Apple 2.0

Covering the business that Steve Jobs built

iPhone 3G pricing: U.S. $199, Germany 1 euro, U.K. free

June 16, 2008: 8:32 AM ET

Last week, Steve Jobs announced that in "almost every one" of the 22 countries selling the iPhone 3G on July 11, the maximum price in would be $199 for the 8G model.

AT&T (T) went with the maximum. Some of Apple's (AAPL) international partners are going with the minimum or close to it.

O2 (TEF), which carries the phone in the U.K., announced last week that the iPhone would be free for customers who sign up for one of its higher monthly tariff plans.

And on Monday, T-Mobile (DT) said that it is doing something similar in Germany, selling the iPhone for 1 euro to customers who select its highest monthly plan.

All three carriers are subsidizing the phone, of course, planning to take back in monthly fees more than they give away at point of purchase. In T-Mobile's case, it turns out, a good deal more.

The chart below shows how much customers who buy the 8GB model end up paying at the end of a two-year contract for unlimited data in the U.S., U.K. and Germany. We've used the minimum tariff that yields the maximum subsidy in each country and converted everything into dollars. And we've chosen a two-year period in the U.K., although O2 offers an 18-month contract as well. (E-mail subscribes, click here.)

It should come as no surprise that these European carriers know what they are doing. T-Mobile's 1 euro iPhone may look cheap compared with AT&T's $199, but by the end of their contract, its customers have paid nearly 74% more.

O2's free iPhone, by comparison, is a relative bargain; after two years, it's only 12% more expensive than AT&T's.

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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