"It comes down to who blinks first, Apple or the operators — or more to the point, ONE of the operators."

Craig Galbraith, Editorial Director

April 17, 2014

3 Min Read
iPhone 6: Sprint, Verizon, Others Should 'Take a Stand' Against Price Jump

**Editor’s Note: Which is America’s top wireless network? Click here to see what we discovered. Or click here for our ranking of March’s hottest selling smartphones to see how Apple’s iPhone fared against the competition.**

Apple‘s rumored move to raise the price on its flagship smartphone this fall might not sit well with consumers, but the popularity of the device might just override any concerns about a heftier price tag. That’s why “it’s time for [mobile] operators to take a stand,” says one analyst.

“It comes down to who blinks first, Apple or the operators — or more to the point, ONE of the operators (forcing the others to follow suit),” noted Rich Karpinski, senior analyst with Yankee Group, commenting on a Business Insider article. ” … a US $100 iPhone upcharge may just be the place [to take that stand]. Let Apple market its new, pricier iPhone; operators should push cheaper yet still premium no-contract alternatives and pair them with cheaper no-contract 4G data rates.”

Speculation surrounding a more expensive iPhone began popping up last week when Jefferies analyst Peter Misek said that Apple had begun negotiating with carriers about a $100 price increase on the upcoming iPhone 6, which would raise the subsidized, on-contract price you pay to $299, $399 or $499, depending on how much storage you want on the device.

Business Insider says that the operators tend to be leaning toward saying no to the hike, but negotiations continue – likely due to the fact that there aren’t any “game-changing” devices from other manufacturers on the horizon that would force Apple to show its hand. A recent Yankee Group survey, however, shows that nearly 60 percent of consumers in the U.S. pay $200 or less for smartphones (see chart on next page).

“Operators are sick and tired of blowing out their margins to prop up Apple’s (or Samsung’s) and long for another path to market,” Karpinski added. “Yet in the U.S., the smartphone game remains a premium one. Users love their best-of-breed devices. Operators tried to sell high-end devices unsubsidized and that didn’t work. More recent no-contract/device financing plans, especially those that build in early upgrade options, seem to be working much better. Apple could raise its iPhone prices by US$100, but it may find operators simply pushing those extra costs out to customers, which would put iPhones at a price premium vs. Samsung Galaxies and HTC Ones.”

Of course, a lot about the next iPhone is unknown. There’s speculation that Apple will once again release two new iPhones this fall — one being a 4.7-inch device, another 5.5 inches. Would the larger one carry the bigger price tag? Hard to say. The Silicon Valley giant faces increased pressure from Samsung and other Android vendors who are unveiling more and more handsets with large screens. Apple only increased the size of the iPhone to four inches in 2012, which is still significantly smaller than most other popular smartphones on the market today.

“… If Apple wants to prop up its margins even further, let it do it alone,” Karpinski said. “When someone holds a gun to your head for years, and then pulls out an even bigger gun, it’s clearly time to make a choice. Continue to be held up or make a break for it.”

We’re likely to see the iPhone 6 make its debut in September or October. 

Follow senior online managing editor @Craig_Galbraith on Twitter.

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About the Author(s)

Craig Galbraith

Editorial Director, Channel Futures

Craig Galbraith is the editorial director for Channel Futures, joining the team in 2008. Before that, he spent more than 11 years as an anchor, reporter and managing editor in television newsrooms in North Dakota and Washington state. Craig is a proud Husky, having graduated from the University of Washington. He makes his home in the Phoenix area.

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