Why Are Apple and Sprint CUTTING iPhone Prices?

Sprint (NYSE:S) is now giving $100 pre-paid gift cards to new iPhone 4S buyers, a deal Apple (NASDAQ:AAPL) will be matching by offering an Apple Store credit for the same amount, according to a Business Insider report.

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The incentive is the second in as many weeks from Sprint, and comes ahead of an expected September 12 launch of the next-generation iPhone.

Sprint last week cut the price of the iPhone 4S to $149, not including a $36 activation fee waiver. Other sellers, including Target (NYSE:TGT) and Best Buy (NYSE:BBY), quickly followed suit with their own discounts. Apple subsequently instructed its stores to match the discount prices being offered by major retailers, limited to $49 for the iPhone 4 and $149 for the iPhone 4S.

Discounting of the existing iPhone indicates that a new model is likely on the way and retailers are trying to clear inventory that will soon be made obsolete.

The new $100 American Express pre-paid card, on top of the $149 discount, activation fee waiver, and free shipping, means Sprint has effectively cut the cost of buying an iPhone 4S to $50. However, there are stipulations — the gift card bonus is online only and lasts until August 26, and when Sprint’s sale ends, Apple too may discontinue its offering.

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