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Fri, 20 Jun 2008 iPhone subsidy is $325 - Oppenheimer

iPhone subsidy is high as Apple profits in new distro deals

Jonny Evans

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AT&T is paying Apple $325 for each iPhone 3G it sells, a report claims.

Speculation as to just how much Apple is charging mobile firms for each iPhone 3G has been ongoing since before the product launched, as it became apparent Apple was shifting from its previous revenue-sharing strategy.

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AT&T is also offering Apple a bonus payment for each subscriber addition it gains from sales of the handset at Apple retail stores, according to Oppenheimer equity research analyst, Yair Reiner.

The subsidy is more than 50 per cent higher than most other smartphones, leading the analyst to say this reflects the carrier's confidence that iPhone 3G will lure in new subscribers and help it make money on other services, such as data plans.

Apple's move means rival firms such as Research In Motion and Nokia will be challenged to deliver devices that match the iPhone in features, at prices that compete.

The end result is that Apple will earn just as much money under the new way of selling the iPhone as under the old, with the main difference being all the money will be up front, rather than deferred.

Reiner estimates 15.2 million iPhone sales in 2008 and 33.2 million in 2009 and has a $235 price target on Apple stock.

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