only because I have TWO OTHER PHONES on the account. I'm assuming most people get the 450 minutes plan for about $40 then add on the $20 data plan. That's $60, then add $5 in all those fees and taxes.

All this being said, thank goodness I went refurbished. All I'm missing out on is probably 3G for the extra $50 I spent. I also can't believe that they wouldn't have a 32GB model out, even if it's $600.
Click to expand...

One month a couple years ago I had to travel a lot for work. Say hello $500 cell phone bill. Even on my personal phone I use 500-600 texts and 1000+ minutes/month now.
 
This is great. I wish it wasn't only for new users though. Not sure I'll be purchasing gen 2. Oh well, we'll see how it all works out.
 
Darn it

I just signed a 2 year contract with an el cheap phone to wait for the iPhone, do a family plan and get 3 iphones in june.

I guess I will not get the discount.

Darn it.

If they are subsidizing the iPhone to the tune of $200, then maybe (start a new rumor) the phone is unlocked!!!!!!!!
 
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