Higher Smartphone Prices May Be Inevitable: AT&T
Smartphone prices may increase for wireless customers, but AT&T otherwise faces no major challenges from higher U.S. tariffs (see 2505120050), COO Jeff McElfresh told a JPMorgan financial conference Tuesday. Handset prices are “a moving target” and are likely "going to rise,” he said. Customers “will bear the brunt” of rising costs “as they have over the last many cycles in the industry.”
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On the network side, most buildout costs are for labor, not equipment, McElfresh said. “With the scale that we operate at in our industry, we’ve got really good measures and controls over how we spend, where we procure,” he said: “We’ve got plenty of capacity, inventory on hand to weather any kind of interruption or turbulence that could exist. … I feel very confident in that.”
McElfresh added, “It sure feels good to be in an industry where the product that you build is in high demand and is quite resilient to a lot of changing dynamics in the macro” economy.
He said AT&T is progressing on copper retirements (see 2504230045) but warned that moving enterprise customers off the legacy network is more complex than transitioning other subscribers. “We still have a large percentage of our revenue” from business customers served over copper. “These are long-term contracts,” he said. “These are sophisticated clients and customers,” including government agencies, so moving them “takes a little bit longer.” With enterprise customers that have multiple branches, “you have to be a little bit more orchestrated in how you transition and migrate them.”
AT&T was the last of the big three wireless carriers to deploy 5G, but that was for a reason, McElfresh said: AT&T is starting to see the efficiency benefits of waiting and deploying using an open network architecture with its partner Ericsson.
Meanwhile, John Strand of Strand Consult defended President Donald Trump’s approach on tariffs against China, saying it’s little understood by many observers. The Trump administration isn’t solely to blame if smartphone prices increase, he said. “I'm sure that Apple will raise the price of their products again this year, in the same way as they have … every year since 2008,” Strand said in an email. “Don't blame Trump for Apple raising prices, they’ve always done that. ...
“Trump wants to do business with China” but is trying to "minimize China's access to advanced American technology,” Strand said. “In addition, he wants companies to move production out of China, either to the [U.S.] or to other countries. What Trump is doing is redistributing wealth from China to other countries.” During Trump’s first term, Apple moved 20% of its production to India, with more to come this term, Strand said.