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Is pre-paid and mid-market the future for the iPhone?

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Analysts have begun their traditional pre-release Apple (s appl) hardware predictions for the next generation of iPhone. It may have started a little later this year, but that only makes it all the more interesting, as we eagerly await Apple’s first iPhone refresh that will take substantially more than a year to arrive.

If Deutsche Bank analyst Chris Whitmore (via Fortune (s twx)) is right, the next iPhone(s) may well be worth the wait. Whitmore says the bank’s clients should expect two iPhones this fall, one a true next-generation iPhone 5 device, and the other an “iPhone 4S” that would basically resemble the iPhone 4 in most regards, but would be sold unlocked for use with pre-paid service for $349. Whitmore points out that this would be a smart move for Apple if the company wants to continue growing in emerging markets like Africa, Asia and Latin American, where pre-paid contracts make up the vast majority of all cellular service.

Whitmore doesn’t cite any specific sources for his prediction, and a lower-cost iPhone has long been a popular theme among Apple watchers and analysts, but this year is the first time Apple has given any indication it could have designs in that direction. Apple COO Tim Cook said in an interview with Bernstein analyst Toni Saccognaghi that Apple was indeed interested in producing cheaper hardware for customers who might have tighter budgets than the average current iPhone buyer. Apple also recently started selling the iPhone 4 unlocked in the U.S., indicating it’s at least interested in appealing more to the contract-wary customer.

Apple is already doing well in key emerging markets, like China, where it saw 250 percent growth during the company’s second quarter. That doesn’t mean it couldn’t stand to do better by embracing a sales model in keeping with what smartphone shoppers in international markets are more familiar with. Choice is still a primary driver of smartphone sales, which is why Android’s (s goog) multi-vendor licensing model has proven so successful. Pre-paid is also on the rise as a service option even in the U.S., which means Apple could capitalize both at home and abroad with a device aimed at that growing category of users.

Morgan Stanley analyst Katy Huberty made some predictions about the next iPhone over the weekend, reporting production of a new model should begin in the last half of August, with the intent to ship devices in late September. Such a timeline would make sense if Apple were revamping the annual iPod refresh, and instead making the iPhone the star of the show.

If Apple does have two iPhone hardware choices on offer come fall, one with more features but a higher price and tied to a contract, and one with older tech but a lower cost of entry and fewer strings attached, which would you opt for?

4 Responses to “Is pre-paid and mid-market the future for the iPhone?”

  1. Mike and iJavaJoe might want to look into getting a used iPhone. Jail-break/unlock it and it’ll run fine for voice under a T-Mobile prepay plan.

    The sweet point is probably a 3GS. It’s fast enough to run iOS 4/5 fine and has a decent camera. Accessories for it are also getting very cheap as the add-on market moves to the iPhone 4.

  2. iJavaJoe

    Hey Mike I’m with you. I have a phone mostly for emergency, otherwise I have no need. Let Apple know this is what you want. Go to the Apple web site and give them this feedback, I did and if enough people do they maght make it happen!

  3. I am not a big cell phone user (for voice). So I carry a cheap Nokia with Tmobile prepay for when I travel. I usually buy a $100 card once a year to maintain (I forget how many minutes that is but, it is plenty for the light user) and not loose any credits at years end. Today my phone is at 617 minutes (about 10.5 hours) or $67 in credits left of talk time. I know from past years, I will have anywhere from 2-4 hours of time left when use em or loose em comes up in 2012. If I have a heavy use year (during a move, typically) I may need to add $20 at the end.
    But tech and time marches on and for about two years, I have *desperately* wanted an iPhone, not so much for the voice, but for the rest of it! I would love to have GPS, and the many apps, web. Music is nice but also very secondary to the apps.
    The ideal iPhone for me is not crippled in anyway (I’d need the memory for apps) but lets me do prepay on voice and data at a reasonable price. $150 a year for voice and data mix would be a welcome start. That is, the credits can go toward either. (It is about time the industries come to the realization that voice is data. The end.) Since I am not a big talker, the majority of my credits would go to data.
    But, I predict the phone company dinosaurs will not care about customers who want mostly data and base the pricing on separate voice and separate (over priced) data credits.