x-small; font-family: Arial">, 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.
Comments
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.
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".
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?
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).
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
the appstore.......thats why.
more iphones = more appstore sales.....