Heavy subsidies in the face of Apple's success means margins are being squeezed.
Reuters reports that AT&T, Spint Nextel and Verizon Wireless are all expected to confirm a drop in profit margins for 3Q08.Analysts reckon this is for two reasons - increased subsidies on smartphones as operators battle/embrace the iPhone effect, and weaker consumer demand for data services.
AT&T is expected bear the brunt of the impact, with JPMorgan forecasting a mobile profit margin of 36.1 per cent, compared to 42.1 per cent in 2Q08. Meanwhile, the bank says Verizon's mobile margins will fall to 43.8 per cent from 45 per cent.
JPMorgan analyst Michael McCormack said: "We expect the success of AT&T's 3G iPhone to pressure results at Verizon Wireless."
Meanwhile, UBS analyst John Hodulik said: "Subsidies have been creeping up anyway but the new iPhone and the efforts to defend against it have likely brought it to a new level."
Advertisement
