Apple’s retail stores will be an important element in selling the new iPhone cellular phone that Steve Jobs just announced at Macworld Expo in San Francisco. The ground-breaking phone will be available in June at Cingular’s 2,100 company-owned stores and kiosks, and at Apple’s 160 stores. The phones will also be available at both companies’ Web-based stores. Cingular is the largest U.S. cellular carrier, with 58.7 million customers. Selling the iPhone means that, before the June introduction date, Apple stores will be equipped with terminals allowing access to Cingular’s customer management software, and employees will be trained to handle the routine customer credit checks, credit card processing and phone activation tasks associated with selling a cellular phone. Many questions remain about how Apple and Cingular will share revenues from sales of iPhones and monthly service charges.
Apple authorized resellers will not be allowed to sell the new iPhone, and reportedly must meet certain qualifications to display and sell the Apple TV product. Cingular documents indicate that only the company-owned stores will be allowed to sell the iPhone, and not the 10,000 authorized agents.In addition to the premium phone cost, iPhone buyers will have to commit to a two-year voice and wireless data plan from Cingular. The cheapest voice plan is $34.99, and data plans for phones and PDAs range from $34.99 for 1 Mb of data transmission, to $49.99 for unlimited data. That would put the monthly cost of the iPhone at nearly $85 a year for unlimited data.
Cingular has over 241,000 national retail prepaid sales locations, but these outlets will also not be selling the high-priced iPhone. The company recently signed a 10-year agreement with Radio Shack to sell Cingular products and services. Radio Shack has 5,000 retail stores, and it’s clear they won’t be allowed to participate in the iPhone sales program.
Cingular continues to juggle integration of certain AT&T Wireless assets that it aquired in 2005, including retail stores. Cingular closed 600 stores during fiscal 2005 as part of their integration with AT&T, but also opened 130 new stores to provide better sales coverge.Cingular’s revenues from sales of phones, accessories and upgrades is about 11 percent of total revenues. However, the cost of equipment sales is about 15 percent of total operating expenses. That resulted in a net loss for the equipment sales operation during the quarter ending Sept. 30, 2006 of about $306 million.
The company’s annual report notes that some distributors purchase handsets and accessories from Cingular, nominally above cost. However, the company adds, “We generally sell handsets below cost to customers who purchase through direct sales channels, such as our company stores, as an inducement to customers to agree to one-year and two-year subscription contracts, to upgrade service or in connection with other promotions.”As a result, Cingular reports, “Revenues from equipment sales are more than offset by the related cost of equipment sales, resulting in a net subsidy to customers.”
More pertinent to its deal with Apple, Cingular says in its annual report that, as they continue to upgrade the network and introduce new data offerings, “We expect to see an increase in higher-cost, feature-rich handsets for both new and existing subscribers. As one of the largest purchasers of handsets in the U.S., we believe we will be able to purchase handsets at attractive volume-discounted rates.”
It’s not clear what type of agreement Apple and Cingular have signed or how they’re sharing revenues. Apple did not say if it is wholesaling the iPhone to Cingular for sales in their stores and authorized dealers, or if Cingular is charging Apple a fee for access to its computer network for completing purchases made at Apple stores. Also unclear is whether Apple will receive any portion of the monthly fees generated from sales made at Apple stores.
The retail stores will also have to cope with iPhone support, providing additional training to Geniuses on how to solve hardware and software problems with the phone, along with troubleshooting for Cingular’s network. This responsibility could be significant, since people who purchased their phones on-line or from Cingular could end up at an Apple store seeking a solution to their iPhone problems.
Sources have said the Apple will offer AppleCare service for the iPhone, indicating the level of satisfaction that the company apparently intends to maintain.In a related announcement, Synchronoss Technologies Inc. announced that their transaction management platform will be used for the activation and provisioning of iPhone customers by both Cingular and Apple. The company counts many cellular and VoIP carriers among its customers, including Verizon, Comcast, Level 3 Communications and Vonage. Cingular is the company’s oldest and largest customer, the Synchronoss says, and has forecast 2007 revenues at $100 million.
In a conference call, Synchronoss chief financial officer Lawrence Irving said that Apple was making a “substantial commitment” to insure the success of the iPhone. He said that non-disclosure agreements prevented the company from providing any other details of its deal with the two companies.
Read my complete review of the iPhone and Apple TV.
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No mention yet about the Apple’s European partner – cellular carrier; it is complicated indeed and we have no information about the situation here at all. We hope that Apple has started to plan a solution that will works in Europe, too.
