Consumers pay a premium to get their Apple (
) fix, willing to pay more for an iPhone than one of Google's (
) Androids. Wireless carriers are just as addicted, and they'd
like to break the habit.
Feel free to call them ungrateful. The iPhone has been a boon
for wireless carriers, some of which had to wait for the
privilege of selling it. AT&T (
) started first, with an exclusive, in 2007. Then Verizon
Wireless, majority owned by Verizon (
), started selling iPhones in 2011. That year Sprint (
) got the iPhone, too.
The iPhone converted people who use their phone to talk into
people who also surf the internet and check e-email. In doing so,
it raised the average revenue per user for phone companies -
which boosted overall revenues.
T Revenue TTM
But this came with a tradeoff: wireless carriers have to pay a
higher subsidy for iPhones than they pay for Android phones -
$420 rather than $300, according to the
Wall Street Journal
. Now that most people have smartphones, the carriers are getting
tired of that. The extra $120 per phone cost AT&T $2 billion
So the carriers are doing what they can to make consumers eat
that cost. AT&T has lengthened the amount of time before
customers can upgrade their devices at a discount, and in
February it raised upgrade fees. That seems to be helping its
T Gross Profit Margin
But it's hard to break an addiction. Apple's expected to
launch a new version of the iPhone this fall. If it does, odds
are more people will buy or upgrade, and the carriers will have
to pay up.
Needless to say, it's good to be the dealer. Captive companies
are one more reason for Apple's success.
AAPL Revenue TTM
From the editors of YCharts.
YCharts Pro Investor Service