One of the side benefits of the completion of T-Mobile(s TMUS)’s merger today, at least for customers of MetroPCS, is that they will eventually be able to use an iPhone(s AAPL) on their current carrier. The all-new T-Mobile hasn’t said when that will be. But there’s also an interesting benefit for Apple when this does happen: the iPhone maker may edge further into the lower-cost smartphone category.
MetroPCS’s current customers can choose from a variety of feature phones or inexpensive Android-powered smartphones: there’s just one flagship Android(s GOOG) device offered, the Samsung Galaxy S III. The vast majority of the devices cost around $99. If MetroPCS subscribers have been waiting for an opportunity to switch to an iPhone, it’s probably less likely they’ll be going for a $200 to $300 iPhone. But the free-on-contract iPhone 4 or $99-with-contract iPhone 4S could be more appealing than their current options.
This also represents a chance for MetroPCS to convince feature-phone owners to upgrade too. And the trend among late-stage smartphone adopters is that they, in general, go for lower-cost devices.
A recent survey of iPhone buyers in the U.S. by CIRP showed while the iPhone 5 represented a little over half of all new iPhones purchased, that is a historically low number: never has an Apple device that’s been available for just over one fiscal quarter seen such slow demand. The iPhone 4 and iPhone 4S, either free on contract or $99 with a contract, are more popular than legacy iPhones have ever been.
T-Mobile says that by joining with MetroPCS, it’s bringing 9 million new customers — and potential new iPhone activations — with it. That might seem small when compared to what T-Mobile already has (a little over 30 million customers) and to what could happen if Apple hooked up with China Mobile. But at this point, Apple needs to expand its footprint anywhere it can. Whether that’s among luxury-brand hungry customers in Tokyo, Shanghai or Moscow who shell out for an iPhone 5, or among smartphone hold-outs who just want a free or very cheap phone, Apple is going to take it.
Last week, Apple CEO Tim Cook used the example of first-time iPhone buyers in China to explain why he’s OK with this scenario: “China has an unusually large number of potential first-time smartphone buyers and that’s not lost on us. We’ve seen a significant interest in iPhone 4 there and have recently made it even more affordable to make it even more attractive to those first-time buyers. We’re hopeful that helps iPhone sales in the future.”
It’s true that trading iPhone 5 sales for the iPhone 4 or 4S could mean lower profits in the end for Apple. But being able to sell smartphones to people who otherwise wouldn’t have purchased an iPhone (either for a feature phone or a cheaper Android device) is not a bad fallback.