AT&T And The iPhone

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    Posted: 28 January 2009 10:14 AM

    AT&T credits Q4 results to 1.9m iPhones

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    AT&T today reported results for the fall quarter that it attributes directly to continued iPhone 3G sales. The company says that its net income dropped from $3.1 billion in late 2007 to $2.4 billion in 2008 but says that its overall revenue climbed 2.4 percent to $31.1 billion based partly on increases in wireless performance and considers the iPhone 3G a “success.” The carrier activated 1.9 million of the devices on its network before the end of December and notes that it activated a total of 4.3 million of the newer Apple handsets since launch.
    The heavily subsidized nature of the current iPhone ultimately cost AT&T $450 million in earnings but was countered by surges in wireless plans; while the average revenue per customer climbed only slightly to $59.59, revenue from wireless data use spiked 51.2 percent from year to year as users adopted iPhones and other smartphones in greater numbers. More than twice as many smartphones are on the network as there were last year, the company says. As a result, the company believes the iPhone is serving as a catalyst for a broader shift towards data on its cell network.

         
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    Posted: 28 January 2009 10:10 PM #1

    It certainly seems as the though the 3G iPhone will pay dividends for AT&T at this point, despite the large upfront subsidies.

    Tracing back to the Con Call, an analyst asked Tim if the iPhone was elastic/inelastic. Tim stated the iPhone has certainly shown elasticity.  So I’m wondering, with evidence pointing to AT&T’s satisfaction with iPhone customers and their high-end data plans, if it’s possible some sort of pricing alteration will occur in the near future.  Perhaps a drop to $150 or below with Apple demanding the same subsidy up front, no less. AT&T seems to be reaping the rewards over the life of the data plan.  It’s their own version of subscription accounting.

    Not the first time this idea has been thrown out on the AFB but the AT&T con call notes can be argued to support this theory. Could be beneficial over time to both parties.  Especially for us.

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  • Posted: 29 January 2009 12:51 AM #2

    This is good news for both companies. The more AT&T sees the long-term benefit to revenues from the iPhone and data services the more the company will be willing to be aggressive on subsidies. I don’t know about a $99 iPhone anytime soon, but I sure would like to see a $149 version as well as the touch hit the $199 price point. Perhaps with economies of scale and continuing growth in unit volume Apple will be willing to re-price both products aggressively.

    Both Apple and AT&T have said publicly there is elasticity in iPhone demand. A $149 iPhone would kick the stuffing out of the competition not to mention increase the revenue possibilities for developers.

         
  • Posted: 29 January 2009 08:43 AM #3

    Here you get the 8GB iphone for 0 Euros and the 16GB for 99 Euros - can’t beat that. Monthly fee is 50 Euros for unlimited calls, SMS and data(24 months) You can also get it for 30 Euros a month with volume limitations

         
  • Posted: 29 January 2009 11:28 AM #4

    It’s interesting to note how prominently AT&T is featuring mention of the iPhone in its public statements. Obviously the iPhone is a centerpiece of the company’s wireless strategy and bodes well for continued rich subsidies for Apple.

         
  • Posted: 29 January 2009 02:26 PM #5

    DawnTreader - 29 January 2009 03:28 PM

    It’s interesting to note how prominently AT&T is featuring mention of the iPhone in its public statements. Obviously the iPhone is a centerpiece of the company’s wireless strategy and bodes well for continued rich subsidies for Apple.

    That struck me too. They’ve also started promoting the iPhone in their online ads. My theory: AT&T has decided—for several reasons—that they love the iPhone again. Let us count the ways:

    http://apple20.blogs.fortune.cnn.com/2009/01/28/why-att-loves-the-iphone-again/

         
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    Posted: 30 January 2009 01:51 PM #6

    Yes att is making hand over fist on us iphone customers on average we pay $100 and more for the iphone per month where the average att phone customers pay between $40 and $60 per month.

    But what I still don’t get is if they are focusing on the iphone why do they still not understand how to support the iphone.  If att keeps on its current path the second some other wireless carrier gets the iphone alot of current iphone owners will switch over.  In my own personal experience the second you mention that you have an iphone to any att service agent they will promptly give you the iphone support number and transfer you to apple even if it is a wireless service issue.  Unfortunately This is not a limited issue to myself i have spoken to hundreds of other iphone owners and they are experiencing the same problem. 

    So my question to att is how can you focus on selling iphones but not have the infrastructure to support the phone properly and give your customer a good experience with your support so that they want to keep using your service even when there is another option available to them.

         
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    Posted: 30 January 2009 01:57 PM #7

    If ATT doesn’t keep up their end of the bargain, “I’m sure” that Apple has its own blowback.  Either Apple buys out ATT or Apple starts releasing iPhones for use with Verizon.

         
  • Posted: 31 January 2009 06:37 PM #8

    foamysking - 30 January 2009 05:51 PM

    So my question to att is how can you focus on selling iphones but not have the infrastructure to support the phone properly and give your customer a good experience with your support so that they want to keep using your service even when there is another option available to them.

