Apple and AT&T announced a new iPhone 3G agreement that eliminates the revenue-sharing model under which AT&T shared a portion of monthly service revenue with Apple. Under the revised agreement, which is consistent with traditional equipment manufacturer-carrier arrangements, there is no revenue sharing and both iPhone 3G models will be offered at lower prices so as to broaden the market potential and accelerate subscriber volumes.
AT&T calculates that average monthly revenues per iPhone subscriber are nearly double the average of the company's overall subscriber base. Currently, less than 20 percent of AT&T's postpaid subscribers have integrated devices capable of voice, Web and data applications.
Some pricing details:
- With a two-year contract, the price of an 8GB iPhone 3G will be $199; the 16GB model will be priced at $299.
- Unlimited iPhone 3G data plans for consumers will be available for $30 a month, in addition to voice plans starting at $39.99 a month. Previous pricing was $20 per month for the iPhone data plan on the Edge network
- Unlimited 3G data plans for business users will be available for $45 a month, in addition to a voice plan.
In the near term, AT&T anticipates that the new agreement will likely result in some pressure on margins and earnings, reflecting the costs of subsidized device pricing, which, in turn, is expected to drive increased subscriber volumes. The company anticipates potential dilution to earnings per share (EPS) from this initiative in the $0.10 to $0.12 range this year and next, with a 2008 adjusted consolidated operating income margin of approximately 24 percent and a full-year 2008 wireless OIBDA margin in the 39-40 percent range. As recurring revenue streams build without any further revenue sharing required, AT&T expects the initiative to turn accretive in 2010.
Apple also confirmed that the iPhone 3G will be available in more than 70 countries, including through América Móvil, AT&T, Bharti Airtel, Globe Telecom, Hutchison Telecom, O2, Optus, Orange, Rogers, SingTel, Softbank, Swisscom, Telecom Italia Mobile, Telefónica, TeliaSonera, T-Mobile, and Vodafone.http://www.apple.com
