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Apple Inc. (AAPL): iWay Or The Highway

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Apple Inc. (NASDAQ:AAPL)As Apple Inc. (NASDAQ:AAPL) hits a smartphone ceiling in emerging markets, perhaps the company has no one to blame but itself. The iPhone maker likes to stick to its guns in numerous ways, and that unwillingness to budge may be costing it opportunities.

A recent Bloomberg report outlines how Apple Inc. (NASDAQ:AAPL)’s strict carrier policies may be limiting its addressable market of subscribers. Apple’s total number of iPhone carriers hasn’t changed meaningfully in years, with approximately 240 official iPhone carriers around the world. Many carriers in important regions have yet to ink partnerships with Apple Inc. (NASDAQ:AAPL), in part due to the stringent requirements that Apple imposes on its carrier partnerships.

iWay or the highway
The company extracts incredibly high subsidies from carriers, which puts pressure on carrier margins. It also demands a much higher amount of control over the user experience; Apple Inc. (NASDAQ:AAPL) is one of the few smartphone OEMs permitted to not ship devices with pre-installed carrier bloatware. On top of that, Apple Inc. (NASDAQ:AAPL) frequently imposes minimum selling requirements, which could potentially put the carrier on the hook for millions of unsold iPhones.

For example, prepaid specialist Leap Wireless International, Inc. (NASDAQ:LEAP) is having a hard time meeting its $800 million obligation, and estimates suggest its selling rate will be short by hundreds of millions of dollars over the next couple years. This rate has improved over the past couple months, thanks in part to some collaboration with Apple on advertising and promotion. However, even though iPhone sales are starting to turn up, Leap Wireless International, Inc. (NASDAQ:LEAP) didn’t adjust its estimates to how much it was short in its most recent 10-Q.

On the other hand, Sprint Nextel Corporation (NYSE:S) initially signed on for $15.5 billion in iPhone purchases. Fortunately for the No. 3 domestic carrier, it appears to be slightly ahead of schedule with its own iPhone obligation, judging by its reported iPhone activations and quarter-specific iPhone average selling prices. Sprint still has 10 quarters to go.

Loosen up
If Apple Inc. (NASDAQ:AAPL) were to relax its carrier policies a little bit, the company could reach an estimated 2.8 billion new smartphone customers, most of which are in important Asian countries.

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