Apple unveils new iPhone, AT&T reaffirms wireless margin outlook

Apple yesterday confirmed what had been rumored for months by unveiling the latest incarnation of its iconic iPhone at its developer conference--though the company did so without the star presence of CEO Steve Jobs. Meanwhile, exclusive U.S. iPhone carrier AT&T reaffirmed its 2009 guidance for its wireless operating margins. 

[1]Rumors had been building for months [2] that Apple would unveil a new device at its developer conference in San Francisco--and the company delivered. The new phone, called the iPhone 3G S ("S" is for speed) will cost $199 for the 16GB version and $299 for the 32GB version with a two-year contract from AT&T Mobility, and will be available June 19. Click here [3] for details on the new capabilities in the iPhone 3G S. The phone will be sold in Apple and AT&T retail stores, as well as Best Buy and Wal-Mart. The phone will be available in more than 80 countries in the coming weeks.

And, in order to clear out the remaining iPhone 3Gs still at those stores, Apple said that phone will go for $99 for the 8GB version--half its old price. AT&T said the 16 GB iPhone 3G will be available for $149 while supplies last.

Shortly after the iPhone's unveiling, AT&T said that its 2009 wireless service operating income before depreciation and amortization would be in the low 40 percent range. AT&T said that cost of customer acquisition for the iPhone 3G S and the new low-cost iPhone 3G are going to be very similar to the costs associated with the original iPhone 3G. Additionally, AT&T said customers with devices like the iPhone 3G S and the iPhone 3G will drive higher ARPU and produce lower churn.

Indeed, it appears AT&T's gamble to deeply subsidize the iPhone is paying off. In the carrier's most recent quarterly report, margins that had once fallen to 33.5 percent after AT&T launched the subsidized iPhone 3G last summer jumped back to nearly 41 percent. It seems AT&T now has enough scale--more than 4.5 million iPhone subscribers paying at least $70 per month--to push margins back up.

[4]Despite the hoopla associated with Apple's announcement, questions remain about how and when some of the gadget's new features will be implemented by service provider AT&T. Apple said the iPhone 3G S would support tethering, wherein a user can connect the phone to a computer as a modem, but AT&T was not listed as one of the carriers supporting the feature. Further, Apple said AT&T would not initially support MMS on the iPhone 3G S.

"We will be offering a tethering plan and MMS for the iPhone," AT&T spokesman Mark Siegel told CNet. "But we haven't announced a date." MMS functionality will be added by the end of the summer, Siegel said, but he did not provide a date for when tethering would be allowed.

The issue is notable considering carriers' fears of data overloading their networks. Indeed, AT&T CEO Randall Stephenson recently warned the wireless industry that operators are not prepared for the deluge of data that increased smartphone use will bring to their networks.

With a new iPhone on tap for a summer release, industry watchers will be keen to see how the gadget stacks up against other recent smartphone releases, including the Palm Pre and the Nokia N97.

For more:
- see this article on the iPhone launch [5] (sub. req.)
- see this article on AT&T and the new iPhone [6]
- see this article on AT&T's outlook [7]

Related Articles:
Apple unveils iPhone 3G S, available June 19 [3]
AT&T to start HSPA upgrades this year [8]
Rumor roundup: A new iPhone on Monday? [2]
Apple exceeds expectations, roars of quarterly iPhone shipments [9]
Apple adds a host of new features to iPhone 3.0 OS
[10]Analyst: Apple will launch two new iPhone models this summer [11]
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