3G iPhone to sell for $199?

Posted on Thursday, May 01 2008 @ 00:26 CEST by Thomas De Maesschalck
Fortune claims the upcoming 3G iPhone will likely be much cheaper than its predecessor. It's believed that AT&T will offer the new phone for $199 with a two-year contract - $200 less than the current iPhone.
At $200, the iPhone would be within reach of a much wider consumer market and give AT&T a strong magnet to pull lucrative customers away from rivals like Verizon Wireless (VZ), Sprint (S) and T-Mobile (DT). The $200 rebate or subsidy would be limited to AT&T customers and not available through Apple’s stores. The new iPhone sold by AT&T will likely be locked or programmed so buyers can’t take the cheaper iPhone to another phone service.

Subsidies of $100 to $200 are common in the U.S. phone market, where people buy their phones from their carriers. Lowering the consumer cost of the phone to win two-year subscribers is considered a small investment with a quick payoff. The average monthly wireless bill is around $50, so a phone company can recoup the phone’s cost in a matter of months.

The average iPhone user however, runs up a $100 tab each month due to the higher priced data and calling plan. This would give AT&T an even quicker payback on its $200 outlay. But AT&T doesn’t get to keep all the money it collects from its iPhone users. Unlike most other phonemakers (but like BlackBerry maker Research in Motion (RIMM)) Apple has a revenue-sharing arrangement that requires telcos like AT&T to pay somewhere between 9% and 25% of the money collected each month from iPhone users.

About the Author

Thomas De Maesschalck

Thomas has been messing with computer since early childhood and firmly believes the Internet is the best thing since sliced bread. Enjoys playing with new tech, is fascinated by science, and passionate about financial markets. When not behind a computer, he can be found with running shoes on or lifting heavy weights in the weight room.

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