No More Subsidies for Apple?

Much of Apple’s (NASDAQ:AAPL) success in the U.S. depends heavily on carriers subsidizing their high-end phones, but will this soon be a thing of the past? While others have yet to follow suit, T-Mobile USA, a subsidiary of Germany’s Deutsche Telekom (DTE.DE) will be offering interest-free financing this year instead of subsidizing smartphones. AT&T (NYSE:T) CEO Randall Stephenson approves, and adds, “It’s something we’re going to be watching.”

According to The Wall Street Journal, smartphones now account for a full 89% of contract phone sales in the U.S., and more users are getting their hands on iPhones than ever before thanks to Apple allowing carriers to sell discounted older models.

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However, market conditions are changing. ABI Research reports that Apple’s annual shipment growth was just 46% in 2012, down from 96% in 2011. As mobile devices senior analyst Michael Morgan observes, “Unless Apple is willing to trade iPhone margins for low cost iPhone shipments, Apple’s handset market share will become dependent on customer loyalty.”