Only 35% of iPhone Buyers Will Get it For $199

The pricing of the next generation iPhone may be a point of confusion on Friday and Piper Jaffray analyst Gene Munster expects only 35 percent of buyers will get the $199 price. As a result, initial sales of the iPhone 3G may be diluted.

See all incoming iPhone posts and Techmeme.

Munster’s big point: Apple (AAPL) delivered a significant iPhone price cut, but “it is not cut and dry as $199.” He writes in a research note:

Though Apple advertises the 8GB iPhone 3G will sell for $199, we estimate that the average entry level price point will actually be $407. Our price increase includes customers not eligible for the carrier subsidy and the activation fees that AT&T will be charging. We believe that roughly 35% of AT&T subscribers will be eligible for the $199 price. Our $407 price reflects data from our survey of more than 200 mobile phone users.

According to Munster’s survey 8.7 percent of iPhone users are AT&T (T) upgrade eligible, 12.6 percent of them are not eligible for an upgrade and 78.7 percent are new AT&T users. Munster reckons that buying will really pick up when the total cost of the iPhone nears $199 including all of the AT&T fees.

We believe that most buyers do not fully grasp iPhone 3G pricing. Pricing misperceptions and our survey lead us to believe buyers will wait until their contract on their current carrier expires, or AT&T subscribers become upgrade eligible. As a result, we believe initial iPhone 3G sales will be
diluted, but that sales will increase over the next 18 months as the average cost decreases (i.e. as subsidy eligibility increases).

Munster still expects Apple to ship 45 million iPhones in calendar year 2009. He predicts mobile phone market share of 8 percent for Apple in 12 months up from 3 percent today.

Comments

[Bastion:]

It's not that most people don't understand the new iPhone pricing - it's that most people don't understand all MOBILE PHONE pricing! Carrier subsidies for handset prices is a generally standard practice. It was a-typical that Apple and AT&T introduced the iPhone without subsidies last year. And that was why the iPhone *appeared* so much more expensive than other smartphones over the last 12 months.

This just brings the iPhone into parity with its competition (well, at least on pricing! ;-), and the new contract subsidies will incent a lot of new activations for AT&T. That's why they do it.

Sure, existing iPhone users will not be able to buy a new one (just a year after their last one, for crying-out-loud!) for $199. But that is the nature of carrier subsidies for a 2-year contract. It is what it is! But it is not news, 'cause that's the way it has just about always been with cellular handsets.

2008 Jul 10 05:29 PM

[Werlingdervish:]

If only one or more members in an AT&T family plan have iPhones, additional members in the family circle should be able to purchase an iPhone at $199 even it is shown as ineligible on the AT&T website. The trick is activate the additional members SIM cards as if they are iPhones. But it must be done by midnight via iTune's old activation procedure.

See instructions at www.iphonealley.com/ti...?

A circle of friends might technically do this but it goes against the written rules. See the comments at the link.

2008 Jul 10 07:03 PM

[Turley Muller:]

I think there is some inaccurate information here. All iPhone users are eligible for upgrade prices. The original phone was not subsidized, thus there is no loss to AT&T for upgrading the phone.

Those who are ineligible are customers who bought a subsidized phone in the last year (or longer). AT&T has to recapture those subsidies before giving a subsidy on a new iPhone.

2008 Jul 10 07:16 PM

[Nextel Acce...:]

Do yourself a favor, buy the Sprint Instinct....

2008 Jul 10 08:22 PM

[mikefarr:]

Ha ha ha ha ha ha ha.

2008 Jul 11 02:50 AM

[mollytjm:]

AT & T has roll over minutes, which many plans to not. Compared to other SMARTPHONE plans, the iPhone is comparable. Compared to the performance of other smartphones, there really isn't any comparison. other phones are trying hard to look like an iPhone. but i don't see people around the world lining up to buy the other ones and the reason is one word: innovation.

2008 Jul 11 12:24 PM