27% of U.S. iPhone buyers unlock, not using AT&T

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27% of U.S. iPhone buyers unlock, not using AT&T

BEIJING, Feb. 3 (Xinhuanet) -- A "stunning" number of people -- more than a quarter -- who purchased Apple's iPhone are using them on wireless networks other than AT&T's, placing pressure on the company's business model, an analyst said.

Bernstein Research analyst Toni Saccon undefined undefinedaghi said analysis of sales numbers from Apple and AT&T Inc. revealed about 1.45 million phones were "missing in action" at the end of 2007.

About 480,000 of those were believed to be held by AT&T as inventory, leaving another 1 million phones, or 27 percent of the total, that Sacconaghi said were "unlocked" so they could work on non-AT&T networks.

Apple executives said last week the number of unlocked phones was "significant" but declined to give an estimate. Most analysts had estimated the portion of unlocked phones at under 20 percent.

The higher number is worrying for Apple because the company receives a cut of AT&T's iPhone service fees, revenue that carries a high gross margin and has fueled optimism over its earnings potential.

For example, Sacconaghi said, if Apple hit its sales goal of 10 million iPhones by the end of fiscal 2008 but 30 percent of those don't result in any carrier payments, its revenue and profit would be 500 million U.S. dollars and 37 cents per share lower than expected.

If Apple cracks down on unlocked phones it could preserve its high margins but miss its sales target, whereas allowing them could erode profitability and make it tough to sign more carriers to similar revenue-sharing deals.

(Agencies)

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