New iphone: "Cash cow" for wireless carriers?

[Guide] from a telecoms company's point of view, the economics of the iphone can be attributed to higher upfront costs in exchange for locking the user's results, allowing users to pay higher phone bills during the two-year contract period.

iphone's impact on wireless carrier data revenue

Beijing time September 12, Apple is expected to release the next iphone in Wednesday, the wireless operators face a decisive test of the curtain. The risk for wireless carriers is how the industry will carve up profits and how far the operators ' investments in the latest networks will be rewarded.

In just five years, the iphone has become one of the most important factors affecting operator profitability, and its influence continues to increase. The At&t and Verizon Wireless both pay huge sums for the handsets and subsidise them at the expense of their own profits to encourage more users to buy the handsets, which makes Apple a huge profit. At the same time, users of these carriers are increasingly delaying their own upgrades to the mobile phone's agenda, in order to wait for the release of the new iphone.

Wireless operators have responded this year by introducing new upgrades to reduce the cost of subsidizing all new iphones. But the biggest impact is likely to come from the latest data program, launched this summer, that should allow users who are obsessed with the new iphone's faster data transfer rates to pay higher fees. What wireless operators want to see is that the first new iphone, based on the fastest fourth-generation network, will change consumer behavior. Downloading video and surfing the web should be a more seamless experience for consumers, and it will be a more profitable business for operators.

A survey of 275,000 smartphone users in the United States, Validas, a market research firm, found that the data plans used by LTE mobile users are significantly different from those of other users. The survey shows that non-LTE smartphone users 2012 average monthly data flow of 500MB, and LTE smartphone users up to 1.2GB.

Lowell McAdam, Verizon Communications chief executive, said to investors in Friday: "These new handsets and the apps they Lowell Maikhadam will boost data usage." After switching from a 3G network to a 4G network, the amount of data used should increase and the cost should be reduced. ”

Wireless operators have performed well this year, with at&t shares rising 10% per cent 24%,verizon, in part because of higher profit margins. One question Wall Street is debating is whether this is primarily a reflection of the temporary calm before the launch of the new iphone or of a more sustainable operator economics improvement. From a telecoms company's point of view, the economics of the iphone can be attributed to higher upfront costs in return for locking the user, allowing users to pay higher phone bills over a two-year contract period.

Since Apple launched its first iphone in June 2007, data Revenues for US wireless operators have indeed been growing rapidly. Data from the US wireless operators reached $17.1 billion trillion in the second quarter, compared with just 5.2 billion dollars five years ago, according to data published by the Swiss bank. However, analysts have focused on the negative consequences of these upfront costs.

The phenomenon can be explained by the financial performance of At&t, the first American wireless operator to distribute iphones. The Swiss bank data show that 12% of At&t's mobile subscribers upgraded to the new handset after the iphone 4S went public in the fourth quarter of last year, while At&t's wireless business margins fell by One-third to 29%; in the second quarter of this year, Many users are waiting for Apple to release the new iphone, so only 6% of at&t users have upgraded to their newer handsets, while At&t's profit margin has rebounded to 45%.

To avoid this volatility of profit margins, AT&T and Verizon Wireless have increased user upgrades earlier this year. Some of Verizon's wireless users now have to pay a 30-dollar upgrade fee, while AT&T increases its upgrade fee by one to 36 dollars. In addition, these operators are less generous than in the past few years, allowing users to upgrade to the new iphone before the two-year contract ends.

"We believe that this reduces the risk that operators will succumb to the demands of the new iphone, which operators face when Apple releases its new iphone." John Hoduli, a Swiss bank analyst, said in a study released last month that the report details some of the steps that operators have taken to reduce the cost of John Khodurik.

More importantly, the new iphone is likely to prompt a surge in data revenues for wireless carriers.

Verizon and At&t have long ago canceled unrestricted data plans for new users, instead of a tiered data plan. This summer, the two companies have made further progress on the strategy, introducing new data plans to reduce the importance of text and voice services, in turn emphasizing more profitable packet services, and the introduction of the new iphone will speed up the process of shifting users to this latest data plan.

Verizon Wireless says the company will only offer a discounted smartphone for users using a tiered data program, which means users who signed up to the unlimited data program when Verizon Wireless sold the iphone from January 2011 onwards will have to pay full price to buy the new iphone , or move to a layered data plan. At the same time, At&t says iphone users who want to use FaceTime video calls via cellular networks will have to sign up to one of the latest data plans.

In addition, the new iphone will run on LTE wireless network technology faster than the 3G network services currently supported by the iphone, according to a source familiar with the situation. Wireless carriers in the United States have invested billions of of billions of dollars to build LTE networks, but so far the use of such networks has been low. Verizon Wireless says only 12% of its 89 million subscribers to the end of the second quarter use the LTE network.

Wireless carriers hope that the new iphone can eventually push many users to the LTE network, which is doubly beneficial: wireless carriers can process data in a more efficient and cost-effective way, and faster speeds will enable users to watch more videos, download more games, and surf the Internet more often.

Bob Azzi, senior vice president of Sprint Nextel Network, said: "What happens often is that when a faster network emerges, the user's penchant for data tends to follow." "Unlike At&t and Veriz Wireless, Sprint Nextel provides users with unlimited data planning and therefore does not earn more revenue because of increased data traffic." The company is in the early stages of launching the LTE network, paying a high price last year to start distributing iphones in hopes of winning new users while preventing other users from losing.

(Responsible editor: Duqing first)