Initial response from carriers has been "no"; however, Misek says carriers realize that there is no other game-changing device this year and Apple may be able to negotiate a lesser increase. A $50 bump in price would offset the gross margin impact of the new device.
"The possibility may at first seem far-fetched in light of investor concerns regarding possible carrier subsidy and handset price cuts due to smartphone saturation and lack of differentiation," Misek comments. "But we think this general lack of differentiation could be the reason why Apple may be able to get a price increase. Carriers realize that the iPhone 6 will likely be the only headline-worthy high-end phone launched this year and that they will lose subs if they do not offer it."
Carriers would likely have to take much of the hit themselves; however, the growth of equipment installment plans would pass the cost to the consumer.
Misek says, an ASP increase could offset iPhone 6 gross margin headwind:
"Our prelim iPhone 6 BOM est indicates GM could be up to 450bp lower than the 5s (pricier display/AP partially offset by general 5%-10% price concessions). Our current estimates assume a 430bp decline, which we feel is conservative unless some of the components run into yield issues. We estimate a $50 ASP increase on the iPhone 6 would raise GM by 375bp and $100 by 700bp so a $50 ASP increase would offset most of the iPhone 6 COGS pressure."
A $50 price increase would raise earnings per share by 2%/11% and a $100 increase price bump would raise revenues EPS by 6%/24%.
Would you be willing to pay more for a larger iPhone 6? Let us know in the comments!