Monday, February 12, 2007

Apple may see royalties from Cingular subscriber growth

Apple could see added perks from its exclusive iPhone distribution deal with Cingular, such as royalty payouts for helping to grow the wireless carrier's subscriber base.

According to Citigroup Investment Research analyst Michael Rollins, the Cupertino-based iPhone maker could receive as much as $250 - $300 for each subscriber it helps lure to Cingular's network beginning this June. The payouts would likely come over the life of the service contracts and represent very high-margin revenue for Apple, he said.Rollins noted that the deal would be similar to an arrangement already in place between Cingular and Radio Shack, where the electronics retailer earns roughly $300 in total for closing new service contracts.

Although the terms of Apple's exclusive deal with Cingular have not been made public, the wireless carrier may be hoping to leverage such an incentive program with Apple to help offset expected declines in subscriber growth over the next few years.

After rising by an average of 25 percent in 2004, 2005 and 2006, global mobile phone subscriber growth is expected to fall to 12.8 percent in 2007, according to a research report released this week by iSuppli. The firm said the slowdown will continue in the years to come, with subscriber growth dropping to 9.6 percent in 2008, to 7 percent in 2009 and to 5.7 percent in 2010.

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