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

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:

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.

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 Telef√≥nica 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 Telef√≥nica 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)

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55 Comments

1. Bluesky02

Posts: 1439; Member since: Dec 05, 2011

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

3. CivicSi89

Posts: 349; Member since: Jul 23, 2011

nah. i still wont. and i never will.

4. jcpwn2004

Posts: 314; Member since: Jan 18, 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.

12. 14545

Posts: 1835; Member since: Nov 22, 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.

17. taco50

Posts: 5506; Member since: Oct 08, 2009

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

21. remixfa

Posts: 14605; Member since: Dec 19, 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".

28. taco50

Posts: 5506; Member since: Oct 08, 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.

32. remixfa

Posts: 14605; Member since: Dec 19, 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.

45. CRICKETownz

Posts: 980; Member since: Oct 24, 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.

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

5. TROLL

Posts: 4851; Member since: Apr 13, 2012

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

54. thelegend6657 unregistered

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

2. kungwei

Posts: 1; Member since: May 07, 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.

18. taco50

Posts: 5506; Member since: Oct 08, 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.

22. remixfa

Posts: 14605; Member since: Dec 19, 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

26. troybuilt

Posts: 155; Member since: Dec 16, 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.

53. parkwaydr

Posts: 572; Member since: Sep 07, 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.

6. ibap

Posts: 867; Member since: Sep 09, 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.

8. remixfa

Posts: 14605; Member since: Dec 19, 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?

13. 14545

Posts: 1835; Member since: Nov 22, 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.

19. taco50

Posts: 5506; Member since: Oct 08, 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.

23. remixfa

Posts: 14605; Member since: Dec 19, 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.

33. taco50

Posts: 5506; Member since: Oct 08, 2009

Want a link or are done looking uninformed for now?

37. remixfa

Posts: 14605; Member since: Dec 19, 2008

oh, i always want a link

39. taco50

Posts: 5506; Member since: Oct 08, 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

40. remixfa

Posts: 14605; Member since: Dec 19, 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."

52. lsutigers

Posts: 832; Member since: Mar 08, 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.

56. thelegend6657 unregistered

Unlocked it's the way to go

9. RobotMan

Posts: 145; Member since: Apr 13, 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 ?

10. -box-

Posts: 3991; Member since: Jan 04, 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

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