Inexplicably, the iPhone—and Apple in general—appear immune to the paranoia over the economy. Almost 2 million new iPhone 4 sales in three days says it all.
Apple sold 1.7 million iPhones in the first three days of availability. The iPad recovered from its shaky start (comparatively) to give AT&T more than three million iPad sales in the first 80 days since its release.
Investors see all the promise for Apple and have rewarded its stock accordingly. But what about AT&T? The growth in customers has been good, but not great when compared to the device sales. Seventy-seven percent of iPhone 4 sales are coming from existing Apple users and 7 percent upgrade from other phones. However, 16 percent of new iPhone purchasers are takeaways—customers stolen from other service providers and locked in for at least two years. That’s good revenue assurance.
Striking while the exclusivity iron is hot is the best revenue management AT&T can currently employ. It won’t last forever, but the company added almost two million subscribers, a quarter of which are locked in with contracts, and the best revenue news here is that operating margins on its $40 billion in revenue held at 17.6 percent.
Still, Apple will continue to be the big revenue winner in this equation even as the exclusivity ends and Verizon and others begin to get it on the action. Oppenheimer analyst Yair Reiner said the addition of Verizon as an iPhone reseller would add 12 million more phones to the U.S. market, bringing Apple a sweet $7 billion in incremental revenue. It will also add more than $3 a share in incremental EPS.
So for as long as it lasts, companies such as AT&T, Verizon and Apple have to play the revenue management game with the cards they are dealt, and the deck is stacked with strategies for volume unit sales. When the device hoopla dies down, the companies can get back to managing revenue with the tools of efficiency, verification and analysis that protect revenue for the long run.
