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Apple shares down 12% from highs as carriers cut on subsidies, Verizon reps pushing LTE over the iPhone

Posted: , by Daniel P.

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Apple shares down 12% from highs as carriers cut on subsidies, Verizon reps pushing LTE over the iPhone
Apple's stock has fallen double digits since its all-time high not long ago, and the main reason smart money is citing for the dip is carriers trying to make people keep their phones longer and overall trying to make more money from smartphones that they did until now. About $400+ have to be paid to Apple by the carrier for each iPhone sold, with high-end Androids commanding a hefty premium too.

Dave Goldman of CNN Money has been reading for a while on forums threads with titles like "Do Verizon sales reps hat the iPhone?", and decided to make a little survey of his own. He phoned Verizon or chatted with a representative ten times, and found out that indeed the reps were pushing 4G LTE phones for the sake of the iPhone 4S. Therefore it is more likely you walk out with a RAZR MAXX or LG Lucid out of the Verizon store, even if you came to ask for the iPhone.

The reasoning behind the Android 4G pitch is that the iPhone on Verizon is only capable of 3G speeds, and LTE price plans are much more lucrative for Verizon. As a carrier rep puts it:
The only drawback to the iPhone is it doesn't have 4G, and Verizon is really pushing 4G. Don't get me wrong, the iPhone is a great phone. It just costs the company a lot of money for returns when customers find out that a faster 4G network is available and the iPhone's only on 3G.

That might be one of the reasons Apple's stock is down so much lately, since the company makes the vast majority of its profits from iPhones, and their carrier subsidies in particular. At the same time carriers are raising the upgrade fees to switch phones, trying to make you use your old device as long as possible, and hiking smartphone data plans to juice the situation up from the other side too.

Apple shares down 12  from highs as carriers cut on subsidies, Verizon reps pushing LTE over the iPhone
Analysts and investors in carrier stocks are loving this trend, and are waiting with bated breath the results from the grand experiment of carriers in Europe, which are trying to get away from the Apple/Android racket by reducing or eliminating subsidies at a faster pace than the US. 

The two largest Spanish carriers Telefónica and Vodafone Spain decided to stop subsidizing new subscribers last month, a move that is likely to save them 25% of their significant subsidy expenses. Existing customers will still be able to pay less for an upgrade, but new ones will have to pay full price for an iPhone 4S or another phone, or pay it off in 12, 18 or 24 month installments interest-free, which is still something. 

Thus a 16GB iPhone 4S will cost Spanish customers 599 Euros (about $777), compared to 199 Euros (about $258) before the new policy. The same 60 Euro monthly plan remains in both cases, but when you pay the phone full price, either directly or on installments, you get more minutes, texts and data in it, which is Vodafone's bait to ease the transition. 

If Telefónica and Vodafone's experiment is successful, cell phone makers might have to live with less sales and profits, which would particularly affect Apple and Samsung as those two have cornered 99% of the industry's profits. If that results in better and cheaper carrier services and cheaper phones for us, then great, but it might also result in less frequent model refresh cycles and more mid-range devices sold. 

We'll have to see Apple and Samsung's reaction over this trend, though - their sales are booming in places like China, so even if US and Europe reduce subsidies, Asia will likely more than compensate.

source: CNNMoney & WSJ (subscription required)

55 Comments
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posted on 07 May 2012, 03:02 7

1. Bluesky02 (Posts: 1439; Member since: 05 Dec 2011)


This is just temporary, since iPhone 5 will have LTE. Then again they'll push the iPhone.

posted on 07 May 2012, 03:53 9

3. CivicSi89 (Posts: 348; Member since: 23 Jul 2011)


nah. i still wont. and i never will.

posted on 07 May 2012, 04:22 4

4. jcpwn2004 (Posts: 314; Member since: 18 Jan 2012)


it really depends on the subsidy apple is demanding as well though. ICS is really a big step up for android. You no longer can say that the iphone has that great of an edge anymore software wise. If carriers need to pay 500$ for an iphone vs 300$ for an android and they sell them both for 200-300 on contract, I'm not too sure that they're willing to keep doing it.

