Analyst: Regional Carriers Help Secure iPhone Growth

Analyst: Regional Carriers Help Secure iPhone Growth

Morgan Stanley: New regional carried deals help ensure iPhone growth

Next week, the iPhone will launch on three additional U.S. regional carriers. This move follows last month’s roll out to five regional carriers plus last year’s addition of C Spire and Puerto Rico-based Claro Puerto (Apple’s first deasl with regional carriers).

Apple’s regional expansion prompted Morgan Stanley analyst Katy Huberty to issue a note to investors saying that the new partnerships will help ensure sustained iPhone growth. She also noted that she doesn’t expect to see carriers dropping subsidized pricing for the iPhone – a concern that has also made investors hesitant when it comes to Apple.

The three regional carriers involved in next week’s launch are Bluegrass Cellular (Kentucky), Golden State Cellular (California), Nex-Tech Wireless (Kansas). Combined with the existing carriers. Their iPhone adoption brings the number of U.S. regional iPhone carriers to ten across a wide range of territories.

In addition to expanding the iPhone’s U.S. market, it’s significant to note that all ten carriers will offer subsidy deals for the iPhone. Those deals are actually better than the options offered by the three national carriers (AT&T, Verizon, and Sprint) – offering users a $50 savings when buying an iPhone.

The expanded markets are good news and will help to sustain, and possibly accelerate, growth for Apple. The fact that all are offering subsidies, however, addresses the larger investor concern. The debate over carrier subsidies is a fair concern for Apple investors given the unsubsidized costs of an iPhone – $375 for an iPhone 3GS, $549 for an iPhone 4, and $649 – $849 for an iPhone 4S depending on the model. Without subsidies, the iPhone would become unaffordable for many customers.

The potential end to carrier subsidies isn’t a new concern overall. The decision by cash-strapped Spain’s top two carriers, Telefonica and Vodafone, to end subsidies for new customers across the board, however, has stoked fears that carriers in other countries might follow suit.

Tim Cook pointed out Spain’s unique situation in Apple’s latest financials call and Huberty echoed his sentiments in saying that she doesn’t expect U.S. carriers to follow suit. Even if they did, she pointed out that it’s unlikely Apple’s contracts with the three national carriers, and any related subsidy requirements, will be up for renewal and renegotiation at the same time.

As AppleInsider points out, however, carriers are lengthening the period during a contract when users are eligible for a full subsidy on a new device – AT&T, for example upped that period to 18 months into a contract to 20. Even so, Huberty expects that the iPhone market can still sustain growth and could even accomodate carriers requiring users to have fully served out their two-year contracts before upgrading.

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About the author

Ryan FaasRyan Faas is a technology journalist and consultant living in upstate New York who has written extensively about Apple, business and enterprise IT, and the mobile industry. In addition to writing for Cult of Mac, he is a contributor to Computerworld, InformIT, and Peachpit Press. In a previous existence he was a healthcare IT director as well as a systems and network administrator. Follow Ryan on Twitter and Google +

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