Analysts: AT&T iPhone subsidy could hurt carrier's finances

14.07.2009
The iPhone subsidy AT&T pays for each device totals about $300 and is expected by some analysts to take a toll on the carrier's quarterly finances when they're reported next week.

While the short-term hit of subsidizing the price of the iPhone could be significant, two analysts today said the exclusive contract with Apple Inc. to sell the iPhone in the U.S. is still a good deal for AT&T. The reason: AT&T can attract new customers who pay at least $70 a month in subscription fees over the life of a two-year contract.

"Sales of iPhone are incrementally positive for AT&T, no doubt," said Rick Franklin, a financial analyst for Edward Jones, which is based in St. Louis, Mo. "Whether iPhone is a huge game-changer for AT&T, I'm still not so sure."

Franklin said he has not yet tabulated an updated forecast of earnings for AT&T, which reports its second quarter financial data on July 23.

Unnamed analysts in a today said that sales of the iPhone for 12 days in June eroded nearly three percentage points from AT&T's adjusted operating income margin, a measure of profitability.

The report notes that AT&T expected that margin to be in the low 40% range when the new , roughly in line with the 40.9 % margin reported in the first quarter for operating income before depreciation and amortization.