Attention Apple (AAPL) Carriers: If You Cut Smartphone Subsidies, You Cut Your Heart Out
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Rating Summary:
44 Buy, 29 Hold, 9 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
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Any Apple (NASDAQ: AAPL) shareholder still worried about subsidy cuts should rest assured that they are here to stay for a while.
In some interesting commentary after the closing bell Monday, BMO Capital analyst Keith Bachman noted that foreign carriers that did away with smartphone subsidies paid a heavy toll.
In April, both Vodafone and Telefonica in Spain cut subsidies on new smartphones, while Orange continued to offer subsidy levels. While the Spanish economy is clearly having a negative impact on all providers, Vodafone has lost over 600,000 net subscribers since April and Telefonica lost 570,000 net subscribers in April and May. Meanwhile, Orange gained 23,000 net subscribers in May.
Vodafone will bring back smartphone subsidies until September 15, while Telefonica will offer a promotion to Orange customers for a free handset and any penalty charges for early termination, the analyst noted.
"We believe the results in Spain indicate that consumers value the reduced cost of handsets via subsidies, even in mature subscriber populations," Bachman said. "However, consistent with our past comments, we believe Vodafone, as well as other carriers, will continue to try to improve profitability through subsidy cuts or other means, longer term. That said, we believe the developments in Spain are positive for Apple and reduce the likelihood of lower subsidy payments in other areas in the near term, particularly right in front of a new iPhone launch."
Bachman reiterated his Outperform rating and price target of $680 on Apple.
For an analyst ratings summary and ratings history on Apple click here. For more ratings news on Apple click here.
Shares of Apple closed at $585.16 yesterday.
In some interesting commentary after the closing bell Monday, BMO Capital analyst Keith Bachman noted that foreign carriers that did away with smartphone subsidies paid a heavy toll.
In April, both Vodafone and Telefonica in Spain cut subsidies on new smartphones, while Orange continued to offer subsidy levels. While the Spanish economy is clearly having a negative impact on all providers, Vodafone has lost over 600,000 net subscribers since April and Telefonica lost 570,000 net subscribers in April and May. Meanwhile, Orange gained 23,000 net subscribers in May.
Vodafone will bring back smartphone subsidies until September 15, while Telefonica will offer a promotion to Orange customers for a free handset and any penalty charges for early termination, the analyst noted.
"We believe the results in Spain indicate that consumers value the reduced cost of handsets via subsidies, even in mature subscriber populations," Bachman said. "However, consistent with our past comments, we believe Vodafone, as well as other carriers, will continue to try to improve profitability through subsidy cuts or other means, longer term. That said, we believe the developments in Spain are positive for Apple and reduce the likelihood of lower subsidy payments in other areas in the near term, particularly right in front of a new iPhone launch."
Bachman reiterated his Outperform rating and price target of $680 on Apple.
For an analyst ratings summary and ratings history on Apple click here. For more ratings news on Apple click here.
Shares of Apple closed at $585.16 yesterday.
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