    This is a good question.

    One of the reasons AT&T covets the iPhone is because of extraordinary customer satisfaction and Apple product loyalty. AT&T will have to go some to keep current iPhone customers when the market opens at the end of the current contract. IMHO it would be best to invest a bit more now than compelled to spend boatloads later to keep iPhone customers from defecting to other carriers when the exclusive arrangement ends.

         
  • Posted: 31 January 2009 06:39 PM #9

    Tetrachloride - 30 January 2009 05:57 PM

    If ATT doesn’t keep up their end of the bargain, “I’m sure” that Apple has its own blowback.  Either Apple buys out ATT or Apple starts releasing iPhones for use with Verizon.

    I think it’s AT&T’s game to lose. So far I’m not impressed by the service nor the store personnel.

    AT&T is paying huge subsidies to Apple. The amounts are so high it’s materially impacting AT&T’s current earnings. It’s silly to think the company would blow an invest this large by not investing in the services provided to iPhone owners.

         
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    Posted: 31 January 2009 09:46 PM #10

    Tetrachloride - 30 January 2009 05:57 PM

    If ATT doesn’t keep up their end of the bargain, “I’m sure” that Apple has its own blowback.  Either Apple buys out ATT or Apple starts releasing iPhones for use with Verizon.

    With a MarketCap of $145B, ATT may be a little out of Apple’s price range.

    Re VZ: Not sure about what changes to the iPhone would need to be made to allow it to work with CDMA nor if Apple would really want to make it?

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    “Once we roared like lions for liberty; now we bleat like sheep for security! The solution for America’s problem is not in terms of big government, but it is in big men over whom nobody stands in control but God.”  ?Norman Vincent Peale

         
  • Posted: 02 February 2009 04:17 AM #11

    Tetrachloride - 30 January 2009 05:57 PM

    If ATT doesn’t keep up their end of the bargain, “I’m sure” that Apple has its own blowback.  Either Apple buys out ATT or Apple starts releasing iPhones for use with Verizon.

    What is key is partnership. A critical piece of Apple’s strategic roadmap involves partnerships. Jobs first iteration of Apple, he insisted that the firm control and own all aspects of the vertical. IBM, MSFT, and others focused on a specific aspect, which was compatible and accommodative to others efforts in the field. That fosters promotion and adoption from other major player. IBM and ms-dos/windows, Dell/Compaq, etc… Intel chips. YET, striving to satisfy and comply with the industry standards does give rise to clout and legitimacy, it reduces independence as the players become interdependent.

    Examples: Look at Dell et al, they are being screwed because of MSFT and Vista’s failure with respect to the defection to Mac, and how does the PC box makers differentiate themselves when they depend on Intel and MSFT. Speaking of Intel, the Vista’s downfall kicked off with MSFT designing an OS to run on Intel’s newest line of processors with integrated graphics stuff that could handle a dressed up GUI such as Vista. However, Dell and the like, opted to postpone any major adoption of the next generation Intels, choosing to stick with the lower-cost industry norm. Vista needed horsepower, and that wasn’t available in PC boxes shipping (So MSFT certified them anyway) There was no incentive for PC manu’s to adopt the new line of Intel CPUs since cost/price is the major factor, and no firm purposely wants to price itself out of the market.  In short, my point is, MSFT is chained to the hardware capability.

    APPLE: SJ admitted Apple’s failure was due to trying to do everything and be everybody, yet as I summarized relinquishing control is just as injurious. There is a delicate balance, a successful company has to retain an acceptable amount of control or a equivalent amount of influence in the areas it chooses not to fully own, ones that its not as skilled/competitive, that don’t make sense.

    Steve Jobs said ” We?re not trying to do a lot of this stuff because it?s not what we do. We don?t think one company can do everything. So you?ve got to partner with people that are really good at stuff….there?s companies doing a way better job because we?re not as good at this stuff as other people are and we?d love to partner with them and so, you know, we selectively do that. And I think it?s really hard for one company to do everything. Life?s complex.”

    Thus, I think there is more to the exclusive carrier agreement than simply what the term implies, the typical industry form. If the two collaborate in developing new innovative services/products, then the exclusive agreement may stand for years, yet if there isn’t a joint effort in a symbiotic roadmap, then the iPhone may appear at other carriers before long.

    One has to ask, why Apple would choose to restrict itself to only one-third of the U.S addressable market, if there weren’t bigger opportunities from a strategic partnership. That question has lead to speculation about the possibility of AT&T subsidized MacBooks or some type of netbook response product.

    I think that if there isn’t a longer term plan the Apple/AT&T are working on, then I would expect Apple to expand to other carriers by end of the year, if not sooner. Eventually, carrier defections to AT&T will slow to a crawl. You have to think that the"low hanging fruit” or those with least resistance have already switched to AT&T for iPhone. You would also have to think there is sizable pent-up demand at other carriers, such as VZ, from those desiring an iPhone but their allegiance is too great (or many other reasons) to break ties with their carrier.

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