More Apple Revenue, Fewer Unlocked Phones

New IPhone Rules: More Apple Revenue, Fewer Unlocked Phones
6E8AEE7B-5F6E-471E-B115-68F780452489.jpgA change in the way Apple Inc. (AAPL) sells its upcoming iPhone could increase how much the consumer electronics giant makes on each phone sold, potentially boosting the company’s revenue by billions of dollars, as well as reduce the number of potential lost subscribers.

While the consumer will be paying about $200 less for each iPhone, Apple is seen as making more money, thanks to the subsidies that the phone’s carriers, including AT&T Inc. (T), will pay. While the companies involved won’t comment on the plan, industry observers now suspect the subsidies may total more than $300 a phone, giving Apple an extra $100 or more on each phone sold.

Based on analysts’ forecast that between 35 million and 45 million iPhones will be sold before the end of 2010, that could add $4 billion or more to Apple’s top line.

Carriers likely are more willing to pay the high subsidy because of a simple change in the way iPhones are sold – Apple now is requiring a service contract at the time of sale. The move is seen cutting down on those iPhone buyers who ” unlock” their phones and use the devices on other cell phone networks.

This action should help carriers benefit as much as possible from their iPhone relationship. It was estimated that about a quarter of the first-generation iPhones were unlocked, preventing those carriers from collecting the monthly subscription fee, which generally ranges between $70 and $130.

In addition to the service contract requirement, Apple also has surrendered its right to part of that monthly subscription fee.

Apple’s highly-anticipated iPhone 3G, which also doubles as an MP3 player and mobile Internet device, goes on sale on July 11.

In the U.S., exclusive service provider AT&T will charge $199 for an iPhone with an 8-gigbyte hard drive and $299 for a model with a 16-gigabyte hard drive, as long as the buyer also subscribes to its cell phone service. It also will sell an iPhone contract-free, at $599 and $699 respectively, and then give buyers an option to use AT&T services without a contract.

With new details about iPhone subsidies this week, equity research analysts say their assumptions about the iPhone’s average selling price were too conservative, thus helping to expose the unexpected gains Apple’s likely to see.”

(Read Full Article HERE)


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