Comments | paladincub21: AT&T Caved Again

paladincub21

AT&T Caved Again

Jun 17, 2009 16:30

AT&T eases upgrade pricing for some early iPhone 3G adopters

If you waited in line all day for an iPhone 3G last July and have one of the pricier calling plans, AT&T will throw you a bone and offer you a full subsidy for an iPhone 3G S. If not, well, then nothing has changed.

AT&T says it has "been listening to our customers," who have been ( Read more... )

tech, iphone

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ivanushka June 18 2009, 06:24:31 UTC

:: shrug ::

Somehow I imagine AT&T isn't hurting too badly by selling a phone they can make a profit on at $499 (unsubsidized) and having a minimum plan that starts at $70 month, with a quite small variable cost (w00t - I did pay attention during microeconomics).

Whether we're special or snowflakes or whatever, AT&T and Apple are still getting their pound of flesh. :-)

paladincub21 June 18 2009, 22:53:02 UTC

but they aren't selling it for 499. They are taking a $400 loss on the item (assuming $599 is cost as well as retail), and then hoping to gain $2400 a year in revenue. I wonder what kind of margin they are hoping for. Could their operating expenses (with all the costs of upgrading and maintaining their system in a way able to handle the data-hogging folks called iPhone users) be $1000 a customer? $1500? Sure, it's a short term cost versus the long-term gain of a subscriber base paying $100 a month rate plan.

Unless of course you take a loss every year on the brand new item the customer base keep buying.

ivanushka June 18 2009, 23:19:18 UTC

Well, nobody has done the tear-apart yet on the 3GS, but let's use the 3G as our example ( ... )

paladincub21 June 18 2009, 23:31:29 UTC

Apple is selling the iPhone to AT&T at cost. I doubt they pay 600 but I also doubt they pay 173. And also, saying it's cheaper to improve than to build is like saying it's cheaper to build a ship in space versus on earth. It's a billin dollar investment even before fan boys start asking for tethering.

ivanushka June 18 2009, 23:40:06 UTC

Of course AT&T isn't buying them for $173 ... but pick some other number based on the realities of Apple's cost structure. They spend about $1 billion of $34 billion in revenue on R&D. Marketing. Steve's turtleneck sweaters. Say Apple tries to make 30% on the core hardware cost (to say nothing of what comes back through the AppStore) and let's say they sell for $300. $350, even? AT&T is net out ~$150 at the start of the contract, and then assuming lowest price contract, never having an overage; there's a lot of money, more so when you remember that Apple expects to sell 500,000 of just the 3GS this weekend ( ... )

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