New MacBook Pros are here! Get the lowest prices anywhere: Apple Price Guides updated Sept 14th (exclusive coupons)
 


Thursday, June 19, 2008, 10:00 am PT (01:00 pm ET)

AT&T paying Apple $325 subsidy on every iPhone 3G sold - report

AT&T is paying Apple a $325 subsidy on each new iPhone 3G sold in the US in addition to offering the electronics maker a hefty bounty for each subscriber addition it gains from sales of the handset at Apple retail stores, according to a new report.

Oppenheimer equity research analyst Yair Reiner told clients in a research report that the subsidy is more than 50 percent higher than most other smart phones, which are typically subsidized by about $200.

He said the abnormal concession on AT&T's part reflect the carrier's confidence in the iPhone's ability to grow its subscriber base and drive an overall increase in the average revenue it makes off customers through higher margin services and data plans.

The net result, according to the analyst, is a disproportionally stacked offense in Apple's favor that will leave rivals like Research in Motion and Nokia "scrambling" to hit lower price points at the expense of their respective bottom lines.

What's more, Reiner said he also believes that AT&T is paying Apple an extra $100 for each new subscriber to AT&T signed up through Apple's brick-and-mortar stores, for a total commission of $425. That data point alone suggests that the analyst believes AT&T is also paying Apple the $325 subsidy on phones Apple sells.

The net result, Reiner added, is that Apple will be generating the same amount of revenue through iPhone 3G sales that it did under its original deferred revenue share agreement with the nation's No. 1 carrier, only this time around the cash will be up front and on the table.