The $831 iPhone

From the New York Times
Apple doesn’t chat too much about the iPhone service fees AT&T shares with it. But the good folks at the Financial Accounting Standards Board (who make rules for how companies keep their books) have forced it to give us some clues. The accountants say that if someone promises to pay you money in the future (as AT&T does for each iPhone activated), you have to report this “deferred revenue” to investors.

All this makes Apple’s financial statement into a rather complex algebra problem. Gene Munster, an analyst at Piper Jaffray, has tried to do the math. His bottom line is rather shocking: AT&T appears to be paying $18 a month, on average, to Apple for each iPhone activated on its network. That adds up to $432 over a two year contract. In other words, Apple will receive $831 for each iPhone it sells.

All this shows how much incentive Apple has to maintain its exclusive deal with AT&T rather than to sell unlocked phones or cut deals with multiple carriers. AT&T is finding that an exclusive on the iPhone draws in new customers and lures existing ones to buy more expensive data plans. Carriers will keep paying Apple big kickbacks so long as its phones still stand out from the pack.

Click here to read more "The $831 iPhone"