Analyst Says End of Subsidized Phones is End of Apple
O RLY? Who is smarter, Steve Jobs, Tim Cook & Apple or this analyst who has a 1-track mind. His premise is if phone companies end subsidizes, Apple is doomed. To Mr. Binary and Mr. No Imagination, there can only be ONE ANSWER to every scenario and of course, it’s doom and gloom since he cannot fathom how there could possibly be another answer. And hey, he is clearly the SMARTEST guy in the room … well, his room.
First, the iPhone is NOT like any other phone. The evidence is very clear - you can apply this to anything else - if you have an item that sells out at FULL PRICE a YEAR or longer - what does that tell you? People want this item and believes it is an appropriate price - otherwise, prices would have to drop as demand is clearly met at a different price point. Clearly, the iPhone is a sought after item with no dropoff in demand - the iPhone 4 sold at FULL PRICE for 20 months before the 4S came out - there is NO other mobile phone that maintains full price for 20 MONTHS let along for 1-month. This scenario is NOT forever certainly but as of now, there is no immediate full price competitor (as we discussed earlier). Until there is another sea change in smartphones due to amazing technology, nothing changes in the near forseeable future in the industry. That being the iPhone is the ONE PHONE hundreds of millions of people are willing to buy at full price (with subsidy). People literally ask for it and wait for it by name. NOTHING else comes close. It sells 45-50% of ALL smartphones at the three big US carriers. Why the big growth in customers and Verizon and Sprint in the last few years? Of course, the carriers are not 100% happy with Apple as obviously they want more control and to take back control from Apple so they will desperately seek to look for another phone that is like the iPhone. But what other phone brings in MILLIONS of new customers and or retains MILLIONS of customers. None. So, if a carrier wants to cut off their nose, they certainly can test the waters and sees how it goes. What carrier wants to step forward and test this out? They need Apple’s iPhone to grow or retain customers.
Next, Apple’s iPhone growth is NOT nearly done. Now that the iPhone & iPad are being manufactured in Brazil, the import tariff that makes iPhones insanely expensive in Brazil and other free trade partners in the region will equalize iPhone pricing. There are about 70 million middle class Brazilians alone - even reaching only 10% next year means adding another 7 MILLION iPHONE users to the tally just in 2012-2013. There’s also Argentina along with Paraguay and Uraguay in Mercosur, Brazil’s free trade bloc partners … part of Apple’s plan to add growth when other regions slow.
And there’s China. There’s no point in adding China Mobile’s 600 million potential audience just yet - when they sell out of every phone manufacturered right now … but in 2014 - that’s a nice block of potential growth audience to add to the tally. Again, who would you count on for the brains of the mobile industry? This analyst or Tim Cook & Apple?
But wait, there’s more. Even if for some reason, AT&T, Verizon & Sprint all lockstepped said we will subsidize no phones going forward (never mind they backed down on adding new fees in about 10-hours after the Twitter blasts), nevermind the anti-trust implications also but you really think the smaller mobile companies would let that pass without an aggressive campaign to scoop up customers? Or that one of those big two will crack in days? It’s not like AT&T or Verizon is willing to drop on the monthly rate so they will pretty much hand the iPhone market to Sprint or T-Mobile? You really believe that scenario?
But more importantly - Apple has so many options even in the worst case scenario (Big Three drops all subsidizes). Apple could launch their own mobile net service in the US - how fast would THAT GROWTH be? (Not only is actual voice dying but clearly it’s the data transmission that’s most important). Apple can buy T-Mobile with pocket change or better yet, just buy part of T-Mobile and link up with the cable companies and use some sort of Wifi packet switching along with cellular … or if they only had a data farm in North Carolina … oh wait, they do. And if they link up the cable companies, you can only imagine the next possibilities.
Apple is not the corner indie grocery store scratching out a living. They have created 5 MULTI-BILLION product lines essentially from NOTHING in the last 15 years. (iTunes, iPod, Retail, iPhone, & iPad). It’s safe to presume they are smarter from a 1-track analyst who thinks ALL of Apple’ growth and revenue is based on carriers writing them a check and that without that check, all is lost.
So, no, not really on so many levels. Most important, Apple does not need the carriers anymore. Not for hardware sales nor for data transmission. I’m NOT saying Apple wants to get into the cellular transmission business because clearly there are a lot of backroom headaches (why it’s better not to have to buy T-Mobile but just link up with them if absolutely necessary). But Apple has thought of all these scenarios because they are not a guy with a pushcart. Under the worst case scenario, Apple still wins by adding in HUNDREDS of dollars EVERY MONTH of additional revenue by being a cellular provider (surprise, your 2-year contract includes an iPhone for $299 - only now your bill comes from T-Mobile, Comcast or TimeWarner).
I think Apple has it covered because well, they’re Apple.