Apple’s A-ha! Moment
A few weeks back Apple became the world’s most profitable mobile phone maker, dethroning Nokia. A company that makes just one phone model which it has been selling for just over two years, beat another that has been selling mobile phones since the 1980s, offers dozens of different models and sells over 100 million phones every quarter. Each iPhone generates as much profit for Apple as fifteen of its phones do for Nokia.
One Ring To Hold Them All
A fundamental reason for the iPhone’s popularity is the fact that its operating system was created ground up by Apple as a “platform” that supports third party applications. Apple was the first to realize that one day the tail, i.e. applications, would wag the dog, the phone. There are over 100,000 applications available for the iPhone for its users to download.
More Future Proof
Consumers usually start thinking their phones as obsolete within a year or two. But Apple works hard to keep the iPhone platform current, by developing and sending remote updates even to all existing phone users. So while a person using a two-year old Nokia phone may grudgingly admire the latest features on its newer models, the majority of features between a new and a two-year old iPhone will largely be the same.
The “iPhone Tax”
Mobile operators buy the iPhone from Apple for $600-$700 but sell it to customers at $100-$200. Many hope to recover the difference in price from locked-in subscribers over a 2-3 year period. But according to research conducted by Strand Consult many operators end up losing money on iPhone customers. For instance, SingTel lost around 3 percentage points from their EBITDA margins in Singapore and Australia. AT&T, the only operator that offers the iPhone in the US has a current profit margin of 37.5 percent versus 46.2 percent for rival Verizon.
(This story appears in the 04 December, 2009 issue of Forbes India. To visit our Archives, click here.)