Friday, July 13, 2007, 07:00 am PT (10:00 am ET)
About 25 percent of iPhone buyers are 'switchers' to AT&T - firmAbout one quarter of consumers adopting Apple's heavily-hyped iPhone handset are 'switchers' to AT&T from other carriers, financial firm American Technology Research reported on Friday, citing unnamed sources.
"We find these numbers impressive, showing that a fair amount of customers are willing to pay high early cancellation fees (~$125-$200) to get out of their existing service contracts for an iPhone," analyst Shaw Wu wrote in the report.
The analyst said the only other product in recent history to command a similar type of respect (at least in the beginning) was the Motorola RAZR in mid- to late-2004. Initially priced at $500 with a service contract and $800 without, the super-slim handset eventually saw subsidies and went on to enjoy phenomenal success, selling in excess of 50 million units.
"We believe both instances indicate that high price points are not an issue for early adopters who purchase the first few million units," Wu told clients.
Meanwhile, the analyst also cited sources in reiterating that Vodafone remains the front-runner and most likely carrier partner for iPhone in Europe, primarily due to its large subscriber base, broad geographic coverage, and investment in advanced technology.
"However, due to AT&T's success and ability to gain new customers with iPhone in the USA, other carriers including Orange, T-Mobile and O2 are aggressively bidding for European iPhone rights, giving Vodafone stiff competition," Wu wrote. "From our understanding, there could be a scenario where iPhone has multiple carrier partnerships (maximizing its market potential) with each tailored for specific regions and/or countries, i.e. Vodafone in the UK, T-Mobile in Germany, and Orange in France."
Regardless of which carrier gets picked for iPhone rights in Europe, the AmTech analyst believes Apple is in a strong position to end up with terms just as favorable as those granted by AT&T in the U.S, where the company collects bounties and recurring monthly service fees from the carrier.
"We believe that potential carrier partners are more willing to accept Apple's tough terms and conditions given Apple's strong brand name and mainstream appeal and iPhone's ability to lure customers away from other carriers," he wrote.
Over the next 2-3 years, Wu expects iPhone to bring smart phone technology into the mainstream, particularly as Apple rounds out the handset's product line with mid-range and entry-level offerings, just as it did with the iPod and portable media players.
"We believe the iPhone is among must-own gifts for this year's holiday shopping season," he told clients.
Wu, who maintains a 'Buy' rating on shares of the Cupertino-based Apple, said he's already seeing the potential for upside to his $165 per-share target.
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