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Galaxy S4 vs iPhone 5: Apple wins the pricing battle on AT&T

The AT&T Galaxy S4 is $50 more expensive than AT&T iPhone 5, when talking about on-contract prices. Could this be an issue for Samsung?
March 29, 2013
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When announcing Galaxy S4 pre-order details on Thursday, AT&T puzzled potential Galaxy S4 buyers with that unexpected $249.99 on-contract price.

Probably anybody keeping tabs on smartphone news, us included, expected the handset to cost $199.99 on-contract with AT&T (and every other carrier in the region) at least at launch. After all, that’s what previous Galaxy S models cost when they were released in the U.S., with pricing going down in the months after their launch.

But what’s really unexpected is to see the Galaxy S4’s on-contract price surpass the cheapest on-contract iPhone 5, currently Apple’s latest iPhone model. The 16GB iPhone 5 costs $199.99 from the same carrier, with a similar two-year contract, or $50 less than what AT&T is planning to charge for a 16GB Galaxy S4 model.

So far we have two American carriers going official when it comes to Galaxy S4 pricing, AT&T and T-Mobile – with the latter, both the Galaxy S4 and iPhone 5 will cost $99 upfront and off-contract, followed by a number of installments of $20/month – and it will be interesting to see how much other mobile operators will charge for Samsung’s new flagship device.

Why would AT&T, or any carrier price, the base subsidized Galaxy S4 model at $249.99? Unofficially, carriers would rather have subscribers choose any smartphone but the iPhone, even if they still need to carry the iOS device in order not to lose customers. So why price one of the most coveted Android handsets of the year higher than its most important rival?

Is AT&T trying to get some of its money that it pays for Galaxy S4 shipments back from future subscribers faster? Is AT&T trying to take advantage of the increased interest in the Galaxy S4 and make a quicker buck off of the first Galaxy S4 sales? We have no way of answering these questions, and neither AT&T nor Samsung commented on the price of the device.

The New York Times reminds us that the Galaxy S4 costs more to produce than the iPhone 5, according to IHS iSupply:

It is unclear why the Galaxy S 4 costs more than an iPhone. Samsung’s last flagship phone, the Galaxy S III, matched the iPhone’s price. Jan Dawson, a telecom analyst at Ovum, pointed out that according to estimates by IHS iSuppli, a components research firm, the parts for the Galaxy S 4 cost more than the iPhone 5’s. The S 4’s bigger screen, new processor and new sensors are adding to its cost, according to iSuppli.

What if it isn’t AT&T’s fault here? Is Samsung simply interested in maintaining its Galaxy S-based profits by hiking the price of the latest model in order to make up for increased production costs? Or is Samsung trying to increase its margins? Whatever the case, the higher the Galaxy S4 cost for carriers, the higher the on-contract price of the device would be. Again, we can only speculate on this Galaxy S4 price issue because we still need more pricing details for the U.S. Galaxy S4 versions.

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We’ll have to wait and see what Verizon and Sprint will ask for the Galaxy S4 to see whether U.S. buyers will indeed have a Galaxy S4 pricing issue on their hands or not.

We will also remind you that, at this time, we have no idea how much the Galaxy S4 will cost in the U.S. – we’re talking full price here, for those buyers that don’t like contracts, or aren’t eligible for upgrades. The 16GB iPhone 5 costs $649 in case you were wondering.

Speaking about full prices for the handset, we’ll notice that the cheapest UK Galaxy S4 pre-order price for an unlocked handset is £529.98 (or $804), while the unlocked iPhone 5 costs £529 in the region.

On the same pricing note, a U.S. Samsung contest that lists the Galaxy S4 among the offered prizes, currently lists the retail value of the handset at $650, although before at least two publications noted a cheaper retail value for the device in the rules section of the contest, $579. So we’ll ask again, did Samsung recently raise the price of the Galaxy S4?

In the Android universe, where new Android handsets arrive every few months or so, carriers and retailers often offer good deals even on high-end devices in the months following official launches. So the Galaxy S4 price will go certainly down in the coming months. Is that why carriers and/or Samsung would be interested in pricing the handset at $249.99 on contract at launch?

Comparatively, the latest iPhone generation sells for the same price, with very few exceptions, with U.S. carriers and retailers, from launch until the next model arrives.

Will you be paying $50 extra to buy the AT&T Galaxy S4, or are you waiting for the price to go down? What if other U.S. carriers (excepting T-Mobile) will also ask $249.99 for a subsidized 16GB Galaxy S4?