Distribution 101 dictates that the more units you produce the lower the cost of goods falls. If you assume that Apple cuts more prepaid deals around the world it could harm rivals with just limited success.
This case was made by Barclays Capital analysts on Monday. They were focused on Apple and its impact on carrier subsidies—a bane for wireless players—and what happens if the iPhone follows an open distribution model.
Barclays analyst Ben Reitzes lays out the case:
Our checks indicate that Apple’s deals with prepaid players (Sprint’s Virgin Mobile and Cricket) are likely only the beginning of Apple’s efforts to expand via partnerships into the open distribution and prepaid markets in the US and internationally. The mid-tier smartphone market has been the fastest growing niche of the smartphone market in recent quarters.
The most successful vendors in the mid tier are Samsung, Nokia, Huawei, ZTE, and RIM. Much of the ~225mn unit mid tier smartphone market is at or below $200, and much of the ~1bn unit feature phone market is at or below $75. Even limited share gains (prudent given Apple’s $350-$400 price point) could eat materially into the growth markets for rival vendors. This could add $4.70 to our CY13 Apple EPS estimate of ~$54.
The emphasis from Reitzes boils down to the midtier smartphone market and the total addressable market. For instance, Nokia has had success in the mid-range market as has Huawei. Today, Cricket is offering an iPhone 4 for $400 and an iPhone 4S for $500. Virgin is going with $549 and $649 for the iPhone 4 and 4S, respectively. IF there’s volume on these deals, however, those prices are likely to fall.
Initially, there’s a mental hurdle to clear with this effort. Prepaid subscribers are often subprime credit material. How are these people going to shell out $400 or more for an unsubsidized iPhone? That said, Apple can leverage its brand and make inroads. If you assume all phones will be smartphones, Apple has a huge shot to get some serious volume.
This article comes from:http://www.zdnet.com/blog/btl/apples-eyes-open-iphone-distribution-the-fallout/79737
The larger display will measure 3.95-inches diagonally and will keep its familiar 1.94-inches width. The new iPhone
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640 x 1136. Reports say that Apple has decided to add 176 pixels to one
end of the screen, bringing it close to a 16:9 screen ratio.