Will AT&T Subsidize Apple iPhone?

The answer to the question of whether the iPhone will be subsidized by AT&T has had many, many, many speculations. Some analysts have argued yes, some have argued no, and the rumors surrounding both sides have been flying. I’ve pretty sure we’ve actually lost track of what the currently-accepted mantra on the iPhone subsidy is. Regardless, the newest rumor to answer that question says that the answer is “probably not.”

AppleInsider reports that notes from UBS analyst John Hodulik gave some clues. He said that comments made during an AT&T investor gathering indicate that while the company may be planning to work on its rebranding during the iPhone launch, subsidies on the iPhone plan would be questionable.

“In fact, AT&T may generate a small margin on sales of the [iPhone] in its stores,” he wrote.

Hodulik add[s] that, “Management would make no comments [sic] on how the phone is activated in its own or Apple owned stores, suggesting that this may be done somewhat differently versus typical handset purchases.”

What’s in it for AT&T, then, if they’re making such a small margin on iPhone sales? Subscribers of course. Handset sales themselves typically don’t represent the meat of a carrier’s business model, and such would appear to be the case with the iPhone as well. That’s the whole purpose of offering subsidies in the first place—to attract new customers and hook them on contracts for x amount of years. However, the iPhone is apparently such a highly-desired device (especially upon initial launch) that AT&T can afford not to offer subsidies. People are going to switch anyway.

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