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iPhone squeezes phone carriers' margins

Discussion in 'Wireless News' started by charlyee, Oct 21, 2008.

  1. charlyee

    charlyee Ultimate Insanity
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    iPhone squeezes phone carriers' margins
    Mon Oct 20, 2008 3:58pm EDT



    NEW YORK (Reuters) - Profits at the three largest U.S. phone carriers are being squeezed by steep discounts on advanced cell phones, triggered by AT&T Inc's hefty subsidy for the iPhone.

    AT&T, Verizon Communications Inc and Sprint Nextel Corp are expected to show a drop in wireless profit margins when they report third-quarter results in coming weeks, also feeling the pinch from consumers holding off on buying add-on services like data to lower their phone bills in the weak economy.

    Wireless carriers have always shouldered part of a phone's cost to persuade customers to sign longer-term contracts, but U.S. market leader AT&T lowered the bar when it helped Apple Inc launch the latest iPhone for only $200 on July 11.

    This forced Verizon Wireless, AT&T's biggest rival, and Sprint, the No. 3 U.S. mobile service, to follow suit with higher subsidies on their advanced phones, analysts said. While that helps boost service revenue in the longer term, it hurts near-term profits.


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    #1 charlyee, Oct 21, 2008
  2. jrip

    jrip Senior Member
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    If the carriers are subsidizing these cell phones, then where are their wireless equipment profit margins coming from? All list them in their SEC filings. What they are really doing is charging customers a price that is above their cost but below MSRP and are calling it subsidizing because they are not charging as much as they could.
     
    #2 jrip, Oct 22, 2008
  3. WirelessBeachBum

    WirelessBeachBum Soylent Green is People
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    Wirelessly posted (Opera Mini on Alltel HTC 6800: Opera/9.50 (J2ME/MIDP; Opera Mini/4.1.11355/408; U; en))

    I own a couple of stores and I wish that's the way subsidizing works... I actually lose quite allot of money when people buy phones, to stay competative with corporate owned stores and online websites is pretty costly. To make it even worse you have to carry that loss for usually up to sixty days until commissions are paid... then hope that customer doesn't actually disconnect before your chargeback period is over... so you don't lose all the money you invested in the phones... The wireless equipment funds you may be seeing on the financial reports could be the reporting of the customers portion of the cost (revenues paid) or could be profits from accessories.
     
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    #3 WirelessBeachBum, Oct 22, 2008
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