Contract-Free Budget iPhone Will Land in September

Apple iPhone 4A new report to investors by Deutsche Bank AG's (ETR:DBK) Chris Whitmore claims that Apple Inc.(AAPL) will offer a budget iPhone which retail for between $300 and $500 USD without a contract. Buyers will purchase prepaid calling cards for the device.

According to Mr. Whitmore, the budget iPhone is what will be likely called the "iPhone 4S", not the fifth generation model. Many previously claimed to have inside knowledge that the fifth generation model would be named the "iPhone 4 GS" or "iPhone 4S". The budget model would reportedly launch in September besides a fifth generation model (presumably named the iPhone 5).

Mr. Whitmore envisions the phone priced at around $350 USD -- a mark he said would not hurt profitability. He writes, "Apple shipped (about 87 million) units over the past 2 years which suggests it has reached only 6% penetration of its current addressable subscribers. Looking forward, we believe Apple has room to run both in terms of greater market penetration as well as incremental carrier additions going forward."

He compares the iPhone 4S to the current $230 USD iPod Touch, which features a 38 percent profit margin, versus the 70 percent profit margin on the current $650 USD unlocked iPhone. He estimates that with an RF module the iPhone 4S would deliver a profit margin of approximately 53 percent at $350 USD.

A cheap, unlocked handset would be essential in the greater Asian and African markets, where less than 20 percent of phones are under contract.

Everyone seems to be in agreement that a cheap, unlocked iPhone is incoming. What they can't seem to agree on is the form factor. Mr. Whitmore and The New York Times suggest a full form factor, similar to the current iPod Touch. By contrast Bloomberg and The Wall Street Journal claim the iPhone may be a mini version of the current form factor.

Source: DailyTech

Tags: Apple, iPhone

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