Apple's iPhone 5 could be boon to carriers, U.S. GDP

Apple's (NASDAQ:AAPL) expected introduction of its next iPhone on Wednesday has analysts and industry observers buzzing over what impact the new device will have on carriers, the smartphone market and even U.S. economic growth.

For carriers, the conventional wisdom has been that they suffer financially when a new iPhone is introduced due to the higher subsidy costs they pay to Apple when customers upgrade their smartphones. For example, AT&T Mobility (NYSE:T) saw its wireless service margin plunge by a third to 29 percent in the fourth quarter of 2011 after the introduction of the iPhone 4S.

However, that dynamic may be changing, in part because of the changes carriers have made to their handset upgrade policies. Specifically, in April 2011 AT&T increased its smartphone early upgrade fee by $50. Then, in February 2012, AT&T doubled its one-time upgrade fee for customers who were due for an upgrade to $36, following Sprint Nextel (NYSE:S), which did so in 2011. And in April 2012, Verizon Wireless (NYSE:VZ) started charging a $30 upgrade fee.

Additionally, the next iPhone is expected to have LTE connectivity, which could benefit AT&T and Verizon as they push customers to tiered data plans and their new shared data plans. Carriers are banking on higher usage of data services--especially streaming video on the new iPhone's larger screen--to increase revenue. Sprint still offers unlimited smartphone data plans.

Verizon has said that customers who were grandfathered into its unlimited data plans and want to upgrade to a new smartphone at a subsidized price will need to pick a voice plan with a standalone data package or one of its Share Everything shared data plans. And AT&T has said customers who want to use Apple's FaceTime video chat feature over cellular data networks will need to sign up for one of its Mobile Share plans.

Meanwhile, analysts are debating how many iPhone 5s Apple will sell. "Until they do something really unimpressive, which I don't see happening this time around, Apple has a serious hit on its hands," IDC analyst Ramon Llamas told Bloomberg.

Some analysts are predicting a blowout of iPhone sales. "We believe that if the 21st is the actual ship date, Apple could sell 6 million to 10 million iPhone 5s in the final week of September barring supply issues," Piper Jaffray analyst Gene Munster wrote in a research note last week, according to AllThingsD, which noted that Apple sold 1.7 million iPhone 4s during that gadget's first weekend of sales and 4 million units of the iPhone 4S during that device's first weekend of sales.

Others are more skeptical. NPD Group analyst Stephen Baker wrote that Apple's iPhone 5 sales in the United States could be dampened by a number of factors, including a maturing market, the need to actively steal market share from other platforms as well as carrier dynamics.

"Last year's iPhone 4S launch could still take advantage of selling into what remained of the huge untapped base of potential subscribers at Verizon and Sprint who were not available to them previously," Baker wrote in a NPD blog post. "This year's introduction faces the specter of a much smaller base of previously unavailable consumers, based on their carrier preferences. None of this should of course be construed that Apple can't, or won't, have an extremely successful launch in the U.S. when the iPhone 5 comes to market. It merely points out that as the market matures the challenges of growing faster than the industry multiplies."

Finally, one analyst estimates that the new iPhone could boost U.S. GDP by 0.5 percent in the fourth quarter of 2012. J.P. Morgan economist Michael Feroli wrote in a research note that if Apple sells 8 million iPhone 5s in the fourth quarter of 2012 at $600 per unit, that could add $3.2 billion to the U.S. economy. According to Reuters, Feroli said the estimate of between a quarter to a half point of annualized GDP "seems fairly large, and for that reason should be treated skeptically." But, he said, "we think the recent evidence is consistent with this projection."

For more:
- see this WSJ article (sub. req.)
- see this Reuters article
- see this Bloomberg article
- see this NPD Group post
- see this CNET article
- see this GigaOM article

Special Report: Apple's iPhone 5: Complete coverage

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Article updated Sept. 12 to clarify Verizon's upgrade policy.