I see the iphone just being kept so carriers don't lose subscribers, but I see Verizon telling employees to push android/wp/blackberry which allow them to make more profit per phone sold.

posted on 07 May 2012, 09:51 3

12. 14545 (Posts: 1067; Member since: 22 Nov 2011)


Exactly. Apple really needs to revise it's policy on how much they charge carriers for subsidized phones before they end up shooting themselves in the foot. The prices are just ridiculous. But hey, good luck to them, as it appears as if people are finally waking up.

posted on 07 May 2012, 11:17

17. taco50 (banned) (Posts: 5506; Member since: 08 Oct 2009)


If customers want iPhone it won't matter what the company pushes.

posted on 07 May 2012, 11:38 4

21. remixfa (Posts: 13902; Member since: 19 Dec 2008)


if customers are so easily lead away from the iphone and to an LTE device, they never truly wanted "THE iPhone", they wanted a smartphone and its the first name they could think of. Again, for many "iphone" is synonymous with "smartphone".

posted on 07 May 2012, 11:53

28. taco50 (banned) (Posts: 5506; Member since: 08 Oct 2009)


Considering iPhones outsold all LTE devices combined is say they're not easily led away. That's part of why you trolls are so frustrated.

posted on 07 May 2012, 11:59 2

32. remixfa (Posts: 13902; Member since: 19 Dec 2008)


u do realize that LTE is not offered in all parts of the country, right? And until a few months ago was only offered on 1 carrier, right? You do know that there are tons of non iphones that are not LTE right? Your lack of logic is amazing.

Who's frustrated. I have no need for LTE. 42mb/s HSPA+ is well more than fast enough. 7.2mb/s 3G is better than most iphones get.

posted on 07 May 2012, 12:39 2

45. CRICKETownz (Posts: 980; Member since: 24 Oct 2009)


Very true. Apple is more of a household name (for some reason) than Android so i've seen most ppl who are new to smartphones associate smartphone w/iPhone only.

posted on 15 May 2012, 06:40

55. thelegend6657 (unregistered)


You clearly don't know the price of an unlocked android phone . Yes it's about 100 dollar cheaper than an iPhone (high end ) not the price tag of 200-300 you said

posted on 07 May 2012, 05:58 3

5. TROLL (banned) (Posts: 4851; Member since: 13 Apr 2012)


Me 2.....
Let's hope it doesn't have 4g, LTE.

posted on 15 May 2012, 06:38

54. thelegend6657 (unregistered)


If it has LTE it's good for anyone .
More option for an LTE phone why you keep hatin ?

posted on 07 May 2012, 03:21 8

2. kungwei (Posts: 1; Member since: 07 May 2012)


This phone pays 20% of normal commission. So that's a no. This phone is also the reason why carriers eliminated unlimited data plans, started to raise plan pricing, took annual upgrades away, racked up upgrade fees, increased prices for other phones. So as a rep, I would have to be an idiot; nay an imbecile to willingly sell this phone.

posted on 07 May 2012, 11:19 1

18. taco50 (banned) (Posts: 5506; Member since: 08 Oct 2009)


iPhone pays the same commission as any other 3G smartphone. You must be indirect. Also android users use more data than iPhone users because iPhone users are more tech savvy and connect to wifi when available.

posted on 07 May 2012, 11:39 4

22. remixfa (Posts: 13902; Member since: 19 Dec 2008)


thats not tech savy, thats being conditioned by apple to use WiFi because for years you didnt have any choice. And on many apps, you still dont.

taco's chant:
T to the R to the OLL

posted on 07 May 2012, 11:48 3

26. troybuilt (Posts: 155; Member since: 16 Dec 2011)


LOL! That's a true statement remixfa. When the 2G iPhone first launched, you had to get on wifi to even load web pages. Edge's speeds just couldn't get it done. Look at the very first iPhone commercials. Notice each one is on wifi? Stick to fact taco, not just your biased Apple lovin oppinion.

posted on 07 May 2012, 22:21 2

53. parkwaydr (Posts: 572; Member since: 07 Sep 2011)


Taco, I thumped you up on accident, I thought id let you know so you didn't think anyone actually agreed with your blatant stupidity.

posted on 07 May 2012, 06:22

6. ibap (Posts: 682; Member since: 09 Sep 2009)


"hat" the iPhone?

And if they want people to keep their phones longer, they should update the software more often.

Many adults would keep their phones till they disintegrated if the software were updated. My teen daughter loves her non-smart phone for texting, because of the keyboard and small size, doesn't really want a monster-sized phone, and she is not a text fiend either. What incentive is there to keep your phone? Increasing the carrier's profits is not high on my list.