What is true of this deal that with a background of shaking up greedy over priced and restrictive industries (i.e., recording and now movie TV) Steve has chosen to roll over and play their game. Does it make sense to you to sign a 2 year contract for a service that you do not know will function for you and have to pay them to leave their bad service? If so I have some bottom land in FL that I would like to sell you.
He could have sold unlocked phones you could have picked and chose the service without a contract could have voted with your feet if it did not work.
Paying for minutes before you use them is another scam, regardless of allowing roll over it is just a bad deal.
We have been sold out by the State and the Feds setting up a uncompetative system and now by Apple with a nice product with a noose attached to it. Further going back to the morbound AT&T is an oxymoron to begin with. Try their phone system and Ii challenge you to get a human to talk to about your problem.
Pay too much for a phone when there is a contract attached (don’t see any real rebate or functional discount here) is nuts.
Look for some hack to this phone to unlock it before you buy!!!
What I find offensive is that Apple signed a multi-year exclusivity agreement, leaving those of us on other networks out in the cold. Verizon is much better than Cingular in terms of service, and my entire family is on Verizon.
While I was at the show in SF yesterday and was blown away by the iPhone, it isn’t enough for me to switch carriers to an inferior service, which would also mean breaking an existing contract with Verizon.
Steve, what a major letdown.
I’ll be as nice as I can be on this one. Europe … no one cares.
Verizon … worst customer service of any company on the planet. As a Mac user who switched to T-Mobile — and therefore am out of luck for now on the iPhone — I was so disgusted with the way Verizon treated me and supported my platform that I say BOO-YA that it got shut out.
You and your entire family, Gkantz, need to switch. Until then, enjoy your ENVY, exclusively from Verizon Wireless. Home of the network, not the iPhone.
You are now legally able to unlock you phone (for the next three years), so though you might not get full functionality for something like the visual-voicemail, you could use an iPhone at other carriers that use GSM. [ifo-However, some advanced features might not work, including Visual Voice Mail, which Apple and Cingular say they co-developed.]
I work for Cingular Wireless. Internal memos put out on the company’s internal servers suggest that the iPhone will not be carried by the company’s 10,000 agent stores and offered only at company owned stores, cingular.com, and Apple stores.
This is pretty much a slap in the face for Apple customers/employees who don’t like Cingular nor want to sell their crappy overpriced service. I mean $50 for a data plan! Are you freakin’ kidding me?!?
People don’t want their Apple stuff mixed with a company like Cingular. Bad move!
Ugh. As a former Apple employee at a retail store, we were asked to put up with hell and high water. I think this might be the straw that breaks the camel’s back for a lot of current Apple employees. It’s not bad enough trouble shooting some idiots PC to get his shuffle to work, but now they have to deal with cell phone service?
Be kind to the folks next time you go to an Apple store… they aren’t paid nearly enough to put up with this.
“Apple stores will be equipped with terminals allowing access to Cingular’s customer management software, and employees will be trained to handle the routine customer credit checks, credit card processing and phone activation tasks associated with selling a cellular phone.”
Its this part that concerns me the most. So basically, Apple expects their employees to bite their tongues & sell Cingular service along with the iPhone in THEIR own retail stores by their (not Cingular’s) employees??? Not to mention, do all the garbage associated with setting up someone’s cellular account, signing/renewing contracts, etc. And with this being a multi-year deal, where does it end? Are they gonna have to learn all of Cingular’s rate/data plans, talk about how “great” Cingular service is, troubleshoot the network problems, etc?? Its a very slippery slope and you can see how it could ruin the whole “Apple retail experience.”
This is definitely gonna bring bad things to Apple & confuse customers as well. Apple is known for great customer service & Cingular is known for the worst. Bringing them together like this with a Cingular “entity” in the Apple retail stores is a bad idea.
I can see some of Apple’s retail employees quitting over this. I don’t blame them, I honestly would, too. If this is true, I seriously feel bad for them. They didn’t come to Apple to be pushing Cingular’s god aweful service.
I am a manager for Apple Retail. This speculation about how the phone and activation will be handled is shear specualtion and nothing more. There has been absolutely no discussion with the stores on how this will be handled. It’s 6 freakin months till we’ll even see the phone. Let’s all be patient and wait for the facts before we start reacting.
Your report is incorrect when you state 10,000 Cingular Authorized Agents. The Agents like the Apple Resellers will not be able to sell the phones. Only Apple and Cingular company owned stores will be selling the phone. Another case of where Apple is working hard to put resellers out of business.[ifo-Report corrected.]
BobK: If you are a manager for apple retail, shouldn’t you be most aware of policy and procedure? Apple employees are no to identify themselves when discussing matters of the company. End of story.
Nunya, Where did I identify myself … My statement is our public statement. Talk about something you understand …