iPhone: Not the Jackpot that AT&T had Hoped, Report Says

Dennis Faas's picture

A major newspaper has recently questioned how much AT&T benefits from its exclusive carrier deal for the iPhone. It says that the network didn't get as many new customers from the deal as might be assumed, and that it has incurred heavy costs which may have taken a serious chunk out of profits.

According to a Wall Street Journal report, 60% of people with an iPhone on the network since its 2007 launch were already AT&T customers. That means the deal has only brought around four million new customers to the company: nothing to be scoffed at, but much less than the 10 million or so who own the device. (Source: wsj.com)

When it comes to the latest model of the phone, the 3GS, the percentage getting the device who are existing network customers rises to 65%, strengthening suspicions that many or even most users of the handset have upgraded from a previous iPhone.

iPhone Users Splash The Cash

It's also questionable how much those customers are worth to AT&T. The firm insists iPhone customers spend more on calls and data than any other phone owners -- almost $100 a month, in fact. However, an analyst says that other phones generate revenues close to this figure which, considering the fact that the subsidy paid to the manufacturer is lower than with Apple, makes them better value to AT&T.

There are also hefty costs for carrying the iPhone. For instance, owners of the device download Internet data at much higher rates than people owning other phones (but those on unlimited deals don't pay any extra for it). In addition, there's the additional costs of upgrading networks to cope with the extra demand. (Source: theinquirer.net)

Retention Rise

However, there are some notable benefits to AT&T. Those who joined the network specifically to get the iPhone will theoretically be worth the best part of $2,000 over the first two years (taking into account the subsidy the firm pays to Apple for the handset). And AT&T's churn rate -- the percentage of customers who leave during a given period -- has dropped slightly since 2007, from 1.7% to 1.49%. That suggests some users who might otherwise have switched networks have stuck with AT&T specifically because it has the iPhone.

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