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iPhone 3G shrinks profit margins of US carriers

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.

by MacNN Staff





  1. WiseWeasel

    Joined: Dec 1969



    Wow, talk about grasping for straws. Lamest excuse EVER!

  1. slider

    Joined: Dec 1969


    Cost of Plans

    Sure people are going to cut back on cell phones. Lot's of folks never approach their minutes, but keep the plan as opposed to going to prepaid for the simplicity. Some even only carry a phone for emergencies. Most folks I know are trying to find ways to cut their month to month costs, gas is still a large bill, food has gone way up, and everyone has debts which is worrying people more and more as not everyone is so sure about their job in the next year. So a $50 to a $100 cell phone bill is an easy cut: Maybe it's time to look at prepaid, disable some of those features, instead of everyone having a cell phone lets share one or two.

    Does anyone really feel they are getting what they pay for?

  1. Guest

    Joined: Dec 1969



    f these wireless carriers. they're bleeding the public dry with exorbitant monthly fees, overages, and contracts. Why? because they can. I can only hope for some heavier regulation in the future so these companies won't be able to get away with their current practices.

  1. dennisobell

    Joined: Dec 1969


    cry me a river

    Profit margins go from more than two-fifths to a mere one-third? Oh, how my heart bleeds for the hard-hit wireless carrier! [Lifts back of hand to forehead, faints.]

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