Apple’s new 3G iPhone, coming July 11, solves two of the first iPhone’s biggest problems: Slow network access and a fat price tag. The new phone will be able to work with faster, 3G cell networks, and will start at $199 — half the price of the current iPhone.
Our first question: How have the economics changed for the new phone?
We don’t have all the details on how the wholesale and retail pricing will break down — Steve Jobs obviously didn’t feel like explaining those details during his keynote. But we’re getting a pretty good handle on it.
AT&T has confirmed reports that it will be subsidizing the cost of the phone by $200, and we assume that other carrier partners like Vodafone (VOD) will be doing the same. This makes plenty of sense, as carriers already subsidise most of their phones — and $200 is reasonable — to draw would-be subscribers from competitors. This means Apple would keep generating the same gross revenue per unit — at least in terms of the hardware itself.
But Apple will also forgo its monthly kickback paid by operators, which, as we calculated last year, amounts to much more than the money Apple makes from selling its gadgets. (Confirmed in this SEC filing.) To be sure, Apple will make some money back through revenue its generates from its new iPhone apps store, and potentially from additional subscribers to its new MobileMe email/calendar/contact synching service. But nothing close to the $12-18 per month analysts thought Apple was getting from AT&T.
Also unknown: As we had predicted, AT&T will charge more for unlimited monthly access to its 3G network than it charged for its slower, EDGE network. Consumers will pay $30 a month for data, up from the $20 that AT&T is charging for first-gen iPhones.
What’s clear: Apple and its partners are willing to make less money to sell more iPhones. The market isn’t thrilled; AAPL is down 4% today, trading around $178.
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