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Analysts Expect Record-Breaking iPhone 5 Sales, but Will It Help Mobile Carriers?

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Mac sales may break a record for the September quarter and Apple goes after Polish website.

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MINYANVILLE ORIGINAL With the likely launch of the iPhone 5 today, how many iPhone 5s can Apple sell in a weekend?

According to analyst Brian White of Topeka, 5 million to 5.5 million iPhones could be sold in the first three days of the launch, assuming that the rollout occurs in seven countries and no supply chain issues occur. Based on the performances of past Apple smartphones, this does not seem implausible. The iPhone 4S received over 1 million pre-orders in the first 24 hours of its launch, and White thinks Apple will see 1.3 million to 1.5 million pre-orders for its new smartphone.

Tavis McCourt, a director at Raymond James, points out that Apple sold 4 million iPhone 4Ss in its first weekend last year, and he expects 5 million to 6 million iPhone 5s to be sold. Analyst Gene Munster of Piper Jaffray has one of the higher estimates, projecting 6 million to 10 million iPhone 5s to be sold on the first three days of the launch.

Pricing Wars

All the sales from an iPhone 5 launch will likely spark a pricing war between wireless carriers in the US and Europe. Apple's iPhones have become an important source of profits for carriers such as AT&T (T) and Verizon Wireless (VZ). Vodafone (VOD) once skipped out on subsidizing a new iPhone in Europe, and customers switched to other carriers that offered the smartphone at a lower price. The carriers pay a large amount for the smartphones and then sell them at a discounted price to subscribers. Companies like Verizon make up the difference of the phone subsidy to customers by locking subscribers into higher phone bills under two-year contracts.

According to the Wall Street Journal, the companies have decided to strengthen their bottom line by charging subscribers new upgrade fees to profit off customers who have been saving for the new iPhone. When 12% of AT&T's customers upgraded to the iPhone 4S in last year's fourth quarter, wireless profit margin dropped by a third to 29%. In the second quarter of this year, only 6% of AT&T customers upgraded, and the company's profit margin increased to 45%.

Some carriers also hope that the new iPhone will result in more customers using the Long Term Evolution, or LTE, networks. Also called 4G, these networks have connections speeds up to 10 times faster than 3G, and carriers, such as Verizon and AT&T hope to squeeze more out of customers who use the faster connection to consume more data. The average 3G device owner has used 500 megabytes of data per month in 2012, while the average LTE device owner has used 1.2 gigabytes of data per month. Since 2007 when the iPhone was introduced, data revenue for carriers has increased from $5.2 billion to $17.1 billion for the second quarter of this year. Companies like Sprint Nextel (S) will not benefit from increased data revenue because it offers unlimited data plans.

European companies such as Vodafone and Telefonica SA (TEF), which moved away from phone subsidies for customers, may need to offer them again to remain competitive against other carriers. One out of every five smartphones sold in Europe is an iPhone according to JPMorgan (JPM). Telefonica in Spain offered smartphones at full retail price, or about 600 euros, in March of this year, and by June, the Madrid-based company had lost 200,000 mobile phone lines in Spain.
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