The incentive is to change carrier, since you often get a better deal on a phone that way. Figure it out, guys.

posted on 07 May 2012, 07:04 5

8. remixfa (Posts: 13902; Member since: 19 Dec 2008)


So basically Other carriers are trying out T-Mobile's Value plan ideas. Full retail and billing to the account.
BTW, most people love it. Who doesnt like saving money?

posted on 07 May 2012, 10:01

13. 14545 (Posts: 1067; Member since: 22 Nov 2011)


As long as the other carriers do like Tmo and decrease your bill for no longer subsidizing your phone. Then I'm all for it. I just hope they also don't think I going to pay full retail, I'll negotiate just like I would with any other expensive good I buy.

posted on 07 May 2012, 11:20

19. taco50 (banned) (Posts: 5506; Member since: 08 Oct 2009)


That's working out awful for T-Mobile since they lost a bunch of customers in Q1. Do you know what they said? They said we lost customers because we don't have an iPhone.

posted on 07 May 2012, 11:40 6

23. remixfa (Posts: 13902; Member since: 19 Dec 2008)


every time i think you cant get more ignorant, you surprise me. I know I say that a lot, because somehow you continue to surprise me with your extreme ignorance.

posted on 07 May 2012, 12:00

33. taco50 (banned) (Posts: 5506; Member since: 08 Oct 2009)


Want a link or are done looking uninformed for now?

posted on 07 May 2012, 12:03 3

37. remixfa (Posts: 13902; Member since: 19 Dec 2008)


oh, i always want a link

posted on 07 May 2012, 12:10

39. taco50 (banned) (Posts: 5506; Member since: 08 Oct 2009)


it was Q4, but I'm sure T-mobile. Lost 800k in Q4 and 600k in Q1 and publicly stated it was because of the iPhone.

http://www.webpronews.com/t-mobile-loses-800-k-customers-no-iphone-2012-02

http://support.t-mobile.com/message/127577?noredirect=true

posted on 07 May 2012, 12:21 3

40. remixfa (Posts: 13902; Member since: 19 Dec 2008)


they didnt say it was because THEY DIDNT have an iphone. It was a crap year, and the fact there was a new iphone that launched that quarter didnt help. The holidays were horrible at Tmobile.

Wanna know what they didnt come out and say "People were scared as hell and leaving the company when they thought we were merging with ATT, as many Tmobile customers are previous ATT customers".

Again, there is a difference between public statements and day to day business. It would be bad business for them to say "this merger not going through screwed us"... because thats what happened.

Oh, and that second link? It was a PROJECTED ANALYTICS.. not facts.

Tmobile has lost customers nearly every quarter for the past year+. It was pretty neutral until the ATT merger then things got bad.. and then worse.. and then yes, when the iphone came out, even worse.. but unlike your troll eyes would like to think, the problems were there long before the i4s launched. But it sure is a nice scape goat compared to calling out the biggest culprit, the ATT merger.

"For T-Mobile USA, the past year was characterized by significant challenges, particularly in the fourth quarter, following the market launch of the new Apple iPhone model by the three major national competitors in October."

posted on 07 May 2012, 21:44

52. lsutigers (Posts: 698; Member since: 08 Mar 2009)


I like TMO's plan idea but it is not working out for them...One of their executives said publically they have had very little adoption as customers are not willing to pay full price for the phone, even if its in installment.

posted on 15 May 2012, 06:44

56. thelegend6657 (unregistered)


Unlocked it's the way to go

posted on 07 May 2012, 07:14 1

9. RobotMan (Posts: 124; Member since: 13 Apr 2012)


" It just costs the company a lot of money for returns when customers find out that a faster 4G network is available and the iPhone's only on 3G." so who said that iPhone have a lower return rate ?

posted on 07 May 2012, 08:19 1

10. -box- (Posts: 3714; Member since: 04 Jan 2012)


Pretty much everyone except apple and their fans... Haven't seen the physical stats to back it up, but the iphone (particularly the 4 and 4S models) have the highest return/exchange/replacement rate of any high-volume phone (at least in North America) since 2005 or 6, if I recall the report correctly. Apple doesn't publish their in-store or over-the-phone-warranty replacement statistics

posted on 07 May 2012, 09:44 2

11. troybuilt (Posts: 155; Member since: 16 Dec 2011)


and why would Apple ever do that? Apple's never going to release information that makes them look bad. Especially in regards to Foxconn. Apple wanted to stay silent about that because they knew what was going on in those factories, till, the media kept pushing the issue and Apple decided to step in. Still nothing has changed in the factories.

