Consumers may love the iPhone, but carriers hate it

apple-money

Ever wonder why when you walk into a carrier store, they always subtly (or in some cases, not so subtly) try to push you toward buying an Android device? The reason is because even though Apple requires a grandiose display of the iPhone, carriers make much more money off of Android phones.

Carriers pay Apple the subsidy that is able to keep the iPhone down to its $199 price point even after cramming in loads of new features in every release. For Apple, this is good. For consumers, this is good. For carriers, this is very bad.

During 2009 and 2010 before Verizon Wireless was selling the iPhone, its EBITDA margin was at an average of 46.4 percent. Right after the Verizon iPhone became a reality, the profit margin dropped to 43.7 percent. Last quarter, which was the first quarter to include iPhone 4S sales, Verizon’s margin was at 42.2 percent.

Fortunately for Verizon, its margins are comparably high to those of AT&T and Sprint. AT&T’s EBITDA service margin last quarter was 28.7 percent, an 8.9 percent decline year-over-year. Sprint’s margin last quarter was even worse at a sad 9.5 percent. The year before that when Sprint wasn’t selling the iPhone, its margin was 16 percent.

The good news is since Apple sells so many iPhones, carriers are still making plenty of money off of them. Don’t ever lose sleep about them not making money — if something doesn’t add to their bottom line, you can bet carriers will not go through with it.

[via CNN Money]

  • Jarrod

    Considering the amount of times I have had to replace my android phone which cost $500 not on contract after three thats roughly $1,500. where as an iPhone don’t have many issues to begin with so they end up saving $900 give or take so they will make their money back.

    • Drew Nusser

      You’ve had to replace your Android phone 3 times?  What are you doing with it, and what broke on it?

  • Anonymous

    It all pales in significance when all smartphones are dumbpiping communications, and ripping out all value added business models, especially in the uk where carriers have much less of a grip on the buyer’s balls

  • Drew Nusser

    That’s crazy, but I’ve actually been pushed toward the iPhone almost every time I’ve gone into an AT&T store.  You’d think that the carriers would grow some balls and realize they don’t need to put up with that crap when they sell twice as many Android phones AND make more money off of them anyway.

    • Anthony

      Just want to point this out, carriers don’t make more money off of Android than they do the iPhone. That’s why HTC, Motorola, and a few others posted 4Q’ LOSSES. If they were making more money off of them then they’d be showing gains. Samsung is really the only one doing great with Android.

      • http://www.gtdaily.net/?source=disqus George Tinari

        I think you’re mixing up carriers with manufacturers.

  • TRDRACER21

    IVE HAD IPHONE I MUST OF RETURN THEM ABOUT 5 TIMES SOMETHING ALWAYS WENT WRONG.. THE SOFTWARE ALWAYS MESSUS UP. YOU GO TO APPLE STORE AND THERE TONS GETTING IPHONES FIXED

    • Anthony

      Cool vague lie bro

  • Adam Mags

    I’ve worked in the past at an independent Apple dealer.  Our profit margins, on a good day, were near 15% and only about 5% on the computers themselves.  Apple has never left margin, but we found creative ways to keep the doors open and please our customers.  The iPhone is popular and I don’t see why carriers don’t get creative to make their margins.  Cases, screen shields, offer up your own protection plan or replacement plan instead of AppleCare.  It’s easy to get creative, unless you would rather just complain about it and slam Apple for making their money.  Sure, Apple has unfair and restrictive contracts with their “partners”, but if you get creative, there’s always a way to make money.
    I was profitable and successful at that dealer.  I got profit sharing and made a good living for a few years.  42%????  I would have killed to be at a 42% margin.  28%????  Again, would have loved it.  My boss would have love it  Think about that for a min…. Verizon is complaining, because if you come in and spend ~$200 on a phone, plus min, text plan, data plan, et al, you drop ~$400-600 and they ONLY make a little less than HALF????  
    iPhone, Android, etc, I’m not here to debate phones, focus on the margins and what they are actually complaining about and be upset about that, not because your iPhone broke once or your Android didn’t work, or whatever.  The hardware is irrelevant, the plans and gratuitous markups are what we should be talking about!

  • Tim

    This is an article?

    • http://www.gtdaily.net/?source=disqus George Tinari

      Yes.

  • Movieman

    Maybe Apple needs to get into the phone carrier business there is so much complaining about the present carriers ?!

  • Anthony

    The carriers only “hate” it initially. They carry the iPhone(and other high-end ones) for the long term profits, that’s why every carrier locks you in for two years with a contract because eventually it’ll be very profitable.

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