iPhone Revenue Gap

$120 million lost for Apple in US?

According to figures released by Apple this week, the iPhone has produced an unexpected revenue gap.

Analysis of sales figures from Apple and ATT indicates that more than 25% of of iPhone users are not using the ATT network. This translates into roughly 1 million iPhone purchasers are not accounted for  and are not producing revenue for neither ATT nor Apple.

Recall that Apple extracted a revenue sharing deal for ATT''s exclusive distribution of the iPhone.  3.7 million iPhones have been sold in the US according to Apple, but ATT figures only show 2 million new iPhone driven activations. 

Blame China?

There is no "official" explanation of what is going on here, but one can make an unofficial guess. The bulk of these iPhones have been hacked and are being used overseas. This is especially so in China. According to my industry friends in Shanghai and Beijing, iPhones are quite prevalent in Chinese electronics stores and the pricing is roughly equivalent to a US sold iPhone at roughly US$474 ( 3,400 RMB).

The financial impact is significant. Apple receives a revenue share for services and airtime for the Apple iPhone. Industry estimates are that it is roughly US$ 10 per subscriber per month. At a million AWOL phones, that translates into roughly $204 million in unrealized revenues not hitting Apple's top line. Conservatively speaking let us assume that 75% of these have gone offshore, with 25% being hacked and held in US hands. Assume a US iPhone user has an ARPU of US$ 100 per month. That translates conservatively into a half a billion dollars or more of unrealized revenue by ATT.

Now, consider what is being lost in the UK. According to the Financial Times, O2 has sold only 190,000  iPhones since it launched. That's 47,500 potentially AWOL and applying the same revenue share, approximately US$ 5.7 million in unrealized present revenues with projections growing to $23 million for all of 2008.  Alot of iPhones are being sucked into China's Middle Kingdom.

Recall we've been covering the China Mobile iPhone saga with on 11/27/07 with  "China Mobile Selling iPhones?", as well as at Mobile Messaging 2.0 where I am a featured columnist, and in my January 30, 2008 post "Apple Rides the Dragon: NOT!" . Stay tuned, the story isn't over yet.

OK. Now its your turn. Do you think the these are significant numbers? Is China being blamed yet again for a consumer electronics phenomenon? Comments are very welcome, please! If you liked the post, please dig, delicous, or stumble to spread the word! Thanks for your readership.

Comments

[deepak purchanda]

Hey I liked your article very much. Few days back I happened to see Google Adwords for cracking code on iphone. The service provider charges you just 150$ in India to crack the code. Why is not apple taking any action against such service providers. Isn't it illegal?

Also, I wanted to ask you if you done any review on Moto Q 9h the recent entry of Motorola in business smartphones...what all are the useful softwares available for the phone...

[Free iPod Touch]

Ouch a loss for Apple? :(