June 26, 2007 / 4:03 PM / 10 years ago

Apple gives cost of iPhone service, first fans show up

NEW YORK (Reuters) - Apple Inc. said on Tuesday its hotly anticipated iPhone could cost as much as $3,000 with a required two-year service contract, but a handful of eager fans still lined up early to spend their money.

A small clutch of gadget enthusiasts staked out spots in front of Apple’s store on New York’s Fifth Avenue, days before the iPhone goes on sale on Friday evening 6 p.m. local time.

Plenty of potential iPhone consumers have said they would wait for Apple’s next versions of the device to buy it, hoping for a lower price and faster network connection.

But industry analysts expect the first iPhone to sell quickly, at least in its initial months. Jessica Rodriguez, a 24-year-old student from the Bronx, seems to agree with them.

“I love everything Apple, and this is going to be something that goes down in the history books of cell phones,” she told Reuters.

Rodriguez showed up on Tuesday morning with a chair, a sandwich and a large iced tea, taking the fourth place in line and braving an expected heat spell in the city.

Rodriguez plans to switch to iPhone’s exclusive carrier, AT&T, just to use the device, and she will give her current Sprint Nextel phone to her mother.

“My dad thinks I‘m crazy, but then he saw the commercial and said, ‘I want it,'” she said of her 76-year-old father.

David Clayman, a recent university graduate who starts a technology consultant job in July and was third in line, said he hoped to buy several devices, one for his father’s 50th birthday and a second to auction off for his favorite charity.

AT&T said it would limit each person who turns up at its stores to buying just one phone. Apple has not said if it will follow the same policy.

Apple shares have gained more than 30 percent since the company unveiled the phone in January, as investors hope that sales of the device will outstrip even its best-selling iPod music player.

A man is reflected in an iPhone advertisement outside the Apple Store in New York, June 26, 2007. REUTERS/Shannon Stapleton

Apple shares, which have been volatile in the weeks ahead of the launch, fell back 2.6 percent to $119.15 on Tuesday after it disclosed the wireless costs, while AT&T was up 14 cents rising to $39.22.

WAITING GAME

Buyers of the iPhone must commit to a two-year contract with AT&T. The device combines a wireless phone, music, video and Web browsing, and will be sold exclusively through AT&T for at least two years.

Apple and AT&T on Tuesday outlined three iPhone rate plans that will be available, from $60 per month for the most basic to just under $100 per month for more talk time. AT&T said iPhone customers could also choose other AT&T service plans listed on its Web site.

A passer-by is reflected in a replica display of Apple's iPhone at the Fifth Avenue Apple store in New York, June 25, 2007. REUTERS/Keith Bedford

While that is consistent with other AT&T wireless plans, it adds $1,400 to $2,400 to the cost of what many say is already a steeply priced $500-to-$600 gadget.

“Given the additional features embedded in the iPhone, we believe the pricing is attractive,” UBS analyst John Hodulik said in a note to clients.

He said the service costs were competitive when compared to similar plans from rivals like Verizon Wireless, a venture of Verizon Communications and Vodafone Group Plc.

The iPhone service plans all include unlimited data, 200 SMS text messages, roll-over minutes and unlimited mobile-to-mobile calling, the companies said.

Not only Apple and AT&T are hoping to profit on the iPhone phenomenon. Advertisements on the New York and San Francisco online message boards at Craigslist.org solicited payment for waiting on line to buy an iPhone.

One listing from a self-professed “professional waiter” offered to stand on line for a fee of $100 per eight hours wait. The person will throw in delivery for an extra $50.

In another listing, a person identified as “Ray” offered to start waiting on Thursday for the highest bidder. Ray noted that people paid over $1000 to get one of the first Sony PlayStation 3 video game consoles, which went on sale in November.

(Additional reporting by Ritsuko Ando in New York and Scott Hillis in San Francisco)

Writing by Sinead Carew and Michele Gershberg

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