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Monday, October 01, 2012, 05:56 am PT (08:56 am ET)

Apple seen as 'unlikely' to introduce new, inexpensive iPhone model

With the iPhone 3GS discontinued as of the launch of the iPhone 5, one market watcher believes Apple has signaled that it does not intend to introduce a new, lower-priced iPhone model in the near future.

Charlie Wolf with Needham & Company said in a note to investors on Monday that he believes Apple should introduce an inexpensive iPhone model to address developing markets. But he doesn't think that will happen anytime soon.

Wolf believes Apple could have addressed prepaid markets by keeping the iPhone 3GS available at a lower price. Previously, the smartphone first released in 2009 was available for free with a two-year contract, but the iPhone 3GS was replaced by the iPhone 4 last month.

In the predominantly prepaid markets of developing countries, unlocked phones can start at prices as low as $150. Because prepaid markets are now growing faster than traditional postpaid markets like the U.S., Wolf said it's an "open question" whether the iPhone can continue to gain market share.

Earlier this year, China surpassed the U.S. and became the largest smartphone market in the world. Because China and other developing markets are predominantly prepaid, Wolf believes Apple has "little choice but to target prepaid markets in emerging regions."

China


Under a prepaid plan, the unsubsidized price of the iPhone 4, first released in 2010, is $450. At that price point, Wolf believes it will be difficult for Apple to gain considerable traction.

However, for the time being Apple can still increase its market share through greater carrier penetration, Wolf said. The biggest target is China Mobile, the largest carrier in the world with 688 million subscribers.

Apple has yet to ink a deal with China Mobile because the carrier's proprietary 3G network is not compatible with the iPhone. But China Mobile is in the process of building out a 4G LTE network that should be compatible with the 4G standard, which has led Wolf to believe "it's only a matter of time" before the iPhone debuts with China Mobile.