The subscriptions for carriers like Verizon, AT&T and Sprint will be reported as up in the first quarter of next year, but their profits will be down, reports The Wall Street Journal. The differential is being attributed to the heavy subsidies that the carriers are paying to onboard new iPhone users.
The analysis, provided by Wells Fargo, indicates that Verizon iPhone activations will be up 29% from its earlier estimations, to 4.5M, but it is slicing down its quarterly earnings by a penny to 54 cents/share. The difference between the huge number of additional users that the iPhone is bringing on and the initial benefit to the carriers is telling.
Of course, once those carriers have onboarded those new users, it will begin reaping those profits back through subscription fees. So as the user stays on, those numbers should get better in subsequent quarters.
The fact that carriers like AT&T have had to spend billions improving their infrastructure to support the heavy data habits of iPhone users also contributes to the gloomy profit outlook.
Nomura Securities analyst Michael McCormack says that although AT&T has grown immensely in size since it began carrying the iPhone in 2007, its profit margins havent improved much at all. “For the most part,” he says, “it’s really been a wealth transfer from AT&T shareholders to Apple shareholders.”
The <3 of EU tech
The latest rumblings from the EU tech scene, a story from our wise ol' founder Boris, and some questionable AI art. It's free, every week, in your inbox. Sign up now!
The carriers have responded by introducing tiered data plans and more aggressive text-message pricing, but at this point they are just treading water.
Still, the allure of the iPhone is strong. Sprint pays more for the iPhone than any other phone it carries and Sprint’s CEO Dan Hesse has stated that the iPhone is the “number one reason” that customers were switching away from Sprint to another carrier.
Apple has got the carriers by the balls. I’m loving this, and hoping against hope that it is bringing us one step closer to our service providers being a dumb pipe that just let us use the phones we want.
Get the TNW newsletter
Get the most important tech news in your inbox each week.