Consumer Electronics
Why iPhone 7 Orders Are Soaring at T-Mobile and Sprint
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T-Mobile US Inc. (NASDAQ: TMUS) CEO John Legere said Tuesday morning that pre-orders for the new Apple Inc. (NASDAQ: AAPL) iPhone 7 and 7 Plus are the highest in T-Mobile’s history. Sales at Sprint Corp. (NYSE: S) were up 375% compared with last year’s sales.
This might be one of those chicken-and-egg quandaries: which came first, the two companies’ unlimited data plans or the new iPhone? By the calendar, of course, the unlimited data plans preceded the new devices by months. But if one carrier has noted a quadrupling of sales and the other is saying that sales have never been higher, then maybe the iPhone is the more attractive.
In any event the pronouncements from T-Mobile and Sprint are good news for Apple because iPhone sales generate nearly two-thirds of the company’s quarterly revenues. Apple already has forecast a third consecutive quarter of declining revenue and whether sales of the new iPhones can turn that around remains to be seen.
Apple itself will not report its first weekend pre-orders this year. The company said last week that first-weekend pre-orders are a better indicator of supply than demand. The official release date for the new phones is September 16, but Apple’s initial quotes of shipping two to three weeks after that date were soon pushed out to four to six weeks for some models, especially the new black and space black phones. That could mean no new iPhone until November.
A report at FierceWireless also notes how heavily promoted the new iPhones are, not only at T-Mobile and Sprint, but at Verizon Wireless Inc. (NYSE: VZ) and AT&T Inc. (NYSE: T) stores. All four carriers offer a free iPhone 7 with 32 gigabytes (GB) of memory to customers who trade in an iPhone 6 (or newer model) and agree to a 24-month service agreement. An analyst at BayStreet Research told FierceWireless:
These promotions are not zero down or free on contract where the service plan has a device payment built in. This is free as if you are bringing your own device to the carrier and only paying for service. Essentially, a consumer with an iPhone 6 or higher that is completely paid off can trade in their device with any of the big 4 carriers and receive a free 32gb iPhone 7 after 24 monthly billing credits, meaning their bill will not include a ~$27 a month charge for their device depending on carrier. This allows a customer who purchased an iPhone 6 under EIP [equipment installment plans] and paid it off after 24 months to enjoy paying nothing a month for their device but have a new iPhone 7.”
Some 19 million owners of iPhone 6, 6 Plus, 6s and 6s Plus could be eligible for this offer.
Apple stock traded up nearly 3% Tuesday morning, at $108.35 in a 52-week range of $89.47 to $123.82. The stock’s consensus 12-month price target is $123.66.
Remember, Apple gets paid the same, no matter what the carriers charge. If this sounds like a new suit of clothes on the old subsidized device model, your hearing is probably just fine.
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