iPhone 8 Promotions Will Offset A Massive Price Tag: Analyst

iPhone 8 Promotions Will Offset A Massive Price Tag: Analyst
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We’ve heard rumors that Apple’s tenth anniversary iPhone could be priced as high as $1,000 or even more, but one analyst is attempting to reassure everyone. He expects there to be so many iPhone 8 promotions that even a $1,000+ price won’t keep consumers from buying it in droves.

He didn’t actually mention the rumor about the price tag reaching or even surpassing $1,000, but one of the great debates about such a high price is whether consumers will be willing or able to afford it. So if Apple is truly going to price the phone so high, mobile carriers will have to step in and take on some of that financial burden.

Current weakness hints at pent-up demand

In a note to investors dated July 5, Nomura Instinet analyst Jeffrey Kvaal said his checks continue to point to weak demand for the iPhone. However, that’s not exactly surprising, given how widespread the rumors about the iPhone 8 are. He explained that mobile carriers in the U.S. are indicating that upgrade rates for the iPhone remain at record lows, with carriers that have higher iPhone penetration rates reporting lower absolute upgrade rates.

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He added that AT&T has the highest penetration of iOS users, and its absolute upgrade rate was the weakest, and its upgrade rate was also the steepest, with a decline of 22%. Further, he said that T-Mobile has the lowest penetration of iOS, and its absolute upgrade rate was flat year over year, giving it the best performance among major U.S. carriers.

The weakness hasn’t eased as the launch of the rumored iPhone 8 approaches. Thus, he describes current iPhone demand as being weak but steady. He feels that demand in China is also steady as demand for the iPhone 7 remains strong and offsets slowing sales of older models. He added that the current softness backs up his belief that Apple will beat consensus estimates in the December quarter.

U.S. carriers planning “assertive” iPhone 8 promotions

Kvaal’s checks indicate that iPhone users in the U.S. are holding off on their upgrades until the more expensive iPhone 8 launches. He also said he believes carriers in the U.S. are planning huge iPhone 8 promotions to support the launch, and he continues to expect Apple to sell 87 million iPhones during the December quarter, including a “rich mix” of iPhone 8s.

He believes Sprint will offer the most aggressive iPhone 8 promotions because it predicted a 15% year over year increase in upgrades and is aiming for 1 million postpaid phone net adds. Kvaal believes that Sprint must be planning huge iPhone 8 promotions in order to support this massive growth.

He also expects T-Mobile to plan some big iPhone 8 promotions to remain competitive because it has often said that it prefers to have periods of high upgrade rates. And with Sprint and T-Mobile looking to expand their subscriber numbers using iPhone 8 promotions, he expects Verizon and AT&T to defend their respective turfs with their own promotions.

The analyst pegs the average selling price for the iPhone at $737 in the December quarter, compared to the consensus of $719. As such, it certainly seems like he isn’t expecting a $1,000 price tag, or perhaps only the model with the highest tier of storage will be priced that high.

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Michelle Jones is editor-in-chief for ValueWalk.com and has been with the site since 2012. Previously, she was a television news producer for eight years. She produced the morning news programs for the NBC affiliates in Evansville, Indiana and Huntsville, Alabama and spent a short time at the CBS affiliate in Huntsville. She has experience as a writer and public relations expert for a wide variety of businesses. Email her at [email protected]
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