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News
Oppenheimer: Apple Gets $425 Subsidy from AT&T for iPhone 3G
Wednesday, June 18th, 2008 at 4:00 PM - by John Martellaro
Recently, AT&T announced that their revenue sharing agreement with Apple’s iPhone has been terminated. That left some people wondering what Apple is getting in return. Oppenheimer analyst Yair Reiner thinks he knows part of the answer: a US$325 up front subsidy plus an extra $100 for subscribers signed up in Apple stores.
Mr. Reiner said on Thursday that this subsidy: "reflects AT&T’s faith in the iPhone’s ability to attract new subs and increase ARPU." [ARPU is Average Revenue Per User.] "Rivals must scramble to hit a lower, less profitable price point," he wrote. That’s because an average subsidy for other smartphones is about US$200.
In the analyst’s assessment, Apple is receiving the same revenue for the iPhone 3G as it got for the iPhone 2G, except that instead of revenue sharing, the the money is coming up front.
He’s also predicting that Apple will sell 15.2 million iPhones in 2008 and 33.2 million in 2009. His price target for AAPL is now US$225.00.
The new deal with AT&T seems to reflect the confidence of both companies that iPhone customers are willing to pay a little more each month for the benefits of the iPhone. As a result, they’re able to turn that added revenue into a price squeezing ploy against the competition and seize more market share at the US$199 entry price point.
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