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Even Without iPhone 5, Apple Could Lure New Customers With Pricing

Marketer Reaches Beyond Tech-Obsessed to Masses With New Carrier, Free and $99 Phones

By Published on .

The world sighed in collective disappointment as Apple revealed today there's actually no iPhone 5 just yet, just a souped up upgrade: iPhone 4S.

With the new release comes the first ever free iPhone, opening up Apple's previously high-end devices from the tech-obsessed to swaths of mass-market consumers. What's more, iPhone will now be available to third-largest U.S. carrier, Sprint, and its 52 million wireless subscribers, as well as on AT&T and Verizon.

While hot new hardware may not draw swaths of old consumers back to re-up for a new iPhone, bargain-basement pricing could draw in brand-new customers looking to upgrade to a smartphone. The introduction marks a departure in strategy from focusing exclusively on the high end of the market to the mass consumer, which haven't all upgraded to smartphones.

"With tiered pricing, Apple has made the iPhone more accessible to more people," said Noah Elkin, mobile analyst for eMarketer. "Plus , expanding to Verizon helped Apple, so expanding to the third-largest carrier [Sprint] can only boost Apple sales with more of a consumer base to draw from."

With a two-year contract, Apple's two-models-ago iPhone 3GS is free with a two-year contract, while the last model iPhone 4 will retail for $99 when the new iPhone 4S comes out on Oct. 14 in the U.S. and Japan.

As more and more U.S. consumers upgrade to smartphones from feature phones, Apple's market share has lagged behind handsets running Google's mobile software Android. Of the 82.2 million U.S. smartphone owners older than 13 in July, nearly 42% had Android phones vs just 27% with iPhones, according to ComScore. (If you look at all mobile devices, including iPads, Apple has the No. 1 mobile operating system with 43% U.S. market share in July to Android's 33%, according to a custom ComScore analysis for Apple, revealed onstage in Apple's Cupertino headquarters today.)

The event announcing the new iPhone emphasized its new mobile operating system, iOS 5, over the hardware, which looks the same as the previous iPhone.

New services will include Newsstand, much anticipated by magazine publishers such as Hearst Corp. and Conde Nast, which will automatically download and display new issues of digital magazine subscriptions. There's also new voice search and commands dubbed Siri (limited to the new device) and Twitter integration within the apps that ship with iPhone. A new cloud service iCloud, similar to Amazon's, will also become available in October.

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