Reuters reports that AT&T will shoulder part of the price of the 3G iPhone, from $200 to $500 per phone, according to analyst estimates. With current versions of the iPhone, the carrier pays Apple a percentage of monthly subscriber revenues, a practice that's ending.
"With dilution running at levels we never fathomed, we believe AT&T is assuming more risk than the previous arrangement," says JPMorgan analyst Michael McCormack. "We question whether a handset exclusivity agreement should warrant such a dramatic financial impact while other successful carriers have not found it necessary."
AT&T said the subsidy, aimed at boosting volume sales, will cut earnings per share by 10¢ to 12¢ in 2008 and 2009.
Apple, on the other hand, is expected to see its earnings dip only about 3¢ a share this year, according to some estimates, as it forsakes the percentage of recurring monthly service revenue it got from AT&T's iPhone users.
Editor's note: Previously, over 50% of iPhone buyers have been customers new to AT&T. Moreover, the iPhone recently lost market share to RIM and Palm, due to more aggressive pricing and marketing.
If AT&T and Apple want to keep this gravy train rolling, then they've obviously made the right moves. How much all of this costs each player in relative terms is a pointless endeavor at this point...
What's your take?
- MacBook's USB-C Connector, Meerkat, Super Troopers, + More
- TED comes to Apple TV
- Agile Bits on passwords and security theater
- Fitbit to add multiple tracker support
- Report: Major Apple TV update, app store expected
- ABC News gets tour of Apple health and fitness lab
- Haptic touchpad on new MacBook Pro
- Tim Cook on internal collaboration and the customer experience
- Report: Apple TV subscription service expected this fall
- Want to live above an Apple Store?
- New movie: Steve Jobs: The Man in the Machine
- Confusion over the MacBook's USB-C port
- Podcast: The Apple Watch
- Griffen WatchStand announced for Apple Watch
- Waterfield Designs Time Travel case for the Apple Watch
- The Apple Watch
- New MacBook comes in smaller, lighter than MacBook Air
- HBO Now official announced for Apple devices
- Reserve Strap battery backup for Apple Watch
- Podcast: Switching to iPhone 6 Plus, Apple Watch Role Playing, Over-Under + More
- New Steve Jobs book announced
- Apple promotes iPhone 6 photo gallery
- Tim Cook talks up customer privacy
- iPhone design and battery life
- Apple event scheduled for March 9th
Browse and search for more articles