No More Subsidies for Apple?

Much of Apple’s (NASDAQ:AAPL) success in the U.S. depends heavily on carriers subsidizing their high-end phones, but will this soon be a thing of the past? While others have yet to follow suit, T-Mobile USA, a subsidiary of Germany’s Deutsche Telekom (DTE.DE) will be offering interest-free financing this year instead of subsidizing smartphones. AT&T (NYSE:T) CEO Randall Stephenson approves, and adds, “It’s something we’re going to be watching.”

According to The Wall Street Journal, smartphones now account for a full 89% of contract phone sales in the U.S., and more users are getting their hands on iPhones than ever before thanks to Apple allowing carriers to sell discounted older models.

However, market conditions are changing. ABI Research reports that Apple’s annual shipment growth was just 46% in 2012, down from 96% in 2011. As mobile devices senior analyst Michael Morgan observes, “Unless Apple is willing to trade iPhone margins for low cost iPhone shipments, Apple’s handset market share will become dependent on customer loyalty.”