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Leap estimated to pay Apple $150 subsidy for contract-free $500 iPhone 4S


By Neil Hughes

Published: 03:11 PM EST (12:11 PM PST)

For customers who buy a $500 contract-free iPhone 4S through carrier Cricket Communications, its parent company, Leap Wireless, is likely to still pay a subsidy of about $150 to achieve that price.

Currently, a contract-free 16-gigabyte iPhone 4S through the Apple Store or ATT costs $649. That lead analyst Brian Marshall with ISI Group to estimate that Leap is subsidizing the phone by about $150 to offer it at a contract-free price of $500.

Of course traditional carriers like ATT, Verizon and Sprint offer much heavier subsidies to get the price of the 16-gigabyte iPhone 4S down to $199, but that price comes with a two-year service agreement. Cricket Communications is a prepaid carrier that advertises “unlimited” service at a price of $55 per month.

Though the $500 iPhone 4S through Cricket carriers a higher up-front cost, Marshall estimates the carrier’s relatively inexpensive $55-per-month plan will allow customers to break even in about six months when compared to a traditional carrier’s $199 subsidized price and higher monthly payments.

For example, comparable voice and data plans from ATT and Verizon can cost a single user more than $100 per month, so a savings of $50 per month with Cricket would amount to $300 in savings in the first six months. That $300 amount also happens to be the price difference between a 16-gigabyte iPhone 4S at Cricket versus traditional U.S. carriers.

Cricket 2

Because of the low-priced monthly prepaid plan, Marshall believes the iPhone on Cricket could gain traction among customers, “depending on quality of service.” If so, it would represent sales in a new, previously untapped market for Apple.

Leap announced earlier Thursday that Cricket would begin offering the iPhone 4S and iPhone 4 starting June 22. The relatively small carrier with 6.2 million customers offers “unlimited” data plans under a “fair usage policy” that allots 2.3 gigabytes of data per month.

Cricket’s voice and data services operate on a 3G CDMA network, like Verizon and Sprint. Its parent company, Leap, owns the seventh-largest wireless telecom network in the U.S., and offers coverage in all 50 states.

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