What's the iPhone Worth?

To AT&T, $900 Million

By Published on .

AT&T was a brand reborn, thanks to the iPhone-fueled buzz. But was it worth the $900 million price tag to carry the model?

That was the collective cost of subsidizing the popular device, which it offered exclusively. The subsidy translates to about $375 per iPhone, which retails for $199 or $299 depending on the model. AT&T said it activated 2.4 million 3G iPhones in the quarter ended September, a day after Apple announced it sold nearly 6.9 million iPhones -- or some 800,000 more than Research in Motion's Blackberry devices.

Seeking Alpha's Larry Dignan was skeptical and suggested the real winner is Apple CEO Steve Jobs: "If you're keeping score on this Apple-AT&T deal it's clear that Steve Jobs & Co. is the winner in the early going. ... And why shouldn't Jobs be stoked? He has AT&T subsidizing Apple's iPhone and driving usage."

AT&T sought to assure investors that its investment in Apple would prove itself over time with the argument iPhone customers generated higher revenue per unit and lower churn than the average subscriber. Many analysts agree that the Apple iPhone, which has given the AT&T brand a huge lift, will be a net positive over time.

The carrier also said approximately 40% of the new iPhone activations were wireless customers new to AT&T. AT&T earned $3.2 billion in the third quarter, or 55 cents per share, up, vs. 50 cents a year ago.
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