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Josh Lowensohn/CNET
Would Apple actually increase the price of its flagship phone?
Apple reportedly has been negotiating with mobile carriers about raising the price they will pay for the expected iPhone 6 by $100, Jefferies analyst Peter Misek said in an investors note released Monday. The carriers have naturally nixed the idea so far. But Misek thinks Apple could get away with it since no other “game-changing” phones are on tap for later this year.
The iPhone already faces competition from cheaper smartphones. Wouldn’t such a move slice Apple’s market share even further?
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“The possibility may at first seem farfetched in light of investor concerns regarding possible carrier subsidy and handset price cuts due to smartphone saturation and lack of differentiation,” Misek said. “But we think this general lack of differentiation could be the reason why Apple may be able to get a price increase. Carriers realize that the iPhone 6 will likely be the only headline-worthy high-end phone launched this year and that they will lose [subscribers] if they do not offer it.”
And who would foot the bill for such a price increase? The carrier and the consumer might split it down the middle, with each half asked to kick in an extra $50. The iPhone 5S currently starts at a subsidized price of $200 with the usual two-year contract, so consumers would end up paying $250 under such a scenario.
The scheme is not as crazy as it sounds, says Misek. Jefferies analysts Mike McCormack and Jerry Dellis agree, saying that the carriers are not in a strong position to resist a higher-priced iPhone. But such a strategy could also easily backfire.
More consumers are opting for monthly smartphone installment plans to avoid getting locked into long-term contracts. That means they bear the full cost of a phone. Without that hefty subsidy from the carrier, such buyers may be more apt to choose a cheaper phone.
Misek’s take also assumes that other smartphone makers would sit still while Apple dominates the market with the iPhone 6. In fact, a higher-priced iPhone could spur the competition to rush out their own latest “game-changing” yet budget-friendlier alternatives.
