AT&T to Sell iPhone for $50-150

Apple is seriously thinking of offering subsidized iPhone. This may be the direct result of what’s troubling Apple now: actually coming out with a disappointing mobile phone in June. AmTech analyst Shaw Wu, however, has a different take on a subsidized iPhone. We are hearing rebates of $50-150 that will be offered by AT&T to lower the price points for iPhone (currently $499 for 4 GB and $599 for 8 GB) and to entice customers to sign longer term voice and data contracts, he wrote to an in-depth research not to AmTech clients. From AT&T’s perspective, a rebate is a great marketing tool and small sacrifice to make to entice a customer to sign up for 2-year voice and data cell phone plans that cost about $75-100 per month (before taxes and fees), meaning $1800-2400 in ‘guaranteed’ bi-annual revenue. Besides taking a bounty every new AT&T customer that signs up through Apple online and retail stores, which revolutionary for the cell phone industry, Apple will also enjoy recurring revenues from AT&T subscribers. We view this incremental revenue from the carriers for Apple ‘s value-added as positive in that it will likely be very high margin, in the 80 percent range, similar to royalty and/or intellectual property (IP) revenue where there is little incremental cost, he wrote. We believe this recurring revenue stream is high quality and adds an additional degree of stability and predictability to Apple’s financial results. It looks like on paper, at least, Apple is going to win financially whether the iPhone costs $499 or $50. We continue to view Apple as among the strongest fundamental stories with its four-pronged vertically integrated end-to-end portfolio (Mac, iPod + iTunes, Apple TV, and iPhone) and see several catalysts in the quarters ahead, including Mac OS X Leopard, new Macs, new iPods, new movie and carrier partners, and lower cost cell phones, Wu concluded. Source