Technology

How The Weak Apple Inc. iPhone 8 Sales Affected Telecom Carriers

The Apple iPhone 8 sales have been weaker than many expected. In fact, the iPhone 8 and 8 Plus weekend sales were a lot lower than the iPhone 7 and 7 Plus a year ago. Traditionally, the new iPhones prompt the telecom carriers to offer huge discounts, trade-in programs, and price cutting to get people to switch networks. Sometimes carriers run such promotions more than once to capitalize on holiday spending.

Apple iPhone 8 Sales
Image Source: Apple.com (screenshot)

Carriers to add fewer new subscribers due to weak Apple iPhone 8 sales

This time, potential buyers haven’t shown great interest in the iPhone 8 or 8 Plus. They rather prefer to hold out for the pricier and bigger upgrade iPhone X. The iPhone X will go on sale on November 3, though you will be able to pre-order the device starting October 27th. The carrier discounts and promotions on the iPhone 8 haven’t been that lucrative, which has affected the switching activity, says research firm Jefferies in its latest report.

Jefferies analyst Mike McCormack told investors that the weak iPhone 8 sales have dampened the September quarter new customer additions for telecom heavyweights. However, with the not-so-aggressive promotional campaigns, carriers would see better earnings than expected. The analyst added that the “rationality in promotions” and the “impact from recent hurricanes” would lead to a modestly lower upgrade activity.

McCormack revised down his estimates for T-Mobile from 900,000 to 635,000 new subscribers in the third-quarter. T-Mobile traditionally adds most new subscribers in a quarter. Sprint is now estimated to gain 165,000 new customers, down from the previous estimate of 175,000. Jefferies slashed the new addition estimates for Verizon from 247,000 to 243,000. The analyst expects AT&T to witness a loss of 129,000 subscribers during the September quarter. Jefferies did not mention the original forecast for AT&T.

It will boost carrier margins in Q3

It’s worth pointing out that these figures are only for mobile phone customers. They do not include other connections such as IoT or M2M. The research firm now expects Verizon to report 97 cents per share in Q3 earnings, up from the previous estimate of 95 cents. AT&T is expected to earn 76 cents a share, a one-cent increase from the previous forecast.

Sprint has the most aggressive iPhone 8 and 8 Plus upgrade program. It is giving customers a free new iPhone with a trade-in. However, Jefferies says it will have “little benefit” in terms of gross adds due to modest Apple iPhone 8 sales ahead of the iPhone X launch. Mike McCormack predicts Sprint would lose only 3 cents per share in September, which is better than his previous estimate of 6 cents a share in losses.

T-Mobile is the only major carrier for which Jefferies reduced the Q3 earnings estimates – from 59 cents to 51 cents per share. It’s not because of the lower Apple iPhone 8 sales, though. The research firm said T-Mobile’s September quarter earnings would be affected by higher equipment costs.

iPhone X could make up for the iPhone 8 numbers

The iPhone 8 and 8 Plus were announced on September 12. They landed in stores on September 22. Even before these handsets went on sale, Wall Street analysts predicted a tepid consumer demand due to limited updates, and the pending launch of the 10th-anniversary iPhone X. Above Avalon analyst Neil Cybart said the opening weekend iPhone 8 and 8 Plus sales were lowest since 2014.

The iPhone X could make for the weak Apple iPhone 8 sales when it comes out in November. However, its effect will be realized in the fourth quarter. Also, the iPhone X has been facing production issues due to low yield rates of the 3D sensors that support Face ID. It could limit the iPhone X availability during the holiday shopping season. Jefferies said a weaker than expected iPhone X launch “could further mute the upgrade cycle, limiting typical Q4 margin pressures.”

KGI Securities analyst Ming-Chi Kuo said a few days ago that the iPhone 8 and 8 Plus sales were stable rather than weak. Based on the iPhone 8 production estimates, the analyst said Apple was expecting a 50:50 split in demand between the iPhone X and iPhone 8/8 Plus. Of course, the iPhone 8/8 Plus launch weekend sales were lower than the iPhone 7/7 Plus, but that’s only because the iPhone X had been delayed by more than a month.

Data from research firm Localytics showed that the iPhone 8 Plus was twice as popular as the iPhone 7 Plus. In fact, the 8 Plus witnessed the strongest opening weekend adoption rate of any Plus-size iPhone. However, Ming-Chi Kuo did warn that the iPhone 8 and 8 Plus shipments might lose momentum as the iPhone X launch approaches.

Apple investigating iPhone 8 Plus battery issues

There have been half a dozen reports from around the world of the iPhone 8 Plus battery swelling out, and pushing the display panel out of its place. The reports of these incidents have come from Japan, Taiwan, Hong Kong, Greece, and Canada. An Apple spokesperson told media that the company was investigating the issues. It’s too early to say if it’s a serious battery problem like Samsung’s Galaxy Note 7. Samsung recalled, and eventually discontinued, the Note 7 after hundreds of reports of faulty batteries.

Apple makes tens of millions of iPhones every quarter, which means there could be a few isolated hardware issues. Some users had also faced similar problems with the iPhone 7 and 7 Plus last year.