Apple to Expand iPhone 3GS' Life in Prepaid Markets, says Jefferies

By Alexandra Burlacu | May 23, 2012 10:15 AM EDT

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Apple has never been a big fan of the prepaid phone market, or at least not until now. According to one analyst, this is about to change soon, as the Cupertino, California-based company is considering broader horizons.

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In a research note on Sunday, May 20, Jefferies analyst Peter Misek claimed he has heard Apple signed "with a major global distributor" in a deal to make the three-year-old iPhone 3GS available in prepaid markets worldwide and developing markets, Forbes reported. According to the analyst, the phone will be re-priced at the wholesale level, dropping the $375 price tag down to a $200 to $250 price range.

While most people assumed that once the sixth-generation iPhone comes along, Apple will phase-out the old iPhone 3GS, but the new research note indicates the old handset may still have some life left after all. In the United States, AT&T currently gives the iPhone 3GS for free, with a two-year contract. The price without a contract is $375. "That new partnership is intended to push the iPhone 3GS in prepaid markets around the world, and expand channels for the iPhone 3GS in developing countries," notes Apple Insider.

Re-pricing

If Misek's claims prove to be correct, after the launch of the sixth-generation iPhone (iPhone 5, maybe?) Apple will likely phase out the 3GS model out of the U.S. market. The iPhone 4 would take its place, i.e. AT&T would offer the iPhone 4 for free with a two-year contract, and the iPhone 4S, in turn, would get a $100 price tag with a contract.

Apple is expected to launch its next-generation iPhone this fall, with most reports pointing to an October release. Considering Apple's current strategy of discounting previous-generation devices, this re-pricing makes sense. On the other hand, if the iPhone 4 replaces the 3GS model as Apple's entry-level smartphone, many expect the three-year-old iPhone 3GS, launched in 2009, to approach the end of its life.

As Apple Insider points out, however, emerging markets are a huge potential source of untapped customers. Earlier this year, one analysis found that emerging markets have 14 times as many people between the ages of 25 and 34, a.k.a. the "smartphone friendly" age group, than Western Europe and North America.

Furthermore, The Wall Street Journal published a report earlier this year claiming that cheap Android phones were "crushing the iPhone" in the European countries most affected by the debt crisis. In those European markets, most users prefer to pay the full, unsubsidized price for smartphones rather than signing a contract, so Apple might just strike gold with this new strategy, if it proves to be real. Will the iPhone 3GS be completely phased out and forgotten, or will it shine in markets where Apple has yet to make a significant impact? Leave your comments below.

 

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