Impact of iPhone on Carriers EBITDA
In order to understand my post, I believe it is good to read this article first: http://money.cnn.com/2012/02/08/technology/iphone_carrier_subsidy/
I agree with most of the points made by this article but one point that the author does not hash out is the lock-in period and ARPU generated by new subs over a period.
When an operator sells the device, he/she essentially sells a 2 year service along with it (which of course comes with early termination fee and what not). Therefore by subsidizing the most wanted handset in the market they lock you in for at least 2 years. Now in order for the subscriber to be profitable for the operator they need you to hang in there with them for a period of 4 years or so. Hence by providing the latest handset at a low price point they actually help themselves in long run.
Yes, in a shorter time frame, it does affect the EBITDA but in long run a new subscriber sticking with the operator is lot more profitable. I would like the author of the article to work on ARPU from an individual new subscriber, who buys iPhone - say from Sprint or ATT or VZW - and a two year contract and ends up sticking for another 2 years thereafter - assuming he also buys another subsidized iphone after the first 2 years. I bet ARPU would still look good….
There is a dent in EBITDA because of iPhone subsidy but believe me it is absolutely worth it for the operators in long run!