Wireless providers are now being recommended to stop forcing subsidized mobile phones on to subscribers, as deals ultimately cut into the profit margins of the wireless provider, recent research indicates.
Specifically, analysts said the extremely popular Apple iPhone -- with subscribers using high amounts of data per month -- doesn't break even until the 17th month into a standard 24-month contract.
If AT&T decided to drop iPhone subsidized efforts, the company could break even in just eight months, analysts indicate. For each new AT&T subscriber who wants an iPhone, the wireless provider must fork over an initial investment of $859.
"Assuming that an iPhone user maintains voice usage comparable to AT&T's average customer and data usage of 5GB per month, Yankee Group estimates that AT&T would achieve an operating margin per account of approximately 47 percent, leading to a total profit margin of 16.1 percent per user," Yankee Group researcher Andy Castonguay said in a statement to Newsfactor.
Furthermore, AT&T would also be able to offer other iPhone deals for subscribers looking into purchasing an iPhone.
The Yankee Group report provides an interesting view into the wireless industry, though it's rather unlikely consumers will see subsidized phone deals any time soon. Most consumers are ready to sign a two-year subscriber contract instead of pay the MSRP for a new phone, with many subscribers unwilling to leave a wireless contract if forced to pay an early termination fee.
In addition to subsidizing phones, the subsidization model could also implode on providers who offer subsidized netbooks to owners.W
