AT&T’s iPhone Subsidy: Insanely Great
by John Paczkowski
Posted on June 19, 2008 at 3:00 PM PT
So those reports that AT&T (T) would subsidize $200 of the cost of the iPhone 3G? Way off. According to Oppenheimer analyst Yair Reiner, the carrier is actually paying Apple $325 in subsidies on each iPhone 3G. And another $100 if the purchaser is a new AT&T customer. That’s $425 in potential commissions per device sold. That’s unprecedented in the industry.
So what was AT&T’s reason for agreeing to pay it–other than the warm glow it felt during subsidy negotiations with Apple CEO Steve Jobs? AT&T’s faith in the iPhone’s ability to attract new subscribers, apparently. Not to mention those subscribers’ penchant for running up a $100 tab each month in data and calling services.
One last point worth noting here. That $425 Apple (AAPL) is said to be collecting is even more impressive when one considers the fact that the iPhone 3G costs about half as much to make as its predecessor. Tear-down specialist Portelligent put the new model’s bill of materials at somewhere around $100.
