AT&T’s profit margin to be lower than Verizon’s due to the iPhone
By Mike Ferro
There is no doubt that the iPhone is one of AT&T’s top selling phones. The company literally made a strong comeback on the back of Apple’s mobile device. However, it seems like there is a flip side to the super fast selling iPhone for the mobile carrier, AT&T.
One of the biggest reasons consumers have switched from one carrier over to AT&T’s wireless service is due to the popular iPhone. AT&T is the only U.S. based carrier that has an exclusivity deal with Apple for the iPhone. Although, with the FCC probing into AT&T’s exclusive deal with Apple this may not last much longer. This exclusivity deal has caused an influx on new subscribers, enabling AT&T to surpass Verizon Wireless, which previously maintained the largest number of new subscriptions in the past.
According to Reuters, analysts predict that AT&T may have around 1.5 million new subscribers this quarter. Verizon Wireless is estimated to have 1 million new subscribers this year. The sudden accelerated growth of AT&T’s subscription base is definitely good news as the future looks bright for the company. However, sudden accelerated growth can negatively impact AT&T if it happens too quickly.
Mobile phone carriers usually subsidize the cost of the device in hopes of making the money back in monthly service charges. New consumers signing up for a two year contract may pay as little as $99 for an iPhone, but the actual price AT&T may be paying for the phone could be as high as $500 with overhead charges.
According to analysts, AT&T’s third-quarter profit margin may be down to 37.5 percent from 38.3 percent due to an increase in new subscribers. In comparison Verizon may see profit margins as high as 46.2 percent for the same quarter. The number of new subscribers a company is able to increase is important, but so is its quarterly profit margin. It seems like growing too fast can be a bad thing for AT&T while Verizon Wireless seems to be benefiting from steady growth balanced out with its large existing user base.
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October 18th, 2009
Your implication is that ATT is largest, which it is not.
ATT is already reaching the breaking point. Their 3G network is getting KILLED by web surfing iPhone types with a corresponding drop in call quality/completion and data rates.
October 19th, 2009
No, I’m not implying that AT&T is the largest at all. Verizon Wireless still maintains the largest network by owning the most number of cell towers.
AT&T (w/ Cingular) currently does have the largest subscription base though.