the appstore.......thats

riki Baker — Wed, 11 Jun 2008 14:33:54 -0400

the appstore.......thats why.

more iphones = more appstore sales.....

jordan, why do you think

Al Fisher — Tue, 10 Jun 2008 17:02:47 -0400

jordan, why do you think that apple charges att 400 per iphone? not, say, 700 or 800?
instead of messing with monthly revenue share model, apple gets revenue share in advance. i see no reasons for apple in charging att just 400 bucks for iphone

Here is another way to

David Kuan — Tue, 10 Jun 2008 09:39:03 -0400

Here is another way to explain it .....

Previous arrangement::
- AT&T does NOT subsidize iPhone at purchase (i.e. Apple does NOT get a ONE-time revenue for the sale of iPhone to AT&T.)
- Apple gets monthly revenue (up to $18/mth according to reports) from each AT&T subscriber on contracted rate plan with activated iPhone

New arrangement:
- Apple is getting a ONE-time revenue for the sale of iPhone to AT&T.
- Apple is NOT getting monthly revenue sharing (up to $18/mth)

Assume the following:
1) %churn of 2% (= 98% subscribers remain on contract for entire 2 yr duration):
2) Unsubsidized cost of 8GB iPhone 3G is $399

Revenue to Apple:
1) In the previous arrangement, $18/mth x 24 mths x 98% = $423.36 revenue over 2 yr period
2) In new arrangement, $200 revenue at time of purchase but no additional revenue over time from AT&T rate plan subscription

The other impact not mentioned here is that with the subsidy model, subscribers are MORE likely to change their device at conclusion of the contract (i.e. new device on new 2yr contract).

Apple is sacrificing revenue

Jordan Golson882676 — Tue, 10 Jun 2008 04:10:13 -0400

Apple is sacrificing revenue to lower the price.

Lower price = lower revenue.

Before, Apple got revenue from a full priced iPhone PLUS a monthly "kickback" from AT&T. That's $400 for the phone plus $18/month for 2 years.

Now Apple gets a one-time "subsidy" from AT&T to cover the cost of the iPhone, but no kickback. That's $400 for the phone but no more.

Apple IS getting revenue share in the form of subsidized handsets. By offering the handset for a lower price, they sell more units. It's just that $200 of the $400 cost of the handset comes from AT&T rather than the customer. AT&T wouldn't cover half the cost of the unit if it wasn't locking the customer into a 2-year contract.

Make more sense now?

Thought it was obvious but

pwb — Tue, 10 Jun 2008 01:13:02 -0400

Thought it was obvious but perhaps not: AT&T will be making a large payment to Apple for each iPhone sold. This is called a "subsidy".

Jordan - you are making no

Steve — Mon, 09 Jun 2008 23:39:34 -0400

Jordan - you are making no sense. How does the idea that Apple is no longer getting kickbacks (revenue share) from ATT contribute to Apple's ability to price the new iPhone so low? Logically, it should be the opposite. If Apple is NOT making additional revenue from ATT on the deals, then they are making less money than they were before and the price of the new phone should be higher.

Furthermore, if Apple is NOT getting revenue share why should they care whether you sign a two year agreement or not. Apple will get the same money either way. In fact, why would Apple give ATT an exclusive at all unless there was another form of revenue share like just an annual exclusivity fee.

This article is really incomplete.

AT&T drops "revenue-sharing" with Apple for 3G iPhone

Jordan Golson — Mon, 09 Jun 2008 19:00:18 -0400

Buried in an AT&T press release touting the company's "exclusive" relationship with Apple is some interesting news:

"The new agreement between Apple and AT&T eliminates the revenue-sharing model under which AT&T shared a portion of monthly service revenue with Apple. Under the revised agreement, which is consistent with traditional equipment manufacturer-carrier arrangements, there is no revenue sharing."

The "kickback" agreement between Apple and AT&T was a source of significant rumor and speculation among analysts wondering how much money Apple made on each iPhone subscriber. Some estimates placed this kickback as high as $18 per month per subscriber -- a significant amount.

That Apple is willing to forgo this revenue to slash the cost of the iPhone shows how serious Jobs and Co. is about making inroads into the smartphone market -- and make their stated goal of 10 million iPhones sold in calendar year 2008.

Like the prior model, the new 3G iPhone will also require a 2-year contract to get the discounted price, but no word from AT&T or Apple on what the phone will cost for upgrading customers or those who refuse to sign a 2-year contract.

UPDATE: An AT&T spokesman told me "the phone will only be available with a two-year contract." In addition, previous iPhone owners will have their existing 2-year commitment restarted when buying a new iPhone.

