iPhone 4 To Debut In India This Friday With Bizarre, Topsy-Turvy Subsidy Scheme

iPhone 4 To Debut In India This Friday With Bizarre, Topsy-Turvy Subsidy Scheme

In most of the world, when you buy an iPhone, you pay a small initial fee upfront, but the rest of the handset’s price is baked into your two year contract, which you pay off in monthly installments. In India, though? It’s totally backwards… and totally bizarre.

When the iPhone 4 launches in India this Friday, it will cost an astonishing amount of money upfront through carrier Aircel: Rs. 34,500 ($760) for the 16 GB model and Rs. 40,900 ($900) for the 32 GB one.

Here’s where it gets interesting, though. Instead of the carrier subsidizing the cost of your iPhone, in India, you essentially subsidize Aircel to provide service to the iPhone 4 for you for the next twenty four months, with Aircel “paying you back” in airtime credits over the course of two years until you, as they claim, “recover 100 percent of your upfront iPhone cost.”

Well, not quite, since “credits” can be worth whatever Aircel wants them to be worth. I wouldn’t be surprised if, at the end of the day, owning an iPhone 4 in India costs more long term than in America, not less. More importantly, how many people can actually afford to drop $900 on a phone upfront in a country with some of the worst poverty on earth? I guess Aircel’s going after the Bollywood elite.

Update: Reader Shashank Mukundan wrote us to explain how Aircel can get away with this: India is already flooded with gray market iPhones, and many people are already used to paying exorbitant prices for them.

I just read your article on cult of mac and i just wanted to tell the current situation regarding the mobile phone market over here. I’m a huge apple product addict , i own an iMac , a MacBook pro an iPad 2 and all the iPhones and live in a city called Madras in India .

What the folks in the united states and the rest of the world don’t realise is that India is flooded with iPhones and apple products which people pay extraordinary amount of money for , for example my pre unibody generation MacBook pro I bought was for 3000$ in conversion to rupees for what was/is priced at 1999$ in USA .

All the iPhones available in India are grey Market products from Australia , UK , and Bangkok where the iPhones are factory unlocked . I can tell you one thing for a fact , that at least 2 out of 10 people have an iPhone over here , and in the bigger metros the ratios are higher .

The sad thing is that apple always launches the iPhone nearly towards the end of the cycle in India and by the time every potential buyer already has bought his/her iPhone . And the prices we pay for our iPhones are close to 1500$ in conversion and that’s the Market apples losing out on .
And paying upfront for the mobile phone in India is a concept that we are all used to so it’s not such a big deal over here for customers . The funny thing is before we use to pay a 1000$ for a phone and continue paying about 50$ every month to our carriers and that’s how our system works over here which is sad and funny in a way . And it’s just not the elite who own an iPhone . I’m a college student and every single classmate of mine has a smartphone and mostly an iPhone who come from extremely different backgrounds .

Just wanted to let you know a few facts about how the iPhone is so popular here.

Very interesting! Thanks for the perspective, Shashank!

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  • SF

    There is bad poverty everywhere, including the US . . . the iPhone is not going after that market, but India has a gigantic middle class far beyond the “Bollywood elite”!

  • Ananonymus

    Mumbai alone has more millionaires than there are in all of UK.

  • sayam_aggarwal

    This sort of stupid shit happens only in india.. 

    P.S. Aircel’s pretty much doomed

  • Jdsonice

    Don’t be surprised at the sales number. There are a LOT of people in India who can drop $900 on this gadget. Remember a small % in India is BIG because the base is 1.2 Billion so even 1% is 10M in India. This may not be a bad deal for AirCell. After all it is like we paying for 2 years of service upfront. Would AT&T and Verizon love it or not?

  • brownlee

    That’s true. When I was in India, all I really saw was the poverty, so it’s easy to forget what a huge discrepancy there is there between the mega-rich and the ultrapoor.

  • Bond

    The iphone you get in India through Aircel is UNLOCKED and not like in US where it is locked to one carrier; an unlocked Iphone in US is also $700 if it is available anywhere – I believe the nearest possibility is that it is contract free and not necessarily unlocked. Apple’s problem is that they release the Iphone pretty late, even the Ipads – that is lame since several of them get their iphones through US or any other grey market.

  • Egor Chernyshev

    KInda similar in Russia, the upfront cost is here 35000 rub for a 16gb version, which is about $1200. Some carriers offer discounts for iphone users, but overall service is about $50 per month. 

    I have bought a UK one for $900 here (produced in december), but the reception is worse than the officially imported ones.

    And yes, nearly everyone seems to have one over here. Moscow tube is full of iphone4′s, probably 10% of central traffic has one – regardless of age, clothing or background.

