updated 05:55 pm EDT, Mon October 20, 2008
iPhone 3G shrinks margins
Apple’s iPhone is currently squeezing profit margins for US wireless carriers, with analysts expecting a drop in third quarter financial results in the coming weeks. Reuters reports that AT&T, Verizon, and Sprint are all expected to unveil lower-than-expected results, thanks in part to a larger subsidy on the iPhone 3G, and users reducing the total cost of their services in today’s depressed economy.
The iPhone 3G’s new lower price forces AT&T’s competitors to offer other similarly featured handsets for comparable pricing, resulting in lower profit margins, market wide.
"The derivative effect is lower profitability in wireless for all the carriers," said UBS analyst John Hodulik. "Subsidies have been creeping up anyway but the new iPhone and the efforts to defend against it have likely brought it to a new level."
AT&T will allegedly be the hardest hit, with its profit margins dropping from 41.2-percent in the second quarter to 36.1.