The full release from AT&T is below:

AT&T TO OFFER NEXT-GENERATION iPHONE ON ITS

HIGH-PERFORMANCE 3G NETWORK

Broadband Speed and New Capabilities Enhance Iconic Mobile Device

$199 Starting Price Significantly Expands Mass Market Appeal

New Corporate E-Mail and Web Applications Move iPhone Further Into Business Market

Note: AT&T will hold a conference call today for investors and analysts to provide background on the new iPhone 3G launch and AT&T’s wireless data strategy. The call will include comments from Ralph de la Vega, president and CEO, AT&T Mobility, and Rick Lindner, senior executive vice president and CFO for AT&T. The conference call will be broadcast live via the Internet at 4:30 p.m. ET on Monday, June 9, 2008, at www.att.com/investor.relations.

Broadcast satellite video available. Details follow at end of release.
SAN ANTONIO, June 9, 2008 — AT&T Inc. (NYSE:T) today announced it will be the exclusive U.S. provider of the new iPhone 3G, details of which were outlined earlier today at Apple’s Worldwide Developers Conference in San Francisco.

Under the terms of a new agreement with Apple, AT&T remains the exclusive U.S. carrier of the new iPhone, which will be available beginning July 11 at a starting price of $199 with a two-year contract. iPhone 3G boasts several significant enhancements, including:

- 3G broadband wireless connectivity, which gives customers a home broadband-like speed experience when surfing the Internet, sharing files and using media-rich Web applications.
- Business-class capabilities, including e-mail, viewed on a large, touch-screen device and designed to meet the needs of companies of all sizes.
- The ability for developers, including AT&T, to create customized consumer and business applications using the Apple software developer’s kit (SDK).

Customers can get more information on iPhone 3G at www.att.com/iphone.

AT&T expects that iPhone 3G’s attractive pricing and rich set of features including business e-mail and other applications, combined with the broadband speeds of AT&T’s 3G network, will spur significant subscriber and revenue growth — particularly in wireless data — and strengthen AT&T’s wireless leadership and long-term growth profile.

“iPhone 3G will take mobile communications and computing to a whole new level by combining a terrific user interface with a great experience accessing the Internet and subscribers’ favorite applications on our 3G wireless network at unsurpassed speeds,” said Ralph de la Vega, president and chief executive officer of AT&T Mobility. “Combine our high-performance 3G broadband wireless network, the new iPhone’s business-class capabilities and a starting price of $199, and I expect that we will continue to increase revenue per user and attract customers who spend the most on wireless. The device is built, and priced, to sell.”

AT&T will sell iPhone 3G in more than 2,200 company-owned retail stores and kiosks, as well as through its direct business sales teams.

New Agreement With Apple Reflects Significant Growth Opportunity
The new agreement between Apple and AT&T eliminates the revenue-sharing model under which AT&T shared a portion of monthly service revenue with Apple. 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 phones will be offered with a two-year contract and attractive data plans that are similar to those offered for other smartphones and PDAs. AT&T anticipates that these offers will drive increased sales volumes and revenues among high-quality, data-centric customers. Currently, less than 20 percent of AT&T’s postpaid subscribers have integrated devices capable of voice, Web and data applications. Based on the company’s experience, average monthly revenues per iPhone subscriber are nearly double the average of the company’s overall subscriber base.

With a two-year contract, the price of an 8GB iPhone 3G will be $199; the 16GB model will be priced at $299.
Unlimited iPhone 3G data plans for consumers will be available for $30 a month, in addition to voice plans starting at $39.99 a month.
Unlimited 3G data plans for business users will be available for $45 a month, in addition to a voice plan.

In the near term, AT&T anticipates that the new agreement will likely result in some pressure on margins and earnings, reflecting the costs of subsidized device pricing, which, in turn, is expected to drive increased subscriber volumes. The company anticipates potential dilution to earnings per share (EPS) from this initiative in the $0.10 to $0.12 range this year and next, with a 2008 adjusted consolidated operating income margin of approximately 24 percent and a full-year 2008 wireless OIBDA margin in the 39-40 percent range. As recurring revenue streams build without any further revenue sharing required, AT&T expects the initiative to turn accretive in 2010.

AT&T’s 3G Wireless Network
iPhone 3G harnesses the power of AT&T’s broad and powerful 3G mobile broadband network, which offers 3G mobile phones download speeds of up to 1.4 Mbps. AT&T’s 3G network is currently available in 280 leading U.S. metropolitan areas; by year-end, the company plans to offer 3G service in nearly 350 metro areas. Following the recent turndown of its TDMA network, the company is further enhancing its 3G network, with improved coverage quality made available through reallocated 850 MHz spectrum.

AT&T’s 3G network is the best positioned among American carriers to grow in line with customer demand, evolving to next-generation speeds incrementally during the next few years. Between 2005 and the end of 2008, AT&T will have invested more than $20 billion in wireless network improvements and upgrades.

AT&T has the best global coverage of any provider, with voice-roaming available in more than 200 countries and data-roaming in more than 145 countries, including more 3G roaming than any other carrier.

In addition, the new iPhone 3G will operate in Wi-Fi mode through wireless modems in homes and offices, as well as public hot spots.

