In the midst of all of the talk regarding Apple releasing a smaller iPad to reach out to budget shoppers, one analyst has another idea on how the company could lower the slate’s cost to infiltrate the budget tablet market. Carrier subsidies.
Analyst A.I. Houriani, of Seeking Alpha, believes that Apple could sell a lot more iPads if it could convince carriers to absorb some of the tablet’s up front costs in exchange for multi-year contracts — similar to what they do with iPhones…
Houriani believes that if wireless providers can subsidize the $650 iPhone down to $199 ($149 in some cases) then they should have no problem giving the iPad a similar discount. He theorizes that Sprint could kickstart this revolution to help it snag customers from the competition.
“By subsidizing the iPad in conjunction with the iPhone, Sprint can create an Apple Ecosystem for its clients. Essentially, the ecosystem is the seamless integration of Apple products together that creates a lasting positive impression on the customer. From doing this, Sprint can promote increased sales in other areas of its business and help increase its bottom line through custom retention and new customer subscriptions…
…In the short run, the cost of subsidies will be extensive, but will pay itself over through the increased buzz over Sprint’s products and services. This will lead to other small carriers implementing the same strategy and, when it becomes a threat to AT&T and Verizon’s marketshare, they’ll have to implement the same strategy as well.”
Let’s do the math: if you sell a $629 iPad at $299, you’re essentially eating $330 up front. Assuming the subsidized tablet comes with a mandatory monthly $30 data plan (a fair average), it would take you 11 months to make your money back. If you’re doing two-year contracts, you might make some profit in the second year, less operating costs and other expenses of course.
But there’s a few problems with Houriani’s theory. For starters, Sprint isn’t an iPad partner — as in, the new iPad doesn’t work on Sprint’s network. And large subsidies aren’t exactly a popular topic with carriers at the moment.
But nevertheless, it’s an interesting idea. And it wouldn’t surprise me at all to see at least some carriers give iPad subsidies a trial run at some point in the not-so-distant future. The question is, would the move pay off?
Would you buy a carrier-subsidized iPad?