IPhone May Cost Verizon $5 Billion in Subsidies in First Year

Verizon Wireless, set to get Apple’s iPhone this month after four years of waiting, may spend $3 billion to $5 billion to subsidize customer purchases of the device this year, cutting into profits, analysts say.

Verizon, the largest U.S. wireless carrier, will announce that it’s getting the device at an event in New York Jan 11 and plans to put it on sale later in the month. While the smartphone will help Verizon add more subscribers this year than rival AT&T, currently the exclusive US carrier for the iPhone, it will also crimp profits, said John Hodulik, an analyst at UBS AG. Hodulik said Verizon may sell 13 million of the devices with an estimated $400 subsidy this year, which would add up to a total of $5.2 billion.