Major Carriers May Not Profit From Subsidized iPhone 5 Customers For Up To 9 Months
The iPhone 5 is on pace to become the best selling smartphone model of all time, but even though that's the case, wireless carriers won't see any real gain for several months. Unlike Android phones, the subsidies on iPhone models are much higher. Barclays analyst James Ratcliffe estimates that the iPhone subsidy is around $400, whereas most other phones -- like Android devices -- check in at $250 to $300.
For wireless carriers, the end result is that iPhone customers don't become profitable until about 9 months have passed, compared to around 5 months for Android devices. Companies like AT&T and Verizon end up seeing their profit margins tighten after each new iPhone launch, though that's partially offset by the profits made from the previous year's model.
Even though iPhones aren't as profitable for wireless carriers as competing devices, it's tough to ignore their popularity. By selling the iPhone, carriers are better equipped to hold onto existing customers and attract new ones into the fold. After all, people aren't lining up for blocks and setting up camp in anticipation of Windows Phone, Android, or BlackBerry devices; they're only doing it for iOS handsets.
For wireless carriers, the end result is that iPhone customers don't become profitable until about 9 months have passed, compared to around 5 months for Android devices. Companies like AT&T and Verizon end up seeing their profit margins tighten after each new iPhone launch, though that's partially offset by the profits made from the previous year's model.
Even though iPhones aren't as profitable for wireless carriers as competing devices, it's tough to ignore their popularity. By selling the iPhone, carriers are better equipped to hold onto existing customers and attract new ones into the fold. After all, people aren't lining up for blocks and setting up camp in anticipation of Windows Phone, Android, or BlackBerry devices; they're only doing it for iOS handsets.
