The quarter saw the launch of the iPhone 4S, the second model to be sold by Verizon, and it was clear that many had been waiting for it. Verizon on Tuesday said it sold 4.3 million of them, and 7.7 million smartphones total.
55.8% of all smartphones sold by Verizon in Q4’11 were iPhones. That’s amazing. Verizon has been bombarding the airwaves touting smartphones with 4G LTE, but sold only 1.6 million units.
An iPhone that Verizon buys from Apple for around $600 is sold in stores for $200. The question is whether phone companies ever really make that money back.
â€œThe average smartphone customer will spend about $2,000 over the two-year contract, if the subsidy is $400, youâ€™re still getting $1,600, and thatâ€™s very cash-flow positive,â€ Ratcliffe said.
I don’t think it’s that simple. The cost of supplying service to that smartphone user over two years will need to be lower than $1600. It probably is, but Verizon throttles data for heavy users and that suggests keeping costs down continues to be an issue.