AT&T shows thinking on new iPhone subsidy

By Scott Moritz

AT&T (T) laid out the case for a subsidy that would lower the price for consumers to buy the next iteration of Apple’s (AAPL) iPhone.

Speaking to Reuters at a tech conference in New York Thursday, AT&T CFO Rick Lindner acknowledged that the phone has not yet been unveiled and neither has the pricing. But speaking more generally, Lindner said subsidies or promotional discounts on phone prices are a common element even in smartphone sales like Research in Motion’s (RIMM) BlackBerry phones.

The buzz is growing ahead of Apple’s debut of the sleeker 3G iPhone, expected during the company’s worldwide developers conference starting June 9. The iPhone is expected to go on sale on the anniversary of the original iPhone introduction on the last weekend of June. As Fortune first reported, AT&T – the exclusive U.S. iPhone carrier – has plans to sell the new iPhone for about $200 by subsidizing about $200 of the customers’ cost of the phone.

AT&T came a step closer to confirming the move as Lindner discussed the thinking that goes into subsidizing phone purchases to stimulate sales. He cited as an example the BlackBerry Curve that AT&T sells for the “promotional rate of $99,” according to Reuters.

“It comes down to economics, how many units you think you can sell at different price points,” Lindner told Reuters. “That’s how pricing is determined on just about any device.”

As analysts have pointed out, iPhone users tend to spend more than $90 a month on data and voice plans, meaning AT&T can recoup a $200 subsidy in a matter of months. And $200 phones are seen as within reach of a much wider consumer market than the normal $400 price of the original iPhone.

In other words, AT&T’s subsidy could be the juice to make the iPhone a blockbuster seller this year.

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From roughlydrafted.com:

The Street needs to create disappointment related to Apple, and the way to do that is to pretend that everyone expected a million phones to sell on opening weekend, and to create expectations that every phone is netting Apple a $700 windfall.

In a video segment produced by the Street, Moritz pats himself on the back for uncovering this new information, without citing any sources.

Because he quite obviously falsified the revisionism that feigned disappointment about Apple’s initial iPhone sales, it is that much easier to dismiss his current ”research“ as guesswork designed to serve the needs of paid-to-say mobile flack-master Entner.

The really comical flaw in the kickback scandal is that Moritz and other proponents frame the deal between Apple and AT&T as an unprecedented event. Moritz cited a ”money manager who is long Apple“ as saying ”This is unheard of. No one has this plugged this into their models.“

Hint hint, Street believers: plug this into your models so you can be disappointed! It’s okay because we’re all long on Apple and are hoping for the best. It comes from the most credible of whispering ghost informers.

Posted By geo, desmoine,ia : May 25, 2008 3:55 pm

with the iphone, you will be able to overwrite your contract, after completeion of 6 months of your contract we will allow you to upgrade,but not at the full discount price, by the way, if one looses his iphone, goes and buys another, when they activate the new iphone, it signs them up for another 2 years, i work for att

Posted By att, atlanta : May 24, 2008 2:43 pm

I was thinking. If you bought a iphone just a few months ago will AT&T really let you sign another contrack to get Money of the next iPhone I talked to a guy up at AT&T and he said you half to atleast be 16 months into your contrack to get a phone for a discount. So it got me thinking there’s not one iPhone user who is 16 months in to it so will that mean if you want to up grade then your just out of luck and will half to pay full price or will AT&T make it ok for iPhone people to upgrade?

Posted By sean Bartlett tn : May 23, 2008 9:30 pm

You don’t have Apple’s success in mind. You’d like to see Apple either make less, cheapen the brand, or set the stock up for a disappointment-dip.

Posted By bob, gales ferry ct : May 23, 2008 9:06 pm

I hope they do this, as I would love to upgrade from my existing iPhone to the latest 3G version. http://stocksbuyorsell.com

Posted By marinello2003 : May 23, 2008 5:38 pm

Earl – I’m failing to see how this article/speculation drives down the stock price? AT&T subsidizing the iPhone is a good thing for Apple. They’re still getting the same carrier payments, but the phone has just become cheaper to the consumer…

Posted By Scott, Minneapolis, MN : May 23, 2008 4:21 pm

Moritz remains the sole ‘analyst’ predicting an AT&T subsidy. Either he’s very good, or – as history has shown – he is completely off track.

I hope he’s right, but his Apple track record is pretty terrible.

Posted By Patrick, Denver CO : May 23, 2008 3:11 pm

I fail to see the downside for Apple if any of the above statement are true or false.

“False” and the market chalks it up to the rumour mill.

“True” and the stock jumps.

Thinking that the market will move off of a short blurb like this? I think your tin-foil hat is getting a little tight.

Posted By Joel, Minneapolis, MN : May 23, 2008 2:53 pm

Spoken like a true moron “earl”.

Posted By Dave, Cleveland, Ohio : May 23, 2008 2:35 pm

Screw Moritz A lying piece of s**t. Floats hopeful rumours to drive the stockprice down. Working AGAINST Apple shareholders in collusion with Cramer.

Posted By earl, shreveport, la : May 23, 2008 12:11 pm

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