iPhone Kills Carrier Profits

Apple's profits are soaring, but at the expense of cell phone carriers who subsidize iPhone sales. AT&T, Verizon, and Sprint all pay about $600 for iPhones that they resell to customers for $200. The carriers figure they'll make up the loss with monthly cell phone bills—but Verizon and AT&T stock have both dropped, and Sprint's losses have ballooned by 40%, since they started selling the coveted iPhone, the Los Angeles Times reports.

"The AT&T wireless model is broken," says one analyst. "AT&T is basically subsidizing Apple's revenues and profit growth." Worse for carriers, competition is forcing them to give customers "early upgrades" and sell iPhones at reduced rates after only one year. One bright spot: Android phones like the Droid Razr and Samsung Galaxy S 4G have sold better after recent ad blitzes. "It depends what you like," says a Verizon clerk in LA. "Do you like the Androids' faster download times, bigger screens, longer battery life and better cameras? Or do you like Apple?" (More iPhone stories.)