Wednesday, April 25, 2012

Apple sells 645000 devices a day during Q2 - ZDNet (blog)

First of all, you're making a grave mistake by assuming that just because the old 3GS and 4 models can be subsidized by carriers to the point of being widely affordable in western countries, they'll be equally affordable in the rest of the world. In fact, they're not. Not even close.

Even now, despite the ultra low prices you see in the US, the 3GS and 4 are not cheap phones. The carriers still have to pay hundreds for each, and only the wealthiest carriers with healthy numbers of postpaid subscibers can afford to shift so much of the phones' value to the contract payments.

There are three things you need to keep in mind about phones in developing countries. One is that the final cost of the phones to the carriers include some high import costs and import duties. The next is that the carriers in developing countries only apply minimal phone subsidies. And finally, only a very small percentage of the huge population of phone users in developing countries buy phones with postpaid contracts.

Despite the lower price of the 3GS relative to the newest 4S, by the time the developing world carriers pay the required taxes and shipping costs, that old device typically ends up costing almost as much to them as the newest 4S costs to the US carriers (which is about $650 per 4S).

Given the low usage of postpaid services, the high cost of bringing these expensive phones into the country, and the tiny amount of subsidy applied to each phone, the monthly data and voice service packages of the iPhone data plans become astronimal, even for the supposedly 'cheap' 3GS. Only the small numbers of wealthy individuals end up being able to afford to use an iPhone. Furthermore, the high cost of these iPhones prevents them from ever being offered on prepaid plans. It is only prepaid phones that are capable of getting widespread adoption in developing countries. For proof of that, just look at what Blackberry did in developing countries. They stagnated in developing countries as postpaid phones for years until they became inexpensive enough to be offered on prepaid plans. They introduced the smartphone to the masses in many developing countries and became the phone of choice for teens and young adults 35 and under. It has only been recently that Android entered the prepaid phone market and began to erode the Blackberry's dominance.

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