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AT&T paying Apple $325 per iPhone 3G

updated 02:45 pm EDT, Thu June 19, 2008

AT&T iPhone subsidy

AT&T reportedly paying a $325 for each iPhone 3G, an unprecedented dollar amount that would put the device well above competing smartphones and mobile devices in terms of carrier-supplied financial assistance. Oppenheimer analyst Yair Reiner told Barron's that typical smartphone gets a subsidy of about $200, but the iPhone will command a dramatically higher subsidy because of "AT&T's faith in the iPhone's ability to attract new subs and increase ARPU." The report also claims that AT&T is paying Apple an extra $100 for subscribers signed up in Apple stores, for a total commission of $425.

Previously Apple did not accept up-front subsidies for the iPhone, instead relying on monthly revenue sharing agreements with wireless carriers.

The Oppenheimer analyst projects iPhone unit sales of 15.2 million in calendar 2008 and 33.2 million in 2009.

The iPhone 3G carries a lower price, but it also costs about half as much to make, according to a report in the EETimes. The report says tests by teardown specialist Portelligent put the bill of materials for the new model as low as $100. That should help offset the 3G's lower $199 price point. Portelligent estimates that based on materials alone, Apple's gross profit on the iPhone 3G totals about $99, compared to $229 for the previous version. Apparently, Apple is counting on sales volume to make up the difference and Apple may also be receiving a payut for each carrier activation, although the revenue sharing plan with carriers, as with the original device, is no longer in place.

by MacNN Staff



  1. Guest

    Joined: Dec 1969


    Manufacture price

    I hate it when these supposed tear downs report the cost of manufacturing costs, when that is only part of the story of a device's cost. No mention of R&D and overhead costs, let alone salaries and operating costs. Apple has again re-defined an industry and long time heavyweights are rushing to play catch up.

  1. jhawk95

    Joined: Dec 1969


    Show us proof!

    Since this is the second time this week you are referencing a supposed tear down of a 3G iPhone that has not been seen in the wild yet, please show us picture or video proof.

    I suppose Apple sent Portelligent a 3G iPhone for the purpose of exposing Apple and their profit margins? No! Wait! Portelligent hijacked a container of 3G iPhones on their way from China to the United States and only got one iPhone? No! Maybe Portelligent found a 3G iPhone in the bottom of a box of Captain Crunch!

    I do not believe this story for one moment!

    Show us proof!

  1. ScottGG

    Joined: Dec 1969


    Early Cancel Then $$$

    Gee I wonder what happens if a ton of people go and cancel their service on AT&T, and keep the phone. Maybe hack it and move it over to T-Mobile, or Sprint, as I'm seeing a lot of people starting to do now, and this works just fine. You would think this idea might backfire on AT&T if lots of people started to do this.

    HEY! Here's an idea. We Rally all iPhone G3 owners all over the USA to at the same time turn their service off canceling their plans all over the USA. I figure it would take about 70% to bankrupt AT&T, then Apple would end up owning AT&T. Then the Apple iPhone would be a Apple Service & Product line.

    That would be so Fracking Cool.

  1. cmoney

    Joined: Dec 1969


    re: Early Cancel Then $$$

    Sprint? Sprint is CDMA. iPhone is GSM. NOT GONNA WORK. T-Mobile has arguably worse coverage than AT&T. And will the iPhone's 3G antenna even work on T-Mobile's 3G freqs?

    It does suck that you're "locked in" to AT&T, but in my experience, it's the best carrier for the iPhone (the only other choice being T-Mobile).

  1. testudo

    Joined: Dec 1969


    ignoring the point

    The point of the article is the $325 subsidy, not the supposed manufacturing costs (which has little or nothing to do with the rest of the article). How they arrive at this figure is undefined, so either this is idle speculation or some 'inside' information. (I seriously doubt the guy just took the EETimes article of $100, subtracted it from the price of last years model, added $25 for the h*** of it, and came out with $325).

    But if it is true, you now understand why AT&T upped the price of the data plan and such (besides just lining them up with the same plans for their other phones).

  1. doolz

    Joined: Dec 1969


    making no sense...

    I presume you mean that AT&T is paying Apple $199 $325 (subsidy) and not just $325....? Because a $126 subsidy is less than the standard subsidy you just quoted....
    The $100 bonus is presumably for signing up new customers and will help offset lost revenue through the original sharing deal.
    If the iPhone costs $99 to "build" then Apple is making $524-99 (425) or $624-99 ($525) profit on the phone based on your article. And not the $199-99 you quote above....
    Those figures sound a bit high to me...! Unless, of course, the real cost of the iPhone is significantly higher than the $99 tear-down - some thing that is quite likely...

  1. ZinkDifferent

    Joined: Dec 1969


    ScottGG - ???

    > Maybe hack it and move it over to T-Mobile,
    > or Sprint

    Really? How's that working out?

    > as I'm seeing a lot of people starting to do now,
    > and this works just fine.

    Really? How's that working out with your Sprint contract?

    > That would be so Fracking Cool.

    Check back with us after you pass your 12th birthday...

  1. Guest

    Joined: Dec 1969


    No one upped the data pri

    No one upped the data plan price... 3G price in AT&T was always that price. Why buy a 3G phone and get an edge data plan?
    So I hope people have got it that the $10 extra was cause it is a different speed plan and it is not upping th price of the plan but changing to a faster plan which has always cost $10 more than the other slower edge plan

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