iPhone and the high non-iPhone mobile tariffs

Apple‘s iPhone is widely hailed as a must-have for most mobile operators, so much so that some go to quite some lengths to get the phone on their networks just to stop haemorrhaging of high-value customers.

There seems to be an un-talked-about¬†additional benefit to mobile operators from the rise of iPhone – higher ARPUs on non-iPhone plans than they’d otherwise get.

The iPhone Tide

As visible in the graph above, after taking out the retail cost of the phones, the monthly cost of an iPhone contract is consistently lower than that of the relatively no-risk SIM-Only plans. As a comparison, the similar ex-phone monthly cost of a Samsung Galaxy S3 is also higher than that for an iPhone on both EE and Vodafone (though surprisingly lower on O2 and 3’s networks¬†Note 4-G).

It appears that the operators are giving up margins in the device (compared to pure hardware sellers like Amazon or Curry’s Note 4-F) and/or margins in monthly tariffs (compared to SIM-Only plans) to ensure the iPhone users stay with them. Add in the higher network traffic from iPhone owners (as frequently reported in media Note 5), and higher risk (compared to no-hardware SIM-Only plans) and it seems that the operators are killing the very reason they want iPhone owners so desperately on their network – higher revenue realisation.

My guess is that something else is happening. Instead of a SIM-Only plan being a baseline price, of sorts, and iPhone plans being built upon it to at least recover the phone subsidy, it’s the other way around. Operators have set the ex-phone monthly cost of an iPhone contract at the baseline figure – the minimum revenue realisation they want from a pay-monthly customer. Then, they’ve built all other phone and SIM-Only plans on top of that baseline figure.

This ensures that instead of haemorrhaging on iPhone contracts, and making normal profits on all other contracts, the operators now get to make normal profits on iPhone contracts and above-normal profits on all other contracts.

Thus, the cost of an iPhone contract acts as a high tide raising all the other contract prices along with it, resulting in higher ARPUs for operators than would have been possible in a non-iPhone scenario. Obviously, the telcos must love the iPhone Note 6.


Continue reading iPhone and the high non-iPhone mobile tariffs