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iPhone 5 rumors: changed subsidies won’t affect Apple

by Nicole
June 9, 2012 at 8:10 am

Recently analysts got alarmed by the decrease in Apple’s share price that could make US carriers stop continuing to subsidize the iPhone.

However, market watchers now believe that changes to the subsidies from mobile networks won’t affect Apple, on the contrary, it could actually be of help to the company.

Analyst Peter Misek at Jefferies & Co states that US networks will prefer to sibsidize “high-end” smartphones such as the LTE 4G iPhone 5, which would surpass Android sales.

Misek estimates that the subsidization of LTE smartphones means that “iPhone prices to the consumer could be lower than prices for mid-range Android devices and other handsets.”

“The iPhone 5 will be LTE-enabled and that the subsidy reallocation will likely help rather than hurt Apple,” he said.

In addition, Piper Jaffray analyst Gene Munster believes that AT&T will focus on tying iPhone 5 customers into longer contracts than previously. However, this method, he says, won’t have a visible effect on iPhone 5 sales.

“The bottom line is we expect both AT&T and Verizon’s (~12% of Apple’s revenue) upgrade threshold to be 20 months for the iPhone 5 release (October), with some potential AT&T exceptions for highly valued customers to get an upgrade after 18 months,” Munster wrote.

The analyst wrote that AT&T’s upgrade thresholds have been 11 months, 12 months, and 18 months, while with Verizon customers had 20-month contracts.

“While this threshold is slightly less generous than past upgrades, due to the high level of expected interest in the iPhone 5, we don’t believe less favourable upgrade windows will have a measurable impact on demand and we remain comfortable with our 49 m unit estimate (up 32% y/y) for the Dec-12 quarter,” Munster wrote.

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