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AT&T slammed for shamelessly whining about smartphone subsidies

AT&T Smartphone Subsidies Criticism

Does it seem just a tad ridiculous that a company that regularly crows about its strong revenue and earnings growth is also complaining about the “unaffordable” burden of smartphone subsidiesMonday Note’s Jean-Louis Gassée certainly seems to think so, which is why he’s penned a long rant about AT&T and other wireless carriers being “shameless” in their “whining” about the costs of subsidizing smartphones. Gassée’s argument is very simple: Smartphones are helping carriers post significantly higher average revenues per user (ARPU) than they’d be posting otherwise, which more than makes up for the burden of subsidizing the devices when selling them to their customers.

“Assuming [carriers] bleed an extra $200 when subsidizing an iPhone (or a top Samsung handset, now that the Korean giant followed suit), they only need $8/month in extra subscriber revenue from the ‘offending’ smartphone,” he says. “And yet here we are: Randall Stephenson, AT&T’s CEO, predicts the end of subsidies because  ‘wireless operators can no longer afford to suck up the costs of customers’ devices.'”

To get a sense of what Gassée is talking about, consider that AT&T in its last earnings report said that ARPU generated by its smartphone subscribers was more than twice the ARPU generated by its non-smartphone subscribers. Also consider that AT&T explicitly says in its latest 10-Q filing that it expects “continued growth in data services ARPU as more subscribers use smartphones and data-centric devices and continue to choose higher-priced usage-based data plans.” What’s more, the carrier is also projecting that its non-smartphone ARPU will keep decreasing “due to lower access and airtime charges, triggered in part by postpaid subscribers on our discount plans and lower roaming revenues.”

Taken all together, it seems as though smartphone users are actually doing the heavy lifting in helping carriers generate revenues, which should more than make up for any lavish subsidies carriers spend to bring them onboard.

“This leaves carriers with conflicted feelings,” Gassée concludes. “They like their iPhone salesman but, like short-sighted bosses who think their top earner makes too much money, they angle for ways to cut commissions down.”

Prior to joining BGR as News Editor, Brad Reed spent five years covering the wireless industry for Network World. His first smartphone was a BlackBerry but he has since become a loyal Android user.