Report: iPhone to cost Verizon billions this year

Apple's iPhone could cost Verizon up to $5 billion in the first year of availability, due to subsidies, reports claim.

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CNET contributor Don Reisinger is a technology columnist who has covered everything from HDTVs to computers to Flowbee Haircut Systems. Besides his work with CNET, Don's work has been featured in a variety of other publications including PC World and a host of Ziff-Davis publications.
Don Reisinger

Verizon Wireless obviously wants the iPhone, but it will pay a hefty price to get it.

Speaking to several industry analysts, Bloomberg found that Verizon could pay billions of dollars this year in subsidies.

According to UBS analyst John Hodulik, Verizon could sell 13 million iPhone units this year and subsidize each device by $400. Overall, that could mean Verizon will pay $5.2 billion in subsidies.

Barclays analyst James Ratcliffe told Bloomberg that he isn't as bullish on iPhone sales. He expects Verizon to sell about 9 million iPhones and subsidize the smartphone at $350, forcing the company to take a $3.2 billion subsidy expense in the year.

Subsidies are commonplace in the mobile market. Carriers acquire phones from vendors at a specific price, and typically sell them for much less. By subsidizing a phone's price, carriers hope to attract more customers and recoup that investment through monthly service plans.

Later this morning, Verizon is holding a press event in New York City where it is widely expected to announce support for the iPhone. The event starts at 8 a.m. PT, and as you might expect, CNET will be there to live-blog every second.