Report: Carriers aren't cashing in on iPhone hype

Wireless operators around the globe that have sunk millions of dollars into subsidizing the cost of Apple's iPhone have not seen their profits or market position improve as a result--and in some cases have lost ground due to supporting the gadget, according to a new Strand Consult report.

[1]The report, to be published this week, is titled, "The moment of truth, a portrait of the iPhone," and shows that "many of the conclusions that the media have published about the significance of the iPhone for mobile operators are not documented in the operators'--or other key market players'--financial statements," said the research and consulting firm.

"According to the research we have conducted on the operators, not one of these have increased their market share, revenue or their earnings as a result of introducing the iPhone," the Copenhagen-based firm said. "On the contrary, some operators have sent out profit warnings because of the iPhone."

AT&T Mobility, the exclusive U.S. carrier for the iPhone, activated 2.4 million iPhones in the second quarter--numbers that carried a cost. AT&T's wireless operating margin was lower for the quarter, at 23.8 percent, than the 25.5 percent it posted in the year-ago quarter. AT&T's second quarter operating income before depreciation and amortization (OIBDA) service margin was 38.3 percent for the quarter, also down from the 41.2 percent it recorded in the second quarter of 2008. AT&T said that without the acquisition costs associated with the iPhone 3GS, which it launched June 19, its OIBDA service margin would have been 40 percent.

The report concludes that AT&T has not experienced a significant increase in data ARPU relative to Verizon Wireless and Sprint Nextel since it launched the iPhone. Strand also examined data ARPU as a percentage of total ARPU, and found no significant advantage for AT&T over Verizon and Sprint. Further, the report notes that AT&T has stated that 40 percent of its iPhone customers are new customers from other operators, meaning the remaining 60 percent are current AT&T subscribers.

"If you examine the number of iPhones sold by AT&T in the [United States] to customers from other operators, and compare the figure to their churn and the development of their customer base over time, it is again not possible to see any iPhone effect," the report said. "At the end of the day, the iPhone has such a small share of the American market and the amount of voice and data traffic it is generating is simply not enough to change any of the total market figures."

When asked for comment, a AT&T representative pointed out that more than half of the carrier's new iPhone subscribers in the second quarter did not previously have a data plan. Further, the carrier said that June 19, AT&T's iPhone 3GS launch day, was the operator's best sales day ever. Finally, the AT&T representative said that the iPhone's impact on AT&T's margins in the second quarter was one-third of what the carrier experienced last year, which the carrier attributed to operational improvements.

An Apple spokeswoman did not respond to requests for comment.

For more:
- see Strand Consult's site [2]
- see this Reuters article [3]

Article updated Aug. 18 to include comments from AT&T.