Along with the updated 3G iPhone, Apple also announced yesterday a revamped business model for sales of its beloved handset. Following a more standard handset sale model, AT&T will now subsidize the handset selling the 8 GB model for $199 with a 2-year service agreement; the 16 GB model will be priced at $299 with a 2-year contract.
It is understood that now Apple will receive most of the $200 price tag, while AT&T will no longer have to pay out a portion of the handset’s service revenues to Apple. Previously, the carrier did not subsidize the price of the iPhone and was under contract to share a portion of the handsets service revenues with Apple.
In a statement, AT&T said: “Under the revised agreement, which is consistent with traditional equipment manufacturer-carrier arrangements, there is no revenue sharing and both iPhone 3G models will be offered at attractive prices to broaden the market potential and accelerate subscriber volumes.”
The carrier also said that initially it anticipates the new agreement “will likely result in some pressure on margins and earnings, reflecting the costs of subsidized device pricing,” but that the lower prices are expected to drive increased subscriber volumes. Continuing in the statement, AT&T said, “As recurring revenue streams build without any further revenue-sharing required, AT&T expects the initiative to turn accretive in 2010.”
In another policy turnaround, Apple also said that many of its carrier agreements going forward would not be exclusive, though AT&T will remain the exclusive U.S. carrier for the time being.
3G iPhones are set to go on sale July 11. New features of the handset beside 3G compatibility include: new business-class capabilities, including e-mail and updated security features and the ability for developers, including AT&T, to create customized applications using the Apple software developer’s kit (SDK).