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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.

58 Comments

ktappe 17 Years · 830 comments

Quote:
Originally Posted by AppleInsider

AT&T is paying Apple a $325 subsidy on each new iPhone 3G sold

I think this explains a lot. It explains why the data plans have jumped $10/month. It explains why AT&T has yet to reveal whether any SMS will be included in the rate or if texting will cost extra (I'm now betting the latter.) With subsidies that high, AT&T has to get its $325 back somewhere....anywhere it can. I don't at all feel sorry for AT&T and am no apologist for them, but am recognizing the simple $$ of the situation. And now I'm less likely to be mad at AT&T for higher iPhone fees and more likely to be mad at Apple 'cos it seems that's where the money is really flowing.

salmonstk 24 Years · 522 comments

I am confused. How much total does Apple get per phone. It sounds like its 199+325 or 524.

Thats more than before

cam'ron 22 Years · 455 comments

Quote:
Originally Posted by salmonstk

I am confused. How much total does Apple get per phone. It sounds like its 199+325 or 524.

Thats more than before

That is what it sounds like to me.

kasper 23 Years · 841 comments

Quote:
Originally Posted by salmonstk

I am confused. How much total does Apple get per phone. It sounds like its 199+325 or 524.

Thats more than before

Yeah -- I did a quick search of all the prior estimates on the per-month revenue share payment ($3 - $14) and it seems that if this analyst is correct, Apple would be making a lot more. But given that the original rev share deal was never made public, everything is estimated so it's kind of a he said, she said kind of deal...

K

tundraboy 19 Years · 1931 comments

Quote:
Originally Posted by salmonstk

I am confused. How much total does Apple get per phone. It sounds like its 199+325 or 524.

Thats more than before

You forget they don't get a share of the monthly subscriptions anymore.