AT&T's new iPhone deal


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 Store

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?

4GB and 8GB iPod nano with video--starting at $99. Plus free shipping.