Major Carriers May Not Profit From Subsidized iPhone 5 Customers For Up To 9 Months

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News Posted: Sat, Sep 22 2012 10:05 AM
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.

iPhone 5

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.
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JFarrell replied on Sat, Sep 22 2012 10:51 AM

Or earlier if the telcos can encourage more early termination fees. Have no doubt. Telcos are more than up to that challenge.

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This has been known since forever. Bell in Canada started carrying iphones purely for the popularity, not the profit. We have three year agreements here, but we do early upgrades and most people get to upgrade around the two year mark, sometimes earlier. Iphone users, unless they pay a ridiculous amount per month have to usually wait until a few months past two (ranges from three to six) and that is because of the price the phone costs the carrier.

It's the same reason we don't carry Sony. Bell approached them and Sony was asking almost Apple prices and Bell said suck it.

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