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A quarter of Apple's iPhones unlocked in US

More than a quarter of people who bought Apple Inc's iPhone are using them on wireless networks other than AT&T's, the exclusive iPhone carrier in the US, a "stunning" number that will pressure the company's business model.

  • Reuters
  • Published: 23:39 January 29, 2008
  • Gulf News

San Francisco: More than a quarter of people who bought Apple Inc's iPhone are using them on wireless networks other than AT&T's, the exclusive iPhone carrier in the US, a "stunning" number that will pressure the company's business model.

Bernstein Research analyst Toni Sacconaghi said analysis of sales numbers from Apple and AT&T Inc revealed about 1.45 million phones were "missing in action" at the end of 2007.

About 480,000 of those were believed to be held by AT&T as inventory, leaving another million phones, or 27 per cent of the total, that Sacconaghi said were "unlocked" so they could work on non-AT&T networks.

Apple executives said last week the number of unlocked phones was "significant" but declined to give an estimate.

The higher number is worrying for Apple because the company receives a cut of AT&T's iPhone service fees, revenue that carries a high gross margin and has fuelled optimism over its earnings potential.

For example, Sacconaghi said, if Apple met its sales goal of 10 million iPhones by the end of fiscal 2008 but 30 per cent of those don't result in any carrier payments, its revenue and profit would be $500 million lower than expected.

If Apple cracks down on unlocked phones, it could hold its margins but miss its sales target, whereas allowing them could erode profits and make it tough to sign more carriers to similar revenue-sharing deals.

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