In an investor's note issued yesterday, analyst Mike Abramsky said that in line with the launch of the iPhone 5, he expects Apple to slash the price of the 3Gs to $0 on contract ($399 unsubsidized) and the iPhone 4 to $99 ($499 unsubsidized).
The analyst believes these price cuts will be part of an entry-level iPhone strategy on Apple's part, designed to "target mid-market smartphone buyers and counter Android's mid-market expansion." Although a $49 iPhone 3GS is , he sees a free iPhone as "psychologically" compelling to customers.
A survey of 1,500 consumers conducted by ChangeWave and cited by RBC found that 14 percent would be very or somewhat likely to buy an iPhone 3GS for free with a two-year contract. That compares with 13 percent who expressed similar interest for the iPad and only 9 percent for the original iPhone.
A free iPhone could also double the number of iPhone customers around the world to 150 milllion from an estimated 64 million currently, says the analyst, and expand Apple's presence outside the U.S.
Abramsky expects the iPhone 5 itself to debut at a price of $199/$299 on contract ($599/$699 unsubsidized). Gazing into 2012, he also believes Apple will unveil a "baby" iPhone, a smaller, prepaid version of the standard iPhone and one designed to take greater advantage of the company's upcoming new iCloud service.
The analyst didn't offer his take on when Apple may release the iPhone 5, a topic that's been subject to a bevy of rumors the past several months. Recent reports from and are predicting a September launch date for the new iPhone.