Even With Verizon, Apple Will Get an iPhone Premium
Great news for Apple : When the exclusive U.S. deal with AT&T ends, and the iPhone goes to Verizon, it looks like Apple will still be able to charge both AT&T and Verizon top-dollar for the phone.
Some background: A basic iPhone 4 costs you $200 when you sign a two-year contract, but that’s not the true price – AT&T actually pays Apple more like $650 for each phone.
That’s a lot more than any other handset maker can charge, and Apple gets it because iPhone owners are enormously valuable subscribers: They buy pricier wireless plans, call customer support less, and stay with the carrier longer.
(Plus, Apple does a huge amount of its own marketing, lowering the carrier’s customer acquisition costs.)
Glenn Lurie, president of AT&T’s Emerging Devices division and the carrier’s main Apple contact, told me he doesn’t expect AT&T to pay much less for the iPhone when exclusivity ends. The reason? iPhone subscribers are still very valuable to AT&T because of their loyalty and big spending. You can watch the interview with Lurie here.
That suggests AT&T and Verizon will both pay something near the $650 average selling price for an iPhone.
Apple’s potential for revenue and earnings growth should continue unabated. Last quarter Apple sold 14 million iPhones at that mid-$600 average selling price, so that’s important. Also, we should expect the iPhone to deliver a short-term blow to Verizon’s bottom line with that big subsidy.
The larger question: Whether iPhone users will stay loyal to AT&T or to Verizon when they can change carriers without abandoning their phones.