The Carriers Hate the iPhone (And Love Android)

February 8, 2012
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That carriers love Android is not really a surprise. Go to any carrier, anywhere in the world, and you’ll notice that most of their smartphones are now based on Android. They even have their best promotions and marketing campaigns around Android smartphones. Android phones are a great way for carriers to also hook customers that have never used a smartphone before and never needed data, on their data plans, and get them to sign more expensive contracts. The conclusion: carriers make more money with Android.

But is the same true about the iPhone? Do carriers love the iPhone, too, and are they making money from it? Apparently not, and this is why it’s a nightmare for them. The iPhone can bring them some extra customers, but at what costs? Some carriers are even forced to subsidize the most of iPhone’s price, as we’ve seen with the Sprint deal, where they’re paying $650 to Apple for every iPhone. That would be $450 subsidized by the carrier.

Considering other manufacturers charge the carriers from $400 to $500 for their high-end phones, that means the carriers are giving Apple an extra $150-$250 for every single phone. That also means that for every 1 million extra customers, it costs them an extra $200 million. That’s a lot of money, and it really puts a dent in the carrier’s profitability.

This also explains why Apple is able to make so much profit compared to everyone else in the industry. Apple can make several times the profit on their phones compared to other manufacturers because the carriers are still willing to pay Apple a lot of money. If only they would realize that Apple is at a point where losing a big carrier would not be acceptable to them anymore, which means the carriers could  have the power to bring Apple down a notch in their negotiations.

I don’t think anyone should watch out for the “poor” carriers. They can take care of themselves. But these negotiations that are heavily favoring Apple are also hurting all the other manufacturers. If the other manufacturers would be able to charge the carriers more because Apple is doing it, then it would be fine, but I think the opposite is happening. The carriers are giving in to Apple, and then try to recover their losses by squeezing all the profit from all the other manufacturers, which is bad for all of us, because our favorite manufacturers get less money to work with for future devices.

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