posted on 07 May 2012, 13:09

46. CRICKETownz (Posts: 980; Member since: 24 Oct 2009)


That was just that guy's sales pitch to get the customer to buy a 4G phone. anyone who works in the stores for Verizon can vouch that iPhone is the least returned smartphone carried. mentioning that iPhone 4S is not 4G isn't a deterrent at all. as far as that salesperson's statement...i've never had anyone return an iPhone b/c they find out it doesn't do 4G b/c they are told before they buy that it is only 3G. most ppl say they don't mind the 3G. the bigger question about that statement is how does a customer leave the store having purchased an iPhone not get told during the sales process that it wasn't 4G.

posted on 07 May 2012, 18:07

51. BattleBrat (Posts: 1038; Member since: 26 Oct 2011)


You don't get it, I have friends who dropped their sub month owned iPhones, walked right in the apple stores and they give you a new one (provided you bought it at an apple store or from apple.com) and trust me quite a few exchange them at the store.

posted on 07 May 2012, 10:23

14. theoak (Posts: 320; Member since: 16 Nov 2011)


Once iPhone goes LTE, reps still may be more inclined to go other phones however if the commission is not as high for the iPhone. At least reps will not get dinged for selling a 3G device.

It is a tough battle really. Once folks start getting apps, folks now have a vested interest in the iOS platform and hence moving to a new platform (like Android) may be a tough swallow because folks will need to repurchase their apps again.

I have a 2nd generation iPod Touch. That was a huge factor in purchasing an iPhone 4 because I knew I would not have to repurchase all my apps. So even though getting an Android equivalent at first may have been cheaper, once you factored in the price of the Android version of the apps, it was cheaper to get the iPhone in the end.

posted on 07 May 2012, 10:34 1

16. remixfa (Posts: 13902; Member since: 19 Dec 2008)


yea, but most of those apps you paid for on iOS are free on android anyways :)

posted on 07 May 2012, 10:29

15. DOGIEFRESH (Posts: 302; Member since: 15 Jul 2009)


Of course they're pushing 4G LTE cuz their 3G is slowwwwwwww as hell

posted on 07 May 2012, 11:23 1

20. taco50 (banned) (Posts: 5506; Member since: 08 Oct 2009)


Stocks go up and down. Once iPhone 5 hits with LTE it's pretty much game over. iPhone 4S had about 60% of sales on the big 3 without having 4g.

Imagine iPhone 4 free on all three carriers, iPhone 4s $99 and iPhone 5 with LTE $199. Apple will dominate smartphone sales like never before and they're already dominating them now.

posted on 07 May 2012, 11:41 2

24. remixfa (Posts: 13902; Member since: 19 Dec 2008)


60% of the sales while sliding in marketshare? Hmm.. someone's math is off.

posted on 07 May 2012, 12:01

34. taco50 (banned) (Posts: 5506; Member since: 08 Oct 2009)


80% on AT&T 51% on VZW and 75% on Sprint. Do you want more links. Almost everything that you type is incorrect.

posted on 07 May 2012, 12:05 3

38. remixfa (Posts: 13902; Member since: 19 Dec 2008)


and you think 1 month/quarter is indicative of the whole year? Android gains in market share nearly every month while the iphone is stagnant at best. If those numbers rang true, then the market would reflect it.
Yes, link it troll. Link all of it.. with links that work.

posted on 07 May 2012, 12:27

42. taco50 (banned) (Posts: 5506; Member since: 08 Oct 2009)


Why did you say my math is off then. Once I present the facts you just change the topic like you never said it.

posted on 07 May 2012, 14:04 4

49. remixfa (Posts: 13902; Member since: 19 Dec 2008)


I didnt change the subject.

Notice how my first reply says your math is off because marketshare doesnt reflect it?

notice how my second reply says your math is off because market share doesnt reflect it?

Isnt it time for you to start ignoring the thread as proof positive that you lost another arguement?

posted on 07 May 2012, 11:56

30. theoak (Posts: 320; Member since: 16 Nov 2011)


Add rumors of T-Mobile being iPhone compatible "soon" also ...

Otherwise, with 4S, 14.4 Mbps on AT&T (with coverage of course), amazing camera, 1080P recording, image stabilization.

I was going to keep my iP4, skip the iP4S and maybe even the iP5 for the one after.

A cheap 4S on AT&T ... is tempting.

posted on 07 May 2012, 13:16

47. CRICKETownz (Posts: 980; Member since: 24 Oct 2009)


14.4Mbps on At&t? was everyone else sleeping and you were on the network by yourself? i'll put that up there w/fairy tales like Santa Claus, the Tooth Fairy, & 2Pac still being alive on some island.

posted on 07 May 2012, 16:36 1

50. bbonline (Posts: 38; Member since: 24 Feb 2011)


That's the theoretical speed the iPhone 4S on AT&T is capable of.

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