Mobile phone companies who shunned the iPhone 4 and have been progressively moving away from subsidizing smart phones may be forced to come back to that market as the iPhone 5 comes to market today.
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When the iPhone 4 was announced, European carriers took up the slack from those who didn’t offer it, putting non-subsidizers at a competitive disadvantage.
This time, there is such pent-up demand for the new iPhone that carriers may not be able to afford to stay away. This could set off a wave of price wars that would benefit would-be owners of the new Apple device.
Carriers who have been winding down their smartphone subsidies have been doing so to save money. This time, they would lose too much market share if they don’t participate.
Speculation is the broader subsidization could last for a couple of months.
Failing to offer the iPhone could mean losing the opportunity to grab customers seeking new service providers. In a soft economy, that loss of market share could have long-lasting repercussions and could even drive some carriers out of business.
One new French company, Iliad, will offer steep discounts on calling plans but has decided not to subsidize the new iPhone, i.e. it will charge customers the full price of the phone.
Those carriers whose profit margins are suffering continue to face increased regulatory pressures that may incentivize them to subsidize in the short term. Projections are that phone packages with subsidized handsets will continue to make up the bulk of the market.
The iPhone goes on sale at 10 a.m. Pacific Time at San Francisco’s Yerba Buena Center for the Arts.