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More regional carriers offer iPhone, again at discount

Thu, 04/05/2012 - 1:16pm
Maisie Ramsay, Wireless Week

The iPhone arrived at two more regional wireless operators yesterday, shortly after nTelos announced it would carry the sought-after device.

Wisconsin-based Cellcom and Alaska’s General Communication Inc. (GCI) said in separate releases they would begin selling the iPhone 4S on April 20 at a $50 discount from their top-tier competitors.

"The demand for iPhone is incredible, and our customers have been asking us for this amazing device," Cellcom CEO Patrick Riordan said. "We are thrilled to be able to deliver iPhone 4S to our customers."

The iPhone could help the smaller companies retain customers who may have been otherwise lured away to larger providers that carry the device, but the strategy comes at a risk, said ABI research analyst Mike Morgan.

“The iPhone is proven; it can draw people to a network," he said. "And yes, it comes at a price."

That price includes expensive, profit-margin-eroding subsidies; potentially onerous volume commitments; and a surge in data traffic generated by the bandwidth-hungry device.

"It's no mystery that Apple demands a lot of the operator if they're going to be carrying the handset," Morgan said. Sprint, for example, is paying $15.5 billion to carry the device. "That can usually be considered a pretty big risk."

But the benefits of the iPhone – customer loyalty, satisfaction and revenue from pricier service plans – could be critical to regional providers straining to defend their businesses against competitors several times larger than themselves.

Financial terms of the agreements between Apple, GCI, nTelos and Cellcom were not announced.

The regional providers are apparently out to undercut larger operators with competitive pricing $50 cheaper than AT&T, Verizon Wireless and Sprint.

The iPhone 4S retails for $150 for the 16 GB model at all three providers, with the 32 GB model offered at $250 and the 64 GB going for $350. They are also selling the iPhone 4 for $50. Customers must sign a two-year agreement and data plan.

C Spire Wireless, the first regional provider to sell the iPhone, also offers the iPhone 4S for $50 less than the top-tier operators, but it offers a less substantial discount on the iPhone 4.

GCI said it will offer the iPhone 3GS for free with the requisite two-year contract and data plan. It is so far the only regional provider to offer the older model of the device.

Breaking larger operators’ exclusive hold on the iPhone has been a top agenda item for the Rural Cellular Association (RCA).

Steve Berry, president and CEO of the RCA, said in a written response that the “iPhone’s success clearly defines the importance of devices and smartphones for carriers to be competitive in a 4G world.”

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