  • CharliK

    Full price US for the 16 GB iphone is $599 before taxes. Considering possible import fees etc $760 might not be so nuts. Cost of buying something from an outside country. 

    Assuming that there is no import fees and the phone could sell for the same price of $599 then I can’t help wondering if this is essentially a prepaid service situation. Rather than putting you on a contract that you could at any time penalty fee out of and run to someone else (very easily since Indian iphones aren’t locked), they make you pay a non refundable amount up front that is a prepaid plan (or portion of the plan) in the hopes that since you already plan that amount you will stick around. 

    In essence it is perhaps not that different than the US etc. Except that, assuming there is a monthly service fee as well, it is possible that once you are ‘off contract’ you are paying less for service. Something that doesn’t happen here in the US. I pay the same $65+taxes when I am on subsidy as off even though I’ve paid back my device costs. Which seems really really wrong. 

  • Prabhakar Siddhant

    the Indian market is very huge. you might feel India’s still poor but there is a major crowd in which people are very much capable of owning a Rs 40-42K($900) worth device. And to add it’s no the fucking 50′s where India was poor. get updated ‘cult of mac’!

  • Prabhakar Siddhant

    and BTW i am a college student and i own an iphone 4, had an iphone 2G back when it launched and i own Macbook Pro, iPod classic and an iPad, so not very poor, are we?
    PS: this is an Indian’s middle class standards. 

  • Qman

    I am not Indian, but it really surprises me how in a country of over a billion people you only focus on the poor ones. Even if we say 50% of the population is poor(which I dont think is), there are still very very rich and middle class people who can easily afford to buy a phone at this cost. sorry to say this, but your stupid american media has corrupted your minds. AMERICANS, STOP WATCHING AMERICAN NEWS, AND MEDIA.

  • Fahadaminkhan

    Aircel is selling the iPhone Black only.. that too i confirmed , it is locked to the network. Not worth paying so much for a network locked device. better import it from Australia or UK for a much cheaper Price 

  • Cult of Mac fan

    I am not sure about the reason behind author’s intent of saying India as “a country with some of the worst” poverty on earth? i found it offensive please be sensible while writing.

  • Dean

    Trying to think of snarky comment about Aircel rebates on older phone trade-ins so I can make a horrible pun about Shashank’s redemption… nope, can’t think of one…

  • cheesy11

    whati  dont understand is why they are releasing in India now, when presumably an iphone 5 is  set to come out soon

  • Yasaswy Nagavolu

    Totally dude.. All the media does is this.. US population is what 330M? even if 50% buys a product its 170M max.. India its 1200M so 15% buy a product its 180M buyers.. I can tell U I could see atleast 40 iPhones (mostly factory unlocked) around the network of 100 people whom I see on an avg.. (Friends and colleagues etc).. Donno when this Apple gets sense to get into the market and grab this before Android does..

  • Jdny5

    Oh yeah? He should have written “country with worst poverty or a country with some filthy rich people”…

  • Jdny5

    No, you don’t have to. In USA you qualify for a new phone every 20th month on subsidized price and sometimes for early upgrade with a little extra payment. So when you are out of contract you can always take the advantage of newer device at subsidized prices again. It is in India and also a few other nations, where the service providers do not subsidize the phones. So if Aircel is paying you off by providing free service on a $760.00 phone it is really a great deal as compared to a US deal. In US one pays a minimum of $70 + taxes per month for 24 months and a downpayment of $199+ tax at start totaling $1925.00 + taxes. You know which figure is nicer: $760 or $1925? US consumer gets screwed a big way in this scenario!!

  • Bharati

    Please understand India has over 350 mill people who have at least  same std of living as the US middle class. We already have achieved prosperity for the same no as the entire US pop, without wars, genocide, deportation or drastic pop control. Like Australia we wld have no poverty if we hunted the aborigines, oops, the poor. So we let them live on the roads or anywhere rather than imprisoning them for free labor like the US, or deporting them and overpopulating the world like the UK did.  We love Australia but honestly, please please do research.

  • Bharati

    About 350 mill of us are merely middle class: we own our 1000 sq ft., live neatly,  have a car and a kid in a nice, private school. So where is this huge discrepancy? Sure there are some super poor and rich folk and we are happy for them because the latter provide employment, patronage to artists and grist for soap operas, etc. 

  • Bharati

    Pity people like u never have anything pleasant to say about India and can never speak/write without using foul language.  Come on, u can do better! I hope u live outside India and I hope the higher education and the job u have was based on the good educational foundation you recd in India. Maybe taxpayer subsidized?

