Apple changes business plan with new iPhones

By Scott Hillis

SAN FRANCISCO (Reuters) - Apple Inc is changing the way it makes money on iPhones as it revamps agreements with wireless carriers so they will cut prices for the devices, Chief Operating Officer Tim Cook said on Monday.

Apple on Monday launched a new iPhone with faster Internet access that runs on so-called 3G or third-generation wireless networks, and cut the price of an entry-level model in half to $199, a move certain to increase sales of the high-end phone.

Cook told Reuters that Apple will give up after-sale fees from carriers, essentially a share of the customer's monthly fee, in new deals with the mobile phone service companies.

"The business model of the first phone was that we received revenue-generating payments from carriers. That continues on the first-generation phone," Cook said in a post-launch interview.

"On the second-generation phone, the vast majority of agreements we have reached do not have those follow-on payments, so you can conclude that the vast majority of carriers do provide subsidies for the phone."

Cook declined to comment specifically on the implications for profit margins.

AT&T is Apple's U.S. carrier. Other carriers include Spain's Telefonica, Deutsche Telekom's T-Mobile, Vodafone Group Plc, France Telecom's Orange and Japan's Softbank.

Cook also said Apple remains very confident of selling 10 million iPhones by the end of 2008.

(Editing by Peter Henderson and Braden Reddall)