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Sent to you by Bill Boulware via Google Reader: Carriers hate the
iPhone via BGR: The Three Biggest Letters In Tech by Zach Epstein on
2/8/12
Apple's iPhone is the most profitable product offered by the most
valuable company in the world. With only three iPhone models in its
lineup, the Cupertino-based technology giant shipped more smartphones
last quarter than any other vendor in the world. Carriers that sell
Apple's sought-after smartphone enjoy huge activation figures each
quarter as a result, but activations and unit sales don't necessarily
paint a complete picture. In fact, according to some industry watchers,
carriers hate the iPhone. Read on for more.
Wireless carriers trip over themselves to offer Apple's iPhone,
especially in the United States. Sprint wanted the handset so badly it
was willing to guarantee Apple $15.5 billion over four years for the
privilege of selling its sleek smartphone, and it certainly didn't help
matters much in the fourth quarter when Sprint posted a $1.3 billion
loss. T-Mobile is still sour over failed negotiations with Apple, and
the carrier has resorted to offering up free microSIM cards to iPhone
users willing to come aboard and forgo 3G data speeds.
"A logical conclusion is that the iPhone is not good for wireless
carriers," Nomura Securities analyst Mike McCormack told CNNMoney.
"When we look at the direct and indirect economics that Apple has
managed to extract from the carriers, the carrier-level value
destruction is quite evident." The site notes that Verizon Wireless's
EBITDA service margin has dropped from an average of 46.4% per quarter
to 42.2% since the carrier added the iPhone to its lineup one year ago.
But the iPhone is a necessary evil for carriers that some expect to pay
off in the long run. Sprint on Wednesday reported its best quarter in
more than six years for net subscriber additions thanks to the 720,000
new postpaid subscribers who came to the carrier for the iPhone. Some
analysts also believe carriers will eventually raise their price points
on the iPhone; despite the handset's high cost to Apple's partners, the
iPhone 4S currently starts at $199 on contract to the end user while
the iPhone 4 is available for $99 and the iPhone 3GS is free on
contract from AT&T.
Regardless of what the iPhone is doing to carriers' bottom lines, it
remains the best-selling smartphone in the world and it likely will for
some time. Apple is expected to launch a completely redesigned iPhone
later this year that will reportedly feature a unibody aluminum case, a
4-inch display and 4G LTE connectivity.
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