How much does does AT&T pay for a unit?

[Sly]

We were in discussion about this in another forum and the two articles that came to the front is this.

http://news.cnet.com/8301-13579_3-9803657-37.html

Which says that AT&T pays apple $400.00 for the iPhone, split over a 2 year period.

http://blogs.computerworld.com/defending_at_ts_iphone_3gs_upgrade_pricing

This one says that AT&T *does* pay $400.00 but that $200.00 you pay up front isn't for AT&T either.

So in effect both articles say close to the same thing (AT&T pays $400.00 per unit), except the second mentions the initial $200.00 in a different light. Who does that $200.00 up front really go to? AT&T or Apple?

I'm just wondering if there are more legitimate articles out there saying how much AT&T really is paying for each unit (Nokia, SE, etc.).

 

[BinarySynapse]

$400 over two years is just under $17/month. Part of your monthly payment covers the new phone. And you get the privilege of continuing that payment once you finish your contract. Of course, $30 for a required data plan.. which is now $25 for 2GB helps cover the cost as well.

 

[Sly]

So it's confirmed that Apple is getting $600.00 per unit?

The discussion was about profit margins so we're trying to figure out how much a subsidized phone really costs.

 

[BinarySynapse]

So it's confirmed that Apple is getting $600.00 per unit?

The discussion was about profit margins so we're trying to figure out how much a subsidized phone really costs.

I'm sure AT&T gets some profit from the phones from volume discounts and what not.

If a customer buys a phone straight from Apple, it's $600. If AT&T buys a phone from Apple, they get it for something like $515 because they also order (or contract to order) 5,000 more in the next three months. Then they turn around and sell the phone to their customers for $600 w/o contract, or $200 with 2-yr contract where they pay out the remainder over 2 years (and continue the payment as long as they keep service.).

That may not be exactly how it works, and the numbers are made up of course, and very few people know the exact details of the deal between the companies. But they're simply not going to give you a phone for one 1/3 of it's price and eat the difference. They will get their money back.

 

[Sly]

How much is an unlocked iPhone. The $600.00 assumption is already $100-$200 off retail (Unlocked iPhones were listed at $799.00, and where i live the 3GS is still $1,000.00). How much do companies get discounted when they buy in bulk?

 

[BinarySynapse]

How much is an unlocked iPhone. The $600.00 assumption is already $100-$200 off retail (Unlocked iPhones were listed at $799.00). How much do companies get discounted when they buy in bulk?

MSRP and actual cost are very different things. MSRP or "list price" is what the manufacture suggests the retailer should sell the device for in order to get a healthy profit. Actual cost is the negotiated amount paid to the manufactured to get the product on the store's shelves. That amount is usually not disclosed, but with some math and a lot of assumptions can be guessed by anyone that follows profit reports for the companies involved. So Apple could have told AT&T "We will sell you one iPhone for $600, 1,000 iPhones for $588, and any phone after 10,000 units in a single order will be $585"

Again, I way oversimplified this. Apple and AT&T likely have a very complex contract dictating the terms about how to handle iPhone and service sales and repayment. The point is until those terms and figures are disclosed by someone with access to them, no one will ever know and the best we can get is some math-based best guesses.

 

[Sly]

Ok. The iPhone 3GS was the main item because i considered it the one with the highest profit margin. $178 in parts, assembled in china, sold for up to $1,000.00 on retail or $600.00 when subsidized. Price remains high even when millions of units are expected to be sold. Is there any other electronic device that can possibly match that?

 

[GMSTBFLA]

Ok. The iPhone 3GS was the main item because i considered it the one with the highest profit margin. $178 in parts, assembled in china, sold for up to $1,000.00 on retail or $600.00 when subsidized. Price remains high even when millions of units are expected to be sold. Is there any other electronic device that can possibly match that?

I'd imagine many electronic makers approach or exceed that level of gross margin on a marginal unit of production. A good portion of the costs for high tech (eg R&D) devices are fixed, which inevitably leads to high gross margins. It probably costs Intel very little to actually produce another Core i7, but the lead up to that production costs billions.

 

[TexUs]

$400 over two years is just under $17/month. Part of your monthly payment covers the new phone. And you get the privilege of continuing that payment once you finish your contract.

That's what I like about TMobile... Their rates drop lower once you get out of contract. Which actually makes more sense to buy a phone out of contract with them (Pay $450 out of contract or end up paying $680 for the same thing due to the "contract rates". ATT is the $680 no matter how you spin it, so it makes just as much sense just to sign a contract with them)

Ok. The iPhone 3GS was the main item because i considered it the one with the highest profit margin. $178 in parts, assembled in china, sold for up to $1,000.00 on retail or $600.00 when subsidized. Price remains high even when millions of units are expected to be sold. Is there any other electronic device that can possibly match that?

The 32GB is $300 subsidized, $700 with no contract.

I think it's safe to say that they both make a fortune off the devices. Nobody knows how much ATT buys the devices for, but I'm sure it's not full price.