U.S. Cellular: iPhone buy-in price too steep


Apple’s(s aapl) iPhone could’ve been available on five carriers this fall instead of just four, according to U.S. Cellular’s(s usm) CEO Mary Dillon. As first reported by Fierce Wireless, Dillon revealed during the carrier’s quarterly earnings call that her company turned down the iPhone because Apple’s “terms were unacceptable from a risk and profitability standpoint.”

It’s no surprise that Apple asks a lot from its carrier partners. When news spread that Sprint (s s) would be getting the iPhone alongside the latest hardware refresh, it also came out that the investment promises that Apple required of Sprint would be very considerable. During its latest earnings call, Sprint said that its investment was worth “every penny.” Reuters (s tri) reports that the total cost of that investment would be $7 billion, since the carrier would be paying 40 percent more than the industry average to subsidize each device sold to customers. Sprint also had to commit to a large minimum order of iPhone devices, whether it could sell those on to consumers or not, and likely won’t reap the benefits of the deal until 2015.

Earlier this week, one of Apple’s Czech carrier partners, Telefonica, decided to drop the 4S and all iPhone models because of Apple’s terms. Clearly, it’s not a price everyone is happy paying, despite the fact that Apple continues to break records for device sales.

U.S. Cellular is the sixth largest network operator in the U.S., serving roughly 6.1 million customers, mainly in the Pacific Northwest, Midwest and New England. It uses CDMA technology for its network, which is something the latest model iPhones support since the introduction of the Verizon (s vz) iPhone 4 early this year.

Despite reaching far more customers than C Spire, which covers the U.S. south and has about 900,000 subscribers, U.S. Cellular was apparently unwilling to make the same investment in Apple that the smaller carrier announced in October. C Spire will begin offering the iPhone on Nov. 11.

Apple has a track record that allows it to make demands of carrier partners that many of its competitors could not, and even though it’s losing some potential subscribers by not being flexible enough to satisfy everyone, it has the luxury of being able to do so. Apple managed to take an estimated 52 percent of the mobile phone industry’s profits, despite having only 4.2 percent market share. With those kind of numbers, it can afford to leave some deals on the table. And U.S. Cellular could come back to that table, too. According to Dillon, the company remains open to carrying the iPhone if the deal makes more sense in the future.



Why don’t you ask your current customers if they would like to have the iPhone instead of making the decision for them. I’m sure there would be no lag in sales if you did. I’ve been a customer for over ten years and I want the iPhone. Probably won’t be a US Cellular customer for much longer now that the decision has been made for me.

David Pat

You know who else makes massive profit margins for a “perceived” better experience? Monster Cables. Draw your own conclusions.

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