iPhone lowering margins for phone carriers

Although many traditionally think of cell phone carriers as huge conglomerate organizations intent on nickel-and-diming the consumer at every corner, one cannot forget about the heavy subsidies on phones that these companies take on in order to lure consumers to sign for longer term contracts. With the release of the new iPhone 3G, however, companies have actually started to eat into their profits to stay competitive in the fast-paced wireless market. According to analyst forecasts, AT&T's $200 iPhone offering has helped profits drop almost 5% from Q2 to Q3: the phone is selling faster than the company had expected, and that directly hurts their bottom line.

Not wanting to be outdone, Verizon and Sprint, second and third respectively in the US wireless market, also dropped rates on high-end smartphones, causing smaller, but still noticeable drops, in profitability, according to analysts. With the worsening economic conditions, carriers will be hard pressed to find ways to attract new customers without further hurting their bottom line. Some analysts think higher subsidies will be cut in favor of cuts to service fees, whereas others feel smartphone subsidies are still the best bet, as smartphones usually come attached with an additional data plan on top of the voice plan.

"I think we'll see average revenue per user (ARPU) decline but the real question will be to what degree," said Stanford Group analyst Michael Nelson, adding that as voice call prices have fallen, carriers have depended on data for ARPU growth.

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Here in Spain they are charging at least 15€ ($19,89) per month for the Internet plan (apart of the calling plan you already got), you won't get the iPhone without it. For that price, you get 200MB download rate at 3G speed, afterwards they throttle the speed to GPRS speed. If you pay 25€ ($33,15) you get 1GB download rate. As said, calling plan apart, which is at least another 9€ per month plus calling rates. SMS are not included, each SMS is 0,15€ ($0,20), one more reason Apple should include a freaking char counter into that cheap SMS program, so we can see when exceeding one message while typing.

Anyway, my point is that here in Spain the iPhone ain't lowering anything, even more, now the company earns at least 15€ more every month than before. Oh, and my iPhone cost me 287€ ($380,59), "subsided", carrier locked.

Islander said,
Here in Spain they are charging at least 15� ($19,89) per month for the Internet plan (apart of the calling plan you already got), you won't get the iPhone without it. For that price, you get 200MB download rate at 3G speed, afterwards they throttle the speed to GPRS speed. If you pay 25� ($33,15) you get 1GB download rate. As said, calling plan apart, which is at least another 9� per month plus calling rates. SMS are not included, each SMS is 0,15� ($0,20), one more reason Apple should include a freaking char counter into that cheap SMS program, so we can see when exceeding one message while typing.

Anyway, my point is that here in Spain the iPhone ain't lowering anything, even more, now the company earns at least 15� more every month than before. Oh, and my iPhone cost me 287� ($380,59), "subsided", carrier locked.

The 15 or 25 EUR are added on top of the minimum contract price, so it ends up being 24 or 35 euro month. And at the current calling rates that's like less than an hour in calls every month, IF you dont sell any SMS.

Apple is insulting consumers by letting telefonica do with the iphone whatever the hell they want. And yes, the iphone it's not cheaper than similar phones and it ends up costing more than any other terminal in the market. They're cashing in BIG time.

I'm sure they're big enough since they charge for making and receiving calls, texts, and for enabling features on your phone, etc.

AT&T may be losing money initially but remember that buying an iPhone under a 24-month plan is essentially a loan. You pay $200 upfront but have to pay the remaining $800 for the cost of the iPhone + more, in future repayments (monthly plan). It works out well for AT&T and they are definitely not losing money or margins over this. It's a great success for them. While they immediately lose $800, they will gain much more over the life of the contract.

I read somewhere that it is about $28 ($18 for iPhone2G) of your monthly plan that goes in to phone repayments. I'm assuming this is for a 24 month plan? That is 672+initial 200 or $872 that they have to pay back to Apple. The rest is all keeps. Note: I don't know exact figures. How much are you iPhone users paying per month anyway? I'm guessing atleast $50 right?

I find this crazy because I own a touchscreen smartphone with push email, gps, wifi and more features the iPhone doesn't have like mms, next-g, hsdpa, video call, video record, copy n paste. I spend $30/month on my phone contract giving me unlimited texts and calls to my friends, extra credit as well as a generous data allowance. I do everything on this phone. The actual phone cost me $350 outright and it's a new model, 2008. This, in the land of expensive mobile providers -- Australia. With a currency that buys 0.7 USD (Thus phone US$245 outright, prepaid is US$21/month).

The only difference between my phone with my provider and someones iPhone with AT&T is that someone is forking out an extra $600 for their phone in the form of $30/month repayments. This money goes to Apple, not AT&T. So everyones square. AT&T pockets a little extra than my Australian provider.

I'd wager the margins are much lower. You have to account fo customers: cancelling contracts, renegotiating for lower price than orig. contract, handset replacements, billing and collection costs and customer support.

There's a lot of hidden costs in these services. I don't know if the texting is price gouging. I got a BB because I can e-mail a lot if I need to. I don't have a GF right now, but I know they can eat through text msgs.

I don't know how good their margins are but whenever a company's pricing is comparable or worse than our Australian monopoly, they must be making a lot!

I'm sure this 5% loss in profit they are talking about isn't accounting for future cashflow from these people locked in to 24 month contract. It's likely just talking about *now*. Well, sure, if you sell a bunch of $800 loans, you'll expect a loss *now*. Check back in 24 months though after all the cash rolls in.

Also, when these people break from contracts, they will atleast cover the price of an iphone -- for sure! So no loss there. Handset replacements come out of the manufacturers pocket last I checked. And every mobile provider has billing, collection costs and customer support.

Here in brazil they found a simple solution to this problem: the iPhone 8G costs about US$ 1,000.00 on any carrier (there is 2 offering).

That's the actual outright price of an iphone. That means your phone won't be subsidised by your plan. That is, you are buying it outright.

What if you don't know the persons email address?
What if that person doesn't have push email on their phone?

That's just about 100% of people I call and text. Too bad.

Unlimited text messages in Ireland for most providers as long as you top up �20 a month. Even if you dont top up EVERY month at least you get free messages for one month... then just eat into your credit the following month.

Dont understand how text messages could go UP in prices these day. As SHoTTa said... it probably costs them nothing to send a message.

Text Messaging has always been cheaper in the states as they get charged to receive as well. Last time I was their PAYG was 10c to send and 5c to receive.

And what network charges you 15p? I havn't seen anyone charging above 12p yet but im willing to be corrected as I m not going to start searching

i guess that's probably part of the reason why some features (cough SMS cough) have gone UP in the last months instead of going down. 20 cents to send a text? I remember when it dropped from earlier higher price to "only 10 cents" and then even down to 5 cents. now it's back up to 20 cents per msg. It costs them prolly like 0.0000001cent to send a SMS but the price keeps going upper and upper!

It costs us 80c ZAR (7c USD) (4.4p GBP) to send an SMS out of a bundle.

If you purchase a bundle, you can get them for as cheap as 34c ZAR (3.2c USD) (1.9p GBP).

But then again, the BEST cellphone to cellphone call rate that you are going to get, on the SAME network, is about 150c ZAR (14c USD / 8.4p GBP) per minute... which is a little steep!!!