Marketing the iPhone to Businesses
iPhone 3G includes new business capabilities, including access to corporate e-mail and intranets, as well as the ability to certify mobile business applications to suit the needs of an array of industries, ranging from health care and real estate to higher education and financial services. Starting July 11, AT&T will begin marketing to its business customers, which includes all of the Fortune 1000. To prepare for the rollout, AT&T will be conducting extensive training among its thousands of enterprise and small business sales force and customer-support employees. AT&T is the world’s leading provider of corporate wireless e-mail solutions.

“We’re anticipating significant demand from companies of all sizes based on the feedback we’ve received from the many corporate customers who have already purchased the first-generation iPhone, as well as from companies waiting for the new iPhone’s business applications,” said Ron Spears, group president, AT&T Global Business Services. “Businesses will benefit from all of the iPhone’s new features, as well as the ability to maximize productivity by using the combination of 3G broadband connectivity and customized applications.”

Through its work over the years with the developer community, AT&T has developed a robust catalog of hundreds of enterprise applications (www.att.com/choice). AT&T will work with Apple, using the SDK process, to enable many of these applications, which today operate on other AT&T-powered wireless devices, to also work on the iPhone. The growth of mobile applications represents a huge opportunity for companies to improve productivity through reduced overhead expenses, access to real-time information and higher levels of speed and efficiency.

Unleashing Innovative Applications With the SDK
AT&T is working closely with Apple to roll out several new and innovative applications that take advantage of the iPhone’s advanced capabilities. For example, AT&T is finalizing YELLOWPAGES.COM mobile for the iPhone, an innovative GPS-enabled application that combines local search with social networking capabilities, giving users the ability to search for information, share reviews and plan activities with friends, neighbors and co-workers. In addition, the company will work to certify many of its existing mobile applications for businesses, created in conjunction with third-party developers, for use on the iPhone.

Find More Information Online:

Web Site Links: Related Media Kits:
AT&T Web Site
AT&T Wireless Web Site
AT&T iPhone Web Site
About the AT&T 3G Network
Apple iPhone The iPhone

Related Releases: Related Fact Sheets:
AT&T Nears Completion of 3G Wireless Technology Deployment That Delivers Broadband Wireless Speeds - for Downloads and Uploads

AT&T Introduces New iPhone Text Accessibility Plan for Customers with Disabilities AT&T Network Coverage Map
iPhone and AT&T's Wireless Data Network
3G Coverage: Cities with 3G Service

Technorati Tags: AT&T, iPhone, 3G Network, Mobile Broadband, Wireless Internet Service
About AT&T
AT&T Inc. (NYSE:T) is a premier communications holding company. Its subsidiaries and affiliates, AT&T operating companies, are the providers of AT&T services in the United States and around the world. Among their offerings are the world's most advanced IP-based business communications services and the nation's leading wireless, high speed Internet access and voice services. In domestic markets, AT&T is known for the directory publishing and advertising sales leadership of its Yellow Pages and YELLOWPAGES.COM organizations, and the AT&T brand is licensed to innovators in such fields as communications equipment. As part of its three-screen integration strategy, AT&T is expanding its TV entertainment offerings. In 2008, AT&T again ranked No. 1 on Fortune magazine’s World’s Most Admired Telecommunications Company list and No. 1 on America’s Most Admired Telecommunications Company list. Additional information about AT&T Inc. and the products and services provided by AT&T subsidiaries and affiliates is available at http://www.att.com.

Cautionary Language Concerning Forward-Looking Statements
Information set forth in this news release contains financial estimates and other forward-looking statements that are subject to risks and uncertainties, and actual results may differ materially. A discussion of factors that may affect future results is contained in AT&T's filings with the Securities and Exchange Commission. AT&T disclaims any obligation to update or revise statements contained in this news release based on new information or otherwise. This news release may contain certain non-GAAP financial measures. Reconciliations between the non-GAAP financial measures and the GAAP financial measures are available on the company's Web site at www.att.com/investor.relations. Previously released pro forma comparisons are available on AT&T's Investor Relations Web site at www.att.com/investor.relations.

NOTE: OIBDA is defined as operating income (loss) before depreciation and amortization. OIBDA differs from Segment operating Income (loss), as calculated in accordance with generally accepted accounting principles (GAAP), in that it excludes depreciation and amortization. OIBDA does not give effect to cash used for debt service requirements and thus does not reflect available funds for distributions, reinvestment or other discretionary uses. OIBDA is not presented as an alternative measure of operating results or cash flows from operations, as determined in accordance with GAAP. Our calculation of OIBDA, as presented, may differ from similarly titled measures reported by other companies.

© 2008 AT&T Intellectual Property. All rights reserved. AT&T, the AT&T logo and all other marks contained herein are trademarks of AT&T Intellectual Property and/or AT&T affiliated companies. All other marks contained herein are the property of their respective owners.

Note: This AT&T news release and other announcements are available as part of an RSS feed at www.att.com/rss. For more information, please review this announcement in the AT&T newsroom at http://www.att.com/newsroom.

The Industry Standard - AT&T drops "revenue-sharing" with Apple for 3G iPhone - Comments