Contracts With Apple Should Blunt Any Carrier Push-Back on iPhone Subsidies

The possibility of a decline in carrier subsidies for Apple’s iPhone has been top of mind for investors recently and partially responsible for the tumultuous few weeks the company’s shares have recently suffered. Question is: Will it happen? And according to a new analysis from CLSA, the answer is probably no — at least for the next 18-24 months.

Because, CLSA argues, the structure of Apple’s carrier agreements will prevent it from occurring. “We believe these are multiyear agreements which tend to stipulate subsidy policies up front,” CLSA analyst Avi Silver explains. “For the major carriers, we believe these agreements have most favored nation clauses so any offering from Apple to one carrier would have to be offered to the other. During the length of these multiyear agreements, we believe U.S. carriers would need permission from Apple to alter subsidy levels.” And if that’s the case, they’re obviously going to have a difficult time getting it. More to the point, that hypothetical most favored nation clause — if it exists — is going to make it tough to trim iPhone subsidies for a while.