updated 05:50 pm EDT, Tue April 24, 2012
Exec points to low churn rate, iPhone status
In a conference call following Apple's fiscal Q2 financial disclosures, CEO Tim Cook downplayed talk of declining subsidies for the iPhone. The executive argued that iPhone subsidies are "not large" relative to the sum of service subscriptions spread across a 24-month period, while the iPhone still has a number of "distinct advantages" over competing products.
Many carriers are said to have told Cook that Apple's iconic smartphone brings the lowest "churn rate," a reference to the tendency for some subscribers to float around between different carriers when their contract term expires.
The CEO further describes the handset as the "best smartphone on the market" to entice customers to upgrade from basic phones to a smartphone with a data package. A great experience for the customer is said to help the carrier, and the executive suggests that some of these factors have been missed in the recent public discussion.
The comments come in response to warnings from several analysts who expect carriers to begin pushing for lower iPhone subsidies, which would have a negative impact on Apple's revenues. Other analysts point out, however, that Apple has likely established multi-year agreements with most carriers, ensuring that subsidy rates are maintained in the near future.
Although Apple does not disclose its iPhone subsidy terms, the device is said to carry much higher subsidies than competing smartphones. The fiscal Q2 results show that iPhone sales have yet to slow, reaching 35.1 million units during the winter and marking an 88 percent gain from the same period last year.