Apple iPhone Sales Hurting Wireless Carrier Profits

Apple’s profits have soared since the advent of iPhone and iPad based devices but that profit has come at the expense of the very company’s that have helped Apple succeed, wireless carriers. While Apple creates each iOS based device for an estimated price of just $150 they sell those phones to carriers for $600.

To get customers interested wireless carriers then turn around and sell iPhones back to customers for as little as $199 with a two year contract.

The school of thought has always been that the customers 2-year contract combined with required data plans for smartphones will lead to a return on investment, yet AT&T and Verizon stock has dropped and Sprint has recorded 40% losses since it started selling the iPhone 4 and iPhone 4S.

One analyst tells the Los Angeles Times:

“The AT&T wireless model is broken. AT&T is basically subsidizing Apple’s revenues and profit growth.”

The system is broken because in order to compete many cellular carriers have had to offer “early upgrades” to keep customers. This essentially means that after one year a customer on a two year contract with an already subsidized phone is given a discount to buy another phone and up their contract for two years again.

There does appear to be one bright point for carriers, Google Android phones continue to increase in popularity and are often slightly cheaper to obtain.

One Verizon employee quips of the choice in smartphones:

“It depends what you like. Do you like the Androids’ faster download times, bigger screens, longer battery life and better cameras? Or do you like Apple?”

Do you think carriers put themselves in the position their in now by bowing down to Apple and the iOS system?