On the Call: AT&T on the economics of the iPad

 

Associated Press, 01.28.10, 01:06 PM EST

NEW YORK --

AT&T Inc. is offering a new type of data plan for Apple Inc.'s iPad tablet computer, to go on sale in a few months.

At $30 per month for unlimited data, with no contract, iPad owners will pay half of what data service costs for a laptop under contract, what the industry calls a "postpaid" plan. There will also be a $15 per month option with limited downloads. The price will include use of AT&T's network of Wi-Fi hotspots, which offloads capacity from the cellular network.

On Thursday's earnings conference call, Chief Financial Officer Rick Lindner was asked to explain how the new plans will be profitable.

QUESTION: On the iPad, could you talk about the economics of that?

ANSWER: It is a substantially different model from our typical postpaid customer economics in that we're not subsidizing the device. Customers will buy the device, they'll activate on an online basis, and they will pay for it via a credit card, pay in advance.

So we don't have the normal acquisition costs, setup costs, billing costs, so on and so forth. So then it comes down to forecasts and estimates for usage on the device. Our expectation is that the device is going to be somewhere between our highest-usage integrated devices, say an iPhone, and a laptop.

We believe though, based on where the device will be used - in homes, offices, coffee shops, bookstores, airports ... a substantial amount of time in a Wi-fi environment...

We'll have to monitor this usage as the device gets out there, and if it's substantially different we'll adapt to it. But right now I think the economics will be very positive, because it will be a really low-cost device for us - no cost really, in terms of acquisition.

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