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Apple Just Released Another 'Cheap iPhone'

NEW YORK ( TheStreet) -- On Tuesday, I confused the math. My bad. Thanks to readers for pointing it out in the comments section of the above-linked article.

My mea culpa aside, T-Mobile will finally offer Apple's (AAPL - Get Report) iPhone 5. And it's pulling out all the stops marketing-wise to convince customers it's different than traditional wireless carriers.


Let's break this story down into three sections: Implications for T-Mobile and Apple and then a rerun of the math to see if you really get a better deal by ditching the big three.

T-Mobile

To be clear, other than adding iPhone to its stable, this is nothing new for T-Mobile. It's basically looping the iPhone into the mix with the smartphones it already offers. As I'll detail in the math section, that's merely a "no-contract," pay-almost-full-price-for-your-device installment plan.

Absolutely excellent marketing, but probably less of a game changer than I initially thought. But that doesn't mean this isn't a big deal.

Apple

This shakes up the industry in a significant way. Apple's acceptance of T-Mobile's installment plan signals yet another shift in the way the company does business. I have to think that before Apple signs off on giving T-Mobile iPhone, it approves how it will be presented and sold to the consumer.

Make no mistake about it -- alongside existing deals on iPhone 4 and 4S -- this is the 'cheap iPhone' we have been hearing rumors about. Or at least it better be. Because a "cheap iPhone" would be absolutely awful news for Apple.

So if Apple is going to go "cheap," it might as well do it in a way that will not impact its margins much, if at all. I presume T-Mobile pays Apple the same way every other carrier does, except the "un-carrier" will make back that upfront cost direct from the installment plan, not via monthly usage charges.


This represents a compromise by Apple, but it definitely will not dilute its brand image like offering a $100 or $200 phone made of plastic would.

The Math

So here's the math, as compared to buying an iPhone 5 via Verizon (VZ - Get Report).

For the phone, you pay Verizon $199. That's it. With T-Mobile, you put $99 down and pay $20 each month over 24 months, bringing the total cost of the device to $579.

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