AT&T Struggling To Profit Off iPhone

While Apple’s (AAPL) iPhone has brought AT&T (T) lots of new customers, it hasn’t brought the company big profits, CNET reports.

AT&T doesn’t break even on an iPhone until the 17th month of a 24 month contract, because of the fat subsidy AT&T provides, and the needed upgrades to its network.

Though the figure is not public, AT&T is rumoured to subsidise each phone by at least $300.

The effort to keep their network in step with demand has apparently slashed the company’s profit margin on the phones. The steady stream of new iPhone users has flooded AT&T’s mobile network, leading to unreliable service that has customers unhappy.

CNET gets its information from a new report from the Yankee Group that says “operators must aggressively reduce their dependence on subsidy models to be more profitable.” If the Yankee Group is right, the price of the iPhone could go up in the future.

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