Apple’s iBargain

A recent article about Sprint’s experience with the iPhone provides interesting insight into the love-hate relationship between the major US carriers and Apple. In short, the carriers love the way iPhone brings in customers and revenue, but are feeling the pain of the billions it costs them in subsidies.

The math is simple: a 16GB iPhone 4s costs $199 with a Sprint contract, and $649 unlocked without a contract. The difference, more or less, is the subsidy that Sprint (and other carriers) pay Apple for the privilege of selling that iPhone to their customers. Apple sold 37 million iPhones over the holiday period, which meant a big subsidy bill for the carriers. This has had a huge effect on the bottom line on both sides: the profit margins of carriers are falling as Apple’s margins and profits increase.

The carriers are willing to put up with this, it appears, as long as Apple keeps delivering the goods, the “goods” being more subscribers and higher revenues. Despite some setbacks, there doesn’t seem to be an end to the Apple innovation and profit pipeline.

This is, however, what the mobile industry said about Nokia in the 90’s and early 00’s, as the team at the 361 Degrees Podcast remind us. In their most recent edition, they ponder the possibility that Apple may be the next Nokia (I think a more apt comparison may be Sony), facing a downfall after years at the top. They conclude that Apple may have the skills to avoid that fate, but that does not mean that the continued success of Apple is guaranteed. The tech world is always changing

photo by Jared Odulio (jaredflo) from flickr


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