  • Bharati

    Like mentioning how Tasmanians and others shot their black natives for sport every time we mention Australia? Or how Columbus was really and desperately seeking the world’s richest country when he bravely turned west and landed in America? Perhaps u have heard of the theft and slavery that was colonization? Pl do read Late Victorian Holocausts to understand western prosperity and civilization. No hard feelings, just history. And no, we dont blame u, the west or excuse our poverty: we are rising  slowly and democratically. 
    Until the US sends another free load of arms to Pak to attack India and India will again be forced to spend 20% of its budget on self defence rather than on the poor. 

  • emperor16894

    shut up man, even I’m an indian aite, and hes not written anything wrong. You idiots give us a bad name by getting all “oh I’m offended now” when anyone criticises our country. Sahi keh raha hai woh bhai.

  • emperor16894

    let them live on the roads? I’m sorry but do you even here in India?? they are forced to live on the roads by the police who extort money out of them, and take away all the money they ever make from begging. 

    Same standard of living as the US middle class? are you insane? india has nearly 60% of its population living below the poverty line. only 10% are said to be more or less wealthy. and its only the rich in india enjoy living standards comparable to the middle class of the US. that leaves you with something like 100million people max. 
    I think you need to do your research… as a country we fail because we’re all so stuck up, and get all offended when criticised. If we really were as successful and awesome as we like to believe we are, India would be a much better place to love in. I’m sorry, but you’re delusional.

  • emperor16894

    bhai, we get it. you arent poor, but man you have to admit, 40k upfront for a phone compared to something like Rs4000 upfront is a big difference. I’m going to be joining college next year, and ill get the macbook pro, iphone and all, but it would be far more convenient if they adopt a staggered pricing model for the iphone. Its not about who has more money or the indian middle class standards. 

    Its very easy to set fire to money like crazy to show your wealth, but that doesn’t mean that your “standards” are high, it just means you’re stupid with your money. I’m Indian, i live in delhi, and I’m sorry but i have to agree with cult of mac today.

  • emperor16894

    Thats true, but monthly instalments make it much more affordable and lucrative to buy. 40k upfront payment is pretty heavy. and on top of the phone payment, you can get phone bill usage of 2-3k per month. the providers dont give you free minutes here, so you pay for the phone upfront AND pay monthly phone bills which are overpriced btw. 

  • emperor16894

    Thats true, but monthly instalments make it much more affordable and lucrative to buy. 40k upfront payment is pretty heavy. and on top of the phone payment, you can get phone bill usage of 2-3k per month. the providers dont give you free minutes here, so you pay for the phone upfront AND pay monthly phone bills which are overpriced btw. 

  • emperor16894

    couldnt agree more (with your last line) :)

  • Saaket Unadkat

    Why isnt anyone talking about the dirt cheap calling rates in India ? I get 2GB of 3G usage a month for Rs. 200 (~USD 4.5) per month and calling rates of 20ps (less than 1cent) per minute. And I am on Vodafone, supposedly the most expensive of the lot in India. Even the most extravagant of users will never cost the equivalent of USD25 per month. An average AT&T customer will end up paying over $80 per month for a similar service at least. Convert that to 24 months and you have the equation right in front of you. Yes I paid INR 30000 for an iPhone 4 five months back. (Bonus: Its factory unlocked, officially sourced from the Singapore Apple store.)

    And the author also must know that it is commmonplace in India for people to spend INR 30000-40000 on phones (~$700-$900). The others, please get the notion of India out of your head that you so wondefully got from Slumdog Millionaire.

  • Nikhil Rawat

    Hi, I have 2 Brand New Sealed Apple iPhone 4 32 GB for sale. Both are factory unlocked and will work with any network. Both iPhones come with a 1 year international warranty from Apple. I am selling both iPhones for much less than the market price. So grab a bargain. I am also giving a free set of protection covers. Please contact me if you are interested in buying. My contact number is 9869369216. I am located in Mumbai and can arrange for delivery if required. Thanks

  • BarryOToole

    Where did you get that number? According yo McKinsey, the population of middle class was about 50 million in 2007, although it will have over a ten-fold increase by 2025, if current growth rates and income increases are sustained.

    Also, a middle-class home in the US is much more than the 1000 sq foot you mention.

    I’d hasten to add that I’m not denigrating; India has made a tremendous progress in the last two decades, and continues to do so. It will be the third largest economy soon and will move to being the fifth largest consumer market by 2025, from the 12th it currently is.

    However, it is futile to compare living standards of two countries with very different economic history. And it is definitely irritating if one can’t handle factual data.

    All this assuming that all goes as planned. There are no further disturbances in South Asia, Pakistan and Afghanistan progress to being stable democracies, terrorism is contained, China remains happy with its economic clout and doesn’t show any territorial ambitions, and India gets a great law & order situation and eliminates corruption, both of which will enhance investor and business confidence.

    That a lot to assume, is it not?

  • Manoj Wadhwa

    Come on.. You have the vis-a-vis numbers to prove it’s a great deal but you are still insisting. Given the duties, etc. the price for the iPhone 4 at Rs. 34,500 is not a bad deal at all.

    Recently, one of my friend got an iPod from HK for Rs. 10,500 while its available for about 15,000 in India. However Aircel and Airtel are offering the iPhone at Rs. 34,500 compared to roughly Rs. 28,750 in HK or US so it’s just 20% extra that you will have to pay.

    And if the recent advertisements are true, Aircel is actually subsidizing 100% of the cost with a 2 year contract by paying roughly Rs. Rs. 2,200 or 50% of the cost can be saved by paying Rs. 1,100 monthly. Surely, its a great offer as you aren’t paying any upfront cost and you are getting huge amount of free talk time minutes, SMS and data usage.

    I have a never been delighted by any of the offers by our India mobile service providers but this time I think the scene is different..

  • Manoj Wadhwa

    Sorry Barry, please check your knowledge about China’s territorial ambitions and revert.

    Although I do agree when you disagree on the comparisons of living standards of the two countries. But at the same time, am sure you will agree on this, the cost of living in India is pretty low vis-a-vis in US.

    Also, as Bharati rightly pointed out, most of the middle class people here live in self-owned homes while most of the people in US are either below middle class or are too affluent; middle class does exist but its a very small proportion.

    I do not have any differential view about any country or religion but at the same time, am not trying to ignore any India’s poverty related facts.

  • Ayan

    Lol.. the last line is classic.
    I am an Indian, and believe you me am not offended or anything – but people back here have had access to the Iphone 4 since the day it was launched and with a price tag of over $950 for the base version more so. Further, these phones were all bought in grey so no apple protection plan to cover this stuff.
    I am no elite but trust me people including me,  have no qualms bout shelling 35k upfront on good stuff. The only reason, they might not buy the Iphone 4 is because people have used em to death already and contemplating on their next buy.

  • Ayan

    Lol.. the last line is classic.
    I am an Indian, and believe you me am not offended or anything – but people back here have had access to the Iphone 4 since the day it was launched and with a price tag of over $950 for the base version more so. Further, these phones were all bought in grey so no apple protection plan to cover this stuff.
    I am no elite but trust me people including me,  have no qualms bout shelling 35k upfront on good stuff. The only reason, they might not buy the Iphone 4 is because people have used em to death already and contemplating on their next buy.

  • BarryOToole

    The point I was trying to bring home is that these conditions are very difficult to fulfill, and therefore the presumption that India will continue on the the current arc unhindered is too simple and may be flawed. 

    However, I hope and wish that India and Indians continue to flourish and prosper, despite these challenges.

    Regardless of the low COL as compared to the West (which I agree with), it’s the attitude that makes the difference in lifestyle between India and the US.

    Indians, until they are very rich, are rather discretionary with their spending (which is good), unlike Americans, who are spendthrifts, buying merchandise even, or mostly, on credit (which is bad).

    I visit India often, and see that only the rich and the upper middle-class seem to approach the standard of living of middle-class America.

    It is true that the middle-class is being squeezed in the US, and is in decline, the income disparity is the largest since 1929 (Great Depression), and the jobless rate is 9.2%. 

    However, there is a big middle-class, because that is what defines the American Dream. Most people own homes, and the main cause of the Great Recession of 2008 was people owning a home bigger than they could afford.

    So I think Bharti is wrong. As anywhere, there are all classes of people in the US, but the biggest class here is the middle.

    To me, the biggest hurdle India has to cross is that of having a stable law & order situation, which includes a  low corruption rate as well as elimination of communal disturbances. Only then will businesses and investors feel safe and we will India grow like never before.

  • Tem Innovaions

    hi nikhil,

    I want o buy iphone 16 GB please let me know the price you are selling it…my email id (sorry, you need Javascript to see this e-mail address)I am also from mumbai
    @gmail:disqus 

  • aihna

    thanks for posting.

  • alansky

    So in India you pay $900 for an iPhone and the carrier “pays you back” by charging $50 a month to use the device?! How is that paying you back??? Here in the U.S., we pay $199 for the same iPhone and the same $50 a month to use it. What’s going on here? Whether Indian consumers are accustomed to paying exorbitant prices for iPhones or not, where are they getting the money for all those iPhones? The cost represents a king’s ransom in terms of the Indian economy.

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John BrownleeJohn Brownlee is a Contributing Editor. He has also written for Wired, Playboy, Boing Boing, Popular Mechanics, VentureBeat, and Gizmodo. He lives in Boston with his wife and two parakeets. You can follow him here on Twitter.

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