Even though the iPhone 5 was met with incredible fanfare at our ‘Big 3’ wireless carriers, one analysts believes the new phone will not drive growth in the short term. This is due to the massive subsidies Rogers, Telus and Bell have to pay out for customers upgrading or renewing contracts to the new iPhone.
A brand new 16GB iPhone 5 retails for $699, whereas carriers charge the subsidized price of $179, which is locked to a three year contract. It is the income received over these three years where carriers benefit.
Maher Yaghi of Desjardins Securities Inc. says benefits from iPhone launches will continue to shrink, even though customers continue to sign onto voice and data plans, reports the Globe and Mail:
Because some people are upgrading from smartphones to other smartphones, the carriers may have to pay out various retention costs without even seeing a boost in the average revenue per user, or ARPU, that comes with a subscriber upgrading from a simple text-and-talk cellphone to smartphone that also has a data plan.
Mr. Yaghi notes that with the launch of the iPhone 4s in October of 2011, Rogers saw its lowest quarterly profit margins in 5 years, as the company paid out for equipment costs, smartphone activations and smartphone upgrades.
“We believe the marginal ARPU lift from the launch of the iPhone 5 will be lower than what we have seen historically given the changing demographics of the wireless providers’ subscriber bases,” Mr. Yaghi wrote in his research note. “As a result, we do [not] expect the launch of the iPhone 5 to drive an acceleration in the rate of ARPU growth in 2013.”
Even with these subsidies, many customers have also opted to buy factory unlocked devices from Apple. This year, Apple went to an online-only ordering system for unlocked versions of the iPhone 5.
Still though, with these expensive subsidies, carriers have seen smartphone activations proliferate along with increased adoption of data plans. The iPhone remains the most popular cellphone on Rogers, Telus and Bell, according to comScore.
Rogers Sees the iPhone Launch as a “Wonderful Thing”
Edward Rogers, deputy chairman and executive vice-president of emerging business and corporate development at Rogers had this to say last week about the iPhone 5, at a recent CIBC investor conference in Montreal:
“I’m amazed when you see the iPhone 5 launch and people line up for a day or two days outside of a store, I think it is a wonderful thing. We wish they would do that for our next-generation of cable boxes,”“I think we should try that and see if anyone shows up.”
Now that would be interesting. Lining up for Rogers PVRs.