Bloomberg is reporting that John Hodulik, a UBS AG analyst, is expecting Verizon to spend somewhere between $3 and $5 billion to subsidize iPhone sales for the customers.
Hodulik runs down the numbers saying that Verizon may sell 13 million iPhones in 2011. Each with a $400 subsidy. However, each new iPhone contract would last for two years and cost between $70 and $120 depending on service packages. That works out to be $1680 to $2880 in contracts, which in turn works out to be anywhere from $28 to $49 billion in revenue.
These subsidies are what brought the iPhone’s price down from the original’s $599 price tag that the device launched with. However, since 2008 with launch of the iPhone 3G, Apple has worked out an arrangement with AT&T to subsidize the cost of the device, bringing the up-front cost to just $199.
We’ve had speculative coverage of the impending Verizon iPhone announcement all day today. We’d love to hear what you think about the announcement, so we set up a forum just for the event. We’d love to